There's a new SEC proposal to make public CEO compensation without making in difficult to figure it out through all the "blizzard of filings made every year".

http://www.msnbc.msn.com/id/10895953/

Here are some of my questions:

Are CEO's overcompensated?

Is our system broken, seeing that many CEOs make huge salaries even when the company is floundering or headed into bankrupcty? (see Delphi execs for example).

If it is, what can fix our system to bring CEO's salaries in line with what they SHOULD be making?


Recently it came to my attention that our CEO was making nearly 2000 times what the average worker was. And we are constantly harassed about the "time not working" that we use. And the CEO even sent out a memo saying people who used all of their sick time would be considered for termination.

2000 times the average worker is FAR excessive to me. He may be good but he isn't worth 2000 people, no way. And he's not even one of the top CEOs salary-wise.

Are CEO's overcompensated?

According to this site CEO's average $630,000 a year (just to put that in perspective that's $71 an hour, every hour, for a 365 day year). The top 25% make over $820,000 a year. This seems ridiculous to me. There is no way an individual's time can be worth that much and I would think that earning something like $200,000 could keep anyone happy. Hell, earning $80,000 would make a lot of people happy. Also, according to the article bonuses are growing faster than the market value.

Is our system broken, seeing that many CEOs make huge salaries even when the company is floundering or headed into bankruptcy? (see Delphi execs for example).

It just shows that things are just as normal as ever: those with money and in positions of power can do what they like and, if they keep things in line, do it legally. All it shows me is the greed and ego people can have. As the old cliche goes "power corrupts, and absolute power corrupts absolutely." Should there be a ceiling at some big, but not huge salary, like $500,000? I would like to think so, but then we would be interfering with capitalism and people would get all mad start yelling profanity like "socialism!" or "communism!" Oh the horrors. I would rather see CEO's, presidents, and VP's make up to a set amount and have the rest either given to the share holders in dividends or invested back into the company for growth, or given as bonuses to workers, ect. Something else instead of huge bonuses for already obscenely wealthy and rich people. But then again, I guess these bonuses could work on the "trickle down effect," after all they are reinvesting in 5th Houses, 3rd boats, and 2nd Hummers; so maybe CEO's are the ones responsible for keeping the economy going and are the sole reason it's been improving! God bless those fearless, brave, and daring CEO's.

If it is, what can fix our system to bring CEO's salaries in line with what they SHOULD be making?

Only give annual bonuses at some percentage of market value growth or something like that. See above answer/rant.

(spelling, ugh)

1) massively overcompensated- insanely over compensated- the only exception is to those who actually found the company in the first place- they took the risk, they get the rewards. There is absolutely no risk to being a CEO of a public company today- and you can vote yourself milk and honey for compensation until the cows come hom without fear of stockholder revolt- because the stockholder has been purposely removed from the equation for a very long time

2) SEC reform, big time. A CEO should have his pensions frozen until 65, or 15 years after leaving the company, with no compensation during years when there is company downturn. If the company is not profitable, or not in business in 15 years, not only should the former CEOs not get any money- they should have to pay back a very large percentage- take them back to laborers wages.

We definately need some new accountability in the boardroom- because, unlike the rest of the worlds MUCH lower paid CEOs of companies that are plain outright kicking our butts - there is no repurcussions either in prestige or pay for non-performance in the US- it is a horribly out of whack system.

Interesting take....

Did you ever think that for a minute that the vast majority of CEO's of publicly held companies were promoted/hired due to their industry knowledge and track record of success??



Did you ever think about a board of directors? Have you ever considered that most CEO's and boards are compensated based upon profitability and stock success?

Take the CEO of Yahoo... Terry Semel. He's on the boards of 2 major companies, the Gugenheim Museum and Emerson College. He's had a roughly 30+ year record of success, to include:
(from Wikipedia)


He's just one of hundreds (if not thousands).

CEO's are the captains of their business ships, often being involved in all facets of the businesses prior to their promotions. It's not like publicly held companies give conciliatory posititions to the highest level officers in their business. That only happens to Hollywood directors!

Think of Gary Kelly of Southwest Airlines... He's been with the company for nearly 20 years, and been involved in multiple facets of their business as well as others. It's not like he just "fell" into the CEO slot...

I have come to believe that the "CEO" talking point for many liberals is either stemmed from jealousy or media hype. Frankly, I'd venture to state that the vast majority of CEO's of publicly held companies worked hard to become the Captains of their ships; which comes with large amounts of responsibility.

Why are CEO's paid so well?? Just ask the businesses that hired them... it's no different than an athlete being paid highly. It's just capitalism... and someone believed that it was worth the expenditure.

(*edited to add below*)


What you fail to address is that this is a CAPITALIST society. Some people are going to have to make more than others. Also, if they work a regular 40 hr work week... they wouldn't be earning $71/hr, but more like $302-303/hr. Frankly, what does that have to do with the price of tea in China? Nothing.

If your logic about $80K held true, I suspect that you could make the argument with $75K, or $70k, etc...

If a business has a CEO who doesn't make sound decisions, and the ship begins to sink... who gets thrown overboard? No brainer.

Why are bonuses growing faster than the market value? Because the businesses believe that they're worth it. Sometimes in order to maintain growth in a saturated industry, innovative ideas must be born. ---> Insert innovative and well comp'd CEO's... (No, I'm not a CEO... but do work of a highly bonus based package... we bring in $$$... we get a piece of the pie...)

This ought to be interesting because I imagine I'm probably going to break with most of the people I usually agree with...

Are CEO's overcompensated?
As a general statement? No they aren't. Aevans made some good points in the post directly above mine - you don't just decide you are going to be the CEO of a company, you either get there due to hard work, success and lots of sacrifice (e.g. your personal life) or you get there because you had a revolutionary idea and you are leading things up.



I wouldn't call $70 an hour ridiculous, in fact quite a few people make that type of wage. If you do freelance programming you can easily charge $70 to $75 an hour if you are good, you can easily charge $60/hour as a graphic designer. My wife charges double and sometimes triple that for an hour of her time as a photographer depending on the job.

