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?"
tl;dr (Score:5, Informative)
Yes
Re:tl;dr (Score:4, Funny)
and also yes.
Re: (Score:3)
I have a fun question: Why do media reporters complain about CEO pay, when many of the really big media journalists themselves pull in $20+ million a year in salary?
Re: (Score:3, Informative)
Why don't they bitch about the high salaries professional athletes bring down? Famous rock stars? Movie stars?
My thing is, why do we complain at all about who makes how much?
I mean, it isn't really a zero sum game. A CEO or basketball star making millions of dollars a year, doesn't take money out of someone doing another job that make signifi
Re:tl;dr (Score:4, Informative)
The salary of the vice president at McD's isn't taking money meant for the burger flippers pocket....
Um, yes... yes, he is. That's exactly the point.
Re:tl;dr (Score:5, Insightful)
And he gets a private jet to travel between his home and Waterloo headquarters at an approx value of 50k per round trip (almost someones full yearly salary) because he is too fucking lazy to move to waterloo to do his job even though he is getting a shitton of money.
And yes I am a bit better because I do live near (and work in)waterloo and know a few people affected by the layoffs.
Re: (Score:3, Insightful)
The reasonableness of this is, "it depends." If the company is healthy and making a lot of money, but it found an area that is not profitable and decides to liquidate or downsize it (and has no place else within the company to absorb all of those skillsets), the employees go with that. High CEO pay is perfectly in line with this.
However, if the company is hurting and t
Re: (Score:3)
I guess when you get to be so good people are willing to pay you that much, you will politely refuse it. But you will still put in 7 day work weeks, never get an uninterrupted vacation and be willing to away from your family for long periods because you are just such a nice guy.
Or is it because you will never get to be that good at anything, you feel that you have some right to tell other people how to spend their money.
That 'compensation package worth 88mil' isn't all cash, so dropping it to 50mil doesn't
Re: (Score:3)
And yes I wouldn't accept that much money, or take it and donate it to a worthy cause. I make an average salary and I already donate some of it to the needy. I honestly wouldn't even know what I would do with that
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: (Score:3)
Is the CEO putting his own money (not salary, but personal wealth) on the line if he
Re:tl;dr (Score:5, Insightful)
"Is that hour worth 60 of those newly employed people?"
No.
In the first place you have a dimensional analysis problem of non-matching units.
In the second place, one CEO can't do the work of 60 people. That's why he had to hire them.
You're right that his job isn't easy. No interesting job is. Lots of people work hard.
The average CEO makes 340 times his average employee. The CEO does not work 340 times harder than his average employee. He doesn't know 340 times more than his average employee. He doesn't single-handedly bring in 340 times more productivity than his average employee.
Instead he gets the credit (and sometimes blame) for what every other person in the organization accomplished.
Good CEOs deserve respect. Not worship. And not money disproportionate to his contribution.
The reason CEOs get paid so much is not because the free market prices them so high. It's because they are on each others' Board of Directors and they all figured out they could overcharge their companies and share the spoils amongst themselves.
Re:tl;dr (Score:5, Insightful)
He absolutely is.
In fact, in the specific case you cite, low-end wages are kept below poverty so that not only is the vice-president of McD's taking money away from the burger flippers, but he's taking money from each and every taxpayer by having the government subsidize his employees.
There are even laws now to codify such arrangements. If a Southeastern state lures a manufacturing plant from say, Washington or Oregon, one of the ways they do it is to agree to allow the company to keep any state income taxes that are withheld from employees wages. The taxes are still taken out of each paycheck, but the money never goes beyond the company's coffers.
Corporations are seeking out this kind of deal, and states, in a rush to the bottom, are giving in so they can show how they're "bringing jobs" to their area.
The issue of sports stars or movie stars is a red herring. There are so few of them as to make it irrelevant, and their pay is directly tied to the profits they are expected to generate for the owners.
CEOs' salaries on the other hand, are entirely a function of a buddy system in corporate boards. Everybody gets a nice income and lifelong security and they scratch each others' backs. You will never hear of the board of directors of a big company or bank asking if maybe they can find a CEO from Pakistan or China who's willing to work for $250,000 instead of $40,000,000, even though there is very little evidence that the CEO has that much impact on a company's bottom line. Despite the fact that it's absolutely the job of the directors to do so. And even if that did ever happen, it wouldn't explain the huge salaries for unproven CEOs for companies getting huge bonuses even when the company is not doing well, which is much more common than most people would imