One of the biggest problems with the current economy is the absurdly outsized compensation packages lavished upon executives at large corporations these days.
Well, here's a large write-up on what's driving that trend, and what problems it's causing.
Imagine also, to extrapolate Martin’s analogy [comparing CEOs to sports team coaches], that the coach and his top assistants were hugely compensated, not on whether they won games, but rather by whether they covered the point spread.
Yeah, that's pretty much how the stock market works for a company. All sorts of evils wrapped up in that kind of scoring of performance.
There's also a mention about how "goodwill impairment" (of which I had not previously heard) forces CEOs to take a short-term view of company return, even if is at the expense of long-term returns.
Another factor not talked about is how low taxes are on the very rich, these days. Back in the day, when the US was growing by leaps and bounds, CEOs paid taxes around 70-90%. Yep, they really did.
What that meant was that to become really rich, they needed to keep working to build up their companies for years. That forced them to take a long-term view of returns, which was great for the company, great for the country, and great for the workers. But now they can get generationally wealthy in only a couple of years (and average CEO time in position is less than five years), so why would they bother with the hard work of building long-term value?
It's a cyclical problem that needs to be dealt with, and I have yet to hear of a policy suggestion from Washington that would even be a step in the right direction.
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