How many of those private equity firms are snapping up those overpaid CEOs now? Executive compensation appears to be at least one area where the free market fails. Because, as the cartoon points out, the members of the comp committees have conflicts of interest. How do you explain the fact that the CEO of Toyota makes a fraction of what the CEO of GM makes. And the Toyota guy runs a profitable company that now sells more cars than GM.
It often surprises people (given other topics on my blog) that I also do not have a problem with current rates of CEO pay. Being a CEO is an insane job that I would not want to do.
For me the issue of concern is disclosure. Many of the benefits provided to corporate CEOs are neatly tucked away in such a manner that it is hard not to conclude that the board is embarassed by them. I don't care if a CEO gets $20 million a year. I DO care if the company's filings lead me to believe that this CEO is only getting $5 million. It creates the suspicion, often unwarranted, that that board has reason to hide something.
I'd be willing to bet dollars to doughnuts that when "XYZ Private Equity Inc" hires Former Star CEO of "EFG Public Corp", XYZ puts together a compensation package quite different from the one that Former Star CEO received from EFG Public.
For example, do you think XYZ Private Equity would ever be stupid enough to give Star CEO some of the obscene golden parachute packages that so many *FAILED* CEOs have received while at public companies? (Think Carly Fiorina if you're hurting for an example.)
Private Equity people can put their money where their mouths are by hiring these former public company CEOs to head their new firms WHILE GIVING THE CEOS EFFECTIVELY IDENTICAL COMPENSATION TO WHAT THEY WERE RECEIVING WHILE AT THE PUBLIC COMPANY.
That means tens of millions of stock options (plus more to come ever year), easy-to-reach "incentive" bonuses, accelerated pension vesting (5-10 yrs of vesting for every one of service), use of the company jet for life, and an obscene golden parachute package EVEN IF THE PRIVATE COMPANY NEVER GETS SOLD FOR A PROFIT.
Think the private equity guys are up for that?
Anything short of that and the private equity guys are simply full of hot air.
So, they would rather be employees? I suspected it all along.
Commenting by HaloScan
