 |
EnMasse
This place is all that is left.
|
| View previous topic :: View next topic |
| Author |
Message |
West Coast Tiger
Super-Link Mistress
Joined: 11 Apr 2006
Posts: 3060
Location: Obviously Concealed
|
 Posted: Sun May 28, 2006 4:38 am Post subject: What a huge CEO salary would buy you |
 |
|
I highly recommend reading this:
What a huge CEO salary would buy you
| Quote: | Bringing up babies
Diller isn't the only CEO who last year raked in what, for the average worker, would be unfathomable buying power. Capital One Financial (COF, news, msgs) Chairman and CEO Richard Fairbank earned $280 million, according to Salary.com's CompAnalyst Executive. As with Diller's bloated pay package, Fairbank's pay was the result of a huge windfall from cashed-out stock options. Here's a look at his buying power:
* Americans are piling up credit card debt at Fairbank's company, some to help meet the rising costs of bringing up their children. Fairbank made enough money last year, before taxes, to raise 1,467 children through the age of 18, based on an Agriculture Department estimate that it takes $190,980 to do the job.
* His pay last year was enough to cover four years of public-university education -- with an average total tuition bill of $21,964 -- for 12,752 students.
* Fairbank earned enough to pay off the credit card debt of 32,000 Americans, based on an average outstanding balance of $8,536 in the country.
"What are they, kings? It's crazy," says Don Hodges, president of the Hodges Fund (HDPMX, news, msgs), a money manager who looks closely at CEO pay when assessing potential investments. "I just don't understand how these guys can even rationalize themselves. How can they look their employees in the eye?"
Hodges says the problem of excessive CEO pay usually comes about because boards of directors are too weak to stand up to pay demands from top executives. "Any board that would let this kind of thing happen is made up of wimps."
...
"It should be a source of great national shame that the United States ranks No. 1 in the world in the size of the pay gap between executives and workers," says John Cavanagh, director of the Institute for Policy Studies, based in Washington, D.C. "And that the gap keeps growing wider." |
_________________
~ Rational ravings from a relative stranger in a troubled paradise. ~ |
|
| Back to top |
|
 |
Left Turn
Revolutionary
Joined: 13 Apr 2006
Posts: 446
Location: BC
|
| Posted: Sun May 28, 2006 7:32 am Post subject: |
|
|
Two things:
a)Corporations are structured in such a way that only people who embody the values of capitalism/corporatism ever make it to the top of the corporate power structure. People without the competitive edge simply can'tdo as good a job of climbing the corporate ladder, because the arn't willing enough to throw other poeple off the corporate ladder so that they can get higher.
Of course one of the values of capitalism/corporatism is a belief that wages should be highly unequal. So pretty well all CEOs have inflated egos, and believe that they are worth these ridiculous sums of money. And because they have the power to fire the board of directors that approves their salary, they mostly get the salary they want.
b) Owners of corporations Consider CEOs to be valuable alies in achieving profits for the company, and in enforcing capitalist work discipline. So owners of corporations usually don't have much of a problem with paying CEOs this kind of money. As well, owners of corporations don't want CEO and other upper management types angry at them because they arn't getting paid what they think they deserve.That doesn't serve the interests of corporations. |
|
| Back to top |
|
|
enki
Member
Joined: 11 Apr 2006
Posts: 44
Location: Toronto
|
| Posted: Mon May 29, 2006 11:02 pm Post subject: |
|
|
| Left Turn wrote: | | Of course one of the values of capitalism/corporatism is a belief that wages should be highly unequal. So pretty well all CEOs have inflated egos, and believe that they are worth these ridiculous sums of money. And because they have the power to fire the board of directors that approves their salary, they mostly get the salary they want. |
Is this true? I was fairly certain that it was the other way around - the CEO reports to the board of directors. At the company I work at this is certainly the case, but we're not publically traded (we are a corporation however).
