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Justification For The Salary?

The ABC reports on a study of the executive pay in Australian companies: Derailing the ‘gravy train’

A leading academic says he has found no correlation between what executives are paid and how their companies perform.

Associate Professor John Shields, from Sydney University’s discipline of work and organisational studies, studied Australia’s 500 largest listed companies and found that pay was generally not closely connected with share price and profit performance.

“Our research is saying, in terms of those traditional measures of CEO impact on company performance – return on equity, total shareholder return – you need an electron microscope to find any association [with executive remuneration].”

Of course, most people have already figured it out – there is no rational reason for the huge compensation packages that most CEOs receive.

In the airlines, the management team that led the company into bankruptcy is given bonuses when it convinces all of the workers to take pay cuts.

In banking the guys who drove over the cliff, are given bonuses to stay on because they are the only ones who know what happened.

They get incentive bonuses when the company does well, and when the company tanks. The executive salaries just keep climbing, when everyone who actually does meaningful work to produce the company’s products are given pay cuts, or are being laid off.

This is insane.

2 comments

1 Kryten42 { 10.03.09 at 2:18 am }

I think there is a quite valid justification for CEO’s salaries.

The rest of humanity are stupid enough to allow them to steal exorbitant sums of money from them.

Simple, really.

2 Bryan { 10.03.09 at 2:56 pm }

The unions in the US have become total wimps. When I was growing up they wouldn’t have put up with this crap. After what has been going on with the banks, insurance companies, etc, the old-timers would have shut down Wall Street and no card carrying member of any union would deal with the “financial wizards” who caused this mess. In New York that’s almost a literal death sentence.

There is a notable peasant mentality in this country when in comes to CEOs. I installed computers in their offices, so I know what clueless con men they are. The only people who are fooled are those who want to be deluded. These people really aren’t that bright.