As the leader of a large company you don't get to punch out at 5pm and take a leisurely weekend, you are working all the time and you are always on. I have run several businesses and am currently involved in a few and I can state that as an absolute fact and I'm not even running a million dollar company.

Is our system broken, seeing that many CEOs make huge salaries even when the company is floundering or headed into bankrupcty? (see Delphi execs for example).
That doesn't mean the system is broken, that means the board of directors and the shareholders aren't doing their jobs. If the CEO isn't performing then their pay should suffer accordingly or they should be booted out.

Let me start off by saying that I do think CEO's are overcompensated. However, I also think most of the people complaining about don't understand the factors driving it, which leads to a false impression of what to do about it, if anything.

Why do CEO's get paid what they do? We live in a market economy; companies that overpay for top executives should lose competetively, and be driven out of the market, right? Yet, CEO pay continues to remain high. How is it possible? The reason is because CEO's are paid based on what impact their contribution to the company could be. A CEO of a major company makes decisions that affect billions of dollars, tens of thousands of employees, and millions of stockholders. That kind of responsibility deserves a very high pay. Further, a company can't afford to go bargain shopping for CEO's when the stakes are that high, can it? How much was Lee Iacoca worth to Chrysler? Without him, the company probably wouldn't even exist currently, meaning he was very personally responsible for billions of dollars of market value & tens of thousands of people's jobs. At the time, I think he was making, with bonuses, about $20 million. That's only a few hundredths of a percent of the value he created. Ask any salesman what they think of such a low commission....they'll laugh at you.



I would agree. Almost any professional service bills out at much higher than that--if you doubt this, try talking to a lawyer . In fact, I would say that this is sound evidence that CEO's are drastically underpaid, not overpaid. I've been billed out at considerably more than that myself, and didn't have anywhere near the responsibility that comes with being CEO.

That's a good point Hobbes, I forgot about that. If you are dealing with one of the big consulting companies the lowliest analyst that is fresh out of college and doesn't know anything is billed out at $150 or so as far as the books are concerned but the company might get a "discount". It gets considerably more pricy as you move up the experience scale but you as a worker don't see much of that.

If we go to something like law, one of the top paid fields right now is intellectual property law - those guys can charge anywhere from $300/hr to $800/hr and up.

Can I help y'all here for a minute??? CEO's that Devil's Ad were discussing don't really make $70/hr. He cited $630K per year, which on a normal 40 work week (which is a FARCE!) comes in at about $302.88/hr. Even at a 55 hr work week, you're hitting $221/hr.

Take 55 hours per week, multiply by 52 work weeks and divide by yearly compensation... Devil's Ad used I think a 7 day work week...

We get the math....Devil's Ad focused particular attention on the hourly rate figure. Even at the amounts you state here (which I would state are very low hours for a CEO...probably more on the order of 60-80 hrs/wk), I've been billed out at those rates myself, and, as I said, I had far less impact on the company than a CEO would.

The real point I was trying to make is that these wages are based on contribution to the company. No one contributes more to the company than the CEO, so CEO's get paid far more. This gets lost in all the rhetoric about excessive salaries, which tends to render the solutions provided impractical.

I think the frustrations come that when a company is losing money hand over fist, that the salaries are still absolutely ridiculous, where if as you say, these salaries are reflective of their contributions to the company, then a company's failure falls largely on the CEO's lap, yet they continue to recieve their bloated salaries (and remember their salaries are often a signficant percentage of a large company's annual losses.) And even when they are fired, they are generally given amazing pension packages.

I thought this recent article was notable for this debate. Google's executives are recieving salaries of $1 a year. This is exemplary corporate behavior, and shows that they are depending on keeping the stock high in order to pay their bills.

http://news.zdnet.com/2100-9588_22-6030190.html



Why not pay all execs in Stock? That would certainly be an interesting alternative.

I don't think you can make that statement in all honesty. Sure a CEO can make a big impact, be it a disaster or a success. But when a CEO makes 10,000 times the average worker's salary for the company....

Are you telling me he has more impact than 10,000 of the companies workers?

I've managed people before and no doubt it's tough work. But let's face it, when you're managing....you're not doing the work are you?

I think the salaries are ridiculous and you cannot tell me these people are making these giant salaries based on what they accomplish. There are too many examples of companies in the toilet with CEOs getting raises and platinum-golden parachuttes.

There was a Harvard business analyst who wrote an essay on how you could get the top grads from the best schools, and get the 1/10 of the proportionate salaries for those grads and they could do the same or better job than these CEOs. I.e. get 4000 grads from Michigan Law or Business school and have them do the job of the CEO.

The difference between a sports player and a CEO is that the CEO got his job because of his connections while the player actually has to be very GOOD at what he does.

I think the system is broken. You have buddies on the board giving the CEO a raise so then he turns around and gives them a raise and stock options. It's the buddy system.

That is the responsibility of the board of directors and the shareholders to determine. If they want to waste their invested money on a CEO which is dragging the company down it is really their business. A board that is doing its duty would penalize the CEO or they would have tied their compensation package to company performance more closely.


While that is certainly eccentric I think it is more for tax reasons than for making a statement. I believe they do better paying capital gains tax than income tax. The company benefits in the form of payroll taxes as well.


You've managed to contradict yourself inside two sentences. Management and Leadership are exercises in thought and creativity, and people with those skills are always paid more than those actually doing the work. You are completely trivializing the effort it takes to manage a small team, much less a multi-million dollar company. You say you've managed people before but if you are making statements like this I'd really question your experience because no one with any sort of responsibility in their job could hold this position.


Wrong, you have a completely inaccurate picture of what a CEO does if you think he doesn't have to be "good" to do his job. In general CEO's fall into two categories. There are those that are made because they are the founders of a company and are driving the direction of the company - many times these people step aside at some point and let a "professional" CEO run things while they serve as Chairman of the board and provide strategic direction. Then there are those that have worked hard climbing the executive ranks and are experts in their area, they have gotten where they are because they deliver. Having connections only opens the door, if you can't deliver you are going to get booted out quickly. That goes for almost any job out there (well private sector jobs anyway).

First off, let me remind everyone that I did start out saying that I do think CEO's are overpaid, and that I was just trying to bring to light why they are paid so much. The reason I think they are overpaid is stated very well by smorpheus:



Yes, I agree completely. I also agree, though, with CubeJockey that allowing this to happen is the fault of the board, not the CEO. After all, how many of us here would turn down such a pay package if it were offered to us, or if we thought we could actually get it?




Short answer....yes. For two reasons. First, the job they do can have more impact on the bottom line, and therefore the stock price, than thousands of workers. Again, consider the example of Iacoca (which is about where the CEO salaries became so bloated, which I'll get to in a minute). I don't think you can argue he saved the company. All of the workers put together couldn't have done that. This led directly to billions of dollars of shareholder value. Again, no group of workers could do that, either. As a worker, you're not as tied directly to the bottom line. How much is adding billions of dollars of shareholder value worth? Well, literally billions of dollars. As such, CEO's that do do a good job running their company are probably significantly underpaid, not overpaid.

The second reason has to do with availability of the skill set. Again, back to Iacoca as an example. He might have been the only person on earth who could have saved Chrysler. However, reasonable replacements for assembly line workers can be found. So, supply and demand has a lot to do with it, as well.

Now, given this, why do I think CEO's are overpaid? Again, it has to do with Iacoca, and the supply and demand described above. I think the market for CEO's is a lot bigger than those that make such decisions think it is. For every Iacoca, there are a whole lot of very average CEO's, and, as I'm sure you'll agree, a good deal of fairly bad ones. I think CEO pay is still tied to the Iacoca example, with one man coming in and saving the day. Such is not usually the case. This is also not the mindset in many other countries, particularly Japan, where CEO pay is much much lower. The reason its lower is because they don't have the Iacoca example in mind--its more of a team effort.

The other factor driving up CEO pay is emphasis on short term results. Trying to achieve them is also often what causes the disastrous failures. The GM thread ongoing currently is an excellent example of this. Why have the exec's at both Ford and GM focused so heavily on SUV and pickup sales, at the cost of developing other models? Because doing so created a wonderful stream of short-term profits, which the market loved. So, the blame goes to shareholders, as well. Companies focus on short term profits because that's what shareholders tell them to do. If people would stop buying stocks based on the last quarter's results, all of this would go away. That's the beauty, and the curse, of the free market system...the market almost always gets what it wants, whether it's really good or not.

No, but the move towards transparency in CEO compensation is a good thing. The erudite and loquacious Mr. Buckley had a good column on the subject recently.

As somebody who's been with two publicly traded companies in bankruptcy, I can say that the CEO is just as important in bankruptcy as they are before and after. A good CEO and management team can make the difference between reorganizing the company, and closing the doors. Sometimes its the same CEO that led the company before the bankruptcy.

Do not confuse CEO salaries with CEO compensation. Salaries are generally only a small part of total compensation, and much of the total is purely dependent on their performance. As for "fixing" our system, I'll restrict myself to only attempting to determine what I should be making, and what somebody I'm employing should be making.

Then quit. If 2,000+ of his employees notify the Board of Directors that they're going to quit unless the CEO's compensation is divied up "more fairly", then you'll have an opportunity to find out if the owners agree with y'all.

Yes- let's discuss how CEOs get all that money from the businesses? Hmmm- could it be because the CEO is all cozy with the compensation board, and frequently the CEO of one corp is a "board" member on several others boards- and they take care of each other more than a bit here? - The layers of insulation from the stock holders is extreme, and they have learned how to exploit this very well, mutual funds that buy into mutual funds, and just have a formula for moving around funds once a year or so, etc, - it is all a very nice gig if you got the connections - a general in the miltiary works for the defense industy, sits on the board of a bank or three, a harvard grad with the right connections etc- once you get into the right board room, you will be on alot more- and really- what is the success measured on- that is how they play the game- and why it is broke- not hatin' the playa- just the game!

We need to divorce the compensation farther from the CEO, and take the hand in glove chummy chummy approach with thier salaries- that really resemble the way a congressman gets his raise- and, in fact, there is very little in the proccess that is different- except that Congress has to be more open and somewhat held accountable-

and the same insulation from the voters is how the CEO gets his deal too- you know, bring home some short term pork, they forget about it in a year- while you rake in the money and bennies- at a rate that would make a politician proud.

There is this false impression that these compensations are somehow regulated by the market- they are, but not in a manner that really reflects the "value of thier labor"- though, admittedly- like the Iacoca example- occasionally very well deserved.

What has happened now though is that marginal managers and boardrooms are still getting the same pay as crappy ones- the GM example, or the former eastern airlines- and the really good ones' pay really skyrockets out of control- because the system is so out of balance.

So if I work for a company and sell $2 million worth of product, I deserve more than the people in the company that actually make the product?

I don't agree with your logic. Just because they have responsibility for billions of dollars doesn't mean they DESERVE those billions of dollars.



Maybe Iacoca wasn't a typical Harvard suffed shirt and actually knew the auto industry. Who knows, maybe there are millions of Iacocas out there? God knows the heads of the auto companies now are hardly Noble Prize winners.

And I think a group of people DID turn Chrysler around. Could Iacoca sit in a room by himself and produce all those vehicles? Did he do the designs? Did he do the marketing?




Then again, Iacoca may have been 1 of a million who could have saved it. He just poured on marketing and fancied up some crappy cars.

I'm not saying pay a CEO what a line worker gets....but 10,000 times as much? That's just ridiculous.



Actually, the don't have the same belief that one person is worth that much....and whose companies are doing better? The company that pays the engineer more than the management or the American companies that pay lousy CEOs 100s of millions of dollars for being part of the good ol' boys network borne from an Ivy league school.



And that's one of the symptoms of our broke system.


For anyone that assumes CEOs are truly rewarded for their accomplishments, read this.

http://www.workingforchange.com/article.cf...CFTOKEN=6304585

Do you really believe the stuff you say? Seriously, what leverage do workers have these days? NONE. Even Union workers have their nuts to the wall. Delphi is making Union workers take a 60% pay cut. Now they may quit....but they are organized.

But if workers did have any leverage, that would be the way to go. But they don't, companies just uproot themselves and go to India or to a state in the US where "people behave".

Nice thought, just not very realistic.

Well, unless I put or or or the like, then yes, I believe it.

Essentially, an employee EDIT and moanin' about the bosses compensation has five options.

1) Take over the company and fire his tusch, or pay what you think he's worth.

2) Work your way into his job. I'll bet that if that happens, then the other employees will still be disgruntled with the compensation differential.

3) Convince the owners to change the compensation scheme. As a firm believer in the virtue of personal choice and responsibility, I find any attempt to use the third party guns of government to dictate economic terms between two parties to be morally reprehensible. Which means that other means must be used to convince the owners. Persuasion, public outrage, shame, threaten their bottom line, etc. Will the suggestion to which you object succeed? Maybe, maybe not. A lot of it depends on the company.

4) Quit. If you can't change the boss's compensation to be more "fair" in your perspective, then get a new boss.

5) Be an upright man (or woman) and suck it up.


Now, of those 5 options, the one's that are realistically within reach of most the folks on this board are #4 and #5. #1 and #2 are tempermentally beyond the reach of pretty much anybody complaining that CEOs "make too much." As for #3, hey, it might work.

American compensation is obscene in relation to what the average citizen in Malawi earns. When folks who think CEO compensation should be "fair" petition their employers to send 98% of their compensation to Malawi, then they can avoid the charge of hypocrisy. Until then, this is nothing more than class warfare rhetoric fueled by envy.

Grace and peace, BD

Is there a reason you have to phrase it that way? Making the observation that your CEO makes 10,000 times what you make is just that, an observation. Is there a reason you have to belittle people? The quality of conservatives on this board excedes many other forums I've been in. But your rhetoric is similar to a lot of highly charged conservatives not of the prior standing.

I guess I could sit here EDIT and moanin about your demeanor or I could report your post. Hmmmmm....

I'd appreciate it if you wouldn't make personal judgements about people. Frankly I don't want to hear what you think is EDIT and moanin. If you can't have a discussion without your personal attacks maybe you shouldn't.



Again these are highly unrealistic. How do you convince the CEO and execs to take pay cuts? Quit? If people could quit lousy jobs no one would be working. And option 5 is pretty much what most people have to do.



That's a good point. What do they do in Malawi and don't they deserve a living wage? If envy=outrage, then I guess you're right. When we have people who can't afford medicine, companies like WalMart who cheat their employees and don't pay them a living wage while the execs rake in 100s of millions per year, where is the envy exactly? It's disgust and outrage. And there is class warfare...guess who's losing?

Are CEO's overcompensated?

On average I'd have to say Yes, but there are many exceptions

Is our system broken, seeing that many CEOs make huge salaries even when the company is floundering or headed into bankrupcty? (see Delphi execs for example).

Yes, in a way not touched on here yet. I'm generally not the "grassy knoll" type, and I do actively trade. But there is a facet to this whole scheme that I've always thought smelled rotten.
- The CEOs are hired by the BoD (herein referred to as "The Club")
- The Directors generally all sit on many of the same Boards.

So I help elect you as Chairman or CEO at Corp A, and you do likewise for me at Corp X.....


If it is, what can fix our system to bring CEO's salaries in line with what they SHOULD be making?
Limiting the number of boards someone can sit on (like maybe ONE), and having BoDs make compensation contingent on shareholder value and profitability. That and greater transparency...

I'm not sure why you have chosen to negate the facts. You'd be hard pressed to find more than a handful of Fortune 500 CEO's who haven't had a fruitful career to land them in the Captain's chair of said company.

All of the top 10 CEO's found here have careers that apply to their industries. Not only do they have applicable experience, but a track record of success. Overwhelming success. This is basically a no brainer.

It's pure capitalism. If you're in high demand, you go to the highest bidder. This is as true with CEO's as it is with any other profession. To make rhetorical statements about marginal managers or crappy CEO's is near-sighted. Unsuccessful CEO's either get fired or resign. Making a claim about GM or Ford to date isn't necessarily applicable in that it will largely be determined by how they change their course. If the companies are continually unsuccessful, mark my words, they'll have new leadership.

You act as if business works in the fashion that politics does... in that people are handed affluence in gift form from generation to generation!!! You'd think Fortune 500 companies were headed by the Kennedys!!!

Aevens- we are not so apart as you may think- I am all for capitalism and market forces- I am all for as high as pay as the market suggests- but the problem is shown by CEOs' enormous salaries (Hewlit-Packard anyone-Carly Fiorina's misguided tenure, which was marked by the ill-advised buyout of Compaq.
) where, even when fired, they still rake in enormous salaries that are a drain on the company as well.

It is not really the compensation itself I have a problem with- let's look at possibly the most succesful CEO of all history- Bill Gates- a super uber gazzillionare that is richer than anyone but the G-7 themselves, and I guess that Ikea guy LOL

I will be the first one to say he has earned every dime- the very fact that we are on this debate site today is impacted by his windows marketing and such-

The problem I have is the skewed way that CEOs come about the compensation-

Let me ask you this- do you have a problem with the way a congressman votes his own salary? Don't like it? Yet, you won't vote him out either, will you? Well, it is even more pronounced with the CEO-

the buddy buddy system of how they achieve thier pay is bad.

Now- I agree with you Aevens- I am sure MOST CEOs are above board, and not paid like Carly Fiona or Ken Lay (who, incidently, had that same wonderful resume of all those other folks you posted links too- until he was caught- 20 some or thirty some years later - that is the other problem- with CEOs everything you hear is roses and oranges, until WELL AFTER they leave, then it turns out =whoops, maybe he/she wasn't so good after all- part of the area reform is needed)
On a conference call with reporters, executives said Fiorina was not terminated for cause and that she would receive severance pay -- and a company spokesman said she'll get a payout of approximately $21 million, including stock options

Your or I get fired for bad performance- do we get several years pay anyway? How in the world did she get this dreamy package - easy, she sat on boards and such and scratched others back in the same way, while they tell stockholders it is "they way we get the best of the best"

Perhaps the very FIRST jobs we need to outsource are CEO jobs? Hire top notch and 10 thousand times better CEOs from Japan- after all, I don't there is a single CEO in America that can hold a candle to Toyota's CEO- and he gets what- 100K a year? Real savings from 21 million don't ya think?

