What’s a Corporate CEO Worth?

May/12/2015 5:37AM
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Idiots, like Elizabeth Warren, who couldn’t run a paper route, think they know what fair pay for a corporate CEO should be.  What was Carly Fiorina worth to HP? She put the company in a tailspin and it hasn’t recovered. What was Bob McDonald, Obama’s new head of the Veterans’ Administration, worth to Procter and Gamble? He screwed it up so bad they are dumping as many as 100 brands. He’s the guy who lied about his military service claiming he was a Ranger and who said heads will fall at the VA? Remember that? How many heads have fallen since he took over? Three, that’s right, three. No wonder those people were reluctant to blow the whistle on the wrongdoings at the VA. They still have same bosses.

Let’s move on to Jeff Immelt, Obama’s favorite business expert, the CEO of GE. Jeff has sat at the right hand of the president to advise him of decisions on economics. What’s Jeff worth to GE, and who should decide? Should it be politicians who  think they are well positioned to decide what is best for investors, should it be protestors who hate Wall Street, corporate raiders who want to benefit by taking down a large corporation, or stockholders who have money invested in the company? After 13 years as the head of GE, it appears Immelt may be leaving.  He replaced a legend at GE, Jack Welch. Let’s look at the record.

Market value, in billions: year 2000: $475, year 2014: $278.5 or -41%, stock price in year 2000: $51.60 and in 2014: $28.51. In 2000 GE was the no. 1 most valuable company based on the S&P 500 and today it’s no. 8, 62% behind the leader Apple. Now, Immelt announced the company is getting out of real estate and selling that portfolio.  Shrink the company when you can’t make what you have perform. So, what was Jack Welch worth to GE for building it into the no. 1 company in the world? What should Immelt have been paid to reverse that and sent it into the tank? It used to be the cradle of CEO’s, but who hires a GE executive to run anything today? Obama, that’s it. And, Obama got what he paid for with Immelt. Unemployment is down to 5.6% because no one works anymore. He shrunk the country just like Immelt shrunk GE.

How about John Chambers from Cisco?  He became CEO in 1995 when the revenue was $1.2 billion and will leave with revenue at $47 billion. He’s leaving at age 65 because in the business world it is recognized that effectiveness diminishes with age. And, because the stock, which was $1.89 when he took over, peaked at $79.30 in year 2000 and has rocked along at $30 since. He could grow a company and should have been paid a maximum salary for doing that. But, his strategy of using stock to pay himself and key employees, and to acquire other companies retarded stock growth for investors. He should have gone off to grow something else and Cisco should have named a CEO who could increase the stock value for investors.

If you work for a company with a great CEO, you are both blessed and stressed. You will see great opportunities, but only if you perform.  If you are an investor, try to find the Jack Welch’s and invest in their companies, short the Immelt companies. Pay that CEO top pay to keep that person in that job. Top pay, as determined by what other top-performing CEO’s are paid, not what Elizabeth Warren thinks is fair pay.

Which presidential candidate is most like Jack Welch. None, simple as that. We don’t pay well enough to get top talent to run the country. Plus, no true leader will go through the process to be elected to that job. How is the president evaluated for performance purposes? By a media with a collective IQ of 75. By polls that judge performance based on what the leader gives the rater for free. By a selective group of special interests like unions, gays, environmentalists, illegals, etc. Not by the big picture numbers that CEO’s must meet, or not meet in the case of Immelt.

Sometimes CEO’s are like politicians, they hang on by smoozing. That’s why I sold my GE stock 14 years ago.  We miss you, Jack Welch.

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