Are Bankers Paid Too Much? Are Technology CEOs? 712
DavidHumus writes with this excerpt from a New York Times article: "Big paydays on Wall Street often come under laserlike scrutiny, while Silicon Valley gets a pass on its own compensation excesses. Why the double standard? The typical director at a Standard & Poor's 500 company was paid $251,000 in 2012, according to Bloomberg News. Mr. Schmidt [Google's CEO] is above that range by over $100 million. ...The latest was the criticism of Jamie Dimon's pay for 2013, given the many regulatory travails of his bank, JPMorgan Chase. The bank's board awarded Mr. Dimon $20 million in pay for 2013, $18.5 million of which was in restricted stock that vests over three years. ...For one, the outsize pay for Mr. Schmidt doesn't square with Google's performance. Putting aside the fact that he is not even the chief executive, Google had net income of $12.9 billion last year. JPMorgan was higher at $17.9 billion...."
DavidHumus notes "Maybe the bigger question is why is CEO pay so entirely disconnected from company performance?"
Re:tl;dr (Score:5, Interesting)
Seconded, yes.
Here's the difference: technology CEOs run companies that make things and contribute to society. Bankers earn a profit by moving other peoples' money around and taking some off the top. One of those jobs is necessary for us to progress.
Re:Pay is exactly where it should be (Score:4, Interesting)
I don't think the school comment was about teachers - it was more likely referring to the increasing sizes of school district administration staff making 6 figures and contributing basically nothing to the education process.
Re:The larger question is... (Score:2, Interesting)
When you run a society based on what people want and are willing to work for themselves, you end up with South Korea. When you run a society based on what people need, you get North Korea. Take your pick.
Re:Of course they are. (Score:4, Interesting)
Possible solution? (Score:4, Interesting)
The problem has always been the "old boys network" where top executives take turns sitting on each others' Boards of Directors, approving each others' salaries. These nitwits are so disconnected from the lives of their workers that they probably sincerely believe they are worth such ridiculous salaries.
Starting this year, here in Switzerland, the shareholders must vote on the executive compensation package at the annual shareholders' meeting. This vote is binding: if they vote against (outrageous) compensation, then it won't get paid. I believe this will have a long-term effect, not only because of the vote, but also because it requires spelling out executive compensation in plain terms that the shareholders can understand.
I expect a number of Swiss companies will have a sudden urge to rethink things, before the next annual meetings take place...
Re:Because (Score:5, Interesting)
1999-2000 Tech bubble?
The tech bubble crash is really interesting to compare to the banking crash. More money was lost in the tech crash, but the impact on the economy was much less. The reason for this is because in the tech bubble, equity was lost, but in the banking crash, it was debt.
Some economists see this as an indication that banks should be financed the same way tech companies are financed, with shares of stock instead of savings. Hard to say but it's an idea worth thinking about.
Re:Finance is a valuable activity (Score:4, Interesting)
The activity is indeed valuable, but that's not the same as saying that they are entitled to as much compensation as they are making.
They're entitled to it in the sense that they've managed to gull stockholders into giving it to them, but that money "belongs" to the stockholders in the bank, who are underwriting the banker's paycheck but have little say in negotiating his salary. Is there some other person who could do just as well at a third the price? Or a hundredth of it?
The financial crisis proves that the job is indeed very important, but it also suggests that a lot of them aren't very good at it. Several major banks failed; more would have failed if the US government hadn't stepped in to save their butts. If they earned their money, it was in convincing the government that they should do that, saying out of the left sides of their mouths that the banking industry was too important to allow to fail, while using the right sides to convince people that it wasn't actually their fault and that banking sector is well run if only it weren't for those dastardly (Chinese, poor people, regulators, etc.)
In the end their compensation is indeed a tiny sip of the gusher of money that flows through their hands, and it wouldn't fix the problem to turn that sip into a sniff. It does, however, imply that they aren't being hired to protect the long-term health of either the bank itself or the economy, but instead engaging in a lot of back-slapping and hand-shaking to use other people's money. If it were a better measure of their relative skill compared to other bankers, rather than merely taking credit for the rising tide that lifted all the ships (and their heavily-leveraged ship higher than most), I wouldn't mind that their salaries were so high. But they don't seem to have gotten there through any meritocracy, and their incompetence puts the entire country in jeopardy from time to time.
Re:Ahh yes, the progressive tax crowd again. (Score:4, Interesting)
Your point about Obama is valid, to some extent. I agree that the salaries of the millionaires running the show ought to be suspended when the country's going broke. However, to claim that they get paid too much is absurd. They make a tiny fraction of what these CEOs make. If you're upset about Obama's salary, you should be orders of magnitude more upset about corporate executive salaries.