I would be right beside you saying "it's all market forces, it is capitalism, quit yer- well, you know- if the system was a true reflection of the market- but it is plainly not.

What intrigues me most about each one of these debates is the denigrating attitude of those pro-CEO side of the debate towards the wage slave, but you treat these guys as Gods, even when the system is clearly out of balance.

A simple divorcing of the comp board from the board of directors, plus direct stockholder elections (perhaps even not allowing proxys at all) on CEO salaries, with total transparency of the process is in order.

I am not asking for extra taxes on them, some artificle cieling on thier salaries- I just want true market values to be instituted, taking away the artificle barriers to transparency we have now.

Listen, I sit on 3 very small corp boards right now- one of them is my own former corporation I founded then sold. They are very small, but make a fair profit, and pay good salaries to everybody in the company- from CEO to new hire- it is a contruction company, remodeling and such, about 15 employees now, as it also does maintenance stuff as well- keeps biz hopping really.

The "CEO' - who also has to pick up a hammer on a fairly regular basis himself- works his tail off. He is also the largest partner in the firm- so if it fails, it is also his fault- so he has the greatest risk, he asks for a raise if profits are up - we give it to him- I am paid a nominal salary as consultant- you know, I made the customer base- so I have the institutional knowledge of the firm.

Okay- this is basically the way it is supposed to work- but if it starts going down the tubes for whatever reason- the CEO ain't getting more money!

Aevens- it is not about the compensation- it is the way those super large corps go about it that is wrong.

For those who have argued that “it’s capitalism” you must consider the number one rule for publicly held companies: maximize shareholder wealth. Although the CEO is typically one of the largest single stockholders it appears many have taken that personally.

And since when does “capitalism” mean screw the average employee in the name of the big kahuna. I find it amazing that considering the amount of time we’ve practiced “capitalism” in America this phenomenon of excessive raises for C level executives as compared to their average employee is really a trend in the last 15-20 years. So those who have argued “they deserve it” or it’s ok because “it’s capitalism” I guess we must have had a bunch of incompetent C level executives in the first 180+ years.

I don’t care how good of a C level executive you are if you don’t have skilled “minions’ executing your plans they’re for naught. A CEO doesn’t sale the product, doesn’t produce it, doesn’t put it through quality assurance, doesn’t maintain it, on and on, it takes a complete team and all should be compensated well and receive the same annual percent raise.

But no, “capitalism” now means alls fair in love and war. Suck it up, tough it out, strap on your corporate ladder and start climbing. That’s fools gold.

I don’t care how hard I work (for a fortune 250 company), and trust me over the last 5 years I can guarantee you I’ve sacrificed just as much as our CEO and I’ll never make it to the board room. It’s not like these positions turn over enough that everyone has that chance.


And how do you know he was responsible for every nickel of increased revenue? My guess is he did what most C levels executives do and that is confer with his direct reports, they conferred with theirs and on down the line for ideas. Options were laid on the table, strengths, weakness were evaluated and then decisions were made as a team. A CEO acting in a vacuum is doomed to fail.


This might be appropriate if we were discussing CEO pay in Malawi. But to pull out the average wage for a citizen in what might be the poorest country in Africa is completely useless. I don’t’ live in Malawi, nor work there or invest in Malawian companies.

But if you want to get jiggy with international comparisons it might be just a bit fairer to look at a country that’s actually closer to our economic model. Consider that Japanese corporations are probably the most efficient and well run, their CEO pay is approximately 9-12 times the average worker, far less than the numbers I’ve seen (200, 1000, and 2000) for American companies.


I hear ya CJ, I too have started a couple of companies and the amount of work and sacrifice is staggering, almost to the point of unhealthy. But that still doesn’t justify CEO’s getting 30 percent annual raises while their employees average 3 percent.

No, this is about what’s fair and the greed that has seeped into the American culture is never more obvious that C level pay. CR had a excellent counter point to the Board of Directors overseeing executive pay. These folks are typically executives of other companies and know full well that if they approve pay raises for the company they oversee and bump up the national average for CEO compensation, chances are they’ll be reciprocated going back to their own board.

A bit bit dated, but this clearly demonstrates that C level compensation isn’t tied to company performance (and I would imagine a more up to date study would end with the same conclusions, if not worse).


So, now tell me again why these “hard working, making important decision” types deserve such a disparity in pay with their average worker?

Oh that’s right, the money grubbing ace of spades excuse: Capitalism.

I chose my phrasing because its more colorful than saying "object." There are a wide array of other synonyms that I could have used, such as accuse, attack, beef, bellyache, bemoan, bewail, EDIT, carp, complain, criticize, denounce, deplore, deprecate, disapprove, find fault, fret, fuss, gainsay, gripe, groan, grouse, grumble, indict, lament, look askance, moan, nag, oppose, protest, reproach, snivel, sound off, wail, whimper, whine, yammer etc, but none captured exactly the tone that I sensed from some of those who object to CEO compensation.

There were two different actors playing Darrin on Bewitched. That's an observation, to which the normal response would be "so what?" or "that's interesting" or "whatever." The CEO compensation ratio observation solicits none of those responses, rather, it goes on to ask "is this wrong?"


you, you, wound me. ...



I was not making a judgement about people, I was making an observation about the tenor of their rhetoric. As you have done regarding the tenor of my rhetoric. Although I am deeply, deeply wounded by your observation, I'll suck it up and carry on.

You don't convince them to take pay cuts, you convince the owners to cut their pay.

Actually, a whole lot of people would be working. Most folks enjoy their jobs, and are not oppressed. Very few people believe that their job is perfect all the time, but most enjoy it.

So its not just an "observation", its outrage.


Japan is not a good comparison, in fact, no country is a good comparison even if they had identical economic models, because of very different social environments. Much of CEO compensation levels fall under the same dynamic as pro athletes and entertainers. Status. Status dynamics in Japan are different, money is at best a secondary indicator of status in the rarified, and even more insular, incestuous world of C level folk than it is here.

