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再读一遍
The proposer's opening remarks
Oct 20th 2009 | Steven N. Kaplan
In the United States, the United Kingdom and elsewhere, CEOs are routinely criticised for being overpaid. Critics argue that boards do not respond to market forces, but, instead, are dominated by or are over-generous to their CEOs. Boards are criticised for not tying CEOs' pay to performance. These criticisms have been exacerbated by the financial crisis and the desire to find scapegoats.
I argue below that the critics are wrong and that there are many misperceptions of CEO pay.While CEO pay practices are not perfect, they are driven by market forces and performance. Contrary to public perception, CEO pay has not gone up in recent years. In fact, the average CEO pay (adjusted forinflation) has dropped since 2000, while the pay of other groups has increased substantially. Similarly, the view that CEOs are not paid for performance is wrong. In fact, the opposite is true and boards increasingly fire them for poor performance. And, most recently,consistent with market forces driving pay, the US and UK government seach hired a new CEO (of AIG and the Royal Bank of Scotland) for pay exceeding that of the median large company CEO.(Last two paragraphs are just the begining of the Issue, tell us the main idea of this exposition: the CEO pay has not gone up in recent year, while the pay of other high-paid groups has increased substantially.)
It is useful to understand how CEO pay is measured.(thesis) It includes three components:salary, bonus and stock-based pay. It is usually measured in two ways.The first is the sum of salary, bonus, restricted stock and the expected value of stock options. I call this expected pay. Expected pay measures what boards believe they awarded the CEO. This is the best measure of what a CEO is paid each year. Note that the CEO does not actually walk away with this money. The second measure replaces expected stock option values with values actually realized and realised pay measures what CEOs walk away with.
The first graph shows average and median expected CEO pay for S&P 500 CEOs since 1994 (adjusted for inflation). It shows that median CEO pay has been stable since 2001; it has not increased. Andaverage pay has declined substantially. In fact, average CEO pay in 2008 is below the average in 1998.
While average CEO pay has declined, the pay of other highly paid groups has increased. The second graph shows S&P 500 CEO pay relative to the income of the top 1% of US taxpayers. Relative to those other groups,CEOs are no better off in 2008 than in 1994. Strikingly, relative CEO pay is a half of what it was in 2001, a huge decline.
To use graphs to support "the decline of the CEO pay"
Which are those groups that have earned increasingly high compensation?(this question sentence leads to the explain "other groups"Hedge fund, private equity and venture capital investors have increased their assets and fees substantially translating into high pay. By one estimate, the top three hedge fund managers earned more in 2007 than all 500 S&P 500 CEOs combined. Professional athletes, investment bankers, consultants and lawyers also have benefited greatly. For example, from 2004 to 2008, the inflation-adjusted pay of partners atthe top 20 law firms increased by 12% while that of S&P 500 CEOsdropped 12%. Those law firms had over 3,000 partners making an averageof $2.4m each.
One can look at the Obama administration for other examples. Larry Summers made $8m (more than the median S&P 500 CEO)giving speeches and working part-time for a hedge fund. Eric Holdermade $3.5m as a law partner.
So, while CEOs earn a lot, they are not unique. The pay of people in the other groups has undoubtedly been driven by market forces; all are compensated in arm's-length markets,not by cronies. Technology, globalisation and scale appear to have increased the market value of these groups. CEOs have not done better and, by some measures, have done worse. Those who argue CEOs are overpaid have to explain how CEOs can be overpaid and not subject to market forces, when the other groups are paid at least as well and aresubject to market forces.
Why is the pay of these other groups relevant for CEOs? Top executives regularly leave to work for private equity firms and hedge funds. Law partners and consultants leave to work for public companies as general counsels and executives. Relativepay matters and all these groups are paid according to market demand.Markets are the driving force for senior executives in all these industries and talented people jump across industries, based on market perceptions of their worth.
another sense group
Critics also argue that CEO pay is not tied to stock performance. Again, that is not true. Looking at what CEOs actually receive—realised pay—Josh Rauh and I found that firms with CEOs in the top decile of realised pay earned stock returns 90%above those of other firms in their industries over the previous five years. Firms with CEOs in the bottom decile of realised pay underperformed by almost 40%. The typical CEO is paid for performance.
This was reinforced in 2008, when average realised CEO pay declined by 25%(according to S&P's Execucomp). And Equilar, another provider of CEO pay data, estimated that the typical CEO experienced a net worth decline of over 40%.
The final myth to bust is that CEOs control their boards and earn high pay through this control and not performance. In fact, CEO tenure has declined, from ten years in the 1970s to six years today, and boards have got tougher on their executives when they do not perform.
In sum, market forces govern CEO compensation. CEOs are paid what they are worth. Talented individuals, who are perceived to be valuable, can move between industries to be compensated well. The clearest example of this is that even governments have to pay highly for talented executives. Recently,the Royal Bank of Scotland (under UK government control) hired a CEO with a package worth up to $16m; AIG (under US government control)hired a CEO with a package worth up to $10.5m. For these critical jobs,both of these executives received compensation exceeding the pay of the median S&P 500 CEO.
My comments: I think if this issue is the response of AW, it must be 6 scored. Firstly, the structure is just simple, and easyly understood. After giving the main idea, Mr Kaplan gives us the description of the CEO pay. This method is the so-called Terminology in 追星剑特训. And the speaker gives us two graphs to tell us why he proposes that the CEO pay has declined recent year. This is a good method, but we can't use it in our AW. After that, is the main comments, the language is so wonderfull that I want to recite it. |
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