CEO pay is one of those topics where some people can’t resist channeling their inner Marxist: CEOs make a lot of money; therefore someone is being exploited. The link provides some perspective.
AT: Will the media ever tell the public the truth about executive pay instead of pushing the Democrat agenda?
Published
Tidewater News and Opinion Forum 
There is a picture of Hitler in the “promoted content”portion at the bottom of that article. I’m sure that’s just a coincidence though.
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RE: “There is a picture of Hitler in the “promoted content”portion at the bottom of that article.
Not in my browser. Perhaps you are seeing it because you visited other sites with pictures of Hitler, or searched on his name.
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I’m thinking it has something to do with a publication that thinks the richest man in the world is a socialist.
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Sounds like a stretch to me. Besides, it is irrelevant to criticize the source if you have nothing to say about the substance of the piece.
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I commented on the piece. Specifically the part that assumes Jeff Bezos, whose employees have to relieve themselves in bottles and occasionally drop dead on the shop floor from trying to meet absurd production quotas, is a socialist because he and his newspaper are rude to Trump. That is one of the most moronic things I’ve ever read.
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I see. My mistake, I guess, but I didn’t read so much into the reference to Bezos. It struck me as only a passing irony.
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Sanders’ statement referred to S&P 500 CEO’s, not to the “2,639,500 top executive jobs” out of which the article said the AVERAGE pay was $189,000. In addition, the BLS was referring to MEDIAN pay.
Heck, I was CEO of my two person LLC, so including me would not get to the point that Sanders was referring to the major employers, which are virtually all stockholder owned, making the CEO an employee.
So we have a casual tossing of facts by the writer. A bit of conservative “fake news” if you will.
Few are asking to equalize pay across the employment spectrum. However, is it in the interest of the company and the shareholders to pay its top hired executive 287 times the average workers? Unfortunately, the shareholders often have little say in the matter. Top pay is determined by compensation committees on the boards and the directors are picked from other companies on which the CEO’s also sit. There is little or no market based pay which is the determining factor in employment compensation at the middle management and labor levels.
Or to put it more bluntly, the top executives have the strongest unions in the world.
And, of course, we have some of the weakest actual labor unions. As opposed to many industrial nations that have worker seats on the boards, we have few of those. And when an executive gets 10’s or 100’s of millions, that is money that might have gone to a broader labor and salary increase and other worker benefits. Either way, the shareholders, the owners, are not getting that money. Just a select few with good connections.
As far as the straw men of movie, TV, music and sports stars getting high bucks, it is important to remember that they are only getting that so long as they sell tickets and ads, make touchdowns, hit home runs, win golf tournaments and get Oscars, Grammys, etc.. No “golden parachutes”. That is, for the most part they are independent agents who have proven that they can fill seats, sell tickets and help market products and services. They are not beholden to shareholders. When they stop being marketable or their skills diminish, they lose their income. In other words, they are the actual product being sold or marketed.
The debate, I believe, is not just about high pay in public corporations, but rather that, (and still is to a degree even in our current employment growth that has been going on for a record 10 or so years), pay is still rising at pretty paltry rates compared to the corner office. Mostly at or just a shade above inflation unless you count healthcare and education. And paychecks at one company are income and profits at others. RR engineers buy Fords, etc. Interestingly enough, the trade deficit with China was exacerbated by Walmart, Dollar Tree and all other importers of less expenses goods that they could still sell profitably to stagnating incomes of Americans. Instead of increasing pay, we just gave them cheaper goods from overseas. It is more complicated to be sure, but the gist is the same.
IMHO
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I often learn things when you post, and when I dig to confirm your observations I learn even more.
I’d also like to note, that you are generally spot-on in your factual statements. Thanks.
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Are you seriously suggesting that CEO pay in general is unfair because 500 CEOs (0.02% of top executives) make too much money?
Also, what standing do you have to tell any particular executive that his pay should go to workers, instead?
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My standing?
None. (Shoot, I’m lucky to be standing 🙈)
But if the issue is why the pay gap is so huge, then I have outlined the reasons.
The authority should be in the hands of the owners, but shareholders are really not afforded much power. Generally the laws of incorporation are written to favor the top echelons.
I have no qualms with successful entrepreneurs who make huge sums. But once a company goes public, the rights of shareholders take precedence.
