Revisiting the Scandal of Executive Compensation

In my previous post I talked about looking at my server log files to see what kind of search-engine queries brought people to my pages. One such query that I noticed in the log this morning brought a smile to my face:

Question Jeffrey Friedl asked at the May 2003 shareholder meeting

I don't know who did the search or why they were looking for it, but they certainly found what they were after. It brought them to a set of pages I'd made years ago and had largely forgot about, and didn't know were even indexed by the search engines:

Gluttony at the Top — Executive Compensation at Yahoo

It includes a transcript of a question I asked at a Yahoo! company shareholder meeting, and a subsequent letter to the Yahoo! board of directors.

The letter generated almost no response. I'd heard through the grapevine that one of the executives (not Mr. Semel) was incensed and wanted me to be fired, but smarter heads apparently prevailed. I was contacted by HR for a chat, but otherwise, I got no response.

I then made the web pages which chronicled the story and quietly circulated it among friends at Yahoo! For a while, people I'd never met would come up to me around campus and give me a thumbs up about the pages, or tell me to “keep up the fight”, etc. I eventually got a visit from David Filo, and we talked at length in a conversation that was essentially his asking me to take down the site without actually asking me to take down the site. I like and respect David a lot, and took down the site, which had been on an internal Yahoo! server not visible from the outside. (Some long time later, someone asked if they could see it, so I put it up on my non-Yahoo! server and pointed them at it. I never linked to it, but somehow the search engines found it.)

Anyway, I did later have a couple of meetings with Mr. Semel. In the first, I told him that while he may be a great businessman, he was neglecting the troops, who wanted more of him. I suggested that he take an hour a few days a week to just walk the campus and chat with employees. He'd garner a reputation of openness and approachableness and would eventually start hearing things directly that he'd not otherwise hear at all. He said he'd think about it, and was quite cordial. (He never did anything about it, of course.)

In another meeting some months later, I brought up the compensation bit. His cordialness was gone, and he got very condescending and said that the market dictates what he gets paid. He couldn't even conceive how any employee could feel bad about what he gets. I think he's been using the executive bathroom too long to remember what it's like to be a real person.

As far as the “market demand” argument, it's a commonly-cited one, but misleading (which is probably why it's commonly cited). For example, consider highly paid sports figures: those paying the tens of millions a year to retain a top-quality player have a vested interest in paying as little as possible because they're spending their own money — they pay only as much as they can get away with. That's market demand.

On the other hand, those handing out tens of millions to company execs are not spending their own money (they're spending the company's money), and often have a vested interest in paying as much as they can get away with. Members of a company's board of directors are the ones who decide executive compensation, and they are often executives at their own company (e.g. company XYZ board member may be the president of unrelated company PDQ). The more they can fan the executive-compensation fire in their capacity as a board member, the more they can go back to their own company and demand more compensation for themselves, as they'll be able to point their finger back and say “look, that's what the market is paying!”. That's not market demand, that's conflict of interest.

It's a wholly dishonest old-boys club of which the Yahoo! board and execs are fully-paid members (paid by the company as a perk, off course).

Eventually, I realized what most people probably know from the start, and that's the sad reality that there's nothing I could do to improve the situation. I was just causing myself stress, so I let it go.

I was a Yahoo employee for eight years, until early 2005 (I left sort of involuntarily — I'd moved to Kyoto for family reasons and worked remotely, but HR didn't like it and eventually told me to come back or leave the company). I'm still a Yahoo! shareholder but have not looked at the company report or followed the compensation of Mr. Semel and friends for years.


All 3 comments so far, oldest first...

I worked in the data department on the same floor as the top executives sit in 2005. There is no executive toilet. Although I tried to spread the rumor 😉
Early 2005 Mr Semel complained people where stealing his food. There is a conference room that cannot be booked. The top execs use it all the time. At least 3 times per week there will be lunch on a table in front of the room. At best 20% will be eaten and all the fancy desserts remain untouched.
Lots of managers, when they have leftovers after a meeting, either leave it for grabs, take the stuff to the kitchen with a sign ‘all yours’ or sent emails around saying ‘all yours’.
Mr. Semel on the other hand thinks we were stealing food. At no point have I ever seen anybody do that. There is too much respect for top execs. But we often had our nose over the fancy desserts to see what it is. If the food is at risk just serve it inside the conference room or add a sign. Anyway.
Communication? He emailed the next SVP who emailed the VP who forwarded the message finally to all the software engineers that sit on that floor. I guess it is very hard to have open doors and direct communication with the working forces that sit on the same floor with you.
Terry walking around on campus?? Only if you count from his office to the cafeteria and back.
mtm

— comment by mtm on April 1st, 2006 at 7:02pm JST (11 years, 8 months ago) comment permalink

I have just had the most enjoyable evening reading some of your web pages. I googled for “garbage truck cakes” so I have no idea how I found you. How delightful.
My little grandson is turning 4 in a couple of weeks . He is enamoured with garbage trucks … thus the cake pan search. He has an Asian mother and a Caucasian father (my son) . Mom was born in Vancouver BC Canada so she is fluent in English and Chinese. … my son only in English. Little Justin learns Chinese from his Asian grandmother and grandfather as well as from his mom (sometimes) and other relatives. We would love to send him to a school where Chinese is spoken but there isn’t one available in our area.
It was so much fun to see your little boy on his fourth and fifth birthdays. He is adorable.
I have added your site to my favorites so I can visit you again sometime.
Warmly Patricia

— comment by patricia howard on May 19th, 2008 at 2:31pm JST (9 years, 7 months ago) comment permalink

In hindsite you got out of Yahoo just in time.

— comment by Eric Mesa on May 28th, 2009 at 3:42am JST (8 years, 7 months ago) comment permalink
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