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

[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.

 

[russ_watters]

By the way, please don't misunderstand me WRT my position on jealousy. There's noting inherently wrong with jealousy and if used properly can be a wonderful thing.

My boss drives a red Corvette convertible to work on warm days when he isn't driving his point-A-to-point-B car, a high-end Audi sedan. Yeah, I'm jealous. Do I want to punish him for it? Vote to have the government seize it from him? No, I want to work hard so that some day I can be him! He's had a long and successful career and worked hard for his money - in addition to providing a job for me so that I could make a comfortable living, for which I am thankful. That's immoral of him? C'mon.

 

[Q_Goest]

Monique,
There's an excellent talk on TED entitled: Richard Wilkinson: How economic inequality harms societies

http://www.ted.com/talks/richard_wilkinson.html

Really fantastic presentation with a considerable amount of data on the topic.

I wouldn't argue with Wilkinson but I don't think this is a good reason by itself to cap CEO's compensation. I think an argument along those lines would need to do more than show the correlation between economic inequality and impact on society.
Edit: After thinking about it a bit more, perhaps that is a good reason to enact laws to cap salaries. Things people do that have a negative impact on society are often regulated even when those negative things people do are 'victim less crimes'.

 

[russ_watters]

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.

Oh, it's worse than that. In order to cap happiness, we first have to define it for other people. We tell them what happiness is and then tell them how much of it they are allowed to have.

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 :)

I remember reading somewhere once that the main difference between pretty rich and super rich is having a jet on standby for you at a local airport and a helicopter to take you to it.

I think I can live without it, so I don't aspire to be more than just pretty rich.

 

[Greg Bernhardt]

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

No doubt there is a difference in satisfaction between earned and inherited money.

That's fun, but it doesn't mean I didn't enjoy my vacation without it.

I for one understand that you can enjoy something without much money. I stayed in SE asia for $15/n and had a great time. However, if I splashed a $1 million on those few weeks, with some imagination, it could have been legendary. If someone can afford it, why rob them of that legendary experience?

 

[Greg Bernhardt]

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

That is why people need to be a little bit involved in knowing the companies they support. They are only in business because people allow them to be. We cry they are making too much money all the while we go and buy their products.

 

[russ_watters]

Monique,
There's an excellent talk on TED entitled: Richard Wilkinson: How economic inequality harms societies

http://www.ted.com/talks/richard_wilkinson.html

While it is nice (and clearly true from the jealous reactions expressed in this thread) to say that inequality is divisive (first sentence of the speech) and we should strive to reduce it, things are more complicated than that. There is strong evidence supporting an inverse relationship between equality and poverty, particularly from China. It may not be nice that while China's poverty rate dropped substantially the gains were unequal, but it happened.
http://blog.compassion.com/eliminate-poverty-just-a-matter-of-priorities/
http://compgovpol.blogspot.com/2013/01/socialism-with-inequality.html

So let me ask you this, hypothetically in case you don't believe the cause-effect relationship: If the forces that cause inequality to rise also cause everyone to get richer including the poor, wouldn't that make inequality a good thing?

Frankly, I don't trust prominent advocates of forced-reduction in inequality because many are manipulating the data to make it say what they want it to say instead of letting it say the truth. The leading European economic policy organizations have taken it upon themselves do define inequality as poverty. https://en.wikipedia.org/wiki/Poverty#Relative_poverty

This leads to the truly idiotic conclusion that poverty has increased in China over the past several decades, when according to more conventional definitions/measurements it has dropped substantially.

[edit] Oh, that's the author of The Spirit Level. We discussed several years ago how he uses manipulative/misleading data to draw unwarranted conclusions.

 

[Q_Goest]

That is why people need to be a little bit involved in knowing the companies they support. They are only in business because people allow them to be. We cry they are making too much money all the while we go and buy their products.

People can boycott products but that doesn't change the fact that what the person is doing would be a criminal offense in just about any other setting.

As an engineer, I have to evaluate bids and proposals for things our company purchases. I would be stepping over the line if I took gifts of any kind from those companies. It's the same thing here. The CEO is taking 'gifts' (compensation) from those people who report to him and who's salaries he directly impacts.

What you would do if you were given the responsibility to determine what your boss's pay raise should be next year?

 

[Q_Goest]

So let me ask you this, hypothetically in case you don't believe the cause-effect relationship: If the forces that cause inequality to rise also cause everyone to get richer including the poor, wouldn't that make inequality a good thing?

I agree, capitalism works. Allow inequality as long as it's fair and doesn't allow people to take money they don't earn. Otherwise, it's theft.

 

[Bacle2]

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.

By that token, why have a police department. If someone is being beaten up, just let it happen; just file it under "life is not fair". And I think one of the things that keep people together as a society is a certain level of commonality of notions like fairness; while there may be some level of disagreement at an individual level, there is an overall agreement on what is considered fair.

Correct.
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?

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?

The case you cite of your own experience is not the one I think others are referring to; in your case, you do believe your boss contributes in a substantial way, and you also believe he is rewarding you fairly. The complaint is about cases where the opposite happens: the CEO contributes marginally, workers make a significant contribution ( measured in terms of productivity gains) and the CEO gets raises consistently; extremely-generous severance, and the workers do not share in the gains.

I don't think that's the point most who complain about CEO pay are making (llet others correct me if I'm wrong); it is the belief that the system is set up in such a way that many (CEO's, in this case) are getting more than their fair share of the pie. There has been an overall increase in productivity over the years, and only --at least mostly -- the ones that have benefited from that increase are the CEOs. Why isn't the gain in productivity being shared in a more equal way? Why isn't the market rewarding equally all those who have increased their productivity (or, do you believe that it has)? Do you believe all CEOs are responsible for the majority of the gains in productivity?
I can't think of any specific measure to take, but I can definitely say that there is something wrong somewhere. If you and I were in business together; you're my boss and the business was profitable: shouldn't I as an employee share (somewhat) proportionally in the returns from the gain in productivity?

Why would people willingly support/endorse a system in which the gains are not distributed in a way they perceive is fair, meaning that the reward is proportional to the contribution to the gains?

 

[krash661]

if fair existed like what is thought,
everything would be equal.
simple.
no one would be here on this topic.
this topic would not exist it's self.
simple.

 

[Bacle2]

if fair existed like what is thought,
everything would be equal.
simple.
no one would be here on this topic.
this topic would not exist it's self.
simple.

I don't think it is that simple; there has to be a level of commonality of shared beliefs/assumptions of what's fair and what's right for a society to remain together. The commonality of those beliefs and notions of justice is reflected in the laws that govern a society. The society remains stable as long as most people perceive that fairness prevails over unfairness.

 

[Bacle2]

Well, yes, one has to make assumptions or end in an infinite regress. If you assume-- and I do -- that people who contribute in a roughly-equal way should have a roughly equal reward over the long run, then there is something wrong in how the gains resulting from an increase in productivity have been distributed for a long time now. Isn't that something we can agree on without a philosophical debate on what justice is?

 

[mheslep]

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

Its doable. I did it back in the day. Charter, no captain, two couples, 42', one week in the Caribbean.

 

[Monique]

My boss drives a red Corvette convertible to work on warm days when he isn't driving his point-A-to-point-B car, a high-end Audi sedan. Yeah, I'm jealous. Do I want to punish him for it? Vote to have the government seize it from him? No, I want to work hard so that some day I can be him! He's had a long and successful career and worked hard for his money - in addition to providing a job for me so that I could make a comfortable living, for which I am thankful. That's immoral of him? C'mon.

No, that's fine and I wouldn't be jealous (I rather drive my bicycle to work anyway).

Monique,
There's an excellent talk on TED entitled: Richard Wilkinson: How economic inequality harms societies

Thanks, I'll watch that video :)

No doubt there is a difference in satisfaction between earned and inherited money.

That's definitely true, but then I also know people who build a chemical company from nothing, working out of a shed in the backyard. They earned a fair amount of money and bought a big house from that, they don't care one bit for their possessions and rather be rid of it. I respect that. I also know people who were active in the housing market, turned around millions, gave 1000 euro tips to waitresses, drove ferraris and what have you not. I was not jealous and enjoyed their entrepreneur spirit and while the big spending was mostly showing off, they did share the money. I know other people who earned thousands of euros in the stock market, bought a nice car, good for them! These however are not examples of excessive incomes. While I know these people, I don't care about the money I could get. If I worked for them I might ask for a share of the profit though.

Currently I work in a hospital and the CEO left with a big scandal and even received a termination bonus. He continued in an "advisory position" that couldn't be explained and he earned tons of money from that. Should I not work in a hospital, because the big boss might be freeloading? Being critical is a good thing. If the CEO increases the revenue of a company they sure can take their bonus.

If someone can afford it, why rob them of that legendary experience?

As said, no one is demanding a middle class income for CEOs. And one can question why other people would deserve to live in poverty. A company needs dedicated workers and one cannot argue that a dedicated worker deserves to receive minimum income just because "one should try to be a CEO". A clock only runs when all the gears are present.

 

[Redbelly98]

Salaries follow the same basic supply-demand principles that apply to prices of goods. If a company offered a significantly lower salary for a CEO than they do, qualified CEO candidates would get a better offer and go somewhere else.

This same discussion has been applied to professional athletes as well, or (in reverse) to teachers not being paid enough. It's still all based in stuff taught in intro economics courses.

 

[Q_Goest]

Salaries follow the same basic supply-demand principles that apply to prices of goods. If a company offered a significantly lower salary for a CEO than they do, qualified CEO candidates would get a better offer and go somewhere else.

This same discussion has been applied to professional athletes as well, or (in reverse) to teachers not being paid enough. It's still all based in stuff taught in intro economics courses.

Hi Redbelly. I think this is a point that a lot of people here are making, but there's an implicit assumption in this logic. The assumption is that the same market forces or supply-demand principals, are at work governing the CEO's salary that are at work for other employees including professional athletes, teachers and even the price of goods.

If I want a raise, I have no influence over the people giving me the raise other than those market forces governing the salary of engineers. The same is largely true for professional athletes. They make ridiculous salaries also, but they can only work for the highest bidder which is essentially the same as what I can do. Teachers the same thing. But the CEO is in a unique position.

From post #60, 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.

...

Unfortunately, there is little in the proposed rules that would empower shareholders to do anything when they believe a CEO is overpaid. When it comes time to vote for new corporate directors, the candidates almost always run unopposed. Challenging those incumbents is expensive, and your average outraged shareholder doesn’t have the time or money to take on the company’s hand-picked candidates. Rare examples of challenges are usually funded by large shareholders like disgruntled money managers or well-funded corporate “raiders.” So disclosure of outsized pay, by itself, will do little to strengthen the link between CEO pay and performance.

http://www.nbcnews.com/id/11414878/.../who-decides-how-much-ceo-makes/#.UZ-aRrXvtXY

For many (most?) CEO's, market forces and supply/demand principals are not involved and don't come into play regarding their compensation. The CEO's payment package is unique, and very much unlike yours, mine or even those of professional athletes.

 

[OmCheeto]

This thread reminds me of my drunken post on FB yesterday.

Ok, and highly recommended, that you ignore the blue portion below. (hic!)

Om; "ps. Are you all still going to be friendly, when I'm a trillionaire?"

Om's sister; "stick with millionaire, trillionaire taxes will kill you!"

Om; "Well, Steven Chu told me the other day that we are spending 430 billion dollars a year on foreign oil. My invention will drop that to about 100 billion dollars a year, which nets me 330 billion dollars a year, which, if you do the math, makes me a trillionaire in just over 3 years. Before taxes of course. But, I've learned lots over the last few years. If I put all my money in my offshore investments, I'll pay no taxes. Ha ha! At a 30% tax rate, that's 100 billion dollars a year I'll be saving. Ha ha! If you do the math, it turns out that every man woman and child in America will have to pay an extra $340 a year in taxes, just to cover that. SUCKERS! It's really nice living in a country filled with idiots that will let me get away with this."

Om's friend; "DON'T TRIP OVER YOUR FEET GOING OUT TO SPENDING IT OK!"

Om; "I mentioned a while back that I was going to buy a ten million dollar yacht for myself and a friend. How many ten million dollar yachts can you buy for a trillion dollars? hmmm... (math, math, math) and the answer is: 100,000. Good god. I'm going to need more Facebook friends. Where on Earth would I keep the other 99,914 spare ten million dollar yachts!"

Om; "Hmmm... Googling indicates that a new ten million dollar yacht is about 100 feet long. If I lined up all spare 99,914 yachts in a row, they would reach from Astoria Oregon to Cabo San Lucas Mexico. Well, there you are then. We don't even need fuel to go on our trips. We'll just connect planks between them, and ride our bicycles down to Cabo during the winter. I'm really liking this trillionaire idea."


Om, again, on a mathematical roll...; "what can I do with a trillion dollars?
100 foot long barge = $ 1,000,000
100 foot long yacht = $ 10,000,000
a trillion = 1,000,000,000,000
distance from Astoria Oregon to Cabo San Lucas Mexico = 1900 miles
5280 feet per mile
99,914 vessels x 100 ft = 1900 miles
99,914 x $ 1,000,000 = $ 99,914,000,000
leaves me $ 900,086,000,000
5 miles is a comfortable bicycle ride, which means I only need 1900/5 = 380 x $ 10,000,000 yachts = $ 3,800,000,000
total cost so far = $ 103,714,000,000
leaving me $ 896,286,000,000
hmmm….
240 watt Solarworld panels are 66 inches long.
How many would I need to stretch 1900 miles?
1900 miles * 5280 ft / mile * 12 inches / ft = 120,384,000 inches
120,384,000 / 66 = 1,824,000 panels
price for four panels = $1,101.12
Total price = $ 502,110,720
Oh good god, I'm not buying anything for less 5 billion dollars, with 896 billion dollars still in the bank.
Multiply those last numbers by 10.
Total price for 18,240,000 panels = $ 5,000,000,000
hmmm… how much energy will they produce?
good god, I'll just say solar insolation is 5 kwh/m^2/Day
the panels are 40 x 66 inches = 2640 in^2 * m^2 / 1550 in^2 = 1.7 m^2
at 1000 watts per m^2, this would imply a….
1000 watts * 1.7 m^2 / 240 watts --> 14% efficiency
.14 efficiency x 18,240,000 panels x 1.7 m^2 per panel x 5 kwh/m^2/Day = 22,000,000 kwh/day x 10 cents per kWh = 2,200,000 per day * 365.242198781 days/year = $ 800,000,000 per year
hmmm….
so my 5 billion dollar investment in solar panels will pay for themselves in 5/.8 = about 6 years.
The question is, how am I going to spend the other 891 billion dollars?
I wonder how much Mexico would want for the Baja peninsula.
Do you think they'd take 500 billion?
There is a bay there I've been drooling over for quite some time.
They use it to manufacture salt.
(google google google)
Ah ha! Guerrero Negro
I'd like to turn it into an algae farm.
Salt is bad for us old people.

