Friday, April 24, 2009

CEO Pay Is NOT The Issue

It sure seems like a crime to pay millions to the CEO of a company that is losing millions. It sure seems like a crime to use government loans and subsidy money to keep a company afloat that squandered millions or more overpaying executives. It seems even more corrupt to pay people extra millions to get them to stick around and fix companies broken by these very people.

But the people who robbed these companies are not the problem. We (Joe Stockholder's) are the problem. We just wanted our stock price to increase. We thought if we rewarded them for increasing our stock price, the stock market would reward us. We offered them millions to increase our wealth. We expected our reward in our paychecks, and our 401k's and our retirement funds. We expected them to keep the stock price going up and up. We didn't expect it to end or we wouldn't have lost so much money when the bubble burst.

My own greed (and yours too, if you're honest) is the issue. As stockholders, we rewarded the wrong behavior out of our own greed. When a company is valued by the stock price, leaders are tempted to pursue short-term gains in stock price at the expense of long-term profitability and contribution. They weren't planning on sticking around either. Our greed has made us short-sighted. Don't tell me you never considered getting yours and getting out. As a popular song once said, "Go on, take the money and run."

If I ever get any money to invest in the market again, it will be in dividend paying companies. After the market run-up of the 1990's and the first decade of this century, I'm convinced that we can't build a system that can sustain those types of gains. I will value companies that make a positive difference, provide a true benefit to their customers and share real, cold, hard, profits with their employees and shareholders.

My only fear is, when the market takes off again, will I be able to hold my ground?

Photo by AMagill