Perspective: CEO pay is out of control, and there’s no justification for it
Apple chief executive Tim Cook speaks at an economic summit a day before the China Development Forum in Beijing, March 24, 2018. By Matt O'Brien Matt O'Brien Reporter covering economic affairs Email Bio Follow Reporter March 8 at 8:00 AM Apple chief executive Tim Cook wakes up at 4 every morning, which is clearly the secret to his success . . . at getting up early.
How can we say that? Well, the important thing to understand is that the business world has been taken over by two big ideas in the last 30 years. The first is that companies should solely focus on increasing their stock prices, and the second is that, to make chief executives care more about this, and attract the kind of top-tier talent that could presumably do a better job of it, businesses should pay them bigger performance-based bonuses in the form of stock options and grants.
On top of that, it turns out that past chief executive performance really isn’t indicative of future chief executive returns, either. The number of executives whose companies were in either the top half or top quarter of performers in one three-year period, who also were in that category over the next one, was almost exactly what you would have expected based on chance alone: 25 percent in the case of the former, and 7 percent for the latter.
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