The downside of the family "real estate assets"... I am spending all weekend maintaining them, so I have just forwarded Annie's question to the top of the list.
"Annie: I think we all agree that CEO comp and the focus on short term profits are a problem in some cases. How would you advise fixing it?"
I wish I knew. Those who have acquired the money and power won't give it up gladly. I don't solely blame CEOs--they're the beneficiaries but not the only culprits.
I'd love to know how to culturally help businesses refocus so there are more balanced, healthy priorities on profits AND employees AND social responsibility. Some companies do it--Costco comes to mind, seems like some of the silicon valley tech giants do a good job.
Any ideas?
--Annie
A story from my previous employer was that in the mid-1980's they were losing $1 million dollars a day and the market was not happy but the it tolerated it. In the 1990's the market pummelled them for only breaking even. And now the market will pummel them if they don't consistently meet the forecasts. This change does make it hard for companies to act in "long term" ways. With this in mind they just had another layoff in the endless effort to deliver to plan...
The Investors demand immediate profits, so the Boards set compensation policy in alignment with this, so the CEO's struggle to deliver, the Markets go up and down and the Employees hold onto the whipping tail and pray...
Thoughts?
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6 comments:
An undue focus on the short term can be very damaging for companies. A large part of the financial crisis was the result of a management grab for short term profits at the expense of taking on long term risk which it wasn't in the interest of managers to understand. Issues like this are another reason why our economy is struggling.
--Hiram
Hiram,
Sound very much like our current Government?? What do you think, anyone??
Sound very much like our current Government?
It does, with many similar negative consequences. One of my favorite subjects is certainty and the quest for it. So often we are told that people want certainty. If that's the case, why do so often those same people act in a way to make things less rather than more certain?
--Hiram
Oh come, the liberal contingent must some ideas. Us fiscal conservatives are going to be hard pressed to say we should not let the free market have its way...
Then it will go something like this, how do we encouraged private investors to be more tolerant of short term losses in the order to enable companies to operate with a longer term focus?
Us fiscal conservatives are going to be hard pressed to say we should not let the free market have its way...
One problem withh executive compensation is that it is not subject to market forces. CEO jobs aren't subject to a bidding process. Compensation is often determined by a process full of conflicts of interest. And those who pay for CEO compensation, the shareholders, have very little power over corporate actions. Shareholder meetings are rubber stamp affairs, and even when management loses, they seem to have the power to override shareholder votes. Basically management runs corporations, and they run them to their own advantage.
--Hiram
Okay, I'll give you some jump start links.
Fortune CNN CEO Compensation
UCLA CEO
Con Law Review CEO
Daily Finance CEO
Harvard CEO
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