Is it possible to hire a CEO for $250,000 a year?

[AnTiFreeze3]

by what standard ?
what makes it absurd ?
what makes it non deserving ?

and also, why could i not apply your comment to your situation ?

what's the differences from your situation and CEO's ?

sounds a lot like a jealousy thing, IMO.

The key to asking questions is to avoid ambiguity and to point out which portions of my text each question applies to. However, I will try my best to adequately answer your vague questions.

1.) The standard from which my claims arise can be found in Jim Hardy's post, namely that CEO's currently make ~125x more than the standard worker in his or her company. But obviously any standard can be arbitrarily chosen to support one's own views, so that was a rather stupid question.

2.) As pointed out above, CEO's making that much more than their workers is, in my opinion, absurd. "Absurd" is simply an adjective that I chose to accompany my description of the salary of CEO's; if you would care to ask me about my actual views, rather than which adjectives I choose to use, I would greatly appreciate it.

3.) Where did I ever imply that you couldn't apply what I am saying to my own situation, and how could you infer the opposite? People in the United States, regardless of occupation, make substantially more than most of the world. This is a sad truth of our economy, and of the state of the rest of the world. Yet, taking my salary, and increasing it by several orders of magnitude, merely increases what negative effects you might attribute to my own income, thus making it more severe and more worthy of discussion and change.

4.) I feel as though my third response effectively answers your fourth question.

Additionally, your last opinionated response attempts to assume traits about my own personal philosophy from which you have no right in doing. I find money to be evil, decadent, overtly and overly powerful, and I do not contain jealousy towards those with more of it than I, but contempt and pity. Despite all of this, money is undoubtedly useful, and I need it if I ever want to go to college and further my education, which is the only reason I even have a job in high school; my money either goes in the bank, or goes into buying textbooks for myself. I'm not jealous of someone making over nine million dollars a year because I don't need that many textbooks.

 

[AnTiFreeze3]

If the people complaining were given the same opportunity to take the substantial salary, they would most probably take up the offer without a second's hesitation ...

Of course. But then almost all of that money would be going towards charities, not a yacht and three homes spread around the world.

 

[PhysicsGente]

If I'm a stockholder and my CEO is making me money I wouldn't care how much he is been paid.

 

[daveyrocket]

CEO's can range in quality from the guys who drove Hostess into the ground to people like Steve Jobs.

Here's a question for you. Imagine you own a company, and you need to hire a CEO. Let's say you could hire Steve Jobs, but he has some other offers. At what salary level would you decide that Steve Jobs isn't worth paying for?

 

[AnTiFreeze3]

CEO's can range in quality from the guys who drove Hostess into the ground to people like Steve Jobs.

Here's a question for you. Imagine you own a company, and you need to hire a CEO. Let's say you could hire Steve Jobs, but he has some other offers. At what salary level would you decide that Steve Jobs isn't worth paying for?

Even post-mortem, that man is probably a more competent CEO than some

 

[jim hardy]

Some statistics on ratio of CEO to worker pay :

http://www.aflcio.org/Corporate-Watch/CEO-Pay-and-You/CEO-to-Worker-Pay-Gap-in-the-United-States/Pay-Gaps-in-the-World

US: 354
CANADA: 206
AUSTRALIA: 93
GERMANY: 147
NETHERLANDS: 76
SWEDEN: 89


the Standard & Poor’s 500 Index top 250 companies are listed by ratio here :
http://go.bloomberg.com/multimedia/ceo-pay-ratio/
#1 is JCPENNEY: 1,795
#250 is AGILENT : 173

Now those numbers might be a little skewed by comparing very top to very bottom of workforce, while the middle has become much larger due to Parkinson's Laws.
That higher CEO to Rank&File ratio makes good headlines though.