However:
“Both the left and right generally accept the public rhetoric about shareholder primacy, but it does not reflect reality. The average real return to shareholders since December 1997 has been 4.8 percent a year. This compares with a longer-term average real return of more than 7 percent annually. (I use 1997 as a starting point, instead of taking the more natural 20-year average, to avoid distortions created by the 1990s stock bubble. The average real return over the past 20 years has been just 3.6 percent.)
These relatively low returns are especially striking because corporations have benefited from substantial tax cuts over this period. The first set was a series of relatively minor provisions put in place under President George W. Bush. The second set, under President Trump, included a reduction in the corporate tax rate, to 21 percent from 35 percent.
It is hard to reconcile more than two decades of low stock returns with a commitment to maximizing shareholder value. The data points to a more obvious goal of CEOs: maximizing their own paydays.
A recent analysis by Larry Mishel and Julia Wolfe at the Economic Policy Institute found that CEO compensation has risen 940 percent over the past four decades, after adjusting for inflation.”
https://www.washingtonpost.com/outlook/2019/08/20/ceos-say-shareholders-wont-be-no-anymore-turns-out-they-already-werent/
Bottom line: top executives vote themselves huge paydays while shareholder return dwindles.
In case WAPO goes against your grain, here is a perspective from Forbes:
Remember the corporate tax cut to 21%. Well, stock buybacks were a way for top executives to bolster their pay. So much for investing long term for company growth and shareholder value.
https://www.forbes.com/sites/aalsin/2017/09/07/whats-the-harm-in-excessive-ceo-pay-answer-long-term-damage-to-shareholders-and-pension-funds/#7a9cfaba4aea
Many of us have retirement funds that are tied to public companies via shares or mutual funds. I could have used a percent or two more over the decades rather than shovel money into someone’s yacht.
But maybe that’s just me.
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Every stock you own sends you a notice of their annual meeting. You don’t have to sign the proxy, you can attend and challenge one of the seats on the BOD.
If you can make your case to the other shareholders, you can fix it. It’s very democratic.
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It is true that there have been some activists that have bought a minimal number of shares to allow them a few minutes. They are tolerated, and ignored.
The big shareholders and mutual funds have the votes. What is odd, or maybe not, is why they don’t want to change the system when the damage done by the perverse incentives has been reflected in returns.
I suspect it has to do with “taking care of your fellow executives”.
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RE: “But if the issue is why the pay gap is so huge, then I have outlined the reasons.”
I get it that you want that to be the issue. But there are two big reasons why it isn’t:
And, second, even if large CEO pay gaps were more common, there is no good reason in all of economics to care about it as an issue.
Karl Marx was the first economist to propose that capitalists make “too much money” because they take for themselves some part of the value that labor produces. Marx, however, was dead wrong about this. More than a century of subsequent economic analysis and real-world experience refute the very idea.
But too many good people refuse to give it up. They keep asking the irrelevant question, “Who stole my cheese?”
When it comes to CEO pay, no one stole anybody’s cheese.
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This is not about communism or even pay equality. It’s about screwing shareholders and shortchanging the economy out of a better paid middle and working classes spending more discretionary income and incurring less debt.
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You say, “This is not about communism or even pay equality,” then you turn right around and give the Communist Party line on what it is about.
That’s fine. I can meet you half way: It is not about communism, it is about economics.
As stated, there is no good reason in all of economics to care about CEO pay gaps.
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One of the smartest posts I have read since joining this forum. Thank you.
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What a CEO is paid is no one’s business other than the stockholders.
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True. That is my contention. So l lets give the shareholders the power they need. Re: my post to John.
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RE: “So l lets give the shareholders the power they need.”
They already have that power. Are you suggesting we give them more power than they are entitled to?
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Entitled to?
They are the freakin’ owners. And if they say the CEO deserves less pay than what his pals on the board give him, then the time has come to shift the compensation structure.
Pay has skyrocketed at the major companies while returns have diminished.
Would you pay your lawn service more money to cut half your lawn?
That is spreading your wealth in a way that would make Marx proud.
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RE: “And if they say the CEO deserves less pay than what his pals on the board give him, then the time has come to shift the compensation structure.”
Shareholders have that power already. Do you think they require something more?
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I don’t want to down a road of specifics. I’m not an expert.
But a good starting point is to re-evaluate executive compensation based on stock returns. There are so many ways to game that system so the returns are good and huge bonuses and payouts become the reward, but the company suffers. Sale of assets and buybacks are two.
Whether changes in culture or regulatory procedures are best is for experts to deal with. But we have laws that define incorporation already. So that might be a starting point.
I’ve made my case as best I can.
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@Tabor
For publicly traded corporations?
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