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The San Jose Mercury News reports that some boards of publicly traded companies in Silicon Valley appear to have become more sensitive to shareholder concerns about runaway CEO compensation, apparently in reaction to a provisions in the Dodd-Frank Wall Street Reform Act of 2010. Two of these provisions, which apply to publicly traded companies, are 1) "say on pay": a requirement that a non-binding shareholder vote approving or disapproving of the CEO's compensation, be held at least once every three years; and 2) "CEO pay multiple": a requirement that the firm disclose the ratio of total compensation of the CEO to that of the firm's median employee salary or wage.
It's important to realize that shareholder votes are based on one share, one vote (rather than one person, one vote); the big shareholders, which tend to be deep-pocketed institutions such as mutual funds and pension funds, dominate the proceedings.
Oracle, biotech company Gilead Sciences, and pharmaceutical distributor McKesson, were mentioned by Mercury News as examples of companies based in Silicon Valley whose CEOs have taken pay cuts in the last year. McKesson's CEO lost the non-binding shareholder vote after Glenn Gray, a warehouse worker who made $16/hr, stood up at the shareholder's meeting to contrast the CEO's compensation with those of rank-and-file workers struggling to make ends meet. Gray was subsequently fired, but his job was later reinstated under court order. He says he has no regrets about speaking out:
My objective was not to tell shareholders [McKesson CEO] John Hammergren deserves this or that. I was speaking for the employees back on the plant who were afraid. You've got some really, really struggling people in Florida.
Recent "say on pay" shareholder votes at Salesforce and Yahoo! also attracted attention, but the dissidents opposing the CEO pay packages failed to win the majority of votes cast.
(Score: 2) by Thexalon on Monday August 03 2015, @07:59PM
Why is that CEO more valuable to a company than someone who can, by working with the CSO and CMO get $20M more in annual sales? Why is that CEO more valuable than the person who can work with the CTO and COO to cut operational and production costs by $20M annually? And why is that CEO more valuable than one that works with the head of R&D to develop a new product so groundbreaking that customers are saying "shut up and take my money" and investment banks are practically falling over themselves trying to win the chance to handle the IPO?
You mentioned George W Bush. Here's the thing: George W Bush was placed in positions of power in every single company he worked at for exactly one name in his Rolodex. A name that he had to do precisely nothing to create that relationship. And because those companies valued that one name, it didn't matter to George W Bush's future what George W Bush actually did.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 1) by tftp on Monday August 03 2015, @08:37PM
And because those companies valued that one name, it didn't matter to George W Bush's future what George W Bush actually did.
It is certainly one of the ways to become a CEO or land in a similar office. Requires no talent and no hard work, just needs the right connections. CEOs and CFOs and other C*Os all have children, don't they? Do they want their children to work in warehouses for $16/hr or, perhaps, they'd rather want them to sit on boards of a few companies for symbolic expense of time and for not exactly symbolic compensation? Where the socialites are going to come from? Clearly not from warehouses. It takes serious income and lack of job duties to sail on yachts and hold banquets. First generation millionaires are often workaholics; but their children, who are born into wealth, may prefer a different kind of life.
Why is that CEO more valuable to a company than someone who can, by working with the CSO and CMO get $20M more in annual sales?
Well, first he is not *more valuable*. Anyone who can get $20M more in annual sales should be also appreciated. To compare you look into such factors as personal contribution, replaceability, initiative vs. doing an assigned work, and such. A CEO is not a one trick pony - he can get a loan on Monday, he can buy land on Tuesday, he can hire a general contractor on Wednesday, he can present in front of investors on Thursday, he can negotiate a deal on Friday... Maybe he cannot develop a product that, if sold, gains the company those extra $20M/yr in sales, but he can assist in making it happen - he can personally hire an all-important specialist and give him extremely attractive compensation for what he knows. CEOs are very universal creatures, and they are used to putting out fires and sweet-talking to a customer almost at the same time. If an engineer screws up and damages the instrument that the customer paid $10M for, it's the CEO who will be apologizing to the customer. The buck always stops at his desk. Is he ovepaid? Probably, if his yearly salary is $10M. However a $1M for managing a company with 10,000 employees may be reasonable.