From a study out of academia,
http://www.ilr.cornell.edu/ICS/InsightsAndConvenings/upload/May-2011-Pay-p14-16.pdf

3. Multiple of CEO pay to median of top 5 percent of earners has doubled.
It should be no surprise, given the information in Figure 1 and Figure 2, that the median CEO to median worker hourly earnings ratio increased over time — we know the numerator (median CEO pay) has increased much and the denominator (median worker pay) has been relatively flat. This ratio, charted in the red line in Figure 3, has in fact increased from about 75 in 1980 to about 180 today. But notice the other two lines in this figure.
The blue and very steep line is the ratio of CEO pay to those in jobs at the bottom (5th percentile) of the earnings distribution. This ratio increases dramatically from about 150 to about 400 over the past 30 years. This is the ratio we often see publicized in the media.
The third and flattest line (green) in Figure 3 is the ratio of median CEO pay to those in jobs at the top (the 95th percentile) of the hourly earnings distribution — these folks earn more than all but 5 percent of other workers, earning about $48 per hour or about $100,000 per year for full-time workers. Since these workers are also likely, on average, to be in professional jobs requiring high levels of education and skill, this seems like a more even comparison. The ratio of CEO pay to the 95th percentile worker has doubled from about 30 in 1980 to about 60 today — not nearly as much as the other two ratios.

So it looks as if there's a general expansion of the pay scale.
Top is moving away from the bottom, but so is the middle just not so dramatically. Like Hubble's expanding universe - the farther away things are the more quickly they are receding..
We were promised this in the Sputnik days - get yourself an education or get left behind.

Is there a natural limit to it? Must be, when the bottom can no longer support the superstructure.

old jim

 

[Bacle2]

Do you have proof of that?
So what? Who are you to tell me what I can/can be allowed to spend in a year? You are assuming that the rich must be corrupt! Yikes.

Since when does supply and demand care about justification? Heck, it would make more sense to look at it the other way: people should explain why European CEOs are worth 20 times less. After all, it is Europe that endeavors to artificially hold down those pay rates. The US just let's market forces have more say.

But if the increase in salary results from an increase in productivity. Why would the market
reward only, or at least mostly, the CEO's for that increase in productivity? Is there reason to believe that the increase in productivity and output is due mostly to the CEO's performance?

 

[Monique]

Sure it's ridiculous, but if you don't like it, discontinue use of that companies products. Otherwise it's none of your business. But no one will, because no one REALLY cares, they just like to complain and are jealous.

I remember you posting a video about wealth inequality in the United States, so you must care? Aren't the CEOs the persons who are in the top 1% of US wealth and they own more than half of the pie? It's the business of people working for the CEO, they get paid less. I don't understand the jealousy argument, maybe the CEO needs to be ashamed. They can get a lot of money, but at some point having more isn't better.

 

[Bacle2]

Moreover, whether people are jealous or not has no bearing on whether it is right or not for the CEO's to take such a large portion of the pie.

 

[AnTiFreeze3]

I remember you posting a video about wealth inequality in the United States, so you must care? Aren't the CEOs the persons who are in the top 1% of US wealth and they own more than half of the pie? It's the business of people working for the CEO, they get paid less. I don't understand the jealousy argument, maybe the CEO needs to be ashamed. They can get a lot of money, but at some point having more isn't better.

While I agree with this post, I wouldn't press Greg too hard about his previous posts, because, as I have found as much with myself as with others, our outlook tends to change in certain scenarios after having been exposed to new information or opinions. But of course, if someone has an issue with the dominance of the 1%, then that person must also have an issue with CEO's.

 

[Nikitin]

Do you have proof of that?

There is a line of thinking in organizational psychology which says that motivation of an employee is mostly dependant on the level of justice & impartiality inside the organization. Do you think most workers would appreciate a bland CEO making 10 mill a year for doing nothing but maintaining status quo? Not to mention the huge amount of people who are in the Occupy WS movement.

You are assuming that the rich must be corrupt! Yikes.

I'm not assuming, I know many are. It's a well established fact that psychopathy, manipulation, greed etc. are useful traits for rising fast in the corporate structure. The countless books written on Wall-Street culture, for instance, aren't just made-up nonsense.

Since when does supply and demand care about justification? Heck, it would make more sense to look at it the other way: people should explain why European CEOs are worth 20 times less. After all, it is Europe that endeavors to artificially hold down those pay rates. The US just let's market forces have more say.

