This is in response to Executive Comp for the Average Joe.
This article is full of truth -- truth you can't deny! I've been wondering for years why the divide between the boss and the people who make things happen has become as wide as the Grand Canyon, and just keeps getting wider.
As the gap becomes wider, the executives feel a sense of entitlement and perhaps a false sense of worth. "I must be amazing, look at how much they pay me." I work for a company with a boss who believes all of us in the lower end of the caste system are replaceable and I don't think most people care about the success of this company beyond wanting to remain employed.
The truth in this article is simple yet profound.
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GREAT POINTS raised by Mr. Cappelli. In the nonprofit world, we are really focusing on employee engagement strategies because we just don't have the $$$. Thank goodness we also have a compelling mission that keeps our top performers with us!
Thank you for this article. Maybe he could shoot it up the ladder to some high level executives and their boards -- they may begin to rethink executive comp.
Girl Scouts of the USA
Human Resources Consultant
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You are going to win the trouble maker of the year award.
That said, it would be nice if B-schools told the truth about exec pay -- these people are part of a powerful elite and workers are not, rather than pretend that its in everyone's interest that the system work as it does.
All the best,
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After 30 years in this profession, it is exciting to find the insight of Peter Cappelli. Matching compensation to the value added by human talent has been a challenge for some time.
Unfortunately, much of the effort falls on the open marketplace. Supply and demand sets the price of labor. As long as there was another woman willing to take the job at a lower rate of pay, companies were willing to pay the lesser amount and equal pay suffered.
I also hate to see the need for an organizing campaign to get the attention of management that maybe wages are too low.
In the financial world, if a money manager could take $500 million and turn it into $50 billion based upon the odds of a mathematical formula, or derivative of several different outcomes, the investment community beat a path to his door.
Greed was the motivator and risk got very little attention. People tried to force Bernie Madoff to take their life savings, just based on what other people said. For a 30 percent return of investment, while the market was giving 5 percent, greed won out.
Few understood the derivative contract's risk, but five major banks built our credit system around them, not expecting the perfect storm. It takes talent to sit at this table, talent and guts that few see in a lifetime.
If an institutional fund manager with billions under his control can beat the index by 1 percent, he has earned bonus, one the average Joe might never understand. Don't get me wrong, I'm not that guy, I sit in the safety of Human Resources.
Miles Standish, Vice President
Lee Air Conditioners
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I have made myself the fly in the ointment for saying the same thing for over 10 years. It never fails to amaze me that some senior exec is more valuable than the persons who have to make work what they dream up. Thanks for making the view public.
Richard Love, SPHR, CCP, CBP, GRP
Associate - Human Resources
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There is very little complexity in how executive compensation has been structured over the last 15-20 years. We can start with company board of directors who are either current or past executives themselves. The board structures executive compensation through compensation committees which usually contain board members and, you guessed it, EXECUTIVES.
Board members are paid extremely well for the relatively few responsibilities they have. Company executives nominate and lobby for these board members to be elected thereby insuring their own obscene compensation. The game is rigged and most of the time shareholders are powerless to intervene.
Too often, executive pay is increased at the expense of the company workers. Most executives enjoy supplemental pension plans which are protected in case of company default or bankruptcy, whereas the workers must take their chances with the [Pension Benefit Guaranty Corp.]
Executives have enjoyed many perks at the expense of workers and shareholders. The network for these privileged few is extensive which allows them to fail at one company and move to another for more money. The system they have created is rather ingenious.
They have succeeded in making many benefits portable which allows them to pack up and move with their accumulated benefits without losing a dime. Once they are discovered as freeloaders or incompetents they contact their agents (headhunters) and secure a better paying position before they take their severance provided vacation.
Many executives seem to operate as mercenaries. They implement policies that are designed to produce short term gains to enhance their bonuses. These policies usually have severe negative long term consequences for the company. Conveniently, the executive relocates to another company before the policy shortfalls surface.
Workers resent most of these overpaid mercenaries because they see through the smoke long before the company. In most cases, hourly workers are the only constant within a company. They have the knowledge and experience that most executives lack. What they are lacking in most cases however, is the respect from the company powers to be heard. Today, the word " Executive" denotes overpaid incompetence to the workforce.