Archive for September, 2010

Is there any real importance to the ratio of CEO to average worker pay?

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Expert Perspective by Grahall’s OmniMedia Editorial Board

The September 17, 2010 article in Financial Times (CEO/employee pay ratios) again addresses the nagging question of the seemingly outrageous difference between CEO pay and that of the average worker but raises the question as to whether a larger or smaller differential is “better”.   The author writes: “Would you work harder if the ratio [between the CEO’s pay and yours] was higher or lower? So called ‘tournament’ theories of income differentials reckon that higher is better…[but] others say that the level of chief executive pay is obscenely high and that investors have a right to know which firms reward bosses too much relative to the peons.”

Peons?  OUCH!   But let’s not argue the semantics of arrogance. 

Say on pay is here to stay.  Companies who are outliers with relatively high executive pay will be loudly criticized. 
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No Harm No Foul? The Justice Department Finds Anti-Trust Violations in Hiring Practices

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Expert Perspective by Grahall’s OmniMedia Editorial Board

In their September 24, 2010 article for the  Wall Street Journal authors Thomas Catan and Brent Kendall (U.S. Tech Probe Nears End)  write: “Several of the U.S.’s largest technology companies are in advanced talks with the Justice Department to avoid a court battle over whether they colluded to hold down wages by agreeing not to poach each other’s employees… these agreements constitute an effort by companies to fix the price of labor, and are therefore just as harmful as price-fixing or bid-rigging—automatic violations of antitrust law.”

Silicon Valley’s response has been two-fold. 
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Rail Against the Chief

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Expert Perspective from Grahall’s OmniMedia Editorial Board

Executive compensation and what is seen as near gluttonous bonus payments during a time when the average American is more likely hurting than not has been a recurring theme in the media.  The Institute for Policy Research has completed its 2009 study of CEO pay titled CEO Pay and the Great Recession that compares for those companies that are the top “layoffs leaders” for the 17 month period, November 1, 2008 to April 1 2010, with the total compensation paid to each CEO for the year 2009.

There are a couple things that aren’t well articulated in either the report or the article covering it by Roland Jones for msnbc.com (CEOs lay off thousands, rake in millions) by Roland Jones.
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It’s Not Easy to Make Executive Compensation Truly Effective

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Expert Perspective by Grahall’s OmniMedia Editorial Board

In his article for Business Week How to Handle CEO Pay Before Dodd-Frank Hits Bill George subtitles his article “Financial reform will bring unintended effects.” And then goes on to outline “six policies that should be rigorously followed, including in bad times when boards are more prone to bend the rules for those in their top ranks.” On the surface, George’s ideas seems reasonable but lets dive down a bit deeper into them and see what the unintended consequences might be of these directives.
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Seven Careers? We Agree: That’s just nonsense

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Expert Perspective by Grahall’s OmniMedia Editorial Board

In his September 4, 2010 article for Wall Street Journal (Seven Careers in a Lifetime? Think Twice, Researchers Say Carl Bialik sensibly questions: “Do Americans really go through careers like they do cars or refrigerators?”

Likely high school and college students asking the question “Fries with that?” do not consider that job, however well paying, to be a career,  And when these same individuals complete their education and go on to be an investment banker they wouldn’t think of the move from “burger flipper” to investment banker as a “career change” .  A job change, yes, a career change, NO.

Likewise the executive compensation consultant who has toiled for some years at Firm A and is recruited to Firm B to do similar work in a new environment (probably with more pay) would also not likely see that as a career change.  A job change, yes, a career change, NO.

So, is the question of career change even really relevant?  We think the confusion over the term “career change” vs. “job change” vs. “whatever ever else people are doing” may be nothing more than an issue of semantics. But the fact that Americans move around with some frequency is relevant to both employees and employers.   
 
