Some CEOs are making $100 million a year. That translates into an hourly rate of $50,000, more than the average person makes in a year. Some people ask, "What is it about them that makes them worth so much?" Couldn't they find somebody who would do the same job for less? Well, obviously, they're not making that much based on their technical skills. There are a number of possibilities. 1) They are pushing the limits of legality, thereby making their company additional profits. 2) They are lobbying effectively to get laws changed which favor their company. 3) They have connections which will expedite an acquisition or merger. 4) They are greasing the palms of other board members who naturally feel that they (the CEOs) are the best persons for the job. 5) They are "cooking the books" resulting in an unwarranted stock run-up. At the CEO level, it is not technical skills that matter; it's a skill set that results in a vast increase in profits. That doesn't come about by making the best widget on the market. It comes about by opening new markets such as in the developing world. It comes about by reducing the cost of labor, and this comes about by transferring production 
facilities to that part of the world where labor is the cheapest. It comes about by lobbying for "free trade" such as the NAFTA and CAFTA legislation. This makes it possible to produce products elsewhere and then import them here without paying any tariffs. It also comes about by moving corporate headquarters anywhere in the world where taxes are the least and incentives (such as free land) are the greatest. Witness Halliburton's recent move to Dubai. There is no loyalty either to provide jobs for the American people or to pay taxes to the US government that might relieve the burden on tax paying individuals. Their only loyalty is to the bottom line.
In a Forbes.com article, "It Paid to Cheat," Maya Roney recounts how three executives, Charles B Wang of Computer Associates, Joseph P Naccchio of Quest and Dennis Kozlowski of Tyco misstated corporate earnings and were responsible for other accounting irregularities. Why? Their pay and stock options were tied to "performance" and large stock run-ups. Performance here has nothing to do with any technical expertise, but is simply the result of stock value increases or the lack thereof. No wonder then that CEOs are less concerned with turning out a good product or service for their customers than they are in getting the stock price to jump. Then they can cash in on those stock options and justify huge increases in their annual salaries based on "performance." How stock options work is as follows. The Board of Directors (who are usually cronies of the CEO) grants the CEO the right to buy so many shares of company stock at the current market value some time in the future. So if the share price goes up, the CEO can buy the shares at a discount and turn around and sell them at a profit. Sometimes there's a vesting period during which the CEO has to wait before he can sell his stock. 
Now the Board wouldn't be so generous to the CEO unless the CEO saw to it that the Board members also were given generous stock options so one hand washes the other. You scratch my back and I'll scratch yours. Now where do these shares come from? The number of shares outstanding is not related to any reality. They can be arbitrarily created by the corporation itself. They sometimes do it by splitting stocks. That means every share of stock outstanding is converted into two shares at half the market price. But they can just generate any number of shares any time they want to and sell them at the market price. No wonder then that the name of the game is to get the stock price up by any means necessary. This is how a good CEO earns his keep.
Goldman Sachs CEO Lloyd Blankfein will take home $70 million in 2007 most of it in stock options including a whopping bonus while other Wall Street CEOs got coal in their stockings. Why? Goldman Sachs didn't lose billions in the sub-prime mortgage mess like Bear Stearns, Morgan Stanley and JP Morgan Chase. How did Goldman Sachs do this? By lying essentially. They shorted or bet against their own investors in mortgage backed assets. So while they were cheerily selling mortgage backed asset debts to investors who proceeded to lose tons of money when homeowners defaulted, money that had to be paid (and therefore lost) by Citibank, Bear Stearns and Morgan Stanley in order to cover the short positions. Goldman Sachs due to their synthetic exposure to this segment of the market (basically betting against the success of their own investors) made out like a bandit. All perfectly legal forms of lying and stealing. And the successful CEO got rewarded while the unsuccessful ones who lacked expertise in manipulating the system got punished.
According to Scott DeCarlo writing on May 3, 2007:
The chief executives of America's 500 biggest companies got a collective 38% pay raise last year, to $7.5 billion. That's an average $15.2 million apiece. Exercised stock options again account for the main component of pay, 48%. The average stock gain was $7.3 million.
