C-level folks make huge strategic and tactical mistakes _all the time_. They are humans. Amazon has burned tens of billions of dollars on dead-end consumer electronics devices (fire phone?). Facebook is shoveling money into a burning pit trying to convince people to wear goggles for eight hours a day so that they can beam ads directly into our eyes using lasers. Huge companies fail and flounder for decades before toppling over under the weight of incompetent, highly-compensated leadership - this is the norm, not the exception.
The assertion that paying more money to the folks at the top has yielded commensurate returns is really not backed by ... anything at all, as far as I can see.
What if you examine the dead horsed mantra of “improving shareholder value”? Does their compensation reflect their ability to have improved shareholder value?
Actually another comment links to an article about:
“CEO Pay and Performance Often Don’t Match Up:
The S&P 500 CEOs who received the biggest pay increases scored middling shareholder returns”
I feel like that entire study is flawed because you can't just compare stock performances straight up.
You have to look at how the same stock would of performed with a different manager.
There are many factors outside of management's control that will dictate the return on a single stock. But don't confuse that with the fact that management decisions do have an impact and can make a large difference.
If they can't control a substantial portion of the downside risk, they shouldn't be allowed to take credit for the full upside, either.
The problem with the executive compensation ratchet of the past few decades is that it is completely divorced from any actual measure of C-level impact. If things go bad, not their fault - if things go well, it couldn't possibly have happened without these strong leaders at the helm.
Who said they don't? Who says those stocks wouldn't have performed considerably worse without good management? That's what I am getting at. Just because a stock goes down does not imply bad management or vice versa. But again that doesn't mean that management decisions don't matter, they can matter a lot.
Amazon and FB are not the norm, especially FB which is controlled by one person. These are tech companies trying to win market share in emerging sectors, and pulling the plug when they fail to get a foothold. Amazon created an entire industry (Cloud) that it's the dominant player in, totally tangential to its main business as durable goods retailer with this strategy, and it's the company's main profit center now.
I can't imagine a shareholder in either company also thinking you know...these guys at the top of both companies have been paid too much, the various right and wrong decisions they've made turned Amazon and FB into the 4th and 7th most valuable pubicly traded companies in the world in 20 years. They should have paid their c-suite half and become what? Still the 4th and 7th most valuable companies in the world? We know this why?
At the end of the day it's a very hard job, and no one has any idea who the hell is good at it. Prior performance is a good signal, but who knows really? Why would you go cheap when the potential for billions of dollars in wealth destruction/creation is at risk?
The assertion that paying more money to the folks at the top has yielded commensurate returns is really not backed by ... anything at all, as far as I can see.