{"id":3193,"date":"2013-08-23T12:47:23","date_gmt":"2013-08-23T20:47:23","guid":{"rendered":"http:\/\/hodakvalue.com\/blog\/?p=3193"},"modified":"2013-08-25T05:47:48","modified_gmt":"2013-08-25T13:47:48","slug":"the-opposite-of-say-on-pay","status":"publish","type":"post","link":"http:\/\/hodakvalue.com\/blog\/the-opposite-of-say-on-pay\/","title":{"rendered":"The other kind of shareholder vote"},"content":{"rendered":"
\"The

The other Steve<\/p><\/div>\n

Steve Ballmer announced his resignation, and Microsoft’s stock price shot up seven percent.\u00a0 Ouch.<\/p>\n

That investor verdict is far more damning than anything shareholders could have conveyed through a proxy vote.\u00a0 It tell us pretty directly what the market thinks about Ballmer or, more specifically Ballmer’s leadership relative to anyone that Microsoft is likely to hire as his replacement.<\/p>\n

One way to read this reaction is that Ballmer has been a roughly $19 billion drag on his company.\u00a0 This deficiency might have been inferred by the fact that Microsoft’s stock has gone exactly nowhere* in the decade that Ballmer has been CEO, significantly underperforming the Nasdaq, not to mention its closest competitors Oracle, Google, and especially Apple.\u00a0 I’m sure Steve Ballmer is in for many unflattering comparisons to Steve Jobs in the upcoming weeks.<\/p>\n

I’m not here to bury Ballmer, or to praise him, but to highlight how this coda of his tenure reflects on the value of a “typical” CEO.\u00a0 I often hear how a CEO doesn’t do it alone–he or she is part of a team.\u00a0 I often hear people questioning whether the average CEO is worth the $15M to $20M per year that they get paid, or whether any CEO “needs” the $100 million they may have gotten paid in a year of outstanding performance.\u00a0 I have answered these questions in prior blog posts, so I will encapsulate them here.<\/p>\n

1)\u00a0 Sure, a CEO is just one person on a team, but the CEO ultimately selects and manages that team, amplifying or cancelling their talents.\u00a0 His or her marginal contribution is still very large.<\/p>\n

2)\u00a0 Ballmer illustrates that a CEO may be worth much less than $20 million per year.\u00a0 Other CEOs, like Jobs (OK, I’m starting the comparisons), are worth much more than $20 million per year.\u00a0 The stock reaction when Jobs announced his resignation was a drop of about $10 billion, although his announcement was not entirely unexpected.\u00a0 So, how plausible is it that the average CEO is worth about $20 million per year?\u00a0 More plausible than $2 million or $200,000 per year, although the value variance around that average is obviously very high.<\/p>\n

3)\u00a0 No person “needs” $20 million or $100 million or any such astronomical sum.\u00a0 But nobody this side of the Soviet Union gets paid according to their need.\u00a0 If things are working right, they get paid what they’re worth.\u00a0 This correspondence is never perfect, but we haven’t yet found a better way.<\/p>\n

By the way, Ballmer earned about $1.3 million per year in salary and bonus as CEO of Microsoft, much less than a typical Fortune 500 CEO, but not out of line for someone whose personal net worth likely went up and down about $100 million a day<\/em> due to his MSFT stock holdings which, as mentioned earlier, didn’t net him anything more than he started with over his tenure.\u00a0 In other words, alignment wasn’t an issue for Ballmer.\u00a0 Maybe he just decided he didn’t need any more?\u00a0 Maybe he wasn’t greedy enough?<\/p>\n

* I’m being generous here by tagging the stock’s fall in his first year as an artifact of the dot-com bust.<\/p>\n","protected":false},"excerpt":{"rendered":"

Steve Ballmer announced his resignation, and Microsoft’s stock price shot up seven percent.\u00a0 Ouch. That investor verdict is far more damning than anything shareholders could have conveyed through a proxy vote.\u00a0 It tell us pretty directly what the market thinks about Ballmer or, more specifically Ballmer’s leadership relative to anyone that Microsoft is likely to […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":["post-3193","post","type-post","status-publish","format-standard","hentry","category-executive-compensation"],"_links":{"self":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/3193","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/comments?post=3193"}],"version-history":[{"count":8,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/3193\/revisions"}],"predecessor-version":[{"id":3196,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/3193\/revisions\/3196"}],"wp:attachment":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/media?parent=3193"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/categories?post=3193"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/tags?post=3193"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}