If I bring in a trillion dollars over the next 5 years, working an average of 20 hours a week, what will be my hourly wage?

And given that my social security annual statement claims that I've yet to make ONE MILLION DOLLARS since I started working at the age of 8 and am now 54, how many seconds, after I retire , will it take for me to make up for all my wasted youthful time?

 

[OmCheeto]

This thread reminds me of my drunken post on FB yesterday.

Ok, and highly recommended, that you ignore the blue portion below. (hic!)



If I bring in a trillion dollars over the next 5 years, working an average of 20 hours a week, what will be my hourly wage?

And given that my social security annual statement claims that I've yet to make ONE MILLION DOLLARS since I started working at the age of 8 and am now 54, how many seconds, after I retire , will it take for me to make up for all my wasted youthful time?

I come up with 20 seconds per million dollars.

Good god. Orders of magnitude problems are a lot of fun.

 

[nitsuj]

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.

Agreed, I have a "luxurious" lifestyle compared to many in a global context, and that's just as admin support for the "bread earners".

Funny how from that equally valid perspective, I'd feel the need to thank the 4k/hr ceo for the opportunity, and would also think the same would be true for the plethora of subordinates below 4k/hr.

 

[FlexGunship]

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).

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

This type of discussion always makes me queasy. I make six figures, but my life goals require I make more than that. My happiness is largely determined by my personal goals and my ability to attain them.

My goals include paying for my kids' education (who aren't even born; I'm still single), retire in my 60s from traditional career life (but probably hold a consulting job), never have to worry about medical expenses, and leave a financial legacy to start following generations on better footing than I started. Those are just a few of my financially-linked goals. My progress towards them bring me happiness.

From whom do I get permission to pursue these goals? I expect to need to make more than twice what I do at age 27 to attain these goals. What if I start making $10 million a year in my pursuit of these goals? What if I, god forbid, become so effective of a leader, so knowledgeable in my field that I become the dreaded CEO?

It's a real-life goal that I have. If I could be a CEO, I will have become so effective and so valuable in my skills that people would choose me to provide creative vision and guidance for their businesses.

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.

Exactly! It's as simple as this: if you can do the job of a CEO better AND cheaper than the current CEO market allows... you are a hugely valuable person. End of discussion.

However, as it turns out, CEOs are pretty close to one in a million people. Let's forget the few awful ones (we don't measure Muslims by their extremist wings, let's give CEOs the same benefit). CEOs are the rarest members of our society and they embody superlative skillsets: they are leaders, creative visionaries, strict realists, and incredibly productive people.

 

[Bacle2]

This type of discussion always makes me queasy. I make six figures, but my life goals require I make more than that. My happiness is largely determined by my personal goals and my ability to attain them.

My goals include paying for my kids' education (who aren't even born; I'm still single), retire in my 60s from traditional career life (but probably hold a consulting job), never have to worry about medical expenses, and leave a financial legacy to start following generations on better footing than I started. Those are just a few of my financially-linked goals. My progress towards them bring me happiness.

From whom do I get permission to pursue these goals? I expect to need to make more than twice what I do at age 27 to attain these goals. What if I start making $10 million a year in my pursuit of these goals? What if I, god forbid, become so effective of a leader, so knowledgeable in my field that I become the dreaded CEO?

It's a real-life goal that I have. If I could be a CEO, I will have become so effective and so valuable in my skills that people would choose me to provide creative vision and guidance for their businesses.
Exactly! It's as simple as this: if you can do the job of a CEO better AND cheaper than the current CEO market allows... you are a hugely valuable person. End of discussion.

However, as it turns out, CEOs are pretty close to one in a million people. Let's forget the few awful ones (we don't measure Muslims by their extremist wings, let's give CEOs the same benefit). CEOs are the rarest members of our society and they embody superlative skillsets: they are leaders, creative visionaries, strict realists, and incredibly productive people.

