Board room pay in the UK: 140 times national average salary

[Chief]

In the US it is over 200x.

Is this value for money? Or is it Taleb's "winner takes it all" and there's nothing we can or should do about it?

US magnate Charlie Munger’s view on Wall Street pay: “A man does not deserve huge amounts of pay for creating tiny spreads on huge amounts of money. Any idiot can do it. As a matter of fact, many idiots do do it.”​

http://www.theaustralian.com.au/opi...m/news-story/3d953bee4670024ff8380c345323910c

 

[Werewolf]

In the US it is over 200x.

Is this value for money? Or is it Taleb's "winner takes it all" and there's nothing we can or should do about it?

US magnate Charlie Munger’s view on Wall Street pay: “A man does not deserve huge amounts of pay for creating tiny spreads on huge amounts of money. Any idiot can do it. As a matter of fact, many idiots do do it.”​

http://www.theaustralian.com.au/opi...m/news-story/3d953bee4670024ff8380c345323910c

Highway robbery is what it is. I've no problem with higher salaries for skilled, important or dangerous jobs, but that magnitude of a pay gap is insane. Even after tax (and even that's sometimes dodged!). There should be a maximum wage, but it's unlikely

 

[medusala]

Is this value for money? Or is it Taleb's "winner takes it all" and there's nothing we can or should do about it?

Shareholders are able to vote out a board if they so choose. Pity we cant do that to public servants.

 

[Chief]

Shareholders are able to vote out a board if they so choose. Pity we cant do that to public servants.

The big issue, at least in Australia, seems to be that the biggest shareholders do nothing to rein in management pay.

Is it a signal to the market? Our CEO is so good we heap gold at his feet like we would a living God.

 

[medusala]

The big issue, at least in Australia, seems to be that the biggest shareholders do nothing to rein in management pay.

Yes, big instos have typically been reluctant to do much, however, I think this has changed quite a bit in the last few years. Their have been a number of shareholder revolts in large UK companies recently over pay. I think the traditional argument is that well paid fund managers dont want to point the fingers at others as the spotlight may shift to them.

Shareholders in smaller companies tend to be more ruthless. Having said that plenty of directors of small ASX companies pay themselves absurd amounts (and very often with a West Perth address).

 

[coerced]

Shareholders are able to vote out a board if they so choose. Pity we cant do that to public servants.

Shareholders being...?

 

[Scotland]

The CEO of BHP earns around $8m, which is around 25% less than his predecessor for whatever that's worth. That's about 100 times what a truck driver is getting now.

Silly money, but it is an organisation of 30,000 people. Their wage bill in Australia alone would be well into the hundreds of millions. How much should he be paid? $100k? $500k? $1m? A shop assistant at Coles for example gets paid about $20 an hour so ~$40k p.a. Department managers maybe $60-80k. Store managers $100k+. Then you have regional managers, state managers etc. all the way up the line to the CEO of Wesfarmers. At what point should it top out?

If I were a major shareholder of a company I would prefer that execs were paid more moderate salaries and earned bonuses based on company performance, but that does run the risk of management behaving like politicians and only looking at short term interest. What irks me is when companies are losing money, laying off staff and top brass still get pay rises and bonuses.

 

[Long Live HFC]

it's an interesting debate.

on the one hand i feel executive pay is a negotiated agreement between consenting parties. on the other (as coerced alluded to), shareholders with enough voting power to matter are normally institutional investors from organisations that also pay their own executives shitloads of cash. does anyone have any serious solutions (assuming there's a problem)?

 

[Scotland]

Most shareholders only care about the value of their shares and their dividends.

Whether the CEO is getting $1m a year or $50m a year isn't usually a big factor.

 

[Bomberboyokay]

Remember reading somewhere (a real news site) how despite the astronomical increase in executive pay in recent decades none of the companies have actually increased their profits nearly as much.

 

[Barry_Badrinath]

The CEO of BHP earns around $8m, which is around 25% less than his predecessor for whatever that's worth. That's about 100 times what a truck driver is getting now.

Silly money, but it is an organisation of 30,000 people. Their wage bill in Australia alone would be well into the hundreds of millions. How much should he be paid? $100k? $500k? $1m? A shop assistant at Coles for example gets paid about $20 an hour so ~$40k p.a. Department managers maybe $60-80k. Store managers $100k+. Then you have regional managers, state managers etc. all the way up the line to the CEO of Wesfarmers. At what point should it top out?

If I were a major shareholder of a company I would prefer that execs were paid more moderate salaries and earned bonuses based on company performance, but that does run the risk of management behaving like politicians and only looking at short term interest. What irks me is when companies are losing money, laying off staff and top brass still get pay rises and bonuses.

Call me crazy, but $8 million doesn't seem unreasonable to me. If the CEO of the biggest mining company in the country can't make bank, then who can? I'd rather someone like that makes squillions than Andrew Bogut or Shane Watson. They certainly deserve 100 times whatever a truck driver makes. You could just about teach a monkey to drive a truck.

 

[Chief]

Call me crazy, but $8 million doesn't seem unreasonable to me. If the CEO of the biggest mining company in the country can't make bank, then who can? I'd rather someone like that makes squillions than Andrew Bogut or Shane Watson. They certainly deserve 100 times whatever a truck driver makes. You could just about teach a monkey to drive a truck.

The Munger quote earlier: a monkey could also create a tiny spread on a huge amount of money.

With concentration of wealth, capital, brands, one person at the top is unlikely to make a huge difference unless they take insane risks.

As we saw in the GFC, lots and lots of damage caused by people taking insane risks because they didn't do their jobs. But many still got paid huge sums.