| Quote: | | b) Owners of corporations Consider CEOs to be valuable alies in achieving profits for the company, and in enforcing capitalist work discipline. So owners of corporations usually don't have much of a problem with paying CEOs this kind of money. As well, owners of corporations don't want CEO and other upper management types angry at them because they arn't getting paid what they think they deserve.That doesn't serve the interests of corporations. |
In any case, you're right here. |
|
| Back to top |
|
|
Stephen Gordon
Dismal scientist
Joined: 11 Apr 2006
Posts: 449
|
| Posted: Mon May 29, 2006 11:18 pm Post subject: |
|
|
Gary Becker had a blog post recently on the economics of CEO pay:
Are CEOs overpaid? |
|
| Back to top |
|
|
elmateo
sleepy.
Joined: 19 Apr 2006
Posts: 4978
Location: socialist corner, ottawa
|
| Posted: Mon May 29, 2006 11:28 pm Post subject: |
|
|
| I sense heresy goings on in this thread. Are we actually questioning if our glorious CEOs are actually worth the amount their wages suggest? |
|
| Back to top |
|
|
Rufus Polson
Purple Library Guy
Joined: 11 Apr 2006
Posts: 3483
Location: SFU and/or the college of Riddlemastery at Caithnard
|
| Posted: Mon May 29, 2006 11:49 pm Post subject: |
|
|
I notice a typo or something that seems to impact what's going on at a very basic level. That is, they say
| Quote: | | For every 10 per cent increase in firm size, measured by the market value of assets, by sales, or by related variables, compensation increases by about 3 per cent. This "30 per cent" law held during the 1930's, and has held for every succeeding decade, including right up to the present. |
They repeat "30 per cent" law numerous times. So should I take it that in fact, for every 10 per cent increase in firm size, compensation increases by *30%*, not *3%*? Or is it a 3% law, not a 30% law? Or what?
If it increases by 30% for every 10% increase in firm size, at what size of firm would the CEO's compensation represent the entire revenue of the firm? I mean, clearly this rule would mean that the bigger the firm, the greater a percentage of the firm's revenues the CEO is taking. It's usually also the case that the bigger the firm, the more layers of management there are (partly because they're needed, partly due to bureaucratic status games).
So from the looks of it, the bigger the firm, the less of its revenues actual line workers get. The bigger the firm, also the more likely they are to seriously distort the political process. In general, it looks like big firms really ought to be broken up, whether or not they represent actual monopolies. |
|
| Back to top |
|
|
Gigi
Fulltime enMasse Member
Joined: 13 Apr 2006
Posts: 169
|
| Posted: Tue May 30, 2006 12:15 am Post subject: |
|
|
I am about to commit heresy myself here, and probably get myself booted off the subscriber list.
I applied for Chief Executive magazine on a lark, and am receiving it. Though, I have yet to receive May's issue so they may have finally figured out that I am not a white guy.
Yes, you have to apply for it, and if approved, you don't have to pay for it. I affectionately refer to it as "White Guy Monthly" and mostly I read the lifestyle section, which usually features such Need To Know info like "how to choose your yacht" and "best golf courses on the planet".
One month, last fall, I think, there was an article on Diversity in the Workplace, with a lead photo of three white guys.
It's a fascinating publication, I must say. |
|
| Back to top |
|
|
Stephen Gordon
Dismal scientist
Joined: 11 Apr 2006
Posts: 449
|
| Posted: Tue May 30, 2006 12:27 am Post subject: |
|
|
| Rufus Polson wrote: | I notice a typo or something that seems to impact what's going on at a very basic level. That is, they say
| Quote: | | For every 10 per cent increase in firm size, measured by the market value of assets, by sales, or by related variables, compensation increases by about 3 per cent. This "30 per cent" law held during the 1930's, and has held for every succeeding decade, including right up to the present. |
They repeat "30 per cent" law numerous times. So should I take it that in fact, for every 10 per cent increase in firm size, compensation increases by *30%*, not *3%*? Or is it a 3% law, not a 30% law? Or what?
