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Are CEO's Worth It…Apparently Not

I cited a piece on CEO pay here. This piece lead me to look at what local CEO’s are paid and conveniently the Australian Council of Superannuation Investors produced the table below.

 

I reordered the data a little to simply show their 2011 Realised Pay to which I added the one and five year share price performance of the various companies they managed.

In adding the price performance metric I wanted to get a sense of the value that CEOs might bring to shareholders since the main argument of paying these plonks vast sums of money is that they bring value. It could be argued that assessing a CEO on share price performance is a bit harsh but remember the crux of the argument for paying them so well is that they deliver share holder value. Share holder value is not a function of the balance sheet, it is a function of what the market will pay you for your assets that are managed by someone else.

As you can see over a five year period only two generated a positive price performance and only one of these was a stand out.

You could argue that the banks one year performance is quite good but I would counter that in the same period the ASX 200 Banking Total Return Index grew 36%.. So they have managed to under perform their benchmark. On that basis If they were a professional money manager  all they would take home would be their base salary.

I am all for people being able to earn as much as they possibly can but only if it is their own business. If you are the head of any entity all your should take home is a maximum of $250,000, the rest is all performance based. And it cannot be the same old bullshit performance criteria of here’s a few million for not sending the company broke in the manner of Sol Trjillo, Who whilst at Telstra managed to lose $25 billion in market value and drive customers to other carriers in droves yet somehow managed to pocket $11 million.

Perhaps it is time we started outsourcing our CEO’s to India or the Philippines as they argument they apply to taking jobs off shore can be applied equally well to them. They are overpaid and simply not productive enough.

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Comments

  1. I couldn’t agree more

    I used to work for an ASX100 company (only just in the 100 too) where the Chief Operating Officer was on more than a million bucks. After watching him in action for a year a few of us decided the best value he could offer was to leave and save us a million a year. It’s about the only time I have ever thought the concept of being able to vote people out of the house was a good idea

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