Corporate CEOs in America Should Be Paid Less

His wholly unresearched opinion will have to contend with the best and brightest in corporate America. - CON's statements in quoted italics. - Sources continued from Round #2 I will address four issues before continuing with my argument:1) Shareholders value their rights to freedom and property more than any corporate CEO, who is merely the steward for shareholder interests. What I will demonstrate by the end of this round is that the CEO has impinged on SHAREHOLDER RIGHTS AND FREEDOMS by failing in his/her fiduciary responsibilities - BY THIS ALONE, CEOs SHOULD HAVE THEIR PAY LOWERED BY A NON-TRIVIAL AMOUNT.2) To say that the Chief Executive Officer of America is an "arbitrary and unjustified" benchmark is insulting. The POTUS has MORE EXECUTIVE DUTIES AND RESPONSIBILITIES than any corporate CEO. That he is a public official is irrelevant - all Presidents CHOSE to run for office over other occupations and faced stiff competition, and they did not do it for the pay.3) To ANY extent that "[CON's] position allows for the possibility of some decrease in CEO pay," and that such a position is a more optimal outcome, my opponent summarily concedes his case and declares me the winner of this debate.4) CON complains that "[CON] had to go [his] entire opening round without knowing what we would actually debate about. " CON either failed to read the resolution, or fails to comprehend that he has HIS OWN BURDEN OF PROOF - to either advocate the status quo or that CEOs are underpaid. HIS CASE IS COMPLETELY UNSUBSTANTIATED AND UNSOURCED. (hereafter, UandU)My opponent has asserted that he bases his case on UandU "reality". The following will highlight what this reality is. Arguments1) Pay for Performance (P4P) is Broken (con't)a) CON leads with an UandU chart that doesn't quantify anything, only shows a haphazard and nebulous rise in the S&P 500, and seems to be non-current by 5 years. IT DOES NOT DEPICT THE FINANCIAL CATASTROPHE OF 2008 AND IS DECEIVING. I will instead show concrete, QUANTIFIED proof that P4P is broken. CON's UandU chart, even without the 2008 catastrophe, demonstrates a dramatic tapering off of S&P 500 performance over the past 12 years. This tapering off has coincided with skyrocketing CEO pay. Keep in mind that performance is defined by Total Shareholder Return (TSR) [6], [10]. TSR from 2000-2011 for the S&P 500 was 29.4%, annualized, ONLY 2.5%. [15] CEO pay during this period rose by AT LEAST 100%, annualized, AT LEAST 8.3%. [16], [video in round #2]. The CEO is clearly failing in their fiduciary responsibilities to the shareholder, as TSR underperformance correlates with skyrocketing CEO pay. P4P is broken. This correlation is cancerous. The wolves are eagerly devouring the flock. This MUST end. b) CON's UandU chart also fails to separate the few remaining shepherds from the wolves. I will demonstrate with the two shepherds I've already proffered:Warren Buffett - CEO of Berkshire Hathaway (BRKA), active 1965-presentPay: $100,000Annual BRKA TSR: 19.8%S&P 500 TSR: 9.2%Steve Jobs - Founder and CEO of Apple Computing (AAPL), active 1997-2011Pay: $1.00Annual AAPL TSR: 19.87%S&P 500 TSR: 7.49%(stock TSR sourced from Google Finance and [15], S&P 500 TSR sourced from [15])Shepherds tend to outperform stewards. Without shepherds like these, S&P 500 performance across the board would be EVEN LOWER. These shepherds embody Autonomy, Mastery, and Purpose, and they don't do it for short term pay. c) CON asks the strawman question "because high-performers are motivated by “purpose,” we shouldn’t pay them? " This is a perfect segway into my proposal: i) Of course we should pay them, but only to a certain extent. Maslow demonstrated that something as base as monetary compensation at best only fulfills biological, physiological, safety, and esteem needs - all lower-order needs. [12] ii) Autonomy, Mastery, and ESPECIALLY Purpose, on the other hand, ALL fulfill higher-order needs - cognitive, aesthetic, self-actualization, and transcendence. [12] This is why CON's UandU assertion that "The POTUS position doesn’t have to attract talent through compensation" is actually true, as a paycheck only motivates to a certain extent before becoming a detriment to job performance. PROPOSALI propose that the current pay structure for CEOs be wholly replaced with a completely stock-based compensation system. A large lump-sum of restricted, dividend-yielding stock would be set aside in escrow and amortized over a 20 year period. The CEO's salary would consist of the cash from dividends. Perks like the corporate jet and pension would remain the same. The first-year compensation would be less than current stock packages - it would be reset back to 2000 levels plus 29.4%, adjusted for inflation, to account for 12 years of underperformance. After 20 years, the CEO receives the stock in full. This instills a greater PURPOSE onto CEOs, because it FULLY aligns their interests to those of the shareholder. It COMPELS them to make decisions that affect TSR over as long a period as possible. It INCENTIVIZES them to excel at long-term decision making - if they do well, this kind of package may far outweigh total compensation currently received by CEOs AT A FAR LESS COST TO THE SHAREHOLDER. Finally, the CEO would fulfill his/her fiduciary responsibilities to the shareholder, one which (s)he is failing currently. Agency theory would succeed upon implementation. Roberto Goizueta (video) is the model for this proposal - unlike most CEOs, he kept his stock grants/options - he held 99% of his wealth in Coca Cola stock [13] and became a billionaire through sheer management genius - Autonomy, Mastery, Purpose. The company grew from $4.3 billion to $150 billion during his 16 year tenure. [14] Truly a great steward. . http://www.youtube.com...This is not legislation. My proposal would be voluntarily instituted by corporate America on terms dictated by shareholders, more than likely during CEO succession. I have already demonstrated that this SHOULD occur in order to align CEO interests with shareholder interests. I am now out of room; I will proffer an example next round. d) Finally, CON asks "Let us say that most CEOs get paid “too much money”. .. So what? " CON implies that no one gets hurt. This is categorically false. The SHAREHOLDER gets hurt. The SHAREHOLDER, who via the board of directors HIRES and PAYS the CEO, and can FIRE the CEO, DEMANDS PERFORMANCE, i. e. TOTAL SHAREHOLDER RETURN. To the extent that P4P is broken and agency theory has failed is the extent that SHAREHOLDERS ARE OVERPAYING FOR CEOs. By this logic alone, along with my above arguments as support, I already have achieved burden of proof that CEOs should be paid less by a non-trivial amount, if not summarily fired from their jobs. PRO and CON are in agreement that "The simple fact is the only people CEO’s need to justify their pay to are the people who actually pay their salaries. "CON has not contested ANY of my critique of P4P. P4P is broken, and CEOs are overpaid. If they are overpaid, they should be paid less. I will continue to forward arguments next round. [12] . http://www.maslowshierarchyofneeds.net...[13] . http://money.cnn.com...[14] . http://articles.latimes.com...[15] . http://www.berkshirehathaway.com...(page 2)[16] . http://www.vanderbilt.edu...(page 75, figure 1)(as of yet unused sources):[17] . http://www.forbes.com...[18] . http://usatoday30.usatoday.com...[19] . http://www.nbcnews.com...