CEOs may try to acquire other companies in order to signal dominance within their firm. At least this is my interpretation of this article in the Sept. Journal of Economics and Business: Logistic regression and Australian data … suggest that both CEO overconfidence and CEO dominance are important in explaining the decision to acquire another firm. When compared to existing US studies, the evidence on CEO overconfidence is robust across two different financial and corporate governance systems. Our results also indicate that CEO dominance is at least as significant as CEO overconfidence in the decision to undertake an acquisition.
While I read this, the global warming comes to forefront and I see the CEO name rephrased to CEO, Chief Environment Officer renaming the CEO Chief Executive Officer as archivedCan this set a stage for a real wealth that is in the pipeline?
I thank youFirozali A Mulla MBA PhDP.O.Box 6044Dar-Es-SalaamTanzaniaEast Africa
SirI am surprised at the criticism aimed at Obama or Clinton or Bush. The reason is simple. This is simple. Does it give us any benefits? Is there any improvement in the word that we throw with al the might? No. Think how many you already have the eyes piercing words that have not changed anything past nor brought you the Katrina victims, the Tsunami victims’ pledge that is still not fulfilled, these are but few of the promises made not happened. When you consider the span of the seat the presidents occupy in the posh leathered back, there is still more then what they can do.. However, this is not done. Now we come to new baby kissers. Say I. The fighting politicians all the might will come and tell you that your child is very sweet kiss the child then ask the secretary to give the strongest detergent to get rid of the smell. That is politics. The problem is we know we vote for change and that is the promise always, there is never the change. So why do we scream change for all. We hardly see any change since year in tax or the medicals and schools benefits. The politicians are bigger reptiles then the chameleon changing colors. One day it will be subsidy but there is increase in the medical or SEC comes in to check the books. UN is the pseudo body of the White House so you see little in Darfur but all want the peace. Talk of recent events Pakistan Bhutto is dead; Scotland Yard goes after the roads have been swept clean by powerful water splashed. No trace. Then of course, we will have the new Musharaf bigger tyrant then ever. He has been in the military. His grips are now stronger. However, we will also hear the politicians shouting, "We need to on course in Pakistan because of Taliban, Osama, and we cannot leave Iran as we have more infrastructures to build. All lies and more lie about the missile shield. The two ways of talking of the nuke program. One for Iran, one for Israel. We have three standards everywhere.To chop off any we will elect a new president and another listening to the changes and promise. Why cannot we be a little tolerant and let them do what they want to do without our no need advices. Change indeed. Has anyone changed the stance in the global warming? Bush is counting days in his office and still the strong shots of veto ring out. Why do we have this veto?I thank youFirozali A Mulla MBA PhDP.O.Box 6044Dar-Es-SalaamTanzaniaEast Africa
Alternate theory: uneconomic mergers mostly happen because the people who promote mergers and acquistions pick up some money off those large transactions. They're only able to talk companies into making those frequently unprofitable mergers and acquistions because they're able to hook some basic human motivations, but the companies wouldn't bother to do nearly as much of m & a on their own.
Be warned: this theory is based on my general feeling of how things work, not specific knowledge.
I fully agree that CEO egomania has a lot to do with what the evidence suggests is anuneconomic degree of merger activity (which always involves one firm taking over the otherone, despite this more neutral implication of this term "merger"). That evidence has longbeen known and is best symbolized by the tendency of the value of the stock of acquiringfirms to fall while that of the acquired firm rises during such activities.
However, I do not think it is just signaling within a firm, if it is that at all. At leastas important is signaling and social status among CEOs. I have had conversations with thevarious CEOs who clutter up the Executive Advisory Board of the College of Business at JamesMadison University over the years. I have lost count of the number of times I have hears oneCEO put another one down on the basis that the putter-downer has more employees under himthan does the putter-downee. One upmanship on the golf course and at the country club.
Eliezer, yes in fact CEO pay relative to corporate profits has been relatively constant over recent decades.
Oh. Cool. Never mind, then.
But I don't see how this is relevant to my last question, which was about the fraction of this pay to attribute to different factors.
Assuming that at least part of CEO pay is pay for value, if CEO pay increases relative to corporate profits, then either the added value of the CEO is increasing, or CEOs have more bargaining power in negotiations, or they are getting money dumped on them by agent failures. That's why I asked whether modern CEOs are adding more value by decisionmaking or inspiration than past CEOs. Though it's also possible that, somehow, the balance of power in negotiations has shifted to CEOs so that they capture more of their added value. But if CEO pay is a constant fraction of corporate profits over time, my attempted point is moot.
