Risk Without Return,
Pay for Non-Performance 

An out-of-town visitor was being shown the wonders of the New York financial district. When the party arrived at the Battery, one of his guides indicated some handsome ships riding at anchor. He said, “Look, those are the bankers’ and brokers’ yachts.”  “Where are the customers’ yachts?” asked the naïve visitor.

–Fred Schwed, Jr., “Where Are The Customers’ Yachts?” (1940)

After a decade-plus of stagnant stock prices — during which time CEO pay has leapt 200%, to an average $10 million annually at the Fortune 500 — that seems a fair question to ask.

The inescapable conclusion?

Clearly, management — not shareholders — sets compensation at publicly-traded corporations.

Nell Minow and many others liken this practice to “grading your own exams.”

Pay For Non-Performance

Observation #2:  the link between executive pay and shareholder returns, which supposedly justified exorbitant pay all throughout the ’90’s bull market, is an elaborate sham.

In reality, CEO pay is a one-way ratchet that only goes up, not down, regardless of shareholder returns.

Anyone on this at the SEC?  Congress?


About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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