Monday, December 22, 2008

A quick note to, hopefully, make things more grey

In the light of a number of corporate bailouts, much ado has been made about CEO pay and bonuses.

I have heard many pundits and journalists express outrage that companies that are receiving federal money would put it toward such a finite investment as a bonus for the CEO. However, I would think that the CEO of a failing company would be thinking, nearly every day, of jumping ship. The decision made by a board of directors to give the CEO more money does provide the value of keeping the existing leader in the time of crisis.

One might also make the argument that the existing leadership of a failing company deserves to be removed from their posts. This might definitely be true. However, the cost of attracting a new CEO to the post might be even more than merely retaining the existing CEO. Place yourself in the shoes of a business executive, and ask yourself what salary you'd require to be the head of AIG right now.

I don't necessarily think all this justifies the expense. But I do like viewing most things as a tricky grey area.

Perhaps our outrage should be toward the fact that CEOs of major companies have such an astronomical baseline salary to begin with, rather than that the failing companies have to keep those salaries high to compete.

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