A lot of banks have had their headquarters in Charlotte for some time.

CEOs, just like star athletes, are not overpaid--they are paid what the market will bear. If they were not worth what they are being paid, then the company would not hire them. Each company tries to pay the best salaries, to attract the best talent, to out perform the rest of the competitors. They take a risk (large salary) in order to get a reward (stockholder value).

This is capitalism at work.

Bank of America beat Wall Street? I guess by their year after year domination of the Worst Corporation tournament they also beat Main Street...every day.

What he should perhaps have said is that the "Gilded Age" of financial services is over... there's an apt parallel to the Industrial Revolution's Gilded Age. Robber barons.

@DeltaTee: What risk do CEOs take? I think they've demonstrated that they can completely destroy a company and profit from it immensely. Just about the only thing a CEO could do that would end in anything but massive financial gains would be to commit illegal activity in such a blatant and inexcusable way that they'd be convicted. Clearly the large salaries didn't work to attract top talent, which is one of the contributing factors to of these companies with extremely well paid CEOs going bankrupt. Maybe you could extol some of the virtues of trickle down economics while you're talking out your ass.

@DeltaTee: That only works if the profits are actually profits.

And how does that explain the wads of cash when someone's fired? There's no reason to reward someone you're canning. This can't be capitalism, because capitalism means bad things for those who don't perform.

The problem is that the highest paid were able to decide their own worth and compensate themselves.

Yeah, they "beat" Wall Street by taking over my company and eliminating my job.

@DeltaTee: capitalism needs capital. The capital went away so the taxpayer provided it, so we get to decide how much we pay them via represention by the Congress and Benny. We own the CEO's capital so we get to pick how much we pay Her. That is capitalism at work.

@DeltaTee:

"They take a risk (large salary) in order to get a reward (stockholder value).

This is capitalism at work. "

Are you serious ? I mean do you really believe what you wrote up there in the quote or are you as crazy as a shithouse rat ? CEO's in this day and age don't take any risk...The shareholders take the risk.Lot's of CEO's own no more stock relative to their income than the guy turning a wrench.(And LOTS of boards own no stock at all) Shareholders take the risk that some asshat will run the company into the ground and that they will get a better return on their investment than they could get in a guaranteed vehicle (like a dormant savings account). CEO's are just like the guy on the assembly line, they are employees. Nothing more,nothing less. They just happen to be much better compensated because with some rare exceptions , they pretty much decide what they think is a fair salary. That addresses the first asinine point you made,the one about what the market would bear. When the CEO picks the board,and the board pays the CEO what the CEO wants,THEN , the CEO sits on another board to determine that CEO's salary,thats not a free market. That is just like a bunch of fraternity brothers looking out for themselves.I truly hope that a LOT of your life savings are tied up in the stock of some company that gets plundered by its "fair market " CEO someday.Then you will learn a lesson that will be hard to forget : These guys are just looking out for themselves and no one else.

@DeltaTee: When you get to decide how much you get paid, regardless of how well you are actually doing your job...that is not capitalism.

@sleze69: yeah, beat Main street into submission...

@DeltaTee: Sorry, but that's hopelessly simplistic. There is no effective marketplace for CEOs, and their salaries are not set by the open market. Why do you think US CEOs make so much more (compared to employees) than their European or Japanese counterparts? Are US CEOs really that much more brilliant?

Salaries at the top of large companies are typically set by a "compensation committee", usually a subcommittee of the board of directors... which is often filled with other CEOs who have a vested interest in seeing the standard to which their own salary is compared go up.

It is a CONSTANT complaint of stockholders that there is insufficient independent voice or overview in the setting of executive compensation.

And as for risk/reward... it seems that the risk is all on the side of the company. The CEO gets paid millions even when the company tanks and the stockholder value falls, gets guaranteed millions more if he is fired, and even gets millions in a golden parachute if the company is acquired or fails completely! It is very well documented that there is NO correlation between CEO compensation and stockholder value.

@KyleOrton:
Delayed compensation. I am hiring your for X dollars today. While I am working for you, I am building up the value to justify my golden parachute. If the amount is $20 million and I work there for 5 years, then the amount is really delayed compensation of $4 million per year.
Really, I think they were trying to avoid shareholders getting fussy about being paid 400 times the amount they are worth.

@DeltaTee:

CEO compensation is not 'capitalism' at work, it's government regulation at work. Corporations cannot exist except through very specific government legislation allowing them to. This legislation allows the companies to be treated as their own legal entities, in many respects.

If we were talking about the CEOs of unlimited liability companies, or companies where their liability was only through insurance purchased on a free insurance market, then you would be correct.

Unlimited liability companies don't tend to appoint CEOs, though.

