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Executive compensation


crocodon
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Salary + bonus + benefits run into the millions for many public company directors. I genuinely don't see how this can be justified. Surely there are plenty of talented people who could/would do the job for less. Is there anything that can be done about this? Why do institutional shareholders stand for it?!

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Salary + bonus + benefits run into the millions for many public company directors. I genuinely don't see how this can be justified. Surely there are plenty of talented people who could/would do the job for less. Is there anything that can be done about this? Why do institutional shareholders stand for it?!

 

Because the benefit is concentrated and the cost is diffuse.

 

Anytime the cost is diffuse and spread so thinly across multiple people where no individual is given an incentive to care, you get systems in place like this. This explains wasteful government programs, lobbying, persistent devaluation of currencies, etc. etc. etc.

 

Savings millions of dollars in a multi-billion dollar enterprise might add a few pennies to each share of their investment. Not anywhere near the impact of other actions they could be taking. Further, now that the system is ingrained, it's hard to change. Maybe there are talented people who could do it for less...but would they if a competing company offers them 50% more?

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I vote against compensation packages for almost all companies I invest into. Exceptions are BRK, FRFHF, and maybe couple more that I forget offhand. I don't expect things to change though as TwoCitiesCapital explained.

 

 

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