CEO compensation levels may be excessive, may be economically unwise for the companies paying them, but....

just as someone who believes in free speech will defend the right of someone else to speak, no matter how offensive their words, someone who believes in economic liberty will defend the right of someone else to pay their employees however they want.

A simple question that hopefully clarifies the issue of whether or not we should interfere in CEO Compensation:

Does anybody here want me monkeying with their compensation?


If not, (and I expect a unanimous and heartfelt chorus of "heck no!s") then, under the Golden Rule, how can you morally advocate monkeying with somebody else's?

I feel like I'm falling into some sort of trap here...but I'll bite. YES! IF whatever you're going to do is make my compensation BETTER.

(I assume we're talking about employees compensation and not CEO's compensation)

I feel like this is one of those things like the 40hr work week. If employees didn't want to work 12hrs a day 5 days a week in steel mills why didn't they just quite? Why didn't they rally behind a union? Why didn't they write to their President? Why didn't they put anything in the suggestion box? Maybe because the employees don't have enough power by themselves?

What about child labor laws? Why didn't the kids just tell their parents and employers they really ought to be going to school? Tell them that, at their age, it was infeisable to be working in such conditions? Shouldn't they have just quit?

Maybe this isn't a good comparison, but the idea is that change can't always come from within. Sometimes a catalyst is needed or some help from an outside source. I believe suggesting that advocating change by just saying it should come from within is a bit naive. Yes, it can help and will most certainly put pressure on a company, but it may not be enough to get what is being hoped for.

You are making a flawed assumption here about CEO pay. Let's say that it was reduced forcibly. Why do you believe that all of a sudden means that the extra millions would go towards worker salaries? That just doesn't make logical sense.

The likely scenario is that you'd either spend that money investing back in the company or you'd give it to shareholders as dividends.

The pay of rank and file workers is governed by market forces, it simply wouldn't fit with the principles of capitalism for companies to use excess cash to start increasing salaries above market value for no reason.

So if CEO pay was reduced your compensation wouldn't change.

This is true, I did assume that. But what I was taking from the original quote was that if Bikerdad got to monkey with compensations then he could do it from more than one perspective (ie. lower some peoples and raise mine). Anyway, I see what you mean. But wouldn't it also be good, maybe better, to have extra money invested back into the company or given to shareholders in dividends (if CEO pay was forcibly reduced)?

Also, with the sports analogy: there is a cap that teams spend on their players in some leagues (NBA and NFL I believe). I'm not sure about the MLS, NHL, MLB, or WNBA. But that is a way of capping salaries while spending the most to get the best. Perhaps we should put a salary cap on cooperations?

Nah, not a trap, a rabbit hole. Assume that I'm going to bring the same attitude towards your compensation as RedCedar brngs to CEO pay.

Generally, CEOs are employees.

They did rally behind unions. They did...

You're right, its not a good comparison. Children aren't adults, hence, they have neither the responsibility nor the authority to make those decisions.

See, that's what's kinda funny, because the examples that you've used are actually examples of folks who took responsibility for themselves. The steelworkers, miners, itinerant fruitpickers, longshoremen, etc all organized themselves and, with outside aid, made the changes. But they were the driving force. On child labor, a large part of the impetus came from parents, acting in their children's behalf. (Incidentally, child labor was already fading when the laws came into force.)

My point is you don't see the CEOs complaining. You don't see the owners complaining. Unlike your examples were its one of the parties of the transaction making a fuss, this CEO pay issue is third parties complaining. Heck, if an owner, aka shareholder, of a company objects to the compensation paid to the CEO, then he can easily sell his stake in the company. That is a lot easier than finding a new job, which is the easiest recourse for the third party employee.

So again, who wants to make setting their compensation my business, with the understanding that my expert assessment of your economic value to your employer, colored by whatever wild hare flips my fancy , is the basis for determination? Oh, and don't forget the capper: if there's any negative consequences from my determination, I don't suffer them. It's fun being a "third party."

edited to add: The salary caps in sports are imposed by the leagues in order to promote competitive balance, which enhances the entertainment value of the league's product, which means more value for the owners. There's a reason they're called "franchises", one of which is that the franchiser gets to set certain guidelines (aka salary caps in this instance) which the franchisee follows in order to play.

You could make laws that forced companies to share profits with workers to some degree.

The problem with the new modern age is that without organized labor, workers have almost no leverage. So with the labor pool becoming gigantic with new countries exporting/importing labor the market value for labor is going to slump dramatically.

You see it already with companies like WalMart that make billionares at the top and poor people at the bottom. Manufacturing is done in Asia, workers in the USA are paid peanuts with no health care.

You could force profit sharing. In fact, you almost would have to force it. Labor is becoming increasingly CHEAP. And unless you want a gigantic gap between rich and poor, with no middle class then you would need to do something.

case in point:

You mean like when a CEO brings in Mexicans when I'm a landscaper in the Midwest or California? Or when a CEO brings in Asians and Eastern Europeans when I'm an engineer or IT person?

There's already monkeying going on. In fact, compensation is almost dictated by management alone. And it's getting worse. Pretty soon it will only be through the benevolence of a company that you receive the wage you do, as they could always find someone much, much cheaper.



Actually, they instituted laws. So maybe we need to write laws to spread the wealth a little more, ya think?





If you vote, it already is your business. Do you think your wage is designated by god?

I think what you are seeing is the "third-world-ization of America"- Bikerdad- do you really think that slanting the rules more and more to folks who can con the system without repurcusions and at the same time it forcing down the average wage of the US consumer is going to have a positive effect on this country of ours?

Right now, there are alot of protected groups in this country- and most of them don't need to be- and they ain't liberal commie groups- they are groups cleverly PR'd to sound as if they are capitalist- but they are very exclusionary from the real market forces- and in fact, ensure there is no real competition.