I think you're missing the point; CEO pay is arguably _not_ a reflection of their ability and productivity. The productivity of workers as a whole has increased since the 70's, but their pay ( in real dollars, i.e., adjusted for inflation) has not risen on a par, except for CEO's. Can you argue convincingly that CEO's are responsible for all, or even most of the productivity gains? If not, why has their pay risen so much faster than that for all the rest? Moreover, as some pointed out, the members of the board, who have a say on CEO pay, are not democratically-elected, and they depend on the CEO's approval to keep their jobs. So it is questionable to me , based on these two points that CEO pay is proportional to their talent.

There is also the fact that a lot of recent research has put into question the belief that ours is an upwardly-mobile society.


The rest of your point seems to be: hey, why change, or even put into question the present system: I'm doing well with things as they are.MINE: too bad if others are not.

 

[Monique]

And the idea that the most worthy person gets the position is not realistic, if you want to be a CEO the best thing to do is start organizing dinner parties and invite the board of directors (bit of sarcasm). That holds true for many positions though, getting the job is more politics than skills.

 

[nitsuj]

And the idea that the most worthy person gets the position is not realistic, if you want to be a CEO the best thing to do is start organizing dinner parties and invite the board of directors (bit of sarcasm). That holds true for many positions though, getting the job is more politics than skills.

And for obvious reasons in my opinion. Sales is ...literally where the money is, and sales is the "politics" of business, in other words politicking is the skill, a sales skill...and a little stretch farther the money skill.

The grass roots growth of electoral/democratic politics from "powerful" business people is not a coincidence.

 

[Monique]

And for obvious reasons in my opinion. Sales is ...literally where the money is, and sales is the "politics" of business, in other words politicking is the skill, a sales skill...and a little stretch farther the money skill.

Well, the same thing happens in science. I order to climb the academic ladder it's more about knowing people than anything else. If I see a professor I don't think "that person was the best fit for fulfilling the position", it's more like that person was around at the right time and knew the right people. I see people more deserving struggle to survive. I doubt that for CEOs there is an advertisement that anyone can apply to and the person with the best knowledge and skill set is picked.

 

[FlexGunship]

I think you're missing the point; CEO pay is arguably _not_ a reflection of their ability and productivity.

I don't concede that that's even the point to begin with. It is a reflection of their ability (and knowledge) but not of their productivity. In fact, a CEO wouldn't be particularly useful if he spent all of his time designing or building machines.

The productivity of workers as a whole has increased since the 70's, but their pay ( in real dollars, i.e., adjusted for inflation) has not risen on a par, except for CEO's. Can you argue convincingly that CEO's are responsible for all, or even most of the productivity gains? If not, why has their pay risen so much faster than that for all the rest? Moreover, as some pointed out, the members of the board, who have a say on CEO pay, are not democratically-elected, and they depend on the CEO's approval to keep their jobs. So it is questionable to me , based on these two points that CEO pay is proportional to their talent.

You should start a company, compete with the heavy hitters in your industry, and operate entirely without a board of directors and hire the worst CEO available to run your company. At least then you'll have a datapoint with which to argue.

There is also the fact that a lot of recent research has put into question the belief that ours is an upwardly-mobile society.

The rest of your point seems to be: hey, why change, or even put into question the present system: I'm doing well with things as they are.MINE: too bad if others are not.

I'm not saying: "hey, why change, or question anything..." I'm saying: "It's not up to me to decide how a company I don't run chooses to operate. And it's CERTAINLY not up to me to villainize someone for having accomplished more than I have."

As far as being upwardly mobile, I was born into a lower class family; I used to call us middle class, but my parents have only really reached that point recently (after their kids had moved out). At 27, I make more than my parents combined. That's not a reflection of them, but on their priorities. My parents chose to start a family early (something I can feel a little jealous about). My dad chose not to take every promotion he could get, or to change careers for more money. Those are CHOICES. Being upwardly-mobile is a choice; anyone who tells you it isn't is either looking for a handout or hasn't ever tried.

I fully expect my career progression will grind to a halt the day I get married and start having kids. It's a choice. I'm preparing for that day by taking even more classes, learning more skills, loading down my life with everything I can do to become more valuable to society.

Upwardly mobile is an active choice. Not something that just happens to you.

And the idea that the most worthy person gets the position is not realistic, if you want to be a CEO the best thing to do is start organizing dinner parties and invite the board of directors (bit of sarcasm). That holds true for many positions though, getting the job is more politics than skills.

That might happen in movies, or romance novels, but it's not reality. Many CEOs come from business consulting firms like McKinsey. McKinsey, by the way, is one of the most reputable and upstanding business consulting firms in existence.

http://en.wikipedia.org/wiki/List_of_McKinsey_%26_Company_people_and_offices

 

[Bacle2]

I don't concede that that's even the point to begin with. It is a reflection of their ability (and knowledge) but not of their productivity. In fact, a CEO wouldn't be particularly useful if he spent all of his time designing or building machines.



You should start a company, compete with the heavy hitters in your industry, and operate entirely without a board of directors and hire the worst CEO available to run your company. At least then you'll have a datapoint with which to argue.



