8/11/2019 US Managers Are Overpriced

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US managers areoverpriced

and protected

Submitted by:

Amit Kumar

27NMP17

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US managers are overpriced

Corporate Point of View

a giant corporate worth billions of dollars

worth to pay millions of dollars to get the best talent.

better decisions can bring in extra hundreds of millions of dollars in revenue.

Over priced in two terms

Relative terms: approx. 10 times to their predecessors of 1960s

Absolute terms: 2 to 20 times more than their counterparts in other rich countries runlarge and successful companies.

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US manager v/s Average worker compensation.

30

100

400

0

50

100

150

200

250

300

350

400

450

1960-1970 1990 2000

Growth of CEOSalaries relative toaverage workers

Series 1

US managers are paid 300 to 400 timesto the average worker compensation.

Free market economist say no need toworry with this disparity.

Mr. Obama is one of the populists whoengage with the politics of class envy.They say unless those who are less

productive accept that people should bepaid according to their productivity,capitalism cannot work properly.

Per hour wages for US worker rose from$18.90 in 1973 to $21.34 in 2006

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Free market View

Rise of compensation of a CEO from 30-40 times to 300-400 times mean thatAmerican CEO have become 10 times more productive.

Is it true?

Better education can be a reason. But is it really 10 times better than theirprocessor? Authors view is negative as he is a teacher at Cambridge University.

If the growing size of the company is the reason, why did it suddenly take off in

the 1980s, when US company size has been growing all the time and same logic canbe applied to a normal us worker also.

If top decision is a reason then why not the CEO of Japanese and Europeancompanies.

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Comparison of different salaries to UScounterparts

Country CEO Salary Normal Wage

Switzerland 64 130

Germany 55 106

Sweden 44

Denmark 40

Japan 25 91Average of 13 rich countries 44 85

US salary is 100 in each case

These figures are vastly understated as they does not include Stock options.

If they include stock options also then Japanese CEO Salary would be as low as 5%.

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US managers are Protected

Apart from excessive pay cheque, dont get punished for bad management.

The most is they will be kicked out accompanied with fat cheque.

Mattel CEO Jill Barad fired in 2000,

Board forgave a $4.2 million loan,

An additional $3.3 million in cash to cover the taxes for another loan

These gratuitous benefits were in addition to the considerable benefits, receivedunder her employment agreement, including a termination payment of $26.4

million and a stream of retirement benefits exceeding $700,000 per year.

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Elimination of this protection

Free market economist say no need to worry.

As competitors will out compete these stupid companies who have thesegratuitous benefits to failed CEOs.

However, it will take a long time eliminate wrong managerial compensationpractices.

Before its recent bankruptcy of GM, people had known for at least three

decades that GM was on a decline, but no one did anything to stop the topmanagers from receiving these type of compensations packages

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Thank you