All that being said, there's nothing magical about the word 'capitalism' that makes everything about it right, or wrong. There are problems as well as advantages to any system of thought, especially in political economy. In my opinion, there's much to be said for pragmatism, and an end to judging ideas by what school of thought they happen to come from.

@DeltaTee: I'll give you credit, though, it's a good analogy: star athletes are no more an example of capitalism than CEOs are.

Athletes' salaries are hardly an indicator of value ... in many cases, they're artificially restricted (because we don't really want unfettered capitalism in professional sports, not unless you don't mind things like watching your season tickets go up in smoke mid-season because your local franchise was poorly run and went bankrupt), and in the rest, they are just the most a team was willing to pay for them for whatever reason. Many times, that turns out to be far more than they were worth. (Exhibit A: Carl Pavano.)

Basically, both positions have salaries that simply reflect what some fools are willing to give them. They're rarely related to current performance, and the people who ultimately pay those salaries have little to no say about them.

@DeltaTee: It bothers me when people run around calling overpaid CEOs part of the free market. It's not, and you're disillusioned if you think otherwise. The CEOs in major corporations are all friendly, and all sit on each other's boards, just as Snarkysnake mentioned. They decide each other's salaries, and since they are all friends, it's greatly inflated. That has diddly squat to do with a true free market.

Remember when everyone hated Saddam Hussein or Kim Jung-Il for having absurdly lavish lifestyles while their countries fell apart from lack of investment? I see little difference here. CEO's "manage" their companies not for the long-term health of the company but the short term valuation of the stock, which is a huge chunk of their compensation. That is why during previous pre-meltdown economic hiccups they would rather lay off hundreds or thousands of employees rather than to take a periodic hit to the bottom line.

Professional sports is not capitalism. Professional sports leagues are industries that have been given exemptions to anti-trust laws. If you and I and every Consumerist poster wanted to pool our money and start a MLB team called the Anchorage Moose Hunters we couldn't do it. MLB, as an example, is an industry that has been able to grow its revenues greatly in the past 10 years while not allowing any new entrants into the industry. So don't think that Jeter and A. Rod and Manny are the beneficiaries of pure capitalism. Hardly. They are beneficiaries of an industry that has been given specific government approval to erect impossibly high barrier to entry.

@BrianDaBrain: What do you propose we do, then? Cap salaries? Most of these CEOs are already quite wealthy. If pay was capped at $250,000, they might not bother.

Even if there's no real free market value, the following is still true: pay attracts talent.

@DeltaTee: [in your defense]

To all those who are arguing that CEO pay determination is somehow "not capitalism": could you please explain how it does not follow the common definitions thereof? Or could you suggest an alternate economic system whose rules are more applicable?

You may not like free markets, and wish that they were, in your view, "fairer", but this is exactly the way the system works, and it works exceptionally well. If you believe that the recent debacle (which was exacerbated by, if not caused by, clumsy government tinkering with markets) has somehow invalidated the last couple of centuries of advancement brought about by capitalism, you've got a rather unrealistic view of economics. Yes, some people will make seemingly obscene, disproportionate amounts of money from the businesses they run, but that is a necessary consequence of the free market system which has elevated the living standards of most of the civilized world. Free markets mean that business owners are free to pay themselves whatever the market will bear. It's not perfect, but it's the best system around.

Arguing for free markets is probably moot at this point, as it is likely that in two weeks we will elect a president who will, along with a compliant Congress, do everything he can to move the country in a socialist direction. So, DeltaTee, you lose, and your critics win. For now.

Did he come out and say that the reason BofA beat Wall Street is because they charge enough in overdraft fees each year to buy a mid-sized nation?

@Ben Popken: Yeah, but we're only a decade away from Bank of America becoming "Bank".

@nataku83: "They" referenced the companies taking the risk of paying a large salary--not the CEO accepting it (though CEOs do take on a large risk, for which they are justifiably compensated).

"Joe the Plumber" is a good example of trickle down economics. When we help the small business owner, he grows his business, hires more people for a decent wage so he can expand his business. Are you saying we shouldn't try to generate new jobs in this country?

@KyleOrton: Would you take a job that required being on the job 24/7, a total dedication to all things corporate, without vacations? What if you also knew that any lapse in judgment (by you or anyone else) would result in your immediate termination (and possible jail time). And, that if you are terminated, then you will likely never be able to work in your field again. How much money would it take for you to accept this job? Would you want to get a guarantee that if something goes wrong, you would have money to live on?

@Snarkysnake: I am sure that Apple would much rather have you than that overpaid Steve Jobs character running the show. It's not like he's got the vision for where the corporation is headed--he's just a cog in a machine (who happens to get a corporate jet to do with as he pleases).

Fraternities will often ask non-members to join, but no one is forced to. Companies are free to hire any independent person that they want to to lead them and pay them whatever they think they are worth. (Unless of course you look at it like a union, where everyone should be paid the same, regardless of ability, and you shouldn't be able to hire someone unless they are a member of the union.)