You are clinging to the belief that unregulated market-forces are king, which is nonsense. There can be many reasons why the CEO-market is so hot in the US, with profitability not necessarily being one of them.

In Norway, the CEOs of the biggest companies (Statoil, Telenor, DNB, Yara etc. - all major international players) only earn ~1-1.5 mill USD a year. At the same time the Norwegian economy is known around the world for its efficiency and fairness, which is partially why Norway's GDP per capita is almost twice that of the US.

 

[russ_watters]

CEO's can range in quality from the guys who drove Hostess into the ground to people like Steve Jobs.

In my opinion, Hostess was killed at least partly by a national union that decided to use it as a sacrificial lamb. But there is a lot of blame to go around:
http://www.policymic.com/articles/19390/hostess-bankruptcy-the-hidden-menace-that-killed-the-twinkie

 

[russ_watters]

But if the increase in salary results from an increase in productivity. Why would the market reward only, or at least mostly, the CEO's for that increase in productivity?

I don't see what an increase in productivity has to do with this. I'm talking about supply and demand for CEOs. If there aren't many available CEOs and/or the quality isn't very good (and people here apparently think the quality is poor), then you have to pay more to attract the good ones.

Conversely, if any idiot can run a company (as many here apparently believe), then you can just hire any idiot to do it - and pay them an idiot's salary.

Again: the "supply" part of supply and demand for workers doesn't have much to do with their productivity or quality. It has to do with their quantity.

Is there reason to believe that the increase in productivity and output is due mostly to the CEO's performance?

Every case is different.

 

[russ_watters]

I remember you posting a video about wealth inequality in the United States, so you must care? Aren't the CEOs the persons who are in the top 1% of US wealth and they own more than half of the pie? It's the business of people working for the CEO, they get paid less. I don't understand the jealousy argument, maybe the CEO needs to be ashamed. They can get a lot of money, but at some point having more isn't better.

Why should the CEO be ashamed? Who are you to tell someone that having more money isn't better? Wow.

Yes, jealousy isn't quite right. It looks more resentment to me.

 

[russ_watters]

Moreover, whether people are jealous or not has no bearing on whether it is right or not for the CEO's to take such a large portion of the pie.

Agreed, but that appears to me to be the motivation behind the opinions here. People are just stating that it isn't right without applying much in the way of facts or logic. People think CEOs make too much money because of their feelings, not because logic tells them it is true.

With the one exception being an attempt to tie CEO pay to productivity. It's logical, so that's good, but it doesn't strictly apply anywhere else up and down the pay scale either, so it shouldn't be the only measure here either.

When I was in high school, I worked food service at at nursing home. I did basically the same job that my friends did at McDonalds, but I made a lot more money. WHY? I made more money because it isn't fun serving food to old people, so they had a smaller pool of available workers to draw from. Lower worker supply caused higher pay. That's how supply and demand works in a job market.

 

[Greg Bernhardt]

Dwight Howard of the Los Angeles Lakers made $20 million last season and he absolutely stunk and his team went no where. WHERE IS THE OUT RAGE!? After all he's a bad person for taking that money!

 

[russ_watters]

Dwight Howard of the Los Angeles Lakers made $20 million last season and he absolutely stunk and his team went no where. WHERE IS THE OUT RAGE!? After all he's a bad person for taking that money!

Oh, I can do you one better than that: The 76ers paid Andrew Bynum $16 million last year and he never set foot on the court.

Now if he lied about being hurt, that would make him a bad person, but if he was legitimately hurt, it wouldn't.

Hopefully, the team had insurance...

Supply and demand causes teams to overpay for high-end talent, particularly at the end of careers when the inevitable downturn is unpredictable.

 

[Monique]

Who are you to tell someone that having more money isn't better? Wow.

It's not me saying it, it's published research. I'll try to find the source. The idea is that having a larger sum in the bank account does not increase happiness when one can comfortably live with less money. One can live comfortably off 4000 euros a month, is the life of a CEO so much better because the sum is earned every hour?