If it increases by 30% for every 10% increase in firm size, at what size of firm would the CEO's compensation represent the entire revenue of the firm? I mean, clearly this rule would mean that the bigger the firm, the greater a percentage of the firm's revenues the CEO is taking. It's usually also the case that the bigger the firm, the more layers of management there are (partly because they're needed, partly due to bureaucratic status games).
So from the looks of it, the bigger the firm, the less of its revenues actual line workers get. The bigger the firm, also the more likely they are to seriously distort the political process. In general, it looks like big firms really ought to be broken up, whether or not they represent actual monopolies. |
From the context, I think the 'rule' is that the increase in CEO pay is 30% of the increase in firm size. If the firm grows by 10%, CEO pay goes up by 30% of 10 percentage points = 3%. If the firm doubles in size - an increase of 100% - this would mean that CEO pay would increase by 30%.
So as the firm expands, the CEO pay/firm size ratio will decline. |
|
| Back to top |
|
|
Senor Magoo
He's got a big one
Joined: 11 Apr 2006
Posts: 8700
|
| Posted: Tue May 30, 2006 3:18 pm Post subject: |
|
|
| Quote: | | Are we actually questioning if our glorious CEOs are actually worth the amount their wages suggest? |
Hopefully not unless we own shares in a company. Otherwise, what the hell business is it of ours what a company chooses to pay its highest-paid employee?
Presumably, if the CEO isn't worth it, the company won't pay the big bucks. At any rate, they have the option of paying a CEO less, hiring someone new for less, etc. It's not like a CEO is some kind of dictator-for-life or something.
_________________
ø¤°`°¤ø,¸_¸,ø¤°`°¤ø,¸_¸,ø¤°°¤ø,¸_¸,ø¤°°¤ø, |
|
| Back to top |
|
|
pogo
Fulltime enMasse Member
Joined: 11 Apr 2006
Posts: 512
Location: Richmond
|
| Posted: Tue May 30, 2006 4:03 pm Post subject: |
|
|
| Senor Magoo wrote: | | Quote: | | Are we actually questioning if our glorious CEOs are actually worth the amount their wages suggest? |
Hopefully not unless we own shares in a company. Otherwise, what the hell business is it of ours what a company chooses to pay its highest-paid employee? |
The controller in Richmond gets about $200K per year. His salary is set by the market. Market salary decisions in private company affect me.
I tend to agree with Stephen's link that there is nothing more happening than the invisible hand of the marketplace controlling the distribution of human capital. I did find some fault with the claim that compensation was the only thing keeping people from leaving big companies for small companies. The biggest reason people rise to executive positions is to exercise power.
The salaries are unjustified. That the marketplace controls that set them are legitimate only shows that the marketplace is amoral. |
|
| Back to top |
|
|
Senor Magoo
He's got a big one
Joined: 11 Apr 2006
Posts: 8700
|
| Posted: Tue May 30, 2006 4:14 pm Post subject: |
|
|
| Quote: | | The controller in Richmond gets about $200K per year. His salary is set by the market. |
If s/he's not worth it, don't pay. That's up to your municipality to decide.
Presumably you're suggesting that if this controller were offered a "mere" $100K by your municipality, s/he would refuse it and instead go work in industry where s/he would make $200K. If that's the case, it's the case because in some way or another — which you or I may or may not understand or agree with — that person is worth the $200K. Otherwise, why would industry pay them that wage if they're only worth $100K?
| Quote: | | The salaries are unjustified. |
This so totally smacks of someone saying "What does she see in him????"
A company decides what is or is not justified based on what a CEO can do for that company. If you feel that some company is paying their CEO more than they should, well, that's really not your call.
| Quote: | | That the marketplace controls that set them are legitimate only shows that the marketplace is amoral. |
Amoral the way gravity is amoral? I can live with that.
