   Executive pay: Entrepreneurs vs. hired guns
  If there is one thing in the Lounge that is more certain than the impossibility of building an MMO singlehandedly, it is that top business executives are paid far beyond what they deserve.In my mind, there are two kinds of executives: Founders and Professional Executives.Founders are the people who see a business opportunity and create a company from nothing.  These are people like Henry Ford, Bill Gates, Scott McNealy (of Sun Microsystems), and the millions of others who have build successful enterprises up from the ground.Professional executives are people like John Thain, the much-maligned former Chairman of Merrill Lynch.  As far as a quick Google/Wikipedia search goes, I don't see that Thain ever started anything himself.  He graduated from MIT and got an MBA from Harvard, then rose to prominence in the New York financial world.My feeling is that founders are entitled to the spoils of their enterprise, and that professional executives are an evil that necessarily comes to fill the void when the founders leave.In other words, I don't begrudge Bill Gates his billions.  He built products and distribution lines that created jobs for literally millions of people.  I even grant that Charles Merrill and Edmund Lynch earned their wealth by building an innovative bank and brokerage that worked to make stock-market trading accessible to middle-class Americans.But in time, all those founders retire and die.  In some cases, they're replaced by other founders from their own organization, but more often they're replaced by professional executives.A professional executive comes to fill a position that has historically paid out handsomely to its holder (and justifiably so, since the person in that position helped create the whole enterprise).  As such, he expects to be paid similarly.  After all, he says, I'll be doing the same work as the last guy, so I should be paid the same.And there's the problem.  Ford's successor did not do the same work Ford did.  He simply continued operating one of the most successful auto manufacturers of his day.  Surely he had plenty of work keeping up with competition, but the hardest part--building a global enterprise--was already done for him.So what do you think?  Are founders entitled to ridiculously large compensation?  Are the professional executives entitled to continue receiving that same compensation when they come to replace the founders?  If not, what do you think professional executives should receive?  And do you think anything can, will, or should be done about it by the government?   
  Considering that the CEO exists to serve the Board of Directors, and thereby the stock holders, who themselves are the owners of the company (and are themselves the "average folk"), then it is the responsibility of said board to choose for themselves if the compensation they give the CEO is reasonable. What right does a third party have to say otherwise?   ;  There certainly is such a thing as an overpaid executive. I'd like to ask you to clarify your belief on why an overpaid executive is bad. Does it harm the company and if so, how?   ;  Unless the company is receiving government bailouts, it really isn't anyones business except the shareholders / boards what executives get paid. If a potential CEO can convince the company that they are worth millions of dollars, even if they ruin the company, then good for them.To be fair, the number of CEOs making millions of dollars in salary is quite small compared to the total number of CEOs. Judging the entire group because of the actions of the few that get the most media attention is hardly what I would call fair.   ;Quote:Original post by trzyThere certainly is such a thing as an overpaid executive. I'd like to ask you to clarify your belief on why an overpaid executive is bad. Does it harm the company and if so, how?Good question.  Overpaying executives (or giving them the ability to be highly paid regardless of performance) may divorce their personal financial motivation from the motivation to keep their company running strong.  If I can run the company irresponsibly and cash out with $20M in three years based on shady stock selloffs, etc, or run the company responsibly and earn $1M/year indefinitely, I'm going to take the first option.I don't personally have a problem with people getting paid huge money (heck, I'd like to be that guy) as long as they're bringing that much value to the company.  One question I'm raising is, do professional executives brought in to run established companies actually bring that kind of value to the table?   ;  From my limited understanding of business, it might be just as hard to maintain a profitable business as it is to start one. In discussions about improving aspects within the company I work for, it is often suggested that we start a second business to run alongside our existing one, because it is too hard to change the roots of our existing business to keep up with our demands. Tools that we develop for those demands inevitably clash with existing tools, and far too often the cure is worse than the disease.   ;Quote:Original post by BeanDogQuote:Original post by trzyThere certainly is such a thing as an overpaid executive. I'd like to ask you to clarify your belief on why an overpaid executive is bad. Does it harm the company and if so, how?Good question.  Overpaying executives (or giving them the ability to be highly paid regardless of performance) may divorce their personal financial motivation from the motivation to keep their company running strong.  If I can run the company irresponsibly and cash out with $20M in three years based on shady stock selloffs, etc, or run the company responsibly and earn $1M/year indefinitely, I'm going to take the first option.So you're saying that an overpaid executive is a drain on the company. Overpaid executives more interested in personal glorification than the well-being of the company will weaken or ruin the business. In that case, isn't this a self-rectifying problem?Until you decide to bail them out, that is. In the case of the financial meltdown, there was a very tight relationship between the government and finance executives. They knew they could twist the government (and the public) into rescuing them.   ;Quote:Original post by BeanDogProfessional executives are people like John Thain, the much-maligned former Chairman of Merrill Lynch.  As far as a quick Google/Wikipedia search goes, I don't see that Thain ever started anything himself.  He graduated from MIT and got an MBA from Harvard, then rose to prominence in the New York financial world.I actually worked at Merrill Lynch through the good days (90$ stock) through much of the financial crisis until they got bought by BofA.Thain actually did a really good job of running the company.  I believe that he was worth his pay.  The unfortunate mess that he inherited still destroyed the company, but he did the best that he could while he was there.  It simply was a time bomb waiting to explode.   ;  They're entitled to whatever they can get, just like everyone else.   ;  A CEO is a CEO, regardless of the size of the company.  You can be a CEO of your own business with 20 employees and your annual salary is a mere £55k, doesn't make you any less of a CEO than Sir Reginald Arseface in London taking home £48302983209480948032948203480 in bonuses after driving his company to collapse and putting 50k lesser paid people, with mortgages and young kids, out of work.  After he leaves, tabloid scandal breaks - Sir Reginald employed a permanent member of staff to hand him sheets of toilet roll, he spent £5000 a day of company money on luxury caviar airlifted in fresh to his office every day from the other side of the world, personally ordered a new £20000 sofa for his office because he didn't like the colour of the old one and he discovered his predecessor's kids had eaten cheese and onion crisps on it five years ago, and bought a fleet of customised top end Mercedes limousines as executive company cars.  That, kiddies, is immoral behaviour at the best of times, even more so when business is bad.Bill Gates is a special case.  Right up until he left Microsoft, he was actively involved in development of his company's products even including sitting in on design meetings and actively influencing design decisions.  Another thing I saw on that episode of The Money Programme on BBC Two last year was that Bill Gates used to sit in his office and use Microsoft products, but he would then fire off an e-mail to the developers if he found something wrong or something that could/should be changed in some way.  He was an integral part of the whole team in one way or another and genuinely cared about the company's success above his own wallet, not like some bigshot sitting in a luxury penthouse office raking in bonuses while the Titanic slowly sinks underneath them.  That is to suggest they're even in the office; what about in Cancun getting drunk and picking up hookers with the equally corrupt and ostentatious CEO of Other Failing Conglomerate Ltd. from the other end of Europe.For the record, I don't have the same faith in Steve Ballmer; the guy is unhinged and I cannot for one moment take him seriously.   