Thought Leadership Blog

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Election Debate: Impact of CEO Salaries on the Economy

It is most certainly an organizational development question to determine the take home pay of top executives.  We can similarly discuss the high compensation for entertainment celebrities and sports athletes.  As CEOs can create jobs, impact work-life and stimulate the economy, we should safeguard salaries to CEOs proportionate to their results at such – as we need to attract top talent there!    
 

While CEO “greed” is certainly alive and well, it finds many exceptions and is not necessarily a direct fallout of tax breaks.  In fact, taxation needn’t have substantial impact on executive salaries at all.  Wherever you find a greedy CEO, you find a CEO who will take whatever s/he can regardless of net profit impact.  Compensation in any US company can be more a factor of supply, demand, job retention and market conditions than anything else. 

 

Tax breaks are intended to lure corporate behavior likely to create net positive impact on the economy.  These incentives are used to create jobs, stimulate economic spending and increase the many other taxation opportunities which fund our government.  Tax breaks to “big oil companies” could be considered in exchange for actions that heal the economy, such as the lowering of fuel costs to the public.  With proper structure and surrounding conditions, this tax break could provide a positive net economic impact.  Additional discussion on this point is well summarized at this CNN article.   While we need to avoid tax incentives as “currency” to special interest group and campaign fundraising, let’s keep the discussion focused on the “how” and “why” we propose tax breaks.  Let's also consider the individual taxes paid on salaries, personal spending and economic impact of the personal investments of CEOs.  Without that language, we haven’t enough information to comment. 

 

As a CEO who does not practice greed, I think and behave like many CEOs who think as shareholders, and I choose to protect company value, the supporting team/infrastructure and my future as the CEO.  CEOs are accountable to the shareholders.  These strategies are the subject of board meetings and MBA programs.  CEOs in large companies may have the shelf life of a pro football player, and if we want to attract top talent to these economy-driving opportunities, as a country we may choose to offer a large incentive package, again proportionate to results.  Where publicly traded companies may wish to empower a “celebrity” CEO to drive shareholder confidence, CEOs must be lured from one high paying opportunity to a higher paying opportunity.  Done well, this creates overall positive economic impact.

 

With the pyramid shape of a large company, competition abounds.  Power and high compensation are fragile here as many others are grooming and gunning for your spot.  If you don’t move up, you move out.  Once at the top, it’s far too easy to get pushed off that pedestal.  This may be career ending as experience isn’t entirely transferable and few companies wish to pay you for what you did for someone else.   

 

If you don’t believe the disconnect between corporate taxes and CEO salary, then spend a little time researching the high CEO salaries of the many giant companies who post annual fiscal losses – yielding no income taxes paid to the government. 

 

Anyone who has studied business in depth knows these principles to be true.  The United States needs first and foremost a President who inspires confidence.  It concerns me – no, disappoints me – that a political party would use lack of education as a weapon against the very sector of our population that it pledges to represent – and protect.  Less education can be a fallout of less financial resources – the people the Democratic candidate, Barack Obama, professes to support.  So why make such wittingly false claims to the people you represent?  I love Democratic ideals and am a centrist at heart.  I tend to agree with Republican fiscal policies.  I tend to vote Republican because I believe in the foundation American principles of capitalism.  I believe the answer lies neither at extreme left nor extreme right.  I have specific ideals and blueprints for action.  I support the working people.  I support people who work as hard, and even not necessarily as hard, as I do.  I refuse to support those who don’t do their best and look for a payout due to some sense of entitlement.  There is no such entitlement.  If you don’t believe me, look up “free enterprise,” the backbone of US principles in business.

 

 


Jessica Ollenburg - Saturday, September 27, 2008