Take the AMA- the Drs asssociation- not the bike club - they are the most succesful union in any free society on the planet- what other profession do you know that can legally regulate how many of thier profesion can graduate from school and become one of them- it is not every body that can become a Dr- they artificially hold the number down so they stay rare enough to demand high prices- if anybody that could qualify to be a Dr, to those actually capable of going through school- we would have far lower salaries- but they say "this university can only graduate X amount of Drs" essentially- so no market forces there!

Same with Congressman- there is no market value on thier salary- they vote what to pay themselves, and once in it is very hard to get them out.

Same with CEOs- if, everybody that worked hard and was capable of doing the job could apply and get selected on pure talent- prices would be much lower- a company could shop around a bit- but stockholders are too removed- it is all about campaigning, gaining proxies etc.

What we are seeing is an actual corrupting of actual market forces, a kind of legalized fraud and corruption you see so often in third world countries- that drives an artificle disparity of pay- that is why it is so much more balanced in other countries- they are simply not so cozy-cozy with the comp commitees, there are real hard questions for CEO based on performance.

Now- to be clear- with any profession, there are good and bad actors- we have regulations in ANY field of employeement to deal with the abuse NOT the good guys. It is sad but true- we have licensing and boards of inquiry for say, Drs, we have oversite and such for Pharmacists- even though most Pharmacists are lilly pure pillars of the community-

But when alot of bad actors find out how to really skew things badly in thier favor- and you can see how even though many really big name fortune 500 company guys are running their company into the toilet yet, when they are finally fired- get 24 million dollar severance package- why is this? Because they wrote the contract, got the rest of the board to sign it- and then signed thier employment contracts- all perfectly legal and ethical under the American system.

You say you like capitalism and all Bikerdad- but I only see you applying to the line staff- not the head honchos.

If we, in America, adopted, say, the German compensation system

http://www.wsws.org/articles/2005/sep2005/ceo-s01.shtml

Here is an excerpt dealing with corporate corruption in the US system:

Two studies reported in the New York Times last month—under the title “Stock Options: Do They Make Bosses Cheat?”—analyzing executives’ pay over the last 15 years found evidence linking large performance-based compensation packages to CEOs cooking the books or mismanaging the companies they head.

Jared Harris, a doctoral candidate at the University of Minnesota, and Philip Bromley, a management professor, studied “435 companies that were forced to restate their financial statements with similar companies that did not run into such problems,” according to the Times.

The report found that (a) companies granting large compensations in the form of stock options are “more likely to go broke”; ( of the “companies where bosses got 92 percent or more of their pay in options, about a fifth ended up faking their books within five years”; © bosses of companies that are doing much worse than their competitors may feel a need to cheat; and (d) companies that turn in a very good year have a propensity for faking numbers the next year.



The other study is by Moody’s, the rating agency. This study found that “companies with the highest paid bosses, adjusted for things like company size and performance, were far more likely to default on debt or to suffer major cuts in bond ratings,” said the Times.


Okay- the comparison:

German CEOs earn less than a third of the compensation paid to chiefs of American corporations, with average salaries that are 21 times greater than that of an average German worker. In Japan, CEO compensation equals approximately 16 times that of an average worker’s paycheck.



In other words, the empirical findings linking large compensation for CEOs to fraud and companies defaulting is an indication of a decaying system in which the very introduction of the tools of progress is the source of wealth polarization and corruption.



I am sure you are all outraged about the old Teamsters mafia union stuff- so why are you so okay to let the broken system with have with mafia types in the boardrooms?

Got an axe to grind against blue collar workers in this country? Really- sometimes I want to know why folks that defend CEO compensation are so ready to commit every blue or mid level white collar worker go into poverty even when fraud is built into the system!

Why would we want to do that? A company should be able to spend their profits as it desires, whether that is for further investment in the company, putting it back into the community, dividends to shareholders or bonuses to executives and workers.

You are basically arguing for an anti-capitalist model which will never happen in our lifetimes.


A couple of things here. First of all, the genie is out of the bottle on globalization for all professions, not just labor. It started with blue collar labor but now there are many white collar jobs at stake that were previously protected. What that means for America in the coming decades is that we need to step up to the challenge and we can't assume that there are "easy" jobs any more. You are competing with billions of people now so you have to act like it.

Secondly, organized labor wouldn't have declined if unions were offering something that workers in general wanted. The concept of a union is great and they've brought us great things throughout history with much needed advances in worker's rights. Today they just kind of exist and cause problems, they've lost their way. The unions themselves admit this if you talk to people in leadership positions, there is an internal struggle going on to try and determine the best way to serve their people.


The solution to the Wal-Mart problem has little to do with CEO pay. The problem with Wal-Mart is that they look at each employee as a cost to cut which results in low pay, no benefits or poor benefits, etc. I also don't see how your cited article has anything to do with this topic.

This topic is not a general "workers of the world unite" debate, Wal-Mart is not relevant to the discussion.

CJ- you have exposed, quite correctly, IMHO the problems with some solutions that are offered to "fix" the corporate salary issue- redistribution of corporate income, unions not being "hungry" enough to be competitive, or really losing thier way- an honest and truthful post IMHO- it is not that they don't do any good, is that they have not been strong enough or reactive enough to thier ongoing demonization by the right and corporate interests etc

But I am curious as to your position on the WAY that corporate salaries are decided- and I am sure you are very aware of the "you scratch my back I'll scratch yours" nature of CEO compensation in this country, as opposed to the way it is structured in other countries....

In fact, I think the ONLY way to get ACTUAL market values for CEOs, instead of these horribly inflated numbers- is to reform the compensation commitee- and, if CEOs are actually succesful- then fine, sky is the limit.

And also- what about the correlation (is it causation too? I would like to hear you on this one as well) between CEO mega-pay, corporate bankruptcy and fraud with the link I provided.

Your linked article described the level of pay of German CEOs vs. their American counterparts, saying that they only earned 1/3 as much.
That article makes observations about levels of pay. It does not advocate a "system" for compensation. Moreover, It wasn't until I read the Marx quotation that I realized I was reading the World Socialist Web Site , not that they may have an agenda here...

This article quotes the growth rate for US companies vs. their German counterparts...