@EyeHeartPie: Steve Jobs is the only CEO I know of that sets his salary, and that is $1/year.

@DeltaTee:

Look at foreign CEO salaries. If CEO's were not overpaid in this country, we'd have higher CEO Salaries in those countries, and much better run businesses.

The fact that this isn't the case is an indicator of a failed market.

@Mr_D:

I'll tell you what we do. Pay the silly bastards in stock. Not stock options,but stock. Payable in full 5 years after they leave the company. Give them a nominal $250,000 per year (anybody can live on that ) and expenses. If the company files Chapter 11,they get in line with the other unsecured creditors (this might remove the incentive to profit on both sides of a bankruptcy filing through "retention plans" which are just theft in plain sight).No more bankruptcy proof trusts (like Delta set up for execs). That is a fraudulent conveyance of shareholders money.

The other point : Pay attracts talent. Agreed,but it also attracts rogues. Look up Gary Winnick (of Global Crossing fame) sometime.Jeffrey Skilling. Andy Fastow. Bernie Ebbers. The list could go on for miles.These people are no different than common thieves.

I'd be fine with astronomical CEO compensation, if it really had something to do with talent or performance. But it doesn't.

They get paid $20M / year whether or not they bankrupt the company or not. And they will still get that golden parachute no matter how they perform.

If I did as poorly as some of these fellas, I'd be in my boss'es office and out the door in a flash. And we wouldn't be discussing severance packages.

What the FS industry CEOs do when they've completely screwed up the company is they "re-negotiate" their compensation package to get rid of the performance based bonuses, and increase the salary and other benefits. When times are good, they increase the performance based bonuses. And no matter how they've done, they always get bigger golden parachutes.

I can't understand how the boards at these companies go for it, time and time again.

Thats bs. Star athletes don't have their salary set by their buddies and do the same for them regardless if it means the team loses. We all know its a rich good ole boy network.

@theczardictates: CEOs are hired on the open market, just like you or me. The lack of "correlation between CEO compensation and stockholder value" is the risk that the companies take. Many hope for larger rewards for larger risk.

@zlionsfan: Teams take risks by hiring the players that they want that can help the corporation make a profit. You don't necessarily have to pay outsize salaries in the NBA to have a team--you just won't get the best talent. And this is fine for some teams--look at the history of the LA Clippers and how they have chosen to make money as the second best pro basketball team in LA.

@BrianDaBrain: If a company did not feel they were getting a good value, they would hire someone else. It doesn't get much freer than that.

@DeltaTee:

I never said that I could do any better (or worse) than the vast majority of these hired hands. Your use of Steve Jobs makes my point for me. He owns a LOT of his company.The last thing he would do is run it into the ground.He doesn't make a lot of salary. He SHARES the profits with other shareholders in proportion to ownership instead of taking his first and determining what his partners should get.

@DeltaTee: I'm not sure you're all that familiar with "Joe the plumber" who was basically a fuck-up who couldn't understand the basics of any kind of tax plan and whose idiocy was manipulated by both presidential candidates. More specifically, trickle down economics doesn't really apply to small business owners even though individuals such as yourself like to set the income bar down so low that you can pretend that it does. Most importantly, trickle down economics doesn't help the small business owner and it doesn't grow the economy. It's a falacy that is used as justification to concentrate wealth in parts of the economy where it will do the least good.

Your first point is correct though; I did misinterpret your sentence. It wasn't immediately clear what the object of "they" was, but from the context it does appear to be "the companies" and not the CEO.

@DeltaTee: Umm, yeah, sure. Very cutting analysis. You are aware, I'm sure, that most CEOs appoint their board members, and it's a subset of the board that makes up the compensation committe, right? That's be like T.O. "stacking the deck" with his buddies and teammates to decide what he should make next year . . . your analogy kinda' starts to break down. Also, just for the record (and you're ill-considered analogy aside) you're saying that professional sports should be the MODEL by which we operate our society? I'd say that when most people I know look at professional sports, they see a system (culturally) that's already broken. But lets return to the "capitalism" argument for a moment. Ever wonder why so many companies have a growth mantra? I mean, sure companies want to grow, but ever wonder why they do it at a break neck pace? It just MIGHT be because CEO compensation scales with company size (statistically) not profitability.

Your analogy fails on so many levels I'm really hoping you didnt' spend too much time coming up with it. If so, it's a rather blatant indictment of your intellect.

Financial Sector CEOs==tulips

We the people also hold blame in this. We have allowed these same scumbag ceos to fund the lobbyists that bribed our politicians who changed the laws that screwed the taxpayers. And I don't know why we swallowed the fly perhaps we'll die :)

@Hodo: Actually, board members are elected by the shareholders. And if, as everyone else has said in this thread, the CEO doesn't have a lot of share in the company, then how would he be electing the board members?