 

[Mofra]

Shareholders are able to vote out a board if they so choose.

Fundies (including super fundies) are the biggest shareholders in most major stocks in Australia (a situation not uncommon in most other countries as I understand).

They don't vote out boards. They want info before the market does, they don't burn bridges.

 

[medusala]

The Munger quote earlier: a monkey could also create a tiny spread on a huge amount of money.

See LTCM, that was their entire business model. Ditto large numbers of banks who took out credit protection with AIG.

Munger and Buffett are in no position to criticise anyone over sharp practices let alone not paying enough tax.

 

[Chief]

See LTCM, that was their entire business model. Ditto large numbers of banks who took out credit protection with AIG.

Munger and Buffett are in no position to criticise anyone over sharp practices let alone not paying enough tax.

I am sure they have a barrel of tricks up their sleeve and aren't afraid to use them.

But does that make the observation inaccurate?

 

[Chief]

Fundies (including super fundies) are the biggest shareholders in most major stocks in Australia (a situation not uncommon in most other countries as I understand).

They don't vote out boards. They want info before the market does, they don't burn bridges.

WHY DOES EVERY THREAD BECOME ABOUT ISLAM??

 

[Mofra]

WHY DOES EVERY THREAD BECOME ABOUT ISLAM??

"You don't hate 1.6 billion people? You must want to kill the gays (but let's not let them marry, ew)"
/RWNJ

 

[Chief]

That broke the tension. Now back to overpaid execs.

 

[Brunswick Trap King]

"You don't hate 1.6 billion people? You must want to kill the gays (but let's not let them marry, ew)"
/RWNJ

 

[Power Raid]

The big issue, at least in Australia, seems to be that the biggest shareholders do nothing to rein in management pay.

Is it a signal to the market? Our CEO is so good we heap gold at his feet like we would a living God.

it is an interesting issue as many shareholder groups are big dumb super funds who have no idea about the management teams running their investee companies.

Those that do know and aren't happy have the choice of selling out or becoming activist. Becoming "activist" can come in two forms being a simple vote or submitting 249Ds (calling for resignation of a director).

I dare say there would be 100 times more 249Ds lumped on desks than submitted through the formal process. As most directors would see the writing on the wall and preserve reputation.

 

[Power Raid]

In the US it is over 200x.

Is this value for money? Or is it Taleb's "winner takes it all" and there's nothing we can or should do about it?

US magnate Charlie Munger’s view on Wall Street pay: “A man does not deserve huge amounts of pay for creating tiny spreads on huge amounts of money. Any idiot can do it. As a matter of fact, many idiots do do it.”​

http://www.theaustralian.com.au/opi...m/news-story/3d953bee4670024ff8380c345323910c

I don't mind high wages for quality executives but the pay is for their executive capacity and not their board capacity. A board role should be limited to $40k-$200k depending on the organisation, responsibility and risk. One has to remember a director can be sued and lose everything for as little as $40k upside.

In regards to executive pay, it is hard to benchmark as there are all kinds of organisations with different demands. The role is often not a job, rather it becomes part of life. A MD role is 24/7 where they are working or thinking about work.

Coming to wages, I feel founders and growth CEOs are worth a lot but a late stage CEO is not as valuable. Perversely the earlier stage and growth stage CEOs generally don't demand big cash salaries as the organisations simply don't have the balance sheets to support them. As such equity based payments are favoured and can be worthless or worth enormous amounts years down the track.

Late stage CEOs often earn way more than they should in cash and often don't have equity based payments aligned with the organisations interests. This is a failing of the remuneration committee.

Out of interest, what is the multiple on the lowest paid AFL players vs the stars of the comp? I dare say inequality is something we tolerate in some forums but not others.

 

[Power Raid]

The CEO of BHP earns around $8m, which is around 25% less than his predecessor for whatever that's worth. That's about 100 times what a truck driver is getting now.

Silly money, but it is an organisation of 30,000 people. Their wage bill in Australia alone would be well into the hundreds of millions. How much should he be paid? $100k? $500k? $1m? A shop assistant at Coles for example gets paid about $20 an hour so ~$40k p.a. Department managers maybe $60-80k. Store managers $100k+. Then you have regional managers, state managers etc. all the way up the line to the CEO of Wesfarmers. At what point should it top out?

If I were a major shareholder of a company I would prefer that execs were paid more moderate salaries and earned bonuses based on company performance, but that does run the risk of management behaving like politicians and only looking at short term interest. What irks me is when companies are losing money, laying off staff and top brass still get pay rises and bonuses.

Spot on and preferably the bonuses should be paid in escrowed equity rather than cash. So the interests of shareholders and management are aligned.

Labor was against this concept and introduced tax rules that prevented alignment of interests with shareholders but fortunately those rules were repealed. Essentially Labor was taxing theoretical value for options, including worthless options, options out of the money and may never be in the money. The rules still aren't "common sense" but with an imaginative government (whenever that arrives) we could remedy the tax treatment which may remedy the pay discrepancy and align interests.

 

[Howard Littlejohn]

The big issue, at least in Australia, seems to be that the biggest shareholders do nothing to rein in management pay.

Is it a signal to the market? Our CEO is so good we heap gold at his feet like we would a living God.

The big shareholders are usually the institutions who themselves have similar packages for their own management and boards. They aren't going to demand change that could blow back on them in the near future.

Basically, the whole thing is part of Adam Smith's "invisible hand of the market" sticking its middle finger up at the public.

 

[Todman]

Worth every penny.

 

[Seeds]

Shareholders are able to vote out a board if they so choose. Pity we cant do that to public servants.

You can vote for a government that wants to sack public servants.