Despite not being a baseball fan, I very much am yelling about the great American pastime becoming something that the ordinary American just can't afford. It's fucking baseball, tickets are supposed to be virtually free.
I find the rest of your post relatively agreeable, but it doesn't make any points in the argument against progressive taxation. Yes, CEOs dodge taxes adeptly. Yes, there's a huge conflict of interest inherent in the way executive salaries are determined. Yes, there's shitloads of other problems. But that doesn't mean that progressive taxation is somehow bad.
There is such a thing as too rich. If Bill Gates had $72T instead of $72B, that would necessarily mean that you and I had no money. Trot out the "it's not a zero sum game" argument as much as you like, but there is a finite amount of wealth in this world (I said finite, not static/constant), and possession of it all by one individual necessarily means that nobody else has any. We're rapidly moving towards just such a scenario, where the poor have no money (but are kept warm and fed by social welfare programs) and the wealthy have it all. Is that what we collectively want?
Re:tl;dr (Score:4, Interesting)
Are you sure? I find it hilarious how huge companies have to lay off thousands of employees, yet the CEOs are still making their 10s of millions in salary. How about first eliminating bonuses, as well as dropping salary before eliminating employees.
,Blackberry CEO getting a compensation package of 88 mil literally days before laying off a bunch of employees. How about offering him 50 mil instead and keeping on 700 workers
For example
Here's why that didn't happen: Blackberry was in financial trouble, losing money each day, which gets the biggest shareholders (including the Board members) really nervous. When a company is losing money (or widely perceived to be), it can't get (or has to pay a lot more for) loans, like the short-term kind (commercial paper) it needs to do day-to-day stuff like pay salaries. The Board demands quick action, and that requires an intact management structure. The Board can't get things done if all its executives are jumping ship to save themselves. But to stick around, the senior-type executives gotta get paid.
Eliminate bonuses? Take a pay cut? Here's the thing: dollar-for-dollar, most senior executives are better off quitting ("retiring"), unless some divorce, gambling addition or coke habit has eaten away all their savings. Also, it's just a thing that senior management types tend to find new jobs (e.g., consultant) more easily than your typical laid-off worker (or just about anyone else). All this adds up to one thing: Mr. CEO can demand the kind of pay that makes it worthwhile for him to come to work each day for a company that isn't sexy, that may not be around much longer, and requires that he do, well, unpleasant things. Like fire 1000's of workers.
And by shedding thousands of workers the company can't afford to pay, he makes the books look better, which gets Wall Street to lend money again, which pays the bills to keep the lights on a bit longer, and makes the Board members a little happier, who pays him a bonus to stick around longer and save them the hassle of having to find someone else to do his job. At least until the company is worth enough on paper that it can be sold off and finally be someone else's problem.
Awful, isn't it? That's how shit happens!
Re:Employed (Score:5, Interesting)
Yeah, there is a difference between a guy who bets he can make a company successful and the guy who gets a multi-million dollar salary plus stock options to help him avoid paying taxes.
The first is a rarity. The second is business as usual in US corporations.
Today, the average CEO makes $9.7 million annually, up year after year, while worker salaries are on a steady decline.
Two separate economies. That is not sustainable.
Re:tl;dr (Score:2, Interesting)
Of course income is a zero-sum game. Economy produces a certain amount of value per year. If your share of the pie grows, mine must shrink.
Whoa there. Hold up.
This isn't true and if you run with that assumption it forms into some very dangerous ideas.
Income, the economy, all that jazz, is most certainly not a zero-sum game. It's only zero-sum if you ignore all the actual work and all the actual spending. The middle part, where the decision about who gets paid what for the work that happened in-between, sure, that's zero-sum.
The restraunt brought in a million bucks in revenue, it spend half a million on rent/food/taxes. How much does the waiter get? The cook? The owner? The busboy? That's a zero sum game.
But if the waiter and the owner kick out the busboy and the cook, do you think there's going to be a $1m in revenue next year?
If the waiter busts his ass and draws in more customers, or the cook just doesn't give a fuck if half the grill burns then there is simply more or less pie to go around. Step back a bit and you'll see the game is not zero sum.
Same goes for the economy on the whole. People can work harder. Huricans can fuck up your shit. People can face existential dread at having to compete with China.
If you fall into that logical pit of thinking that the problem is merely a matter of distribution, then you might be tempted to take the whole pie and distribute it manually. That really didn't work out so well for the French, Russians, Chinese. Revolutions TEAR IT ALL DOWN, and subsequently there's simply less pie. Now, if you go from getting 1/100th of a pie, to 1/5th of half a pie, then it's a step up. But don't pretend that HALF the GDP didn't just go down the pipe.
Now. All that said, even in non-zero-sum games, those fuckers can steal your slice of the pie. CEO's pay has gotten ludicrously out of porportion for the "work" they do.