Incidentally, when you asked that question, how did you expect your readers to answer it?
Eliezer, yes in fact CEO pay relative to corporate profits has been relatively constant over recent decades. But I don't see how this is relevant to my last question, which was about the fraction of this pay to attribute to different factors.
I've never heard that CEO pay was increasing in proportion to the size of the companies directed. Has it?
I'm sure that CEOs correlate to company performance. The question is whether they are actually being paid for this, or simply having money dumped on them by agent failure. Is there evidence that better-performing CEOs are better-paid? And why were earlier CEOs paid so much less - were they all such worse performers? And most of these correlations are with negative performance - a CEO can screw up a company easily enough; can they save it?
Of course we are totally threadjacking here, but Robin should have known better than to put in that last sentence if he didn't want this post threadjacked. Then again, I can probably read about this whole debate more effectively elsewhere.
"Unless you think that modern CEOs add much more value to key decisions or are much more impressive for employees to look up to, the amount paid for this can be bounded by the total amount paid to CEOs before the salaries started skyrocketing."Eliezer,
This could be achieved simply by economic growth and economies of scale. If corporate decisions have impact roughly proportional to the resources they direct, and inspiration can be done on a one-to-many basis, then the economic value of the same actions will increase with scale. The effect would be similar to the increase in musician earnings (at the very top) driven by digital recording technology.
Also, the correlations between company performance and certain measures of CEO psychology suggests that there are meaningful differences in CEOs: http://online.wsj.com/artic....
Object lesson; Sun Microsystems. Great company, great products, but in 25 years of propagandising, Scott McNealy is no closer to persuading everyone to chuck out their general-purpose, von Neumann architecture computers and go thin client. Clearly, the secret of their success is not Scott.
I'm inclined to think that 1) most strategic decisions are made by the board of directors 2) Short-term tactical decisions are pretty much reducible to analytical models. Thus, I'd say the average CEO in a big company doesn't add much value as decision maker. OTHO, the average CEO in a small company probably adds a lot of value as a tactical decision maker because small companies don't have sophisticated models at their disposal.
Unless you think that modern CEOs add much more value to key decisions or are much more impressive for employees to look up to, the amount paid for this can be bounded by the total amount paid to CEOs before the salaries started skyrocketing.
I think the letter is very absurd.Let me elaborate.It is not the Fed, it is not Dr. Bernanke or the previous Alan Greenspan policy that has got us stuck where we are.The big picture is not the money that we do not have at home but that this money was awash in the wars.USA has been dominating force to tell the world the power it holds. While doing that, China, India, Russia, and many far East countries have watched and copied the monetary system that was Adam Smith , Keynes, Malthusian, name many and that the foreign countries too USA as a testing ground after the war that was made up via WMD.If I were in the monetary of the foreign policy, I too would watch what exactly is happening in the powerful nations and what can I learn?The result isKatrina residents not settledThe UN pilferages. Koffe Annan, Tom Delay, Scooter Libby and many took off with huge chunks of money and there was no follow up. All watch the veto veto veto and more veto.I as country would laugh at the stealing by manyTalk of judiciary system and the senate, many have left.This leaves the moral low. This is not money but the bottom line is, ' Under these dubious circumstances do I buy any property when I am not guaranteed about the IT to the viruses that pop up.The ceremony of 9/11 was a blow to most viewers.There was one thing that touched me too.The dead laden under the new buildings not tall but gone. I cannot lay my flowers on the dead.While I watch the ceremony and sing the hymns, I recollect my friends and dear ones who are stuck up in Iraq. England withdraws some from Basra. Why do I have to stay on tunes to the dead ones who may come or not as there is still a debate about," Yes we are winning". While the army top shots state we are gone, stuck in the sand and must call our troops soon.Sir, with these feelings of hopelessness, I do not want to hear Dr. Bernanke or the FED.I want to settle down in the small house that bank wantRaised inters rates were too late to announce and the housing collapsing is not the politicians work. The landlord default. So why do we blame the economist and the banks.It is opportunists that failed the economy with the false hope of," Yes we will come up". The dollar is at the lowest ebb.Who did this? Dr Bernanke or the CPI?The more I read on the Cap 11 of the bankruptcy law of the USA and how SEC is the mean machine of the politicians, the more I believe the freedom to buy and sell is not with the feds.The money measure has lost the wheel and it is stuck in the spokes that need injection of lubricants not from Dr. Bernanke who took up the post to steer the economy clear, but the CPI fails, you have a problem, If I want to keep on holding the money as I do not have faith in the monetary policies, who will ask me to spend. I will not.Sir It was the truth that USA is now at the low level compared to the Far Eastern countries that are buying the USA like products from other countries, selling these to USA and making a rip off.It is the Import and Export zone that is a wreck not Dr. Bernanke.Sir:The strategy of cashless ness
