Corporate CEOs in America Should Be Paid Less

Background1) S&P 500 CEO pay. http://www.youtube.com...At 2:17 in this video, we learn that average pay for S&P 500 CEOs is $9.6 million for 2012.2) Back to innomen's statement - I'm going to play some mad-libs here. I will underline what I've changed in his statement:You are comparing two different things that aren't even in the same universe (hyperbole, not literally). The person who is cleaning off the table isn't held accountable daily to the America, nor is he held responsible for past, present and future performance of this country, whose economy impacts millions, if not billions of people, and should this performance slip, you can be sure that his job is on the line. He is responsible for the overall direction of this massive country, and the make up of its workforce [and corporations]. The very image of this country lies within the grasp of the PRESIDENT OF THE UNITED STATES (POTUS). To say that the guy behind the counter is the same, or should be considered in the same light as the POTUS is beyond absurd, it's just ignorant to how things work in America. Compare this mad-lib to innomen's original statement in round #1. No question that a corporate CEO is responsible for much, but his responsibility pales in comparison to the POTUS, who is also responsible for ALL of America's corporate citizens as well. The POTUS's pay in 2012 is $400,000 [1], placing him in the top 1% of wage-earners in America. [2] He hasn't received a raise in 10 years. This is less than 5% of an average CEO's pay. I will use our nation's Chief Executive as a benchmark for corporate CEO behavior and accountability, and then reference such behavior to their respective pay rates. ArgumentsThese arguments are just the beginning. The main question I want the audience to ask: Why is a CEO paid so much? The typical answer is that top talent is expensive, and that in an environment where performance is everything, you must pay for that performance. Therefore, what the market will bear for CEOs is very high. I will now proceed to destroy this answer. My primary argument:The Shepherd is dead. The Wolves are Shepherding the Sheep. Most current CEOs of S&P 500 companies did not found the company. They are stewards of the legacy left by greats like Henry Ford, Sam Walton, and Thomas Edison. These titans not only managed their respective companies, they were primary owners as well. They were the driving force behind the success of the company - they were the shepherds. Agency theory [3] attempts to address this conundrum - upon the passing of the shepherd, how do you align the interest of the steward along the lines of the shareholder? Agency theory's solution has been via monetary compensation. Agency theory has failed. Instead of raising stewards, they have raised wolves. These wolves are now in charge of many S&P 500 companies. Support1) "Pay for Performance" is BrokenManagement has existed for as long as companies have existed. Yet even today, the best and brightest in business simply cannot answer two basic questions regarding CEO pay: What is adequate pay? What is the benchmark for performance? James Heskett, a senior faculty member at Harvard Business School (HBS), DOES NOT KNOW. He asks: ". .. awards can be made subject to performance, however it is measured, over longer periods of time. But what is the right length of time? How much of the total compensation should it involve? " [4] He has no answers. He notes: "Longer-term incentives involve delays in compensation that may make a job much less attractive to managers with shorter-term needs or interests. On the other hand, it may serve as a way of sorting out managers with a longer-term view of the job. " [4] By this logic, the longer the term measured for performance, the better for the company. Warren Buffett, one of the world's most successful businessmen whose opinion typically trumps most in the field, has a simple and candid answer for the "right length of time": FOREVER. [5]Yet, when looking over studies on executive pay, acute myopia is the norm. A recent exhaustive study on CEO pay highlighted the various long term incentive (LTI) packages inherent in CEO pay today. [6] Yet, ALL analysis cuts off at 3 years. There is cognitive dissonance in the business world in regards to defining "performance". Not surprisingly, this myopia results in poor performance. Dan Ariely, a professor of behavioral economics at the Sloan business school at MIT, notes that "Financial rewards are a double-edged sword. They provide motivation to work well, but they also cause stress and preoccupation with the reward that can actually hurt performance. " [7]Daniel Pink explains why. His recent book with accompanying speech at TED earned him recognition at HBS as one of the top 50 thinkers in management philosophy for 2011. [8] His explanation is simple: "As long as the task involve[s] only mechanical skill. .. the higher the pay, the better the performance. " [9, at 9:40] One reason why HBS's Prof. Heskett could not determine neither pay nor performance for a CEO is that the job is anything BUT mechanical skill. It requires extreme out-of-the-box thinking - Pink's candle problem [9, entire presentation] - meaning that each and every situation is entirely different and totally unpredictable. Thus, it is impossible to fully incentivize via pay, because it is less relevant to addressing the real wants and needs of a CEO. Instead, Pink showcases "extrinsic" vs. "intrinsic" motivation. Extrinsic motivation is monetary compensation - how business has been done. Intrinsic motivation is his eureka moment:AutonomyMasteryPurpose[9, 12:40]People want control over their work environment, the opportunity to master their work, and to know that their work serves a higher purpose. This is an extremely powerful motivator. More importantly, it is intuitive, and perfect for out-of-the-box thinking. Now think about the shepherds, like Warren Buffett and Steve Jobs. These men thrived in environments that had all three elements of Pink's intrinsic motivation. Buffett was paid $100,000 in 2011. [10] Steve Jobs was paid $1 annually from 1997-2011. One Dollar. [11]Now think of the President of the United States. No matter what your politics may be, it is clear to everyone that the POTUS also enjoys autonomy, mastery, and purpose at his job. The POTUS's track record is better than any American company. ..236 years of torrid growth and expansion without a single bankruptcy. Recall that the POTUS's pay is 5% of the average S&P 500 CEO pay. I have cited the best and brightest minds in business today, and have highlighted the problems faced with pay and performance. Later, I will proffer a solution to this conundrum, while further advancing my argument. My opponent has the unenviable task of arguing that corporate CEOs are justified in their pay, or are even underpaid, that the wolves which I will define later have not devoured enough sheep. I wish my opponent luck in this endeavor. [1] . http://www.gpo.gov...[2] . http://www.economist.com...[3] . http://www.investopedia.com...[4] . http://hbswk.hbs.edu...[5] . http://www.mcgrawhill.ca...[6] . http://www.farient.com...(requires email for access)[7] . http://www.nytimes.com...[8] . http://hbr.org...[9] . http://www.ted.com...[10] . http://www.bloomberg.com...[11] . http://www.redmondpie.com...