I'm not saying: "hey, why change, or question anything..." I'm saying: "It's not up to me to decide how a company I don't run chooses to operate. And it's CERTAINLY not up to me to villainize someone for having accomplished more than I have."

As far as being upwardly mobile, I was born into a lower class family; I used to call us middle class, but my parents have only really reached that point recently (after their kids had moved out). At 27, I make more than my parents combined. That's not a reflection of them, but on their priorities. My parents chose to start a family early (something I can feel a little jealous about). My dad chose not to take every promotion he could get, or to change careers for more money. Those are CHOICES. Being upwardly-mobile is a choice; anyone who tells you it isn't is either looking for a handout or hasn't ever tried.

I fully expect my career progression will grind to a halt the day I get married and start having kids. It's a choice. I'm preparing for that day by taking even more classes, learning more skills, loading down my life with everything I can do to become more valuable to society.

Upwardly mobile is an active choice. Not something that just happens to you.



That might happen in movies, or romance novels, but it's not reality. Many CEOs come from business consulting firms like McKinsey. McKinsey, by the way, is one of the most reputable and upstanding business consulting firms in existence.

http://en.wikipedia.org/wiki/List_of_McKinsey_%26_Company_people_and_offices

First of all, I was referring to the contribution of the CEO to the overall increase in productivity, and their own productivity, measured in how the CEOs decision help improve outpout, while using fewer resources; not as a machine operator. Their salary gains do not seem to be proportional to their contribution to the increase of productivity--tho maybe you believe it is. Why is the real increase in real salary flat since around 1973 for most , but not for the CEOs? How is their salary a reflection of their ability, if the boards cannot freely fire them without risking losing their jobs? If small shareholders have little say?

What do you mean by not having a data point? The increase in productivity has not benefitted all economic sectors at the same rate since around 1973. Look at the data; is that not enough to make conclusions? Actually, unlike you, I'm using a large collection of data points, and not just my personal experience/impression. I don't understand your basis for dismissing the data.

And the same goes for upward mobility; apparently much fewer people are choosing to remain in their earning decile. Look at the data; if so few people are moving out of their respective deciles ( and I believe at a much lower rate than previously ) , can't you argue that there may be an underlying systemic issue that does not reward talent effectively-enough? Again, I'm citing studies; aggregate data, and not referring to my case nor my personal impressions. Do you disagree with the data

And, re responsibility, maybe we can all have some influence by pressuring for change. I admit I have not made any effortd

 

[FlexGunship]

First of all, I was referring to the contribution of the CEO to the overall increase in productivity, and their own productivity, measured in how the CEOs decision help improve outpout, while using fewer resources; not as a machine operator. Their salary gains do not seem to be proportional to their contribution to the increase of productivity--tho maybe you believe it is.

CEOs are not paid based on productivity. Maybe this is the confusion. Their stock options are certainly based on company performance (right?), but their salary is dictated by market conditions and the availability of CEOs, not by the number of widgets produced by them or their company.

If it was possible to hire a Lou Gerstner for $250,000/year, then everyone would. But it's not possible. The Lou Gerstners of the world are not available at that price.

You could, however, get a Flex Gunship for that price. Maybe you could even get a Bacle2 for that price. But IBM, Morgan Stanley, Boeing, Toys R' Us, and Ford would look at my resume and say: "Wait, how many multi-national companies have you successfully led? None?" And I might say: "But I'm 100% certain I can do it and I'm 200% certain I could do it better than your current CEO!" And they would (correctly) respond: "I don't think so. We need more proof than that."

Really think about that. CEOs and directors are a small circle of individuals not because they're exclusionary, but out of simple necessity. The list of people who are manifestly able to run a company is very small. Much smaller than the list of people who are actually able to run a company.

These salaries exist because, if you can walk in and show proof (or better yet, be recognized) that you can keep a company going (even at a conservative and stable 2% loss) you are an asset of immense value and people are going to compete to have you. Sometimes they will offer $60 million to have you.

Why is the real increase in real salary flat since around 1973 for most , but not for the CEOs? How is their salary a reflection of their ability, if the boards cannot freely fire them without risking losing their jobs? If small shareholders have little say?

Real increase in salary is flat since 1973 because the "real" (private) economy has been roughly flat since then. Inflation adjusted GDP has grown an average of about 3% annually since 1970. The average inflation adjusted household income has grown about 1% annually since 1970. The average inflation adjusted tax rate increase has been about 5% annually since 1970; if you split that in half (45% of that 5% comes from corporate taxes) you see that the actual growth of wages SHOULD be about nothing (after adjusting or inflation and including increases in taxes). Essentially, every increase in inflation-adjusted GDP has been accompanied by an equivalent increase in taxes on corporations and on their employees.

