My friend Tom Collins (from my publisher WME Books and WME Blogs) sent me a link to an L.A. Times intereview with Charles Munger, who is Warren Buffet's Vice Chairman at Berkshire Hathaway. The interview focused on the issue of CEO compensation and began with the question "How did CEO compensation get so out of whack?"
In the course of answering that and similar questions, here are just a couple of the excellent points Munger made:
What makes CEO pay so difficult is that only a few of the people who are earning these huge amounts are actually worth it. ... I like the idea of high pay for people who are really worth it. The problem is that most of them are not. Every mediocre employee who rises through the ranks to become CEO thinks he should retire rich. It's crazy.
I would like to see CEOs act as exemplars. I would like them to realize that they are setting an example when they are setting their own pay. But CEOs are very pompous and they assume they are right about everything. Saying that to them would be a total waste of breath.
I agree, but my question to Tom was: How would you test for greed before hiring a CEO or putting someone on a Board?