http://www.latimes.com/business/hiltzik/la-fi-mh-ibm-s-ceo-w...
X and Y are arbitrary
The PR version: http://today.tamu.edu/2015/10/15/ceo-effect-on-firm-performa...
But there could be an element of truth to it, which might warrant further research. If CEOs really do have a much more limited influence than they are given credit (or blame) for, then incentives perhaps ought to be adjusted, not just in the interest of fairness but also in the interest of finding better ways to actually improve performance.
Regardless of the firm's performance, it's a difficult role to fill -- especially for a large, multi national conglomerate.
Just because Pharaoh decides to build a pyramid, doesn't mean it will happen, however hard they think it, without an army of people doing the actual work.
Also, after the fact, sure, you got a pyramid, but what might have happened if those people were doing something else? It is easy (and in leaders' interests) to take credit for non-negative changes, but it seems difficult to determine if there is any relationship between these changes and the actions of the leader (rather than some other effect), let alone establishing causality.
note: apologies for off-topic rant
September 2012 IBM stock 205.5 September 2013 IBM stock 192.75 September 2014 IBM stock 190 September 2015 IBM stock 145 March 2015 IBM stock 140
If the CEO pay logic even remotely applied this woman would never be employed by anyone again. I'd rather hire a pyromaniac that did 100 million dollar in fire damage to his last employer : it'd be far, far cheaper.
Since she led IBM the stock has lost 11% of it's value every year, but it's not an average : the loss has accelerated over time. For her fifth year she's on track to have IBM stock lose 37% of it's value (trendline Sep 2015 to today, then see where that trendline is on Sep 2016. Where will it be ? 92 dollars). In absolute value, IBM shareholders have lost 62.4 billion dollars, about 1/3 of the total market cap.
If you're right, and the CEO is responsible for this ... Just wondering: I'm not the CEO. Suppose I do something that loses my company 46% of it's total stock price, damage sufficient assets to cause 60 billion dollars in damage. What will happen to me ? 16 million dollars extra pay ? Or something else ...
As for the content of what you've said, if it's true, then it's quite terrifying! But it hardly seems unusual [0].
[0] http://www.theguardian.com/business/2016/mar/04/bp-chief-exe...
I haven't even said the worst of my analysis. If I make an NPV calculation assuming the 5-year average interest rates will be 1%, IBM is currently far overvalued, essentially 100%, mostly because of too much debt compared to assets. In a firesale, IBM wouldn't fetch half it's market cap.
You can tell by the short interest in IBM that I'm not the only one who thinks so.
In fact, that's the only real quality I would ascribe to Ms. Rometty : investors in IBM should be panicking, and they're not. Since she's the main point of contact between the board and the company, she probably should get some credit for that. But in a way it's the worst kind of compliment : she has been able to push something that's either a lie or mindless optimism on a lot of investors.
"Why would you attribute an increase in sales or profits solely to the leader?"
If you meant something similar, then fine, but if not, then do you really believe that the pharaohs would have been able to build their pyramids without their work force? As for whether we could build one now, I think you might say that we just have different gods [0].
http://www.businessinsider.com/ibm-ceo-ginni-rometty-gets-a-...
You don't need to pay me Elop level money to destroy something like Nokia - I would happily do it for 100K per year. I may not do it as well, and could probably have the unfortunate success story here and there. But I am capable - just give me a chance.
But just to really dogfood it, Watson should drive itself to work, too, not just hang out in server room :)