2017 CEO vs worker compensation

[jesmu84]

https://www.vox.com/platform/amp/policy-and-politics/2018/8/16/17693198/ceo-pay-gap-income-inequality?__twitter_impression=true

[tower912]

Not going to end well.   But, hey, I posted before the lock.   Yay.

[mu03eng]

It turns out when you reform CEO pay to force it to be pegged to the stock market and the government builds all of it's fiscal policy around inflating the stock market....suboptimal things happen.

[GGGG]

It turns out when you reform CEO pay to force it to be pegged to the stock market and the government builds all of it's fiscal policy around inflating the stock market....suboptimal things happen.

Exactly.  I recall back in the day when people were complaining about CEO salaries and how they were out of whack with company performance.  Now that they are tied to company performance, compensation has gotten out of hand.

I have thoughts on how this disparity can be dampened, but it treads too much into politics.

[MU82]

My solution:

Quadruple the pay of every corporate employee making at least $1 million.

I mean, if you're gonna go for it, go for it. Stop messin' around with triflin' little figures like $10 million and $50 million and $80 million. They've "earned" it.

Did I say quadruple? Give 'em 100x what they make now. Wheeeee!

(Might as well have some real fun before the lock.)

[MUBurrow]

CEO compensation no matta

[Silkk the Shaka]

It turns out when you reform CEO pay to force it to be pegged to the stock market and the government builds all of it's fiscal policy around inflating the stock market....suboptimal things happen.

Plus capital gains are taxed at much lower rates than labor, so $ gets consolidated at the top even faster.

[Benny B]

Every time I see an article on CEO compensation, I think to myself, “Self, the answer is simple... we need fewer outliers.”

While CEO compensation in many cases is hardly defensible, comparing it to the lowest paid employee as a method of bringing light to an issue is a fools distraction.

What people should be doing is boycotting companies where the CEO is unjustly compensated and/or where the low line employees are. 

[real chili 83]

 CEO’s earn only the easy cash.

[WarriorFan]

When I get there I want that kind of money too. 
Most of the top people I know earn it.  They work almost 24/7, give up all form of personal life and have amazing skills across multiple disciplines. 

[Jay Bee]

#FakeNews: "CEO Mr. Smith made $30 million last year!"

Reality: Mr. Smith made $1.5 million. He also got RSUs totaling $28.5 million. If the company meets lofty performance goals over the next 3 years, he will get the RSUs. If they company does not perform, he'll get 0.

[MU82]

When I get there I want that kind of money too. 
Most of the top people I know earn it.  They work almost 24/7, give up all form of personal life and have amazing skills across multiple disciplines.

Sounds like most newspaper journalists I know. And they don't get paid millions. And the best ones -- those who cover the White House, for example -- do more important work than any CEO (IMHO).

Of course, they made the choice to be journalists, so that's a whole 'nother argument.

Hey, the whole deal is always what the market will bear, supply and demand, etc. It's why LeBron will make $40 million while a teacher makes $40K. There's only one LeBron; teachers are a dime a dozen. (Then again, while LeBron could be a fine CEO, there ain't a single CEO on the planet who could do what LeBron does.)

With CEO compensation as it relates to the average worker, it does seem like there will have to be a breaking point some day. Especially the cases with the golden parachutes for the crappy CEOs. It's one thing when a CEO makes the big bucks because his/her company performs bigly. But it's another when a CEO runs a company down and STILL makes the big bucks. But I digress ...

Always an interesting conversation ... until the lock.

[mu03eng]

When I get there I want that kind of money too. 
Most of the top people I know earn it.  They work almost 24/7, give up all form of personal life and have amazing skills across multiple disciplines.

CEOs are just like every other human being working and are subject to the bell curve of performance and the can be subject to the peter principle like everyone else.

That means there are great CEOs that are underpaid, good CEOs that are properly paid, decent CEOs that are somewhat overpaid, and bad CEOs who are vastly overpaid.

The fact that CEOs work almost 24/7 and give up family life for the job is a societal "pressure" and not one that is actually required in the modern era to be effective. I know lots of people at lower levels that give up similar things for a pretty good salary that isn't a CEO's salary so they aren't correlated. Further a lot of time that CEOs spend on the job is in sitting on other companies boards, in part (conscious or not it's true), ensuring CEO compensation stays high.