@Snarkysnake: How is it that Steve Jobs came to own a great deal of Apple shares? (Hint: He wouldn't own many of them based on your compensation plan outlined above.)

@AtomicPlayboy: Capitalism is based upon the concept that there is a seller, who is trying to sell a product/service for the highest possible profit, and a buyer, who is trying to receive a product/service at the lowest possible cost. Why this does not work is because there is no cost to the buyer (the board). Do you think CEOs would be paid nearly as much if the money came out of the board member's pockets instead of the company's?

Saying that something should be accepted as-is because there is no apparent better system is a faulty argument; it assumes that there is no better system that hasn't been discovered yet. Feudalism was the best system around when everyone was engaging in barbarism, so there is obviously no better form of government! Egregious executive pay is not a necessary consequence, because alternatives have not been explored. Pay could be done through a shareholder vote, a neutral expert could be brought in to appraise the shareholder, etc.

Business owners should be free to choose a reasonable salary. The thing is, the CEO and the board do not own the company, the shareholders do. And a great many of them are not having their voices heard.

Lastly, I think you're a little late to be predicting the end of free markets. Government has had a hand in business for a long time, it's merely a matter of how much. The recent bailout was just another (bad) example of that. If this is capitalism, then sign me up for socialism, 'cause Europe is doing fairly well by comparison.

@johnfrombrooklyn: You are correct: the salaries paid to professional baseball players are kept artificially low because of an anti-trust exemption given to MLB. If there were multiple high-level baseball leagues, salaries would go up as the teams competed for the best talent. The teams have benefited by this exemption by not paying the players their true market value.

@johnfrombrooklyn:
As an aside to this(and a few others who are talking about sports) i actually have less of a problem with some fairly high compensation for pro sports players. The leagues make *SO* much money *directly* off the backs of the players with ticket sales, broadcast rights, and merchandising and licensing fees, that I think it's only fair that they give those guys a decent cut of it. The sports industry is pulling in billions with their names, likenesses and abilities, and to say "here's your $40,000 a year" would be a total dick move.

CEO's aren't the same thing. They're grossly overcompensated administrators and talking heads for companies. They probably deserve more than the average employee, but not hundreds of millions. I like the idea from another comment: $250k a year, everything else in stock - payable 5 years after they leave the company. Heh heh.

As much as BofA sucks, they've got their sh** together. US Bank is another that weathered the storm. Neither got involved in the subprime loans (and lost a lot of business in the short term) but it's paying off now.

If BofA would get rid of all those ridiculous fees...I'd defect to them in a second.

Give me a break. BoA was probably too big and cumbersome too take advantage of the ridiculous returns on offer with subprime mortgates. They still had expsoure and if it was such a bad idea, why did they buy the largest subprime broker - Countrywide way back in April. Everyone was greedy and while you cannot blame all the mess on Wall street (www.savingtoinvest.com), no one was innocent. If BoA was so good why is it share price down 50% and heavily supported by the government?

@Pixelantes Anonymous:
Board members like to increase executive pay because then when they are CEO they will make more money. Simple as that

After watching the Jets lose on OT, I saw that 60 Minutes segment.

The first thing that came up on my mind when Ken Lewis said about people being overpaid was: "So, everyone else was overpaid and you're not overpaid yourself? Cut your own damn salary before you cut the livelihoods of your company's staff first, jackass!"

@DeltaTee: Steve Job's compensation package is "someewhat" innovative in that he gets stock options that vest when certain performance objectives are met. Since his compensation is almost entirely in options, his compensation is "performance based".

A lot of CEO compensation packages are NOT performance based, and your comments truly indicate your ignorance in such matters. CEO compensation packages often include clauses that cover every possible type of failure. Early retirement, ousting by the board, failure to improve earnings, etc. What risk are you speaking of now?

@Wormfather is Wormfather: Yeah, pretty much. It'll be Bank, and Chase.

It's because the CEO's are profiting from pain and not from running a successful business that most people have a problem with. If that is your problem then start a campaign to get congress to change the commerce laws to throw the CEO's in jail for such mismanagement. If enough people agree eventually it'll pass.

Ben (or anybody): How much does Ken Lewis make?

@Anks329: Yes, and how does one "get on the ballot" to be a board member again (and don't reply with how it works "in theory" . . . reply with how it works in practice)?

In 2007, Kenneth D. Lewis raked in $24,844,040 in total compensation according to the SEC.

[www.aflcio.org]

I work for TDBanknorth and we survived. The bank chose not to get involved in the subprime mortgage business. Our CEO saw that in the long run it would not be good for overall business. We are conservative in our lending and only lend to people who can afford the amount they are borrowing.

BTW - our CEO only makes $2M a year, which is still a lot, but I would say his talent and foresight is worth the compensation.