*edit* It's the Easterlin paradox, http://www.pnas.org/content/107/52/22463

About the supply/demand, there are other professions where the supply of quality people is rare, but they don't make exorbitant amounts of money.

 

[russ_watters]

It's not me saying it, it's published research.

It is you (and others) suggesting something should be done about it.

I'll try to find the source.

*edit* It's the Easterlin paradox, http://www.pnas.org/content/107/52/22463

Why does that matter to the person making the money? Doesn't he get a choice? Or should we have governments make all of the decisions for everyone?

Research says soda is bad for you: Ban it.
Research says black cars radiate heat better than other colors: Ban all colors but black.
Research say you can't watch more than two TVs at once: Ban the ownership of more than two TVs.

About the supply/demand, there are other professions where the supply of quality people is rare, but they don't make exorbitant amounts of money.

Sure, it isn't the only factor but it is a major factor. Still, "exorbitant" is a matter of perspective. If I'm working at a nursing home for $9 an hour and my friends are working at McDonalds for $7, they might consider my pay to be exorbitant.

 

[Greg Bernhardt]

The idea is that having a larger sum in the bank account does not increase happiness when one can comfortably live with less money. One can live comfortably off 4000 euros a month, is the life of a CEO so much better because the sum is earned every hour?

Are you asking us whether traveling to tropical islands on a mega yacht drinking top shelf Mai Tais is better than comfortably living in a 1 bed room flat in an average town drinking Stella in a local pub?

 

[Monique]

It is you (and others) suggesting something should be done about it.
Why does that matter to the person making the money? Doesn't he get a choice? Or should we have governments make all of the decisions for everyone?

Research says soda is bad for you: Ban it.
Research says black cars radiate heat better than other colors: Ban all colors but black.
Research say you can't watch more than two TVs at once: Ban the ownership of more than two TVs.


Sure, it isn't the only factor but it is a major factor. Still, "exorbitant" is a matter of perspective. If I'm working at a nursing home for $9 an hour and my friends are working at McDonalds for $7, they might consider my pay to be exorbitant.

You are aware that lots of products and services are regulated or banned. I'm sure you don't advocate alcohol for children or drugs for everyone. Apparently morals don't apply to making money, everyone should be pro-exploitation when it comes to cash?

The idea that a 9 dollar could be considered exorbitant is ridiculous as well, we're talking about top incomes here.

 

[Monique]

Are you asking us whether traveling to tropical islands on a mega yacht drinking top shelf Mai Tais is better than comfortably living in a 1 bed room flat in an average town drinking Stella in a local pub?

With an income of $4000 one can easily travel to a tropical island and spend time on a yacht. And I hope you're not seriously suggesting that one can't be happy without sitting on a yacht and having a drink. There are millionaires who choose to live as a hobo several months a year, because that's what truly brings them happiness (http://www.hobonickels.org/columbia.htm).

 

[krash661]

your are doing nothing more than whine about how it's not fair.
do you realize " fair " does not exist.
it's a fight for something that does not exist.

 

[Greg Bernhardt]

With an income of $4000 one can easily travel to a tropical island and spend time on a yacht. And I hope you're not seriously suggesting that one can't be happy without sitting on a yacht and having a drink. There are millionaires who choose to live as a bum several months a year, because that's what truly brings them happiness.

Debatable, I don't know any people earning $48k taking vacations to tropical islands on yachts.

So if people can be happy being a bum, that must mean accumulating anything more than a bum is wrong. That likely means you are making too much money Monique. Why aren't you a bum, you could still be happy.

 

[WannabeNewton]

I'm really at a loss regarding the counter argument. If the CEO has a means of making the money and he/she isn't explicitly breaking the law (because we all know what goes on behind the scenes that is out of our control) then why deny him/her the profit being reaped? I agree with krash that ethics and fairness are not practical things to be sought after in the business world. Instead of focusing on what the CEOs are making and criticizing their immense wealth, why not try to attain it yourself? If you have no interest in attaining such wealth and find that happiness does not come from money then good for you but why does it matter then if the CEOs are rich? They have a right to make money as they please. Whether or not it is useful to have that much money is a totally different question.