_________________
ø¤°`°¤ø,¸_¸,ø¤°`°¤ø,¸_¸,ø¤°°¤ø,¸_¸,ø¤°°¤ø, |
|
| Back to top |
|
|
pogo
Fulltime enMasse Member
Joined: 11 Apr 2006
Posts: 512
Location: Richmond
|
| Posted: Tue May 30, 2006 5:01 pm Post subject: |
|
|
| Senor Magoo wrote: | | Presumably you're suggesting that if this controller were offered a "mere" $100K by your municipality, s/he would refuse it and instead go work in industry where s/he would make $200K. If that's the case, it's the case because in some way or another — which you or I may or may not understand or agree with — that person is worth the $200K. Otherwise, why would industry pay them that wage if they're only worth $100K? |
Our controller was working happily for a mere $100K and then was lured away. To get him back we had to double his salary.
The problem is how we define worth and determine compensation. If we consider that certain levels of compensation are exorbitant regardless of how it is measured in terms of marketplace worth, then measures to create downward pressure on the compensation are justified. |
|
| Back to top |
|
|
Senor Magoo
He's got a big one
Joined: 11 Apr 2006
Posts: 8700
|
| Posted: Tue May 30, 2006 5:16 pm Post subject: |
|
|
| Quote: | | To get him back we had to double his salary |
Well that's exactly my point. It sounds like he was worth more than $100K to someone else, and if your municipality joined in the bidding war then he must have been worth more than $100K to your municipality as well. I suspect that, like many people, he was beavering away happily because he didn't know his own wage value until someone made him a better offer.
| Quote: | | If we consider that certain levels of compensation are exorbitant regardless of how it is measured in terms of marketplace worth, then measures to create downward pressure on the compensation are justified. |
To me that makes no more sense than artificially limiting the amount that paintings can be sold for. I think that anything more than a few hundred bucks for a painting is exorbitant. But how would it benefit me to cap them? If someone is willing to pay millions for a piece of canvas with some colours on it, why should I try to prevent it?
Noting here, by the way, that any economic injustice that comes from an exorbitant wage could be corrected by the taxman as easily as by some artificial cap.
_________________
ø¤°`°¤ø,¸_¸,ø¤°`°¤ø,¸_¸,ø¤°°¤ø,¸_¸,ø¤°°¤ø, |
|
| Back to top |
|
|
Rufus Polson
Purple Library Guy
Joined: 11 Apr 2006
Posts: 3483
Location: SFU and/or the college of Riddlemastery at Caithnard
|
| Posted: Tue May 30, 2006 5:21 pm Post subject: |
|
|
| Stephen Gordon wrote: |
From the context, I think the 'rule' is that the increase in CEO pay is 30% of the increase in firm size. |
Ah. That makes sense. Scratch my previous point, then.
In that case, this isn't really an unusual pathology and I don't expect it to go away unless the whole system does. But I don't think it has anything much to do with markets, really, except in a rather secondary sort of way. And it certainly doesn't have anything to do with talent or the attraction of it, except in theoretical intent perhaps. Lots of CEOs seem to be incompetent gits. Nor do I believe it has much to do with the actual amount of value delivered by the CEO. Every once in a while a CEO will come along with a serious vision for changing a company and will have the organizational skills to put it into practice and that vision will really do something fundamentally useful. Most of the rest of the time, IMHO the Dilbert theory of CEOness applies--the company is an incredibly complex thing and everyone's lying to the CEO anyway, so he has no basis for making sane decisions. The only thing to do is act randomly, tread water and put out press releases hyping what a wonderful job he's doing.
In a typical software company, I would suggest that the lead programmer makes far more difference to the fortunes of the company than the CEO ever could. But the lead programmer will not be paid more than the CEO.
