$$Millions 4 bad CEOs

[GracieRuth]

The is the kind of story that makes me nauteous. How can anyone think these guys are worth this kind of money? It makes me wanna join the Wall Street protests, it's so disgusting.
http://www.msnbc.msn.com/id/44989625/ns/business-us_business/

•Tom Ward
•Company: SandRidge Energy Inc.
•Total compensation: $21,756,257
•Change in stock price: -22.4 percent

SandRidge, an oil and natural gas company, has piled on debt as it has moved from gas to liquid energy assets. In the process, SandRidge spent $2.2 billion on assets in the Permian Basin and $1.8 billion for acreage on the Anadarko Shelf. Long-term debt reached $2.9 billion at the end of 2010. The debt is listed as one of the risk factors in the company’s 10-K. SandRidge’s prospects improved in 2010 as revenue rose to $932 million from $591 million in 2009. However, last year’s sales were well below the $1.2 billion the company brought in during 2008. SandRidge lost $3.2 billion in 2008 and 2009 combined. This improved to net income of $153 million last year.

 

[magister343]

High salaries are often justified by the need to keep an executive with the company rather than moving on to a competitor, but it doesn't really make sense. Executive contracts could easily be made to feature non-compete clauses, which are currently ubiquitous in lesser employment contracts. Leaving to work at a competitor could be made to cost an executive several times more than his income. Also, money has a diminishing marginal utility. If a job pays several millions of dollars in the first year, a rational person would choose to save the money retire early.



A major problem is that executive salaries are not really set by the shareholders, but rather by the Board. The initial members of the board are usually determined based not on skill but rather connections. Typically they don't know how to run a company, they just know enough rich people to be able to acquire capital. In theory the Board of a public company is elected by shareholders, but in practice, not so much. New Board members tend to be hand picked by old board members, with an "election" just fr show. (I recall that when the one company in which I own stock sent out info on the election of a new board member, it said that the existing board had selected the man that they want and would cast my vote for him unless I expressly forbid them from doing so within two weeks. I forget whether I could do that by mail or had to drive to their headquarters and attend a meeting in person, but I believe that actually showing up was a prerequisite for being able to suggest any alternate candidate.)



High ranking executives tend to be the kind of people who are almost pathologically competitive. They don't think of their income in terms of what they can do with the money, but rather in terms of using it to measure social status. They just want to make sure that they are earning more than their friends, and especially more than their enemies. They get angry when they find out that someone they consider inferior to themselves is being paid more, and insist that by not increasing their salary or benefits the company is demonstrating a total lack of respect. They often threaten to leave and find a better paying job elsewhere.


(On another forum I frequent we had an "Ask an Executive" thread, where a said executive (I think he said he was CFO of a major European pharmaceutical company) was surprisingly upfront about the fact that executives are usually competitive bastards and that boards are more about nepotism than sound governance.)

 

[This]

CEO'S salaries are really at the discretion of the share holders. If you don't like a stock don't buy it. It's hard to pay yourself a very large salary when you aren't getting any capitol. The real problems that happened with stocks mostly have to do with the systems themselves that have been set up. Sure you can decide as an individual which stocks you want to buy, vote on proxies, even take companies to court (actually, I found out recently that I have rights to be heard in court for the Nisource/Duke merger since I have Nisource stock.) The problem is how much control do you really have over the companies your 401k invests in? you don't, this is where the system falls down and where it begins to be able to get exploited. The CEO knows that the company will still get funding without individual support because of those retirement plans/mutual funds/etc. In my opinion that's the real problem with the stock market today, an inability to vote with your feet and wallet.