You are right about the "C's" that run these companies. Here is something
written by a gentleman named Marc McDolnald back in 2005. It certainly
applies now...
CEO pay continues to soar into the stratosphere, while wages for the average
American worker stagnate.
Forbes magazine reported that the CEOs of America's 500 biggest companies
received an aggregate 54 percent pay raise in 2004. As a group, their total
compensation totaled $5.1 billion (compared with $3.3 billion in fiscal
2003).
Some think that under America's free market system, these chief executives
"earned" their pay. But did they?
Forbes, a publication not exactly considered to be in the progressive camp,
seems to think otherwise. The magazine says some CEOs "did so bad they
should have paid their shareholders."
Take Peter Cartwright of Calpine, a maker of gas-fired power plants. Forbes
reports that Calpine's average annual return to shareholders over the past
six years has been minus 7 percent. During the same period, Cartwright
pocketed an average annual $13 million.
America's CEOs are by far the highest paid CEOs of any nation on earth.
Which begs a question: why? The U.S. economy isn't exactly stellar at the
moment. America's economy is facing a major crisis.
Our exploding fiscal and trade deficits are the highest that any developed
nation has ever seen. America's once-vaunted manufacturing base has been
hollowed out. And the dollar continues to crumble in value.
Exploding CEO pay is a relatively recent phenomenon in U.S. history. For
example, in the 1960s, the average CEO earned around 40 times what the
rank-and-file workers earned. Today the average CEO makes over 500 times
what the average worker earns. And the gap continues to widen, year by year.
Like a magician pulling a rabbit out of a hat, some are constantly coming up
with reasons to justify soaring CEO pay. Here are three of my favorites:
CEOs create jobs. They create shareholder value. They have supposedly made
the U.S. economy the strongest and most competitive in the world.
First of all, let's take a look at jobs. The past few years haven't exactly
been a boon to job seekers in the U.S. Fewer and fewer jobs are being
created these days. And the jobs that do exist are paying less and offer
increasingly meager benefits. And American employees work the longest hours
in the industrialized world, as author Juliet Schor pointed out in her book,
The Overworked American.
Now, consider the issue of "shareholder value." The past few years haven't
exactly been stellar for the stock market. But even the CEOs who preside
over companies with sinking share value continue to pocket huge compensation
packages.
Last, but not least: let's take a look at America's "competitiveness" these
days.
A recurring mantra with America's mainstream and business press is that the
U.S. is the most "competitive" economy in the world. A casual look at
America's current trade figures, though, explodes this myth.
The fact is, America has the largest trade deficits of any First World
nation in history. It seems to me that the U.S. has a difficult time these
days creating products that other nations want to buy. Meanwhile, Americans
line up to buy products from countries like Germany (which exceeds even
China as the world's largest exporter) and Japan---despite the fact that
average wages in those two countries are now higher than U.S. wage levels.
If U.S. corporations are really that "competitive" these days, it seems
strange to me that America's CEOs seem to have a tough time making ends meet
without corporate welfare.
Take Wal-Mart for example. The world's largest corporation (with over $286
billion in annual sales) cost American taxpayers over $1.5 billion in 2004,
according to Walmartwatch.com.
If you want to get an idea of how out-of-control soaring CEO pay has gotten,
it's important to look at the CEO pay of America's automakers. To me,
Detroit sums up many of the major problems that America's economy as a whole
faces these days.
Detroit's CEOs have long pocketed by far the highest compensation levels of
any auto executives in the world.
This shouldn't really be surprising: American CEOs in general have long
raked in vastly higher pay packages than their overseas counterparts. U.S.
CEOs make, on average, 22 times what their counterparts make in Japan and 17
times what their counterparts earn in Europe.
If pay is somehow tied to performance, then you'd think that America's
automakers are the world's most competitive, correct?