No, it's a social thing. Quite simply, you've got a group of hierarchical institutions that measure success by money. And I'm not just talking de facto--corporations explicitly measure success by profits, and everyone at the top of them explicitly subscribes to an ideology of selfishly maximizing personal monetary gain as the only appropriate and sane behaviour. So, OK, how do you measure who's the highest status in such an organization? By how much money they're given. So how can you tell that the CEO of a big company is higher status than the CEO of a little company if he doesn't *make more money*? The CEO doesn't have to insist, everyone involved understands it implicitly without even thinking about it.
There are other sorts of organizations which work differently. For instance, in government the top pay rates tend to be much smaller for a given size of organization, and it's frequently the case that cabinet ministers and even prime ministers make less money than some of the upper-level bureaucrats. I'm not sure the top-of-the-organization salary scales in the same way, either--the mayors of some cities may make as much money as the prime minister. There's still some tendency for an association between money and status, because the assumptions of capitalism are woven into our society at large, and indeed I'd say it's growing stronger--I'm always seeing new bigwigs in the public sector getting paid a bunch and using the market-based reasoning of corporate salaries. But it's weaker, and other considerations still dominate especially in the elected positions. The point isn't how much money you make, it's how big your constituency is--how many people you're courting the votes of and then making decisions for. With status based on that, money is less the issue.
Science fiction fandom, Free software and scholarly research base status almost entirely on peer acclaim. People may co-ordinate large organizations effectively on a volunteer basis; to the extent that pay is involved it tends to come more from a recognition that people need to eat while they're doing this stuff than on the notion that the money should be commensurate with their efforts, value or status.
This is a matter of anthropology, not economics.
All this says nothing about the relationship between pay and worth of intermediate-level skilled positions with perhaps rare skills and knowledge base such as the controller discussed above. I suspect people often overvalue such skills in our society just because of this tendency to talk a lot about the "best people" and so forth, but at the same time some people really can be hard to replace. Just because a couple of municipal bigwigs setting salaries think person "X" is worth "Y" salary to the municipality doesn't mean they are--but it doesn't mean they aren't, and at least, unlike a CEO, there's a decent chance that there will be some kind of association between their pay scale and how useful their output actually is. |
|
| Back to top |
|
|
Stephen Gordon
Dismal scientist
Joined: 11 Apr 2006
Posts: 449
|
| Posted: Tue May 30, 2006 5:44 pm Post subject: |
|
|
I'd agree with pretty much all of that. There are a couple of other points that I've seen raised as well in this context:
- The 'tournament' hypothesis: CEO pay is high so that those below have an incentive to work extra hard in order to get a chance at the top job.
- The 'Lake Wobegon' hypothesis: Every search committee is supposed to find someone who is 'above average'. They don`t really know if a candidate has above-average talent, but they can at least pay above-average salaries. |
|
| Back to top |
|
|
Tehanu
More or less, more or less
Joined: 12 Apr 2006
Posts: 17646
Location: Seceded from the Ford Nation
|
| Posted: Sun Aug 31, 2008 8:44 pm Post subject: |
|
|
Loopholes are helping the super-rich CEOs in the USA to avoid taxes, to an estimated tune of $20 billion. And this is in a country that doesn't tax them all that much in the first place.
| Quote: | ... The biggest loss comes from a "stock-option accounting double standard" that allows corporations paying executives stock options to deduct more than their actual expenses, they said.
For example, when UnitedHealth Group Inc. paid chief executive William McGuire nine million stock options, it put on its financial statement that the compensation cost the company nothing, according to the Institute for Policy Studies and the group United for a Fair Economy. But its tax filing claimed a deduction of $317.7 million, the groups said.
... A practice known as deferred compensation – which allows executives to defer an unlimited amount of pay – costs the government $80.6 million a year, among other loopholes that bring the total loss in federal tax revenues to $20 billion, the groups said. |
Toronto Star. |
|
| Back to top |
|
|
|
|
You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot vote in polls in this forum
|
|
FAQ
Search
Memberlist
Usergroups
Register
Profile
Voting Centre
Log in to check your private messages
Log in
Front Page
Links
Acceptable Use Policy
Donate
Today's Active Topics