Thursday, February 23, 2012

Broken Feedback Loops: CEO pay

One of our biggest problems are the broken feedback loops in our society. A lot of rewards are given for unknown or even counter-intuitive reasons.



http://money.cnn.com/2012/02/22/technology/att_ceo_pay/index.htm


So according to this article, AT&T cut $2,000,000 from there CEO’s pay for 2011 due to the bad gamble that cost the company $4,000,000,000. No, I believe CEOs get more credit than they deserve (just like I feel presidents do). And he still made over 20 million- so he lost less than 10% of his pay on gambling $4 trillion. Of course this is another example of the unbalanced rewarding at the top of risky behavior.

How are not the average workers getting more of the profits when things are going well? Plus corporations are currently making record profits.

This is a fundamental problem with our current society. This reminds me of the story from the 90s. Congress was so upset that CEO was so much larger than theirs- (in my opinion). Congress then made a bill that all public corporations had to disclose CEO compensation with the intention of reducing it. Now their thinking was that people would not accept such outrageous pay. And the result of this new mid-90s legislation- CEO pay has increased steadily to even more outrageous levels since ever other CEO knows what everyone is making. So they all negotiate ever higher packages and golden parachutes.

I really don’t understand how their compensation is not more performance based or made with more long term vesting. Too often they are reward for short term gains which leads to policy with long term ramifications. I am of course thinking of many examples, but Enron is a specific one that comes to mind. A lot of those a$$holes got away with millions and just fundamentally immoral actions.

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