[mu03eng]

With CEO compensation as it relates to the average worker, it does seem like there will have to be a breaking point some day. Especially the cases with the golden parachutes for the crappy CEOs. It's one thing when a CEO makes the big bucks because his/her company performs bigly. But it's another when a CEO runs a company down and STILL makes the big bucks. But I digress ...

One interesting thing about the golden parachute, is it's not always intended as a golden parachute, it's actually intended as a poison pill for a CEO to stay in place. Take the CEO of Blockbuster during the mid-2000s, John Antioco, he had a $57 million buy out(which one could consider a parachute) but it was actually put into his contract so that it would be harder to force a CEO change when Carl Icahn came sniffing around to raid them.

As always the law of unintended consequences is as immutable as gravity.

[Lennys Tap]

Sounds like most newspaper journalists I know. And they don't get paid millions. And the best ones -- those who cover the White House, for example -- do more important work than any CEO (IMHO).

Of course, they made the choice to be journalists, so that's a whole 'nother argument.

The dude that looks like a poor man's George Clooney does more important work than Jeff Bezos (who employs thousands of people)? I strongly disagree.

And the fact that "they made the CHOICE to be journalists isn't "a whole 'nother argument" - in a free society it's the whole argument.

[Lennys Tap]

Hey, the whole deal is always what the market will bear, supply and demand, etc. It's why LeBron will make $40 million while a teacher makes $40K. There's only one LeBron; teachers are a dime a dozen. (Then again, while LeBron could be a fine CEO, there ain't a single CEO on the planet who could do what LeBron does.)

How many guys in the NBA, NFL, MLB, NHL, etc., chose a career in athletics over a position in corporate America that was a pathway to being a CEO? Of course, Lebron might succeed under the right conditions as a CEO today due to the brand he's built over the last 15 years (and the fact that he's a smart guy) but I don't think he was on that track when he came out of high school and entered the work force.

[Lennys Tap]

With CEO compensation as it relates to the average worker, it does seem like there will have to be a breaking point some day. Especially the cases with the golden parachutes for the crappy CEOs. It's one thing when a CEO makes the big bucks because his/her company performs bigly. But it's another when a CEO runs a company down and STILL makes the big bucks. But I digress ...

Always an interesting conversation ... until the lock.

100% agree!

[TSmith34, Inc.]

#FakeNews: "CEO Mr. Smith made $30 million last year!"

Reality: Mr. Smith made $1.5 million. He also got RSUs totaling $28.5 million. If the company meets lofty performance goals over the next 3 years, he will get the RSUs. If they company does not perform, he'll get 0.

Incorrect.

Not the part about RSUs, PSUs, or old fashioned-standard stock options being a majority of compensation--that part is correct.  The "lofty performance goals" is where you are incorrect.

Gates and hurdles to obtaining the incentive pay are designed to be highly achievable; it does not take extraordinary performance in order to meet the requirements for payouts.  The ratio of pay opportunity to actual payouts is quite high, not low, across the F500.

I have yet to see one compensation committee or C-suite whose goal wasn't for the EC consultant to justify why their package should be at the 75% or 90% percentile.

[mu03eng]

Incorrect.

Not the part about RSUs, PSUs, or old fashioned-standard stock options being a majority of compensation--that part is correct.  The "lofty performance goals" is where you are incorrect.

Gates and hurdles to obtaining the incentive pay are designed to be highly achievable; it does not take extraordinary performance in order to meet the requirements for payouts.  The ratio of pay opportunity to actual payouts is quite high, not low, across the F500.

I have yet to see one compensation committee or C-suite whose goal wasn't for the EC consultant to justify why their package should be at the 75% or 90% percentile.

One intriguing concept would be to put "common" workers on the compensation committees....those voices and the perceptions at the worker level is seemingly lost.

[Pakuni]

The dude that looks like a poor man's George Clooney does more important work than Jeff Bezos (who employs thousands of people)? I strongly disagree.

Is this the whole "We should all be grateful for our corporate overlords for deigning us with employment opportunities (that, in Amazon's case, typically depresses wages) to further their wealth" argument?

[Jockey]

The dude that looks like a poor man's George Clooney does more important work than Jeff Bezos (who employs thousands of people)? I strongly disagree.

