Home Depot's (HD) CEO Nardelli left the company today. One of the big reasons? Stockholders thought his pay (about $124 million in six years) was too high given the performance of HD stock, which dropped about 5.6% under his tenure. Given Home Depot's market capitalization, he lost about $1 billion a year. His severance pay, triggered by his high pay, is $210 million. So, he gets total pay of about one third of a billion dollars for destroying about $5 billion in stock value. Amazing. I have no doub that Nardelli has above average ability in terms of negotiation and his mastery of the alpha male dynamics. What I (and most everyone probably) doubts is his ability to actually create wealth.
The CEO is the last of the monarchs. Whatever your beef with George W. Bush (and readers of this blog know I have plenty), he puts up with plenty of criticism from his own citizenry and press. By contrast, CEOs get almost no criticism from within their own companies. To speak out against a CEO in the same way that, say, Paul Krugman speaks out against George Bush would ensure a loss of citizenship, I mean employment.
The corporation has risen to great power. I would argue that it is today's dominant institution. But the power structure within the corporation is dated, echoing the power structure of medieval popes or Renaissance kings.
One of the biggest problems with the modern corporation is that it is now owned by the likes of me and you. Peter Drucker seemed to have been the lone voice pointing out that a silent revolution had taken place in recent decades: suddenly the biggest owners of stocks were common employees who held equity through mutual and retirement funds. Yet even though we own these stocks, we don't have a mechanism for influencing policy. CEOs still have disproportionate power over corporate policy.
If a CEO actually influences stock price enough to justify pay of a third of a billion in five years, he is simply exercising too much power, playing the autocrat far too much. A Renaissance king was easily the richest man in the kingdom. Today's presidents are rarely in the list of the top one hundred wealthiest. We'll know that the corporation has adopted a more sensible power structure when the top paid employees within a corporation are only rarely, rather than inevitably, the CEO. It's time for corporate revolution.
The CEO is the last of the monarchs. Whatever your beef with George W. Bush (and readers of this blog know I have plenty), he puts up with plenty of criticism from his own citizenry and press. By contrast, CEOs get almost no criticism from within their own companies. To speak out against a CEO in the same way that, say, Paul Krugman speaks out against George Bush would ensure a loss of citizenship, I mean employment.
The corporation has risen to great power. I would argue that it is today's dominant institution. But the power structure within the corporation is dated, echoing the power structure of medieval popes or Renaissance kings.
One of the biggest problems with the modern corporation is that it is now owned by the likes of me and you. Peter Drucker seemed to have been the lone voice pointing out that a silent revolution had taken place in recent decades: suddenly the biggest owners of stocks were common employees who held equity through mutual and retirement funds. Yet even though we own these stocks, we don't have a mechanism for influencing policy. CEOs still have disproportionate power over corporate policy.
If a CEO actually influences stock price enough to justify pay of a third of a billion in five years, he is simply exercising too much power, playing the autocrat far too much. A Renaissance king was easily the richest man in the kingdom. Today's presidents are rarely in the list of the top one hundred wealthiest. We'll know that the corporation has adopted a more sensible power structure when the top paid employees within a corporation are only rarely, rather than inevitably, the CEO. It's time for corporate revolution.
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