But this was not the case. For example, in the same period, 1992 to 2000, the S&P 500 appreciated 3.63 times (17.4 percent per year) and the DAX, the German stock index, grew 3.93 times (18.7 percent per year), slightly outpacing the US stock market.

First off, an 8-year snapshot of growth which includes both East-Germany integration and the adoption of the Euro is specious at best. More significantly, this article makes no mention of the size of the companies involved. Isn't it safe to say that the CEO of a firm making 3 times the salary CEO of a German firm is also running a firm 3 times the size? Or maybe 20 times the size?

There are 63 German firms on the Forbes 2000 list, 62 French firms (including extremely corrupt ones like ElfTotalFina), and there are 711 American firms. Comparing the growth rates of the S&P 500 to the DAX is like comparing home run totals between the New York Yankees and the Bad News Bears. It's not the same league. General Electric is worth something like $400 Billion, while Siemens AG is around $60 Billion. Both companies have around the same number of global employees, but GE's business is much bigger. And this is a generous comparison. Once you get past the top 10 or 15 German companies, you get pretty small pretty fast, at least compared to their American counterparts.

I'm not saying that CEO's aren't over-compensated, but to say that overseas there is some "better system" in Europe or Japan is a little naive in my opinion. Our companies and economy are leading the world for a reason. I think that more transparency, more independent board directors (!), and yes some regulation would yield progress in this area.

I think there are some problems here, but it isn't as bad as many people believe. I don't believe that we should set any limits on what a company pays a CEO but I do think there is a lack of transparency in many companies and a disconnect between poor performance and pay.

These are largely shareholder issues in my opinion because they are the ones that lose out because of this. If they aren't going to speak up and reform their particular company then there isn't much anyone can or should do about it. Businesses rise and fall daily, and if you aren't going about things in the right way you'll fail.

Transparency - many companies don't disclose or only partially disclose the compensation packages of their top officers. I could see this as some that could be required by law at least for publicly traded companies because it impacts shareholders. If shareholders don't know this information then they can't take action on it. This kind of thing should be easily accessible on every company's web site and in all of their official filings with the SEC.

Performance - I think that the compensation package for top executives should be heavily tied to performance of the company, but that's just my personal opinion and shouldn't be enforced on anyone - were I an important shareholder or running my own company that is how it would work. Right now some companies do that extensively, some don't. I really don't see that as something we should make laws to govern, it is the responsibility of shareholders to determine the compensation packages and the rules. I do think the idea of a "golden parachute" should be outlawed. If you run a company into the ground you shouldn't get a free pass out with millions of dollars while everyone else gets unemployed with nothing to show for it.

Regarding that article I'd say correlation, but not causation. The real problem isn't that compensation is tied to performance, the problem is that the government is not doing their job with respect to oversight, they also have not historically done a good job of arresting and convicting white collar criminals. If you rob a liquor store you are going to jail, if you cook the books at a company you often just need to restate the financials and your stock price takes a hit. You benefit financially but other people pay for it. Both are stealing, only one set of people ever see jail time. That needs to change. However, I don't see the corporate friendly GOP lining up to take on this task any more than is necessary due to scandals that have enraged the public like Enron. I don't really see the Democrats lining up either because it isn't a priority. So it will likely continue. It is wrong but that is our government for you. If it becomes important to us as voters then we have to speak up about it. Right now it isn't, people care more about whether a candidate talks big on ridiculous issues like abortion or whether he promises them tax cuts (bread and circuses!) than things like this that really matter.


That is what the shareholders should have done, this is their only recourse here. If the people elected as directors will not perform their duties and obligations then they need to be removed (a power held by shareholders) or they need to have legal action taken against them. As a director on a board you have a fiduciary duty to your shareholders and if you fail to meet this legal action is appropriate.

When christians try to convince me to do something by saying "but it's in the bible!" my simple retort is "I don't believe in the bible".

I'm not a dupe for the "but it's non-capitalist!". There are plenty of things that may go against someone's belief of what capitalism is, taxes for instance. Taxes are anti-capitalist!! But we do need infrastructure and we need a way to pay for it.

So that's not really an answer. Why can't we force companies to have profit sharing? We force them to pay taxes.


So we need to start acting like the billions of people in China and start taking $1/hr or less wages?

Gee, that's really aiming for the stars.


IMHO, you are correct. Unions were once important when we didn't have laws protecting workers. But if we reach your goal of world-class poverty wages in the US then you will indeed see a big resurgence of organized labor.

If you look at the thread, Bikerdad was suggesting that people wouldn't want anyone else monkeying around with THEIR salaries.

My point is that CEOs and coroporations do it every day as do politicians. WalMart is a prime example of this. They offshore manufacturing so manufacturing wages plummet, then the service jobs provide no health care and low pay. But because they are moving jobs overseas they are decreasing opportunities locally, forcing 25,000 people in Chicago to apply for 325 jobs!

That's how it relates to this thread.

Great article today regarding the subject matter.

http://moneycentral.msn.com/content/P125120.asp

Ok fine here's another answer, we don't live in a communist country.


Well if you want to take the defeatist attitude about it then sure, but that isn't what I meant. It means we need to stop resting on our laurels and start leading and innovating again. Biotech is the next big industry and we need to strive to make advances there (That means that if the GOP was smart it would come off this ridiculous stem cell position and additionally we'd consider things like the 3 billion bond measure California passed a year ago to fund research), students need to be thinking about careers in that industry and so do people that are in industries with no future such as manufacturing. We need to take strides forward in Information Technology and Computing. We have a chance to lead in alternative energy if we want to take it.

There are a lot of things we can all do to continue to lead the world into the 21st century we just need to sieze them.

Manufacturing is dead in this country and people need to accept that. No one should count on that being their career in 10 years or so and students coming out of high school and college definitely shouldn't be staking their futures on it. New industries may spring up but almost every existing industry has its days numbered. The only thing that has the potential to change that is a radical upswing of energy prices with no alternative infrastructure in place.


My aren't you doing a good job of putting words in my mouth. That isn't what I said or implied anywhere. And since you've only been around since December of 2005 I wouldn't start making assumptions about my positions on issues either because you'd be wrong.