Becoming a CEO of a public Co. - opportunity to legally loot your company or fair compensation?

Economics Economics Questions
1

I know how the system is supposed to work. The CEO’s pay is set by the shareholders and based on his performance running the company. As the owners, the shareholders can also fire him should his performance be found lacking. The board acts as further governance.

Problem is, that’s not how the system works anymore. The system has been gamed. The shareholders tend to be large pension funds or mutual funds that don’t actively participant as shareholders. They’re largely passive. The CEO’s pay is usually determined by a pay committee that’s hired by the CEO, and the head of this committee is a fellow CEO. Talk about a conflict of interest - you hire a colleague for big dollars to your salary. And who better to overvalue the importance of a CEO than a fellow CEO? How can this system not drive up salaries through the roof?

But at least there’s the board to provide some governance, right? The CEO is often the Chairman of the Board and selects the other members. What checks and balances even exist at this point?

The whole thing is an rigged game that chiefly benefits the CEO. He has a license to legally loot the company.

That’s my take on it. I don’t know the answers and am reluctant to favor a government imposed solution like a salary cap, but I can’t help thinking that this system if broken. Any thoughts? Am I off my rocker?

2

  • If shareholders don’t care about the situation, than there is no problem

  • If shareholders do care but face shareholder laws they don’t like, the problem is state imposed and will get solved by privatizing said law

3

In Crashproof, Peter Schiff says that nowadays stocks are just a way of looting the shareholders to give to management. All perfectly legal, of course. After all, you buy stocks voluntarily.

Solution: Don’t buy stocks.

4

Solution, get an Ivy League MBA and work your way up to upper management at a big public company, then cash in! How is it that Japan’s CEO’s reign themselves in compared (CEO pay is something like 50 times the lowest salaried worker’s pay vs. something like 200 times the lowest salaried worker for the American) to their American counterparts? Culture? Disincentives that aren’t apparent? Sense of shame? Different corporate structure/checks on pay absent in the American system? Seems given the same circumstances, the Japanese CEO’s would enrich themselves just as much as the Americans, but I’m told it’s not the case. Curios why, though.

5

America still has businesses?

6

Hollywood, law firms, debt collection agencies, goverment sector, military industrial complex. The new America. Aint it sweet?

7

Do you still have lungs?

8

No.

9

Here is another problem we could easily blame on government intervention. Huge mutual and pension funds own huge chunks of the stock market because of the tax code.