If so, you'd be wrong. Detroit, in fact, has been steadily losing market
share to foreign automakers for the past five decades. And the blame for
this can be laid squarely on the shoulders of Detroit's CEOs, who've made
one stupid decision after another for decades. One recent example: Detroit's
decision to stake everything on gas-guzzling SUVs, while the Japanese were
busy perfecting hybrid technology. (Hybrids are currently by far the auto
industry's hottest segment).
Detroit CEOs have long complained that "it's not their fault" and have
offered up one excuse after another as to why America's car companies are
losing market share. My favorite excuse of theirs is that foreign
automakers' workers earn less than their America counterparts (an excuse
that the U.S. mainstream and business media has never bothered to
challenge).
A quick look at the numbers explodes this lie. The fact is, automaker
employees in both Japan and Germany earn higher salaries than U.S. automaker
workers do these days. Japan's wages run 30 to 40 percent higher than
Detroit's wages. And German automakers workers earn around $49/hour on
average versus $39/hour for Detroit's workers.
Although U.S. automaker workers earn less than their foreign counterparts,
Detroit CEOs make vastly higher pay packages than their counterparts do in
Germany or Japan.
This vast gulf was vividly demonstrated in 1998 when German automaker
Daimler-Benz took over U.S. automaker Chrysler. As it turned out, the CEO of
Daimler-Benz, Jurgen Schrempp, was earning a pay package that was less than
one-tenth of the pay package of Chrysler CEO Robert Eaton.
One might think, given the gigantic pay packages of America's CEOs these
days, that being a chief executive is a demanding job. It seems to me that
the opposite is true. CEOs seem to do little more these days than bitch and
moan and offer up excuses for their companies' declining fortunes. There are
always plenty of handy scapegoats around. Unions. Democrats. "Excessive" red
tape and regulations. Lower wages overseas. Ad nauseam.
It seems to me that, far from having a difficult job, America's CEOs
actually have one of the easiest jobs in the world these days. When things
aren't going well, simply blame others for your mistakes (shades of the Bush
White House here). And, if that doesn't work, simply ask for another round
of corporate welfare from the government.
----- Original Message -----
From: "Brian Ellis" <[log in to unmask]>
To: <[log in to unmask]>
Sent: Sunday, November 23, 2008 10:36 AM
Subject: Re: [TN] A Modern Parable
OK, we've had a lot about cars, some of it valid and at least is
absolute nonsense, but what about the electronics industry? Is it any
better? No, it isn't! Just think from where you are buying your PCBs?
China? India? Malaysia? Why? Because we priced ourselves out of the
market with top-heavy administration and rigid adhesion to useless
over-specifications. You can buy some prototype home-produced circuit
boards for $30 or $50, which is far less than it would cost a large
fabricator just to set up his silk-screen machine to apply the legend,
because the guy who does it has a 4- or 5-deep hierarchical chain above
him with bloated salaries and bonuses. Because this hierarchy, with a
CEO, CFO, COO, CSO and every other letter between the C and the O,
doesn't have a clue what a PCB is about, they are easily hoodwinked by
their equally ignorant subordinates. This includes said subordinates
covering their asses with rampant over-specification of everything,
always pushing costs ever-higher. Is it any wonder that the western PCB
industry became less competitive?
Then there is too much departmentalisation. This means that the
co-ordination between departments is at least two hierarchical steps
above those for whom it matters: too many chiefs, not enough Indians.
I have visited plants in various Far Eastern countries. With the
exception of Japan and some State-owned plants, the organisation, even
in large companies, is much more open and the shop floor worker has just
one person between him and the technical director, in many cases. What
is more, he understands what he is doing and the repercussions that his
work can have along the line. Above all, he is encouraged to use
commonsense and initiative, something often quashed in the west.
One company I visited, for example, in Shanghai, was a 5-storey building
of about 1200 mē/floor. We were taken up, in a lift to the office floor
and were shown into a conference/board room, seating about 16 persons.