Sources: (http://www.econedlink.org/lessons/index.php?lid=808&type=student, http://www.heritage.org/federalbudget/growth-federal-spending , http://www.cbpp.org/cms/?fa=view&id=3822)

And a board can remove a CEO easily. It happens at a lot of companies very often (every 5 years or so). Likewise, the board can be changed out by investors or by the CEO in some cases. The book Who Says Elephants Can'T Dance is a prime example of this. If you're curious to see how an actual company goes through the process of removing a CEO and replacing him, rad that book. It's one of my favorite business books because there's a genuine narrative.

What do you mean by not having a data point?

Only that no company has ever, intentionally, hired a discount CEO. If there was an example of Joe Blow the newbie CEO coming in for $45,000 and keeping a company running, then you'd have your datapoint. Granted, it wouldn't really establish a trend.

A good example are the business savants (Jeff Bezos, Elon Musk, etc) who start out making nothing, but are quick to reap the benefits of their successes. They don't shy away from the rewards of being superlative.

And the same goes for upward mobility; apparently much fewer people are choosing to remain in their earning decile. Look at the data; if so few people are moving out of their respective deciles ( and I believe at a much lower rate than previously ) , can't you argue that there may be an underlying systemic issue that does not reward talent effectively-enough? Again, I'm citing studies; aggregate data, and not referring to my case nor my personal impressions. Do you disagree with the data

I don't know which data you're referring to. I just went back through all of your posts in this thread. Did I miss it?

Regardless, if people are unhappy with their earnings, they should seek new employment. That's how employment market demand works. I did it when I left my previous employer, the my employer before that, and before that, and before that...

However, if there's a legitimate decrease in the value of skills in the marketplace, then there's really nothing you can do about it. Either the market is flooded with those skills, or new sources of those skills are uncovered. The U.S. used to be a manufacturing power house, until those skills were learned by others who were willing to do it cheaper... then we priced ourselves out of that market.

And, re responsibility, maybe we can all have some influence by pressuring for change. I admit I have not made any effortd

I suppose. I'll offer to take any senior executive position at ANY company for $250,000, right now, today.

 

[Bacle2]

Yes, sorry, I forgot to link to the data on upward mobility. I think these are reasonable sources:

http://business.time.com/2012/01/05/the-loss-of-upward-mobility-in-the-u-s/http://www.ns.umich.edu/new/release...-the-u-s-is-a-myth-international-studies-showhttp://articles.washingtonpost.com/...1146_1_economic-mobility-project-sons-fathers

 

[mheslep]

US income mobility has been addressed with more reference and detail in other threads. As one might expect with data that requires tracking people over generations the surverys are not all in agreement.

 

[nitsuj]

Well, the same thing happens in science. I order to climb the academic ladder it's more about knowing people than anything else. If I see a professor I don't think "that person was the best fit for fulfilling the position", it's more like that person was around at the right time and knew the right people. I see people more deserving struggle to survive. I doubt that for CEOs there is an advertisement that anyone can apply to and the person with the best knowledge and skill set is picked.

Wow, it'd be near "poison" for science.

The fun 'n games of business/capitalism whatever, not everyone can be "captain" and that's to the benefit of all imo, generally of course. fringe situations are just that.

Struggling to survive can mean lots. If it's literal, well no one should have to struggle with that, food, healthcare, education as "standard" ...and out onto the "field".

If it's the difference between Joe works his butt off for $10 an hr and Jane who socializes and makes deals effectively gets 4k an hr well tough chest for Joe.

 

[OmCheeto]

US income mobility has been addressed with more reference and detail in other threads. As one might expect with data that requires tracking people over generations the surverys are not all in agreement.

I cannot believe, that I did not let myself get sucked into that thread.

Maybe, there is hope for me...

 

[OmCheeto]

I agree, capitalism works.

Finally, something everyone can agree upon.

Allow inequality as long as it's fair

Q... Don't ever use the word "fair" when discussing money. It will lead to a least a full page of arguments that it is a silly word.

and doesn't allow people to take money they don't earn. Otherwise, it's theft.

Do you mean like the CEO's of GM and Chrysler, when they went bankrupt?

But going back to your first statement; "Capitalism works"

This brings back one of the few things I remember from my 2 terms of economics at university around 30 years ago: The Laffer Curve.

Now the Laffer Curve has nothing to do with what we are talking about, except in a roundabout way. So I propose a new curve. You can call it the OmCheeto Curve if you like, but I'm sure someone has thought of it before, so I'm sure it has some real name.

Anyways...

Both the topic of discussion, "Over compensated CEO's", and "the semi-recent (last 50 years) reduction in tax rates", have yielded a much publicized; "Wealth distribution inequality", perceived problem.