 

[Monique]

Debatable, I don't know any people earning $48k taking vacations to tropical islands on yachts.

I've been to a tropical island and sat on a yacht, or must it be a boat of a certain value in order to qualify?

So if people can be happy being a bum, that must mean accumulating anything more than a bum is wrong. That likely means you are making too much money Monique. Why aren't you a bum, you could still be happy.

That is completely missing the point, again. *edit* Didn't you post the US wealth inequality video?

 

[Greg Bernhardt]

I've been to a tropical island and sat on a yacht, or must it be a boat of a certain value in order to qualify?

Whatever you did, add in a value factor of an additional $1 million dollars and you can't tell me you wouldn't have had a better time. If you don't think so, you lack imagination :)

That is completely missing the point, again.

I see you are making a case to cap levels of happiness. Why be really happy when just sort of happy is good enough. Why have lots of money when just some money is good enough.

Forgive my terrible source, but apparently there is a legit study that reports more money, more happiness.
http://www.huffingtonpost.com/2013/04/29/money-and-happiness-study_n_3179345.html

 

[russ_watters]

You are aware that lots of products and services are regulated or banned. I'm sure you don't advocate alcohol for children or drugs for everyone.

Correct.

Apparently morals don't apply to making money, everyone should be pro-exploitation when it comes to cash?

So not only don't they need money, it is immoral to make a lot of money?

You're now saying that:
1. Making a lot of money is immoral/people who make a lot of money are immoral.
2. Anyone who makes a lot of money must be exploiting people.

Really?

Clearly, we should eliminate lotteries and professional sports contracts, but I ask you: do you really believe that someone who got lucky is immoral just because they made a lot of money?

The idea that a 9 dollar could be considered exorbitant is ridiculous as well, we're talking about top incomes here.

Exorbitant just means "very excessive", but that wasn't the point of the example. The point of the example was to show that pay is tied to other things than just productivity, all the way up and down the pay scale.

Another example a little higher up: a few years ago when nurses were in short supply, their pay went up dramatically and some were given pretty significant signing bonuses (some still are). Are nurses who accepted signing bonuses - getting paid for no work - greedy and immoral?

 

[Monique]

Whatever you did, add in a value factor of an additional $1 million dollars and you can't tell me you wouldn't have had a better time. If you don't think so, you lack imagination :)

When I look at my friends, the ones who come from rich families express more dissatisfaction of their lives and are harder to please.

Would I have had a better time with 1 million dollars? I seriously doubt it, I could buy expensive jewelry or book the Sheikh's hotel room, spend time in a helicopter. That's fun, but it doesn't mean I didn't enjoy my vacation without it. Also, luxury becomes old really fast. I'm thinking of people who feel the need to buy more cars than they can drive. I don't care that they do, but I don't feel the need to envy them.

So not only don't they need money, it is immoral to make a lot of money?

This is really upsetting you? One question: are you're against the concept of fair-trade products as well?

 

[Q_Goest]

I think one of the problems with CEO compensation regards how they can manipulate others to increase their compensation.

So how do these packages get approved? Corporate boards usually include a subset of the board called the compensation committee. The problem is that many corporate directors (so-called “inside” directors) report to the CEO. So their judgment is not exactly impartial. (“Hey, boss: remember that raise I asked you for? One reason I need it is because I’m staying late working on your generous pay package for next year.”)

When it comes to “outside” directors (people who work for other companies), some CEO pack their boards with friends and cronies. So the board’s final decision is not always, well – above board. The Sarbannes-Oxley law took some steps to set rules on this, requiring certain new reporting procedures and holding directors personally liable if shareholders squawk.

http://www.nbcnews.com/id/11414878/.../who-decides-how-much-ceo-makes/#.UZ-aRrXvtXY
Edit: How is this not theft?

That and what I'd mentioned before - CEO's simply don't generate value for the company that is on par with their contributions like every other employee must.