Academics Need Not Apply

by Henry on June 23, 2009

Felix Salmon quotes Economist American business editor (and former CT guest-blogger), Matthew Bishop.

This columnist once heard Mr Welch tell a chief executives’ boot-camp that the key was to have the compensation committee chaired by someone older and richer than you, who would not be threatened by the idea of your getting rich too. Under no circumstances, he said (the very thought clearly evoking feelings of disgust), should the committee be chaired by “anyone from the public sector or a professor”.

{ 11 comments }

1

roac 06.23.09 at 8:35 pm

I once read a book of practical, not to say cynical, advice for young Protestant clergymen by a veteran of the trade (it was long enough ago that the audience was presumed to be exclusively male). I think the title was How to Become a Bishop Without Being Religious. It contained exactly this advice. Specifically, the author said: Never, never let anyone on the Compensation Committee who does not make a lot more money than the most you can possibly imagine yourself being paid; because there is no one alive who thinks any minster should make more than he does.

(To avoid leaving a wrong impression: I do not know why I read this book. I never ever wanted to be a minister, then, before or later. If I had, the book might have cured me. It was a good read, though.)

2

Steve LaBonne 06.23.09 at 8:38 pm

But- but- all this time I’ve been solemnly assured that executive compensation is determined by “the market”, not by insider logrolling! Jeez, next you’ll be telling us the tooth fairy isn’t real.

3

rea 06.23.09 at 8:46 pm

Never, never, let tghe tooth fairy committee be chaired by someone with more money or more teeth thanyou . . .

4

Tim Wilkinson 06.23.09 at 10:03 pm

‘Compensation’!

5

nick s 06.23.09 at 10:20 pm

The other rule, as Steve LaBonne hinted, is to make sure that the other members of the remuneration committee are executives whose cash and prizes will be determined by a similar committee. And thus the circlejerk perpetuates itself.

6

Barry 06.24.09 at 12:21 am

Well, you have to understand, a well-compensated CEO will not be worrying about his or her personal finances when deciding on the proper compensation for board members :)

7

jhe 06.24.09 at 12:42 am

The free market, like the ecosystem is taking care of it. The model here is the host/parasite model. Parasites can be very successful without conferring any superior fitness to their host.

8

Map Maker 06.24.09 at 3:19 am

Begs the question why anyone from the public sector or a professor sits on those boards anyway. And I am looking at you Morton!

9

Jock Bowden 06.24.09 at 3:31 am

I have no problem with this so long as the reverse courtesy is paid and corporate executives do not apply for senior university posts.

10

StevenAttewell 06.24.09 at 8:00 pm

JHE – but the free market isn’t taking care of it. Many studies have shown that quite often compensation increases as performance declines, thanks to the pre-eminance of “golden parachutes.”

And how exactly is the free market supposed to deal with it, given the manifest incapacity of shareholders to shape executive compensation?

11

Aliza 06.26.09 at 12:26 pm

the responsibilities of CEO also cover up all these issues (is they understand). but their negligence can’t be compensated in any case either this one or else.
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