“Over paid and under performed!”

Many people today are furious at the compensation packages executives are receiving today based on their level of performance. How can someone make so much money while the company is under-performing? This is the question many investors, unions, and regular people are asking today. Is this a problem with corporate governance? What do the board members have to say about their executives receiving these huge fixed contracts while the company is moving in the opposite direction? I leave these questions open for discussion.

One specific union organization named The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) wanted to make some noise about these current events. According to Rakesh Khurana and James Weber, authors of AFL-CIO: OFfice Investment and Home Depot, AFL-CIO “helped its unions obtain better pay, benefits, security, safety, and working conditions for their members.” The significance of having the AFL-CIO is that it does things that individual unions are incapable of doing.

The AFL-CIO focuses its efforts on large corporations with excessive compensation packages to its executives. They do this because they feel there is a link to other corporate governance issues that could negatively impact its customers pension values. Damon Silvers, associate general counsel for the AFL-CIO stated: “We look at executive compensation at large marquee companies because that is where our money is and because that is where the teachable moments are.” So the next question is how do they attack this issue?

Khurana and Weber list a couple of tactics that the company uses to address this issue of over compensated executives. The first is making the issue available to the public. In doing so they created a website that listed the total compensation of chief executive at public companies. This efforts were put towards the result of shareholders pressuring companies to put a halt to executives huge compensation packages. Khurana and Weber also mention how they organized public protest events, testified in front of Congress, backed shareholders in proxy voting at company’s annual meetings, and tried to work with the company directly to hand these problems. They feel that they are a huge institution and have a lot of presence in society. With that being said, they feel it is their responsibility to bring positive change given their reputation as a large, well-known company.

One question I raise is that if these Unions or Federations are as highly sought upon as I am reading about, where is their impact in the financial sector? Why are they not attacking the “big banks” to provoke change?

This entry was posted in Blogging, Cases (Real World) and tagged , , , , . Bookmark the permalink.

5 Responses to “Over paid and under performed!”

  1. Cander says:

    I think it mainly comes down to that the AFL-CIO is worried about labor jobs, which are going to be primarily manufacturing, construction, and some government work. The financial sector is not going to be concerned with these jobs and any pressure the AFL-CIO would try to exert would seem out of place.

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  3. cornerback5 says:

    Devil’s advocate: Should there be so much anger towards high paid CEOs if the company has been prosperous before and is currently just going through a hard year or two? Shareholders vote in a board that they trust. They should trust that they will acquire a worthy CEO, and although things might look grim at the moment, not to panic too much. Afterall, shareholders do not have the expertise to run a company, a CEO does. Although I do understand their frustration because it is their money that is being used to run the company with.

  4. Pingback: “Let’s make ‘em work for their millions!” | Biz Gov Soc

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