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3 replies (most recent on top)
They need to employ the GE methodology of Rank and Yank
I believe the enormous compensation packages of CEOs are often not justified. While skill plays a role, much of their success can be attributed to luck, timing, and the prevailing industry conditions. Furthermore, the negative impact of poor leadership tends to be significantly greater than the positive effects of good leadership.
From the article on LinkedIn
𝐄𝐱𝐞𝐜𝐮𝐭𝐢𝐯𝐞 𝐂𝐨𝐦𝐩𝐞𝐧𝐬𝐚𝐭𝐢𝐨𝐧
One of the most effective ways to evaluate executive compensation is by comparing their pay vs company performance. High executive pay can be justified when a company creates significant shareholder wealth. For example, a total compensation of $10M for the CEO may seem high in a vacuum. Still, it can be justified if the company has created $10B in shareholder wealth within the same timeframe. In this example, for every dollar paid to the CEO, shareholders received 1000x more. The problem happens when the company steadily declines in valuation, and its shareholders continuously lose money while its CEO and executives continue to collect high compensation.