CEO Pay

K was a our family friend for years, and his long-time hands-off CEO turned up in the company one day and claiming he want the full control over the operation. The most shocking bit was the CEO claimed that he should have 70% of the shares instead of 60%, which was agreed upon when they started the VC firm 2 years ago.

I was very shocked, in western culture, integrity and consistency are the 2 important qualities to measures a human being. Without them, it is hard to find yourself a job/friends/partner. K's CEO is a very well-known, widely respected politician, yet he can backed down on what he had promised before. Yes, money is very important but reputation/integrity/consistency is the ulmost important virtues for survivals. Perhaps the old CEO doesn't care and he doesn't need to want to preserve any face. I despite him, he could have done it in a clever way without showing his ugly face. Perhaps things work differently in Chinese world?

Speaking of CEO pay has gone sky high after 1980's, that's because their pays are mostly linked to stock. CEO are paid relative to the performance of the company instead of being paid like a bureaucrat. It is hard to mesure how well a CEO has done to increase the revenue of the business, stock price seems to be very good indicator. CEO will spend less since spending the company's money is like to spend his/her personal wealth. At the same time, CEOs are taking more risk (because of their big fat paycheck, it is said that they take higher risk if fired, how about me???).

It doesn't mean paying CEO a sky high salary is to rip off the shareholders. Suppose the CEO has made the revenue increase tenfold, guess it is OK. This high paying CEO also boosts CEO to push high the stock prices - by all means. Such as re-pumping the revenue into its own stock holding. CEOs are hoping they can vast their option and take profit.