Jeff Reid said:
Except those people seem to be the exception when it comes to the quality of CEO's. The track record for startups in the USA is about 1 in 10 succeeds, and a significant part of the sucesses are dumb luck in cases of having the right product at the right time. I've seen a significant number of high level managers move from job to job, and their success or failure has little to do with the decisions they've made. Most of the time, they've simply inherited a situation, and/or it's a few key employees or staff that have more impact on how a company does.
mheslep said:
Well we are bouncing around a bit here. We were discussing highly paid CEOs, who make something like 100x more than a line employee? That rules out the vast majority of startups, and rather makes the point, that part of the reason for success in business is professional management. In most cases, the founders of a startup that lives long enough and grow enough to warrant more investors in most cases face demands that the founders step aside for professional management to take the reins.
Professional managers for day to day activities, such as accounting, genereally do good jobs. The track records of CEO's in many cases seem be inconsistent, but perhaps I have a squewed view being in a tech industry (firmware programmer, mostly computer peripherals), where success or failure seems to be independent of the decisions made by the CEO's. Quite often, a fey key employees are responsible for the success or failure of a company.
The other issue with CEO's is that there's little personal risk. They get paid the same regardless if their decisions are good or bad, and sometimes get rewarded with huge severances if their bad decisions result in them getting fired.
As a matter of degree that might be arguable, but as an absolute statement that is certainly not true, as many CEOs have stock in a company or performance related bonuses, which in the case they tank the company they lose money too. Also, I'm not aware that many high level CEOs of failed companies enjoy great job prospects. And though they won't starve or even sell the yacht, I think most often it is off to the consulting circuit for that crowd. As a general statement, I'd agree that more CEOs should be forced to take more of an equity stake in their firms. For instance, I believe the Detroit CEO's have stated they are 'all in' on company stock now?
For the big 3, that's unsual. Most CEO's stand to make a lot of money regardless of how the stock does. If the stock does well, it's a big bonus, but when you're making an 8 figure salary, does it really matter? I haven't seen a lot of CEO's in action, but I've personally witnessed a high rate of turnover of of both good and bad upper management at many tech companies, their success or failure often based on circumstances they inherited or were beyond their control or simply wrongly perceived. Even the truly bad ones usually find jobs, and continue to work until their poor decision making ends up having a perceived negative impact on a company and then they move on.
One issue with corporations is that the interests of the individuals often conflict with the interests of the company itself, its stock holders, its employees, or its customers.
At all levels. Call it hidden agendas. For example, individuals often have a stake in a particular product or process of a company and often defend that product, and attack competing products, even when it's clear that the continuing development of the current product or process as opposed to the new product or process is an overall detriment to the company, and only a benefit to the group involved with the particular product or process.
Another example are the lies and coverups that occur between layers of managment (common in many tech companies). New product or process programs are often "sold" to upper management with unrealistically short schedules and man power requirements, counting on the fact that once committed, the process will be allowed to continue. It seems that only a few upper management types are able to see through these lies, it's rare that upper managment will covertly interview the actual workers on a project to get a true picture of the "cost" of implementation of a product or process.
Another issue is that short term profits are often sought at the expense of long term profits in a coportation, because the incomes of individuals are more closely tied to the short term profits, even when these decisions represent a long term detriment to the company. There have been cases where personal gain came at the expense or the demise of a company.
Individual interests often conflict with corporate interests, but it's the individual interests influencing the decision making process.
Getting back to the earlier point, wouldn't the big 3 be attracting better line workers because of the better pay and benefits, noting that it has a small overall affect to the price of the cars they sell? If relatively high pay is good for the CEO's, then why not the line workers?
Well it might, but clearly the problem is not that Detroit needs better line workers, AFAIK they're no better or worse than the line people working in Tennessee Toyota plants. What Detroit needs is better management.
In fact, it would appear that the higher paid CEO's of the big 3 are doing a worse job than the lower paid CEO's of "foreign" coporations. Part of this has to do with consumer behavior beyond the control of the corporations (the general economy and gas price spiked changed consumer behavior). Sales of "foreign" autos in the USA are also way down, but those corporations aren't as dependent on the USA market. Somehow, Ford seems to be doing the best of the big 3. As a small example, the Mustang has been very successful compared to competing products.