The highest-paid boss of the 500 companies we tracked: Apple chief Steve Jobs. He drew a nominal $1 salary but realized $647 million from vested restricted stock last year.
The next four top-paid chief executives also earned most of their pay from exercised stock options: Ray Irani of Occidental Petroleum ($322 million total pay), Barry Diller of IAC/Interactive Corp ($295 million), William P. Foley of Fidelity National Financial ($180 million), and Terry Semel of Yahoo!.
So stock and stock options are very important for CEO pay. Parenthetically, Steve Jobs (and Bill Gates) are exceptions to my thesis here in that they actually created or were responsible for creating better widgets, namely the Microsoft operating system and the Apple Macintosh and ipod. Enron is a good example of a company who lied (through fraudulent accounting procedures), cheated (by deliberately manipulating markets) and stole millions by overcharging customers (including Grandmas in California).
"They're f------g taking all the money back from you guys?" complains an Enron employee on the tapes. "All the money you guys stole from those poor grandmothers in California?"
When Enron stock was near its maximum, CEOs cashed out; when its share value dropped to nothing, employees with stock options were left holding the bag. A disaster of deregulation, Enron was only one of a number of such disasters which included the savings and loan and sub-prime mortgage debacles.
On August 14, 2001, Jeffrey Skilling, the chief executive of Enron, a former energy consultant at McKinsey & Company who joined Enron in 1990, announced he was resigning his position after only six months.
"[T]he reasons for leaving the business are personal," said Skilling at the time, "but I'd just as soon keep that private." Observers noted that in the months leading up to his exit, Skilling had sold at minimum 450,000 shares of Enron at a value of around $33 million (though he still owned over a million shares at the date of his departure). Nevertheless, Kenneth Lay, the chairman at Enron, reassured analysts by affirming that there was "[a]bsolutely no accounting issue, no trading issue, no reserve issue, no previously unknown problem issues" prompting the departure. He further assured stunned market watchers that there would be "no change in the performance or outlook of the company going forward" from Skilling's departure. Lay announced he himself would re-assume the position of chief executive.
The next day, however, Skilling admitted that a very significant reason for his departure was Enron's faltering price in the stock market. The columnist Paul Krugman, writing in the NY Times, asserted that Enron was an illustration of the consequences that occur from the deregulation and commodification of things such as energy. A few days later, in a letter to the editor, Kenneth Lay defended Enron and the philosophy behind the company:
The broader goal of [Krugman's] latest attack on Enron appears to be to discredit the free-market system, a system that entrusts people to make choices and enjoy the fruits of their labor, skill, intellect and heart. He would apparently rely on a system of monopolies controlled or sponsored by government to make choices for people. We disagree, finding ourselves less trusting of the integrity and good faith of such institutions and their leaders.
The example Mr. Krugman cites of "financialization" run amok (the electricity market in California) is the product of exactly his kind of system, with active government intervention at every step. Indeed, the only winners in the California fiasco were the government-owned utilities of Los Angeles, the Pacific Northwest and British Columbia. The disaster that squandered the wealth of California was born of regulation by the few, not by markets of the many.
Oh yeah. I beg to differ, Mr. Lay. I think you could more accurately state that it was deregulation run amok combined with corporate greed that caused Enron's and your personal downfall. I could go on and on with scandal after scandal involving CEO lying, cheating and stealing. But one more example will suffice. Tobacco company executives lied to Congress in 1994 when they testified that they knew of no studies that cigarettes were addictive.
Tobacco company executives stood in front of the august body in 1994 and, under oath, said that nicotine was nonaddictive and that they knew of no studies linking cigarettes to cancer. The Justice Department tried to prove that the suits had lied, but the executives insisted that these were their personal viewpoints.
So there you have it friends. Now you know how CEOs attain their lofty positions and make tons of money. They make the market price of their stock go up not by producing better widgets but by throwing Americans out of work so they can reduce the cost of their labor input by hiring the cheapest labor wherever it exists in the world, paying the least in taxes, and, in general, lying, cheating and stealing.