And the fact that "they made the CHOICE to be journalists isn't "a whole 'nother argument" - in a free society it's the whole argument.

There is no democracy without journalists. There is still a democracy if Bezos dies tomorrow.

The journalist's work is a thousand times more important. Of course, the people who believe the media is the enemy of the people will believe as you do.

[MU82]

The dude that looks like a poor man's George Clooney does more important work than Jeff Bezos (who employs thousands of people)? I strongly disagree.

And the fact that "they made the CHOICE to be journalists isn't "a whole 'nother argument" - in a free society it's the whole argument.

First, you used Bezos -- the richest and one of the most successful CEOs in the world -- as your CEO example but "the dude that looks like a poor man's George Clooney" (I don't even know who that is) as your journalist example. I mean, I could use Jeffrey Skilling (the criminal who ran Enron) as a CEO example and Maggie Haberman as my journalist example, and the journalist would "win." Let's not cherry-pick.

And yes, I'd argue that Maggie Haberman's work today is more important than Jeff Bezos'. He can delegate to 100 people. He could take off 3 months and Amazon wouldn't miss a beat. Not saying he does, but he could.

And of course, you're right (as was I) about journalists choosing to be journalists.

How many guys in the NBA, NFL, MLB, NHL, etc., chose a career in athletics over a position in corporate America that was a pathway to being a CEO? Of course, Lebron might succeed under the right conditions as a CEO today due to the brand he's built over the last 15 years (and the fact that he's a smart guy) but I don't think he was on that track when he came out of high school and entered the work force.

Any number of intelligent world-class athletes have "what it takes" to be great CEOs. They are smart, they are leaders, they are willing to take chances, etc, etc, etc. That's why many of them become successful small-business owners, successful GMs/team presidents, etc. Yes, many fail financially once they leave the field/court ... but the same is true of many businesspeople.

While LeBron or Tom Brady or Justin Heyward could learn how to become great CEOs, there is 0.0000000% chance that Bezos or Gates or Nooyi could learn how to become a professional athlete! (And you don't claim anything different.)

I don't think we disagree on most of these things, Lenny. I simply tend to give CEOs a little less credit as being somehow presupposed to "having what it takes" to be CEOs, as if they possess some kind of gene that makes it all possible while the rest of us plebes lack it.

To me, it's like the whole "Trading Places" thing. Give Billy Ray Valentine the big office and the training while casting Louis Winthorpe III into the streets, and Billy Ray ends up being the tycoon while Winthorpe ends up in the gutter.

Of course, Winthorpe also ends up with Ophelia, so there's that!

There is no democracy without journalists. There is still a democracy if Bezos dies tomorrow.

This. We're having trouble keeping our democratic republic in one piece now. If great journalists weren't on the case, we'd be screwed.

[mu03eng]

This. We're having trouble keeping our democratic republic in one piece now. If great journalists weren't on the case, we'd be screwed.

Hyperbole aside, journalist, CEOs, athletes all have their role in society and I don't think anyone can claim one is more important than another IMO.

Also as long as the roles exist people of quality will seek to do those jobs and do it well. If Maggie Haberman we're at the NYT then someone from the Chicago Tribune or the Saint Petersburg Times or whatever would fill that role and be as good or nearly as good. Regardless of role, there are very few irreplaceable people in this world IMO.

[MomofMUltiples]

I've always thought there's a bit of a conspiracy going on.  Who makes up the vast majority of corporate boards?  Other CEOs! And the boards set the pay for the CEOs.  So the guys all sit on each others' boards and jack the pay up for the CEO to create comparable expectations for themselves.

Further, I simply can't understand how CEOs earn bonuses when the company loses money and the share price is down.  Yet you regularly read of the CEOs who presided over these "failures" rake in bonuses of $10 million or more.

I help lead a small company.  In years we lose money, there is nothing there to pay bonuses to anyone.

[Lennys Tap]

Is this the whole "We should all be grateful for our corporate overlords for deigning us with employment opportunities (that, in Amazon's case, typically depresses wages) to further their wealth" argument?

I guess so, comrade. Up the revolution!

Henry Ford's vision, drive (no pun intended) and hard work made it possible for thousands to feed their families. I think that's more important than Jim Acosta's tete-a-tetes with Stephen Colbert. Sue me.