Only 2 persons came into to welcome us, the CEO and the technical
director. Their offices were modest and adjoining. About one-third of
the rest of the top floor housed all the office staff and the rest was
manufacturing. All the other floors were manufacturing. The two
directors showed us round the whole factory and were conversant with
every step of production AND with the personnel. Yes, they worked 10
h/day in two shifts for 40-100 yuan, but my impression was that this
factory was a well-oiled machine - and they had almost zero defects.
OK, I admit that my first paragraphs are perhaps slightly overstated but
not by much.
I have visited car makers in Japan, France, Germany but not in the US.
Again, I was most impressed by Toyota and even more so by Nissan's
showpiece fully automated assembly line, with working personnel just
counting 19 to do the jobs unable to be automated (plus a few engineers
floating around to tweak the robots!). I have run many Japanese cars for
over 40 years. They just keep on going, on and on and on. Repairs are
minimal. Running costs are minimal. I have never run the same car for
more than 9 years in that time, but my daughter just traded in a 16
year-old Corolla with over 200,000 km on the clock and it was still
running perfectly and looked good - and that was in Switzerland with
heavily salted roads in winter. My last car was a Honda CR-V and was the
one that I had for almost 9 years. It was in perfect state and I got
back 40% of what I paid for it (OK, low mileage of about 8000 km/year, I
think 73,000, so it was at peak performance). Other than tyres and one
battery, the only replacement part was a lambda gizmo in all that time.
AFAIK, there is no European car maker that can come up to these
expectations.
Brian
Ken Bloomquist wrote:
> It's Friday so it's time to stir the pot!
>
> A Japanese company (Toyota) and an American company (Ford Motors) decided
> to have a canoe race on the Missouri River. Both teams practiced long and
> hard to reach their peak performance before the race.
>
> On the big day, the Japanese won by a mile.
>
> The Americans, very discouraged and depressed, decided to investigate the
> reason for the crushing defeat. A management team made up of senior
> management was formed to investigate and recommend appropriate action.
>
> Their conclusion was the Japanese had 8 people rowing and 1 person
> steering,
> while the American team had 7 people steering and 2 people rowing.
>
> Feeling a deeper study was in order; American management hired a
> consulting
> company and paid them a large amount of money for a second opinion.
>
> They advised, of course, that too many people were steering the boat,
> while
> not enough people were rowing.
>
> Not sure of how to utilize that information, but wanting to prevent
> another
> loss to the Japanese, the rowing team's management structure was totally
> reorganized to 4 steering supervisors, 2 area steering superintendents and
> 1
> assistant superintendent steering manager.
>
> They also implemented a new performance system that would give the 2
> people
> rowing the boat greater incentive to work harder. It was called the
> 'Rowing
> Team Quality First Program,' with meetings, dinners and free pens for the
> rowers. There was discussion of getting new paddles, canoes and other
> equipment, extra vacation days for practices and bonuses. The pension
> program was trimmed to 'equal the competition' and some of the resultant
> savings were channeled into morale-boosting programs and teamwork posters.
>
> The next year the Japanese won by two miles.
>
> Humiliated, the American management laid off one rower, halted development
> of a new canoe, sold all the paddles, and canceled all capital investments
> for new equipment. The money saved was distributed to the Senior
> Executives
> as bonuses.
> The next year, try as he might, the lone designated rower was unable to
> even
> finish the race (having no paddles,) so he was laid off for unacceptable
> performance, all canoe equipment was sold and the next year's racing team
> was out-sourced to India.
>
> Sadly, the End.
>
> Here's something else to think about: Ford has spent the last thirty years
> moving all its factories out of the US, claiming they can't make money
> paying American wages.
>
> TOYOTA has spent the last thirty years building more than a dozen plants
> inside the US. The last quarter's results:
>
> TOYOTA makes 4 billion in profits while Ford racked up 9 billion in
> losses.
>
> Ford folks are still scratching their heads, and collecting bonuses...
> IF THIS WEREN'T SO TRUE IT MIGHT BE FUNNY
>
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