So what are the axes of the OmCheeto curve?(I just thought of this, this morning, so pardon me for not being prepared for my own lecture)

The Laffer Curve assigns "Tax Rate" to the x axis, and "Revenue" to the y axis.
Revenue, in the OmCheeto Curve, would be replaced with "Level of everyone's happiness".
As revenue, is what let's us all buy flowers and soup. (The first two of three nouns of the title of the book I'm supposed to write(Soup, Flowers, and ********). I cannot mention the third noun, as that seems to be the implication of this thread.)
So what about the y axis? I have decided, that like Mr. Laffer, I will call it the tax rate.
Only in the OmCheeto Curve, the tax, is CEO pay.
And since the tax rates have plummeted from 90% when I was born, the CEO's get to keep it all, yielding nothing for me.
Which I suppose, would imply that the OmCheeto Curve requires a z axis: Tax rates
Which leads me to conclude, that the curve requires another axis: Things I need to survive, aka, the w axis
Which yields the v axis: Number of companies supplying the products on the w axis.
Which implies that this is a poly-dimensional mathematical problem, which would require someone of higher math skills, than I.

--------------------
It's not that I couldn't expand on the complexity of this problem, but the sun is about to pop out, and I have better things to do with my time. (I have 5 boats, a gorgeous river, and some very real friends to attend to today)

 

[Bacle2]

CEOs are not paid based on productivity. Maybe this is the confusion. Their stock options are certainly based on company performance (right?), but their salary is dictated by market conditions and the availability of CEOs, not by the number of widgets produced by them or their company.

If it was possible to hire a Lou Gerstner for $250,000/year, then everyone would. But it's not possible. The Lou Gerstners of the world are not available at that price.

You could, however, get a Flex Gunship for that price. Maybe you could even get a Bacle2 for that price. But IBM, Morgan Stanley, Boeing, Toys R' Us, and Ford would look at my resume and say: "Wait, how many multi-national companies have you successfully led? None?" And I might say: "But I'm 100% certain I can do it and I'm 200% certain I could do it better than your current CEO!" And they would (correctly) respond: "I don't think so. We need more proof than that."

Really think about that. CEOs and directors are a small circle of individuals not because they're exclusionary, but out of simple necessity. The list of people who are manifestly able to run a company is very small. Much smaller than the list of people who are actually able to run a company.

These salaries exist because, if you can walk in and show proof (or better yet, be recognized) that you can keep a company going (even at a conservative and stable 2% loss) you are an asset of immense value and people are going to compete to have you. Sometimes they will offer $60 million to have you.



Real increase in salary is flat since 1973 because the "real" (private) economy has been roughly flat since then. Inflation adjusted GDP has grown an average of about 3% annually since 1970. The average inflation adjusted household income has grown about 1% annually since 1970. The average inflation adjusted tax rate increase has been about 5% annually since 1970; if you split that in half (45% of that 5% comes from corporate taxes) you see that the actual growth of wages SHOULD be about nothing (after adjusting or inflation and including increases in taxes). Essentially, every increase in inflation-adjusted GDP has been accompanied by an equivalent increase in taxes on corporations and on their employees.

Sources: (http://www.econedlink.org/lessons/index.php?lid=808&type=student, http://www.heritage.org/federalbudget/growth-federal-spending , http://www.cbpp.org/cms/?fa=view&id=3822)

And a board can remove a CEO easily. It happens at a lot of companies very often (every 5 years or so). Likewise, the board can be changed out by investors or by the CEO in some cases. The book Who Says Elephants Can'T Dance is a prime example of this. If you're curious to see how an actual company goes through the process of removing a CEO and replacing him, rad that book. It's one of my favorite business books because there's a genuine narrative.



Only that no company has ever, intentionally, hired a discount CEO. If there was an example of Joe Blow the newbie CEO coming in for $45,000 and keeping a company running, then you'd have your datapoint. Granted, it wouldn't really establish a trend.

A good example are the business savants (Jeff Bezos, Elon Musk, etc) who start out making nothing, but are quick to reap the benefits of their successes. They don't shy away from the rewards of being superlative.



I don't know which data you're referring to. I just went back through all of your posts in this thread. Did I miss it?

Regardless, if people are unhappy with their earnings, they should seek new employment. That's how employment market demand works. I did it when I left my previous employer, the my employer before that, and before that, and before that...

However, if there's a legitimate decrease in the value of skills in the marketplace, then there's really nothing you can do about it. Either the market is flooded with those skills, or new sources of those skills are uncovered. The U.S. used to be a manufacturing power house, until those skills were learned by others who were willing to do it cheaper... then we priced ourselves out of that market.



I suppose. I'll offer to take any senior executive position at ANY company for $250,000, right now, today.

Is the tax rate and increase you refer to the nominal rate , or the effective rate after teams of accountants have gone thru every possible loophole. Many of the top corporations; even many with a combined $160 billion in profits did not pay a dime in taxes:

http://thinkprogress.org/economy/2011/11/03/360185/30-corporations-no-taxes/