US managers are

overpriced
and protected
Submitted by:
Amit Kumar
27NMP17
US managers are overpriced

Corporate Point of View
a giant corporate worth billions of dollars
worth to pay millions of dollars to get the best talent.
better decisions can bring in extra hundreds of millions of dollars in revenue.

Over priced in two terms
Relative terms: approx. 10 times to their predecessors of 1960s
Absolute terms: 2 to 20 times more than their counterparts in other rich countries running similarly
large and successful companies.


US manager v/s Average worker compensation.

30
100
400
0
50
100
150
200
250
300
350
400
450
1960-1970 1990 2000
Growth of CEO
Salaries relative to
average workers
Series 1
US managers are paid 300 to 400 times
to the average worker compensation.
Free market economist say no need to
worry with this disparity.
Mr. Obama is one of the populists who
engage with the politics of class envy.
They say unless those who are less
productive accept that people should be
paid according to their productivity,
capitalism cannot work properly.
Per hour wages for US worker rose from
$18.90 in 1973 to $21.34 in 2006


Free market View
Rise of compensation of a CEO from 30-40 times to 300-400 times mean that
American CEO have become 10 times more productive.
Is it true?
Better education can be a reason. But is it really 10 times better than their
processor? Authors view is negative as he is a teacher at Cambridge University.
If the growing size of the company is the reason, why did it suddenly take off in
the 1980s, when US company size has been growing all the time and same logic can
be applied to a normal us worker also.
If top decision is a reason then why not the CEO of Japanese and European
companies.



Comparison of different salaries to US
counterparts
Country CEO Salary Normal Wage
Switzerland 64 130
Germany 55 106
Sweden 44
Denmark 40
Japan 25 91
Average of 13 rich countries 44 85
US salary is 100 in each case
These figures are vastly understated as they does not include Stock options.
If they include stock options also then Japanese CEO Salary would be as low as 5%.
US managers are Protected

Apart from excessive pay cheque, dont get punished for bad management.
The most is they will be kicked out accompanied with fat cheque.
Mattel CEO Jill Barad fired in 2000,
Board forgave a $4.2 million loan,
An additional $3.3 million in cash to cover the taxes for another loan
These gratuitous benefits were in addition to the considerable benefits, received
under her employment agreement, including a termination payment of $26.4
million and a stream of retirement benefits exceeding $700,000 per year.

Elimination of this protection
Free market economist say no need to worry.
As competitors will out compete these stupid companies who have these
gratuitous benefits to failed CEOs.
However, it will take a long time eliminate wrong managerial compensation
practices.
Before its recent bankruptcy of GM, people had known for at least three
decades that GM was on a decline, but no one did anything to stop the top
managers from receiving these type of compensations packages

Thank you