I love the strategy, if there be one. A strategy is definitely positive, a sweet tune to the ears and the shine of the eyes and the nod of the head with the shaking of the body with happiness. That is strategy. What you spell is drastic sad news that is right down the gutter. No two has used the pathetic word,” This article has one major flaw. It assumes that one's friends aren't cheap, rotten bastards." And I think he feels the same way I do. Ceaselessness is the norm of going to the red zone and looking for any hooker sir. I expect this not from the decent ECONOMIST magazine that teaches me how to make money not how to lose and become brokeWhat is more? You yearly publish," YEAR IN 2008" will come out. This article punctures 2008 right in the eye.Here what I have to pacify my friend who is very nostalgic.We have created ATM, the plastic cards that many have lost and found; we have the machines that open the vaults with the scanning of the iris of the eyes.We have lots to thank.How does this write up males me vomit the ATMs cards?Guessed right. It is the pathetic Global warming and the extinctions of the birds and bees and the Putin wanting more babies in Russia and Japanese prime Minister resigning and the Tsunami.But that is not cash. It is the policy and ours. We make this and we cry over it.To talk of cashnessless is right at this time but could we have this rephrased please. It makes me a beggar.A cost of living increase
I read a hilarious page from THE INDEPENDENT paper of UK. The writer, reporter stated that it was good that the oil went up. He went to state the statistics of the obesity and the oil price increase making many walking to the tram with the packed lunch boxes. He went to state that he received abuses but that was the truth. The children are obese in America as adults are.Where does this cost of living fit in, I am lost. We have learnt from the history the losing power of money. So what is new?I thank youFirozali A.Mulla MBA PhDP.O.Box 6044Dar-Es-SalaamTanzaniaEast Arica
Except in a very few cases, CEO salary it has very little to do with the individual. It's just a vicious circle.
The board remueration committee reflects on how hard hard they've serched for an "above average" performer for the role, and therefore naturally wants to pay "above average" to the appointee to proclaim their sucess to the market. That raises the average for the next peer survey, and around we go.
Plus it never hurts (from the boards perspective) to improve the Director's Fees to CEO Compensation ratio. The more He gets paid, the easier it is to sell the next increase in Board Comp...
While I read this, the global warming comes to forefront and I see the CEO name rephrased to CEO, Chief Environment Officer renaming the CEO Chief Executive Officer as archivedCan this set a stage for a real wealth that is in the pipeline?
I thank youFirozali A Mulla MBA PhDP.O.Box 6044Dar-Es-SalaamTanzaniaEast Africa
SirI am surprised at the criticism aimed at Obama or Clinton or Bush. The reason is simple. This is simple. Does it give us any benefits? Is there any improvement in the word that we throw with al the might? No. Think how many you already have the eyes piercing words that have not changed anything past nor brought you the Katrina victims, the Tsunami victims’ pledge that is still not fulfilled, these are but few of the promises made not happened. When you consider the span of the seat the presidents occupy in the posh leathered back, there is still more then what they can do.. However, this is not done. Now we come to new baby kissers. Say I. The fighting politicians all the might will come and tell you that your child is very sweet kiss the child then ask the secretary to give the strongest detergent to get rid of the smell. That is politics. The problem is we know we vote for change and that is the promise always, there is never the change. So why do we scream change for all. We hardly see any change since year in tax or the medicals and schools benefits. The politicians are bigger reptiles then the chameleon changing colors. One day it will be subsidy but there is increase in the medical or SEC comes in to check the books. UN is the pseudo body of the White House so you see little in Darfur but all want the peace. Talk of recent events Pakistan Bhutto is dead; Scotland Yard goes after the roads have been swept clean by powerful water splashed. No trace. Then of course, we will have the new Musharaf bigger tyrant then ever. He has been in the military. His grips are now stronger. However, we will also hear the politicians shouting, "We need to on course in Pakistan because of Taliban, Osama, and we cannot leave Iran as we have more infrastructures to build. All lies and more lie about the missile shield. The two ways of talking of the nuke program. One for Iran, one for Israel. We have three standards everywhere.To chop off any we will elect a new president and another listening to the changes and promise. Why cannot we be a little tolerant and let them do what they want to do without our no need advices. Change indeed. Has anyone changed the stance in the global warming? Bush is counting days in his office and still the strong shots of veto ring out. Why do we have this veto?I thank youFirozali A Mulla MBA PhDP.O.Box 6044Dar-Es-SalaamTanzaniaEast Africa
Alternate theory: uneconomic mergers mostly happen because the people who promote mergers and acquistions pick up some money off those large transactions. They're only able to talk companies into making those frequently unprofitable mergers and acquistions because they're able to hook some basic human motivations, but the companies wouldn't bother to do nearly as much of m & a on their own.
