Reply #12: The Big Lie - CEOs and Shareholder interests are aligned

[54anickel]

http://www.prudentbear.com/archive_comm_article.asp?category=Guest+Commentary&content_idx=52812

There seems to be “prevailing wisdom”, or we could call it a school of thought, that if the CEO of a public company owns stock, that their interests are aligned with shareholders.

The underlying logic is that all shareholders want the price of the stock they own to go up. So if management owns stock, and they work to get the price up, then management and shareholders have achieved a meeting of the minds and everyone is happy. Right ? Wrong.

There is one primary disconnect that makes this completely untrue and at its heart, the reason why executive pay has gotten so out of line and why individual shareholders are being taken advantage of every single day.

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Which is why the concept of CEO and shareholders interest being in alignment because they both own stock is a big lie. The CEO wants to hit the homerun of their career when they take the job, the shareholder just doesnt want to strike out with their life savings.