ghariton wrote:
I was thinking of hockey, which is a team sport. Goals and assists are all very well, but cooperation and tem-building would seem to be important as well. But harder to quantify.
I don't follow hockey but guess that stats are kept on penalties, speed and stuff like that.
As I understand it, both build brands. Those are relatively long-term assets, which can generate a very large portion of the athlete/entertainer's income.
Brand revenue (endorsements) certainly build over time and can dwarf direct income -- see Tiger Woods. But it's the direct income that dominates for much/most of the playing career and its consistent performance at high/excellent levels that attracts the endorsements.
But there are large signing bonuses and multi-year or multi-event contracts. A large enough signing bonus must be amortized over a number of years, or the payer is out of pocket. Here, the golden-parachute is up front.
CEOs get signing bonuses too. So they're paid lavishly for both coming and going.
I think that's relevant only for tax purposes.
No, millions spent to renovate a CEO's office are millions the company can't spend on machinery or personnel to generate profits for the shareholders.
After-tax, what matters is the entire yearly compensation package, not its composition. As long as executive perqs are approved by the Board of Directors, they are a proper part of the compensation package.
You're assuming that directors responsibly monitor and consider such spending. See the lawsuit filed last year against Chesapeake Energy.
I haven't looked up average CEO tenure lately, but I seem to remember that it has gotten quite short.
I believe it has gotten short for those highly-paid CEOs who don't deliver. And when dumped by one company, they move to another. Without ability to coach or be a broadcast analyst, a physically impaired athlete has no alternative in his/her chosen field.
All parties take into account their present and future prospects, including longevity, when they negotiate their compensation packages. But, I believe, major corporation CEOs have substantially greater longevity and get paid substantially more in any year than professional athletes except for solo athletes, and solo athletes are self-employed. Similarly, all of the big-bucks entertainers are self-employed.
A nice question, and one which I don't have the quantitative tools to answer. But I get the impression that many celebrity entertainers are the beneficiaries of fads, huge PR campaigns, and occasionally a lot of covering up by the studios/agencies/studios. If's not immediately clear to me what talent, say, the Spice Girls had, to take one very well documented example of an agent-created success.
Agreed. That's why I qualified my statement about entertainers.
As for athletes, I don't know the role of puffery in the creation of stars. But rRemember, we are not talking of the presence of talent -- I assume it's necessary just to get on the team -- but of the edge that moves someone from $300,000 a year to $10 million a year.
I'm not a sports fan at all but don't see how puffery affects advancement. My understanding is that it's the stats. A CEO has many ways to spin failure and many others to blame. When a batter hits a home run or strikes out, that's transparent.
Now let's look at a couple of other points. If a CEO has a positive impact - and I agree that this is hard to measure -- he or she will have created profits for investors, more and better jobs for workers, and better and cheaper products for many, many consumers. Most importantly, we look to the teams that CEOs appoint for innovation and productivity in our society. If they collectively fail, we will live lives that are less prosperous.
Agreed.
Compare that with someone whose contribution to society is put a small piece of rubber into a net (or into a hole on a green), or someone who can flash her tits more provocatively than other women. Who is contributing more to society, and who should be paid more?
The athlete/entertainer isn't paid big bucks for putting a small piece of rubber into a net or flashing her tits. They're paid for their ability to fill seats, sell CDs, attract viewers to commercial TV broadcasts, and to push merchandise on behalf of corporate sponsors. That too creates profits for investors, more and better jobs for workers and more -- though not necessarily cheaper -- products for many, many consumers.
In passing, I would note that richly paying (or overpaying) a CEO should, in principle, motivate hundreds of thousands or youg people to enter and work hard in the business world. By contrast, richly paying hockey players or singers will only encopurage a whole bunch of young people to pursue careers in hockey, etc. Which would we prefer?
First, consider that the skills kids are supposed to learn in sports -- discipline, teamwork, achievement, etc -- are the very skills necessary for success as a CEO. Second, I'm not aware that there's a shortage of people striving to become CEOs. Third, many -- including our own Pitz -- have lamented that Wall Street's lavish compensation has attracted too many brilliant young people to non-productive financial engineering instead of productive real engineering.
That said, a number of black leaders -- including Obama -- have lamented that too many black kids are overly focused on professional sports, rather than education, as their way out of poverty. A totally valid concern.
So we should look to golf players or actors to give us a positive role model.
Not in terms of personal behavior. But they still perform the jobs they're supposed to perform. According to Sorkin's account, the Wall Streeters not only abdicated their responsibility to prudently assess and manage risk but then, with few exceptions, proved incapable of measuring the depth of the holes they had dug. Then, when directed by Paulson and Geithner to work together in developing and implementing private sector solutions, they failed again. Ultimately, again with few exceptions, they wound up as marionettes with Paulson pulling the strings. At least according to Sorkin. (And, if we believe Elizabeth Warren, their business conduct and strategies today are no different than they were before the crash.)
Don't get me wrong. Of course there have been terrible abuses in CEO compensation. But these were not solely due to the greed of CEOs. Where were the Boards of Directors? (cronies of the CEO)
Aye, there's the rub. And why any analogy between CEO and athlete comp fails. CEOs have benefited handsomely from a closed society. CEOs and directors are not only members of the same club culturally, but serve on each other's boards -- and even on each other's compensation committees.
Most importantly, where were the government and the regulators? (in the pockets of the CEOs -- or, to be charitable, incompetent).
Before TARP, what authority did regulators have over CEO comp? Notwithstanding that, I agree that too many are in thrall to CEOs and/or downright incompetent. And, of course, too many legislators are in hock to PACs funded by corporations and unions.
Unfortunately, lavish CEO comp is now a permanent fixture, deserved or not. I'm sure Mackenzie's paper pointed out that North American companies were more profitable years ago when there was a much smaller gap between the top of the house and the corporate median/average. But those days are gone and I don't see how they can be brought back.*
* IIRC US senior execs are paid much more than their foreign counterparts. As foreign entities such as sovereign wealth funds buy more of corporate America, I wonder if they might move to rein in executive comp.