mm1352000:

 

6FIEND: I have merely asked "what proportion" of said success should we reward the CEO with in your opinion?

 

Sorry, I thought I had been clear. The proportion that they are directly responsible for.

 

You're not being clear.  You're being deliberately obtuse and continuing to demonstrate an abject lack of understanding of the role that a CEO performs, how their performance is typically measured, and what their obligations and personal liabilities might be.

If you're not interested in engaging constructively, I'm not going to bother...

6FIEND: You're not being clear.

I honestly don't know how I can be more clear.

What I mean is that if the CEO - through their actions, knowledge or whatever - is directly responsible for 5% of the profit increase then their remuneration should reflect that.

If it's 10% responsibility then 10% reflection in remuneration.

I said that I could not answer your question because you did not give me any basis on which to asses how much of the overall profit increase was directly attributable to the CEO.

I'm genuinely sorry if that's not clear. I don't know how else to explain what I mean.

6FIEND: You're being deliberately obtuse...

Once again, I'm sorry if my responses have come across as obtuse. It is not deliberate on my part.

The public service seems to employ a higher proportion of women in senior and executive positions than the private sector.

How does this policy on executive pay mesh with the policy on gender pay?

What proportion of higher earning females work in the public sector?

I wouldn't be a public sector CEO for any money.  Unreasonable expectations.  Subject to the whims and political machinations of the government of the day.  Largely reviled and criticised by the media and vocal members of the the public.

mm1352000:

 

6FIEND: You're not being clear.

 

I honestly don't know how I can be more clear.

 

What I mean is that if the CEO - through their actions, knowledge or whatever - is directly responsible for 5% of the profit increase then their remuneration should reflect that.

 

If it's 10% responsibility then 10% reflection in remuneration.

 

I said that I could not answer your question because you did not give me any basis on which to asses how much of the overall profit increase was directly attributable to the CEO.

 

I'm genuinely sorry if that's not clear. I don't know how else to explain what I mean.

 

In that case - I'll try to explain a little...

In a general sense, a CEO has "overall" responsibility for all aspects of an organisation and is "directly" responsible for relatively little.

Depending on the size of the organisation, a CEO might have a full suite of executives under them (CFO, COO, CIO, etc)  And they, in turn, might have a hierarchy of Management under them - Heads of Department, General Managers, Regional Managers, etc.  As you get further and further down the chain-of-command, "direct" responsibilities increase and "overall" responsibilities decrease.

In a large organisation, the performance measures for a CEO tend to be a blend of

• tangible/measurable objectives - Eg. increasing revenue, restraining costs etc.
• intangibles - Eg. Corporate reputation, Staff retention/engagement, etc.
• occasionally specific high level deliverables - Eg. Expand into this country, Launch all new product. etc.  (Typically assigned by a Board of Directors)

Trying to peg remuneration to directly actioned elements makes no sense at that level...

Imagine an airline telling a new CEO that they weren't going to get a rise or bonus (despite the company returning record profits, and featuring as the country's most trusted company)  because they didn't prepare any of the new in-flight meals themselves...  Or didn't personally log any flying hours. 

You get the picture right?

MikeB4:

One CEO out of how many? Show me a plausible trend using an appropriate sample size then I may look again.

Enron

Geektastic:

 

I don't have a socialist hat. I don't really mind much what the people at the bottom are paid. If they accept that and keep doing their job, I will assume they are content. If they start leaving and suddenly there is a recruitment and retention issue, then it is time to look at that.

 

Why only treat people well when they complain? Treat them well from the start and there won't be any reason to complain.

6FIEND:

 

You get the picture right?

 

Co-operative model. Everyone gets a share of the profits (or loss). As the ultimate one responsible, the CEO gets a bigger share. But it is still proportionate to the rest. That is what is lacking in the current situation.

6FIEND: You get the picture right?

Yes, I get the picture.

6FIEND: Trying to peg remuneration to directly actioned elements makes no sense at that level...

When I said "direct responsibility", I meant responsibility in the sense of being a source, author or contributor. For example, in that sense the CEO is usually [partially] responsible for an organisation's vision and strategic direction. I was trying to say that the CEO's remuneration ought to be a reflection of the value - in terms of magnitude, importance, timeliness, novelty etc. - of their contribution to those elements of an organisation which a CEO is typically associated with, and the corresponding impact on the organisation's key metrics.

Coming back to your example/question, if the doubling of Acme Corp.'s net profit was largely due something outside the CEO's control (eg. a competitor's failure) then I don't see any justification for the CEO receiving additional remuneration. In colloquial terms: what did they do to deserve it? They were obviously competent, but they got lucky.

On the other hand, if the increase in profit was driven by something that could be traced back to the CEO's contribution (eg. a timely change of strategy), it seems fair to me that their compensation would be increased commensurate with the growth and their contribution to the elements that drove it. If my calculations are correct, doubling in 5 years is equivalent to an annual growth rate of ~15%. I'd start with that as an upper limit.

Is that a more satisfying answer to your question?

Rikkitic:

6FIEND:

You get the picture right?

Co-operative model. Everyone gets a share of the profits (or loss). As the ultimate one responsible, the CEO gets a bigger share. But it is still proportionate to the rest. That is what is lacking in the current situation.

 

Sounds fair to me. Any CEO should be happy with that.

Rikkitic:

 

Geektastic:

 

I don't have a socialist hat. I don't really mind much what the people at the bottom are paid. If they accept that and keep doing their job, I will assume they are content. If they start leaving and suddenly there is a recruitment and retention issue, then it is time to look at that.

 

 

Why only treat people well when they complain? Treat them well from the start and there won't be any reason to complain.

 

 

 

I'm not suggesting that they be treated well or badly.

I'm suggesting that the line you should tread is the one where the business finds and pays the minimum amount at which employee retention and engagement is not an issue to the business.

The business is not a charity: it's purpose is to make money for the owners who risk their capital, not reward the employees unnecessarily generously.

Geektastic: I'm not suggesting that they be treated well or badly.

 

I'm suggesting that the line you should tread is the one where the business finds and pays the minimum amount at which employee retention and engagement is not an issue to the business.

Man, that approach to business grinds my gears. I can understand the logic, but to me, if a business is treating their employees essentially as replaceable units of labour then I don't want to work for them. At any price. Never. Hence why I work for a small company (12 people) and do some contracting for myself on the side.

mm1352000:

 

Geektastic: I'm not suggesting that they be treated well or badly.

 

I'm suggesting that the line you should tread is the one where the business finds and pays the minimum amount at which employee retention and engagement is not an issue to the business.

 

Man, that approach to business grinds my gears. I can understand the logic, but to me, if a business is treating their employees essentially as replaceable units of labour then I don't want to work for them. At any price. Never. Hence why I work for a small company (12 people) and do some contracting for myself on the side.

 

It maybe a hard fact to swallow but a business as an entity only obligations to staff are those prescribed in teh employment agreement and those statutory obligations prescribed. The human side is another thing and that is between the individuals and not the entity. 

People who like their boss and who feel good about their workplace are likely to go out of their way to benefit the business. Like answering someone else's phone when they are not at their desk. And making an extra effort to help a customer find an answer to something even though it is not your direct responsibility.