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Filed under: Expert Perspective - Organization Development



Prevention may still better (and cheaper) than the cure even with Health Care Reform

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Expert Perspective by Grahall’s OmniMedia Editorial Board

It likely didn’t come as a surprise to anyone that the Kaiser Family Foundation Employer Health Benefits 2010 Survey, according to the article September 2, 2010 article in the New York Times by Reed Abelson (Employers Push Costs for Health on Workers), found that “Workers’ share of the cost of a family [health insurance] policy jumped an average of 14 percent, an increase of about $500 a year. The cost of a policy rose just 3 percent, to an average of $13,770… Since 2005, while wages have increased just 18 percent, workers’ contributions to premiums have jumped 47 percent, almost twice as fast as the rise in the policy’s overall cost.”

Clearly there are forces at play here that have been around for a long, long time. Health care reform is supposed to fix some of those problems.  But with little happening before 2014, companies and consumers are left to wonder what reform will mean for the overall health of Americans and that of their wallets. 
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Get Prepared for Your Employees’ 2011 Summer Vacations NOW!

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Expert Perspective from Grahall’s OmniMedia Editorial Board

The economic downturn has done more than put people out of work. It has put extreme pressure on some of those still holding jobs to do more and more.  This past summer has been a lesson for some companies under stringent workforce limitations to continue to provide service and products while at the same time providing often overworked employees with much needed and well earned vacations. 
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It’s Not Hurd on the Street Any Longer

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Expert Perspective By Grahall’s OmniMedia Editorial Board

Not surprisingly, plenty of media attention was focused on the fact that Mark Hurd, once CEO of H-P, didn’t last long in the unemployment line.  Hurd has landed himself a new position as Co-President of Oracle, sharing the job with Safra Catz and reporting to CEO Larry Ellison.   Three articles published in the Wall Street Journal on this subject particularly caught the attention of the Grahall Editorial Board.  Ben Worthen and Joann S. Lublin write (in their article At Oracle, Hurd Lands in Rare Situation: Having a Boss for First Time in Years Means the Former Hewlett-Packard Chief’s Relationship With CEO Ellison is Crucial): “How Messrs. Hurd and Ellison click is crucial as Oracle tries to expand beyond its core business of selling software and takes on tech conglomerates… in hardware…. So far, the outlook appears positive, said people who have worked with the executives. Messrs. Hurd and Ellison are friends. And while the two have very different management styles, those styles seem compatible, said these people.”

That’s good, since cooperation at the top of the food chain in any organization is critical for the company to quickly and effectively embrace opportunities and resolve issues.  In fact, some companies find that cooperation and coordination in these roles is so important that the CEO and President are in fact the same person.  For companies who separate these roles, the President position is often looked at as a grooming spot for the future CEO. 
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Unemployment: Who or What is to Blame?

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Expert Perspective from Grahall’s OmniMedia Editorial Board

At the risk of going “off the ranch” and getting into topics that are fraught with politics, our Editorial Board reviewed and discussed Robert Barro’s August 30, 2010 article for the Wall Street Journal (The Folly of Subsidizing Unemployment).

Mr. Barro had much blame to pass around for the continuing high unemployment in the US, landing most squarely on “the expansion of unemployment-insurance eligibility to as much as 99 weeks from the standard 26 weeks.” 

This may be an argument that only history will be able to resolve.   But from a “compensation” perspective, unemployment checks are a form of incentive pay. 
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Our Notions on Investing – Getting a Little Banged Up?

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Expert Perspective by Grahall’s OmniMedia Editorial Board
 
Graham Browley writes in his August 21, 2010 article for the New York Times
(In Striking Shift, Small Investors Flee Stock Market) that  “The notion that stocks tend to be safe and profitable investments over time seems to have been dented in much the same way that a decline in home values and in job stability the last few years has altered Americans’ sense of financial security.” 

This recession has been unusually deep, with unemployment remaining stubbornly high as companies lay off workers and jobs move overseas to cheaper labor markets.  It’s not your “grandmother’s recession” (of the 1960s) or even your “mother’s recession” (of the 1980’s) for that matter.   In this one, the marked difference is that, from the late 1980s on, more and more Americans became investors in the stock market through their 401(k) plans. 
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