Be warned: this theory is based on my general feeling of how things work, not specific knowledge.
Eliezer, I guess I was hoping to hear from people who actually worked with CEOS and boards who hire them.
Barkely, yes, CEOs treating number of employees as a measure of importance seems to be an important element.
I fully agree that CEO egomania has a lot to do with what the evidence suggests is anuneconomic degree of merger activity (which always involves one firm taking over the otherone, despite this more neutral implication of this term "merger"). That evidence has longbeen known and is best symbolized by the tendency of the value of the stock of acquiringfirms to fall while that of the acquired firm rises during such activities.
However, I do not think it is just signaling within a firm, if it is that at all. At leastas important is signaling and social status among CEOs. I have had conversations with thevarious CEOs who clutter up the Executive Advisory Board of the College of Business at JamesMadison University over the years. I have lost count of the number of times I have hears oneCEO put another one down on the basis that the putter-downer has more employees under himthan does the putter-downee. One upmanship on the golf course and at the country club.
Eliezer, yes in fact CEO pay relative to corporate profits has been relatively constant over recent decades.
Oh. Cool. Never mind, then.
But I don't see how this is relevant to my last question, which was about the fraction of this pay to attribute to different factors.
Assuming that at least part of CEO pay is pay for value, if CEO pay increases relative to corporate profits, then either the added value of the CEO is increasing, or CEOs have more bargaining power in negotiations, or they are getting money dumped on them by agent failures. That's why I asked whether modern CEOs are adding more value by decisionmaking or inspiration than past CEOs. Though it's also possible that, somehow, the balance of power in negotiations has shifted to CEOs so that they capture more of their added value. But if CEO pay is a constant fraction of corporate profits over time, my attempted point is moot.
Incidentally, when you asked that question, how did you expect your readers to answer it?
Eliezer, yes in fact CEO pay relative to corporate profits has been relatively constant over recent decades. But I don't see how this is relevant to my last question, which was about the fraction of this pay to attribute to different factors.
I've never heard that CEO pay was increasing in proportion to the size of the companies directed. Has it?
I'm sure that CEOs correlate to company performance. The question is whether they are actually being paid for this, or simply having money dumped on them by agent failure. Is there evidence that better-performing CEOs are better-paid? And why were earlier CEOs paid so much less - were they all such worse performers? And most of these correlations are with negative performance - a CEO can screw up a company easily enough; can they save it?
Of course we are totally threadjacking here, but Robin should have known better than to put in that last sentence if he didn't want this post threadjacked. Then again, I can probably read about this whole debate more effectively elsewhere.
Additional measures beyond the ones Robin mentioned, that is.
"Unless you think that modern CEOs add much more value to key decisions or are much more impressive for employees to look up to, the amount paid for this can be bounded by the total amount paid to CEOs before the salaries started skyrocketing."Eliezer,
This could be achieved simply by economic growth and economies of scale. If corporate decisions have impact roughly proportional to the resources they direct, and inspiration can be done on a one-to-many basis, then the economic value of the same actions will increase with scale. The effect would be similar to the increase in musician earnings (at the very top) driven by digital recording technology.
Also, the correlations between company performance and certain measures of CEO psychology suggests that there are meaningful differences in CEOs: http://online.wsj.com/artic....
Object lesson; Sun Microsystems. Great company, great products, but in 25 years of propagandising, Scott McNealy is no closer to persuading everyone to chuck out their general-purpose, von Neumann architecture computers and go thin client. Clearly, the secret of their success is not Scott.
I'm inclined to think that 1) most strategic decisions are made by the board of directors 2) Short-term tactical decisions are pretty much reducible to analytical models. Thus, I'd say the average CEO in a big company doesn't add much value as decision maker. OTHO, the average CEO in a small company probably adds a lot of value as a tactical decision maker because small companies don't have sophisticated models at their disposal.
Unless you think that modern CEOs add much more value to key decisions or are much more impressive for employees to look up to, the amount paid for this can be bounded by the total amount paid to CEOs before the salaries started skyrocketing.
Sir;
I think the letter is very absurd.Let me elaborate.It is not the Fed, it is not Dr. Bernanke or the previous Alan Greenspan policy that has got us stuck where we are.The big picture is not the money that we do not have at home but that this money was awash in the wars.USA has been dominating force to tell the world the power it holds. While doing that, China, India, Russia, and many far East countries have watched and copied the monetary system that was Adam Smith , Keynes, Malthusian, name many and that the foreign countries too USA as a testing ground after the war that was made up via WMD.If I were in the monetary of the foreign policy, I too would watch what exactly is happening in the powerful nations and what can I learn?The result isKatrina residents not settledThe UN pilferages. Koffe Annan, Tom Delay, Scooter Libby and many took off with huge chunks of money and there was no follow up. All watch the veto veto veto and more veto.I as country would laugh at the stealing by manyTalk of judiciary system and the senate, many have left.This leaves the moral low. This is not money but the bottom line is, ' Under these dubious circumstances do I buy any property when I am not guaranteed about the IT to the viruses that pop up.The ceremony of 9/11 was a blow to most viewers.There was one thing that touched me too.The dead laden under the new buildings not tall but gone. I cannot lay my flowers on the dead.While I watch the ceremony and sing the hymns, I recollect my friends and dear ones who are stuck up in Iraq. England withdraws some from Basra. Why do I have to stay on tunes to the dead ones who may come or not as there is still a debate about," Yes we are winning". While the army top shots state we are gone, stuck in the sand and must call our troops soon.Sir, with these feelings of hopelessness, I do not want to hear Dr. Bernanke or the FED.I want to settle down in the small house that bank wantRaised inters rates were too late to announce and the housing collapsing is not the politicians work. The landlord default. So why do we blame the economist and the banks.It is opportunists that failed the economy with the false hope of," Yes we will come up". The dollar is at the lowest ebb.Who did this? Dr Bernanke or the CPI?The more I read on the Cap 11 of the bankruptcy law of the USA and how SEC is the mean machine of the politicians, the more I believe the freedom to buy and sell is not with the feds.The money measure has lost the wheel and it is stuck in the spokes that need injection of lubricants not from Dr. Bernanke who took up the post to steer the economy clear, but the CPI fails, you have a problem, If I want to keep on holding the money as I do not have faith in the monetary policies, who will ask me to spend. I will not.Sir It was the truth that USA is now at the low level compared to the Far Eastern countries that are buying the USA like products from other countries, selling these to USA and making a rip off.It is the Import and Export zone that is a wreck not Dr. Bernanke.Sir:The strategy of cashless ness
I love the strategy, if there be one. A strategy is definitely positive, a sweet tune to the ears and the shine of the eyes and the nod of the head with the shaking of the body with happiness. That is strategy. What you spell is drastic sad news that is right down the gutter. No two has used the pathetic word,” This article has one major flaw. It assumes that one's friends aren't cheap, rotten bastards." And I think he feels the same way I do. Ceaselessness is the norm of going to the red zone and looking for any hooker sir. I expect this not from the decent ECONOMIST magazine that teaches me how to make money not how to lose and become brokeWhat is more? You yearly publish," YEAR IN 2008" will come out. This article punctures 2008 right in the eye.Here what I have to pacify my friend who is very nostalgic.We have created ATM, the plastic cards that many have lost and found; we have the machines that open the vaults with the scanning of the iris of the eyes.We have lots to thank.How does this write up males me vomit the ATMs cards?Guessed right. It is the pathetic Global warming and the extinctions of the birds and bees and the Putin wanting more babies in Russia and Japanese prime Minister resigning and the Tsunami.But that is not cash. It is the policy and ours. We make this and we cry over it.To talk of cashnessless is right at this time but could we have this rephrased please. It makes me a beggar.A cost of living increase
I read a hilarious page from THE INDEPENDENT paper of UK. The writer, reporter stated that it was good that the oil went up. He went to state the statistics of the obesity and the oil price increase making many walking to the tram with the packed lunch boxes. He went to state that he received abuses but that was the truth. The children are obese in America as adults are.Where does this cost of living fit in, I am lost. We have learnt from the history the losing power of money. So what is new?I thank youFirozali A.Mulla MBA PhDP.O.Box 6044Dar-Es-SalaamTanzaniaEast Arica
Except in a very few cases, CEO salary it has very little to do with the individual. It's just a vicious circle.
The board remueration committee reflects on how hard hard they've serched for an "above average" performer for the role, and therefore naturally wants to pay "above average" to the appointee to proclaim their sucess to the market. That raises the average for the next peer survey, and around we go.
Plus it never hurts (from the boards perspective) to improve the Director's Fees to CEO Compensation ratio. The more He gets paid, the easier it is to sell the next increase in Board Comp...