What Type of CEO Will A Company Get For $ 500,000 A Year?

February 4 2009 | jveritas

[jveritas]

Obama announced an executive order to limit the salary for CEO of bailout companies to $ 500,000 a year. Besides that this is the scary socialism on the march the question from business perspective is what type of CEO would a company get for $ 500,000 a year? The answer to that is very simple. They will get very incompetent CEO’s who are even much more worse than the current CEO’s who are running these bailout companies.

[Red in Blue PA]

I’ll gladly do it.

(and probably better than the schmucks already in place!)

[Red in Blue PA]

Exactly.

All of the people complaining that the poor execs are getting enough (”only” $500,000) should write the execs a check if they really believe that.

[Red in Blue PA]

I noticed your post did not mention PROFIT. Something the greedy execs bumbled badly.

[AbeKrieger]

Thank you ALL for explaining some points I overlooked. Much better now.

[cbkaty]

So you don't care if the CEO packs the board with cronies and cuts the corporations profits from 20% to 10% by skimming money into his own pockets?

Now partner...I never said I would approve of corruption.... Maybe I stretched the "don't care" statement, but no one put a gun to my head and forced me to buy the stocks I own....and yes one is Bank America and another is Wells Fargo....

I invested in those stocks on my own free will as a free American which I intend to do until I die. My point was, I do not need Obama's or Barney Franks assistance.

[cbkaty]

BTW.........Limiting CEO pay does not eliminate corruption.....

[oldvike]

Get paid $500K per year to run in the red? Count me in. GM here I come!!!

[theknuckler_33]

$500k would basically be someone wanting to either do the job for nefarious purposes (getting in there and influencing the company) or for charity. Basically, $500k would be $250k after taxes. Of course, their corporate jets are gone so figure at least $50k per year out of their pockets for travel because travel expense at that level is often looked at as compensation. We are now at $200k. Now, most of these companies are HQ’d in places like New York city. An average apartment in NYC costs around $7k per month for a three bedroom. That’s another $84 thousand. We are now down to $116k.. Now, your CEO is making what your average business analyst makes.

What do you mean "at that level"? I'm not aware of anyone who pays out-of-pocket for work related travel. They would absolutely be reimbursed. And, why do I care about their housing situation?

[mnehring]

Same way Dashle was busted for not paying taxes on his limo because it was treated as part of his compensation package, even if it was transportation to an from the office. It is like a car allowance, that is considered compensation.

[SampleMan]

Now partner...I never said I would approve of corruption.... Maybe I stretched the "don't care" statement, but no one put a gun to my head and forced me to buy the stocks I own....and yes one is Bank America and another is Wells Fargo....

No one put a gun to my head and forced me to buy my house. I still don't want it burglarized. As a shareholder, a person has a right to expect honesty from their management team. As shares have become more divested, it has become easier for management teams to steal from them. That is a real problem. I've never argued that there should be hard caps on compensation, there shouldn't, but that doesn't mean that there isn't a problem. Very few CEOs would be making what they are if they were working directly for a single shareholder instead of a boardroom full of their buddies.

My point was, I do not need Obama's or Barney Franks assistance.

I don't care for their involvement either, but these management teams have made a deal with the devil by sticking their hands into the public till.

[texmexis best]

This is easy to break.

500,000? No problem...

Memo:

I want as much eps incentive as possible.
OK.You’re hired...
Call the treasurer and buy back as many shares off the market as possible.

Bonus time. Eps goes up, no actual change in financial position.

You can even make it deferred, stored value as options at pre buy back market prices.

See how easy that was children?

[theknuckler_33]

Same way Dashle was busted for not paying taxes on his limo because it was treated as part of his compensation package, even if it was transportation to an from the office. It is like a car allowance, that is considered compensation.

I think that is completely different. Daschle's limo and driver were basically political donations for personal use that he needed to report as income. To equate that to reimbursement for travel expenses for a CEO and use that to argue that it effectively reduces the CEO's salary (by the amount of the travel, no less, not just the taxes paid on that amount), doesn't make any sense.

[mnehring]

The way I put travel expenses is like a car allowance. For example, if I have to travel for work, I am compensated for tax purposes something like .38c per mile. Any additional compensation for travel on top of that is reported as income.

[SampleMan]

BTW.........Limiting CEO pay does not eliminate corruption.....

However, limiting corruption will very likely limit CEO pay.

The shareholder is the long forgotten and ignored victim. CEO pay is always compared to line worker pay. That is a bogus argument. Undue compensation isn't at the expense of the line worker, its at the expense of the shareholder.

Far too many CEOs feel that they should have the rewards of an owner. That is BS. They are employees and deserve nothing more than just compensation. What's just? That should be for the shareholders to decide. The problem is that when no one owns more than 5% of a company, let alone 51%, there are insufficient mechanisms to get rid of a loaded board of directors. Of course you can divest, but that doesn't put any real pressure on them, as they have already gotten what they were after.

[theknuckler_33]

Call the treasurer and buy back as many shares off the market as possible. Bonus time. Eps goes up, no actual change in financial position.

You'd have to buy a significant amount of shares to make a significant increase in the eps. If your business has a huge expense on their books due to buying back those shares, thats a dollar-for-dollar cut in the bottom line earnings... effectively shooting yourself in the foot. You can't just increase eps by buying back stock since the act of buying back stock hurts bottom line earnings.

[jveritas]

Are you still on FR?

[theknuckler_33]

The way I put travel expenses is like a car allowance. For example, if I have to travel for work, I am compensated for tax purposes something like .38c per mile. Any additional compensation for travel on top of that is reported as income.

I know I'm making a mountain out of a molehill here, but if you are reporting mileage reimbursement and other travel expense reimbursement as additional income, I think you are being screwed. http://en.allexperts.com/q/Tax-Law-Questions-932/2008/1/Mileage-reimbursement-taxes.htm

[taxcontrol]

Before you let congress off the hook, you need to read up on Glass-Steagall Act and Gramm-Leach-Bliley (GLB) Act.

Prior to GLB, banks could not sell mortgages backed securities.

[Crystal Cove]

Apparently.

[Crystal Cove]

And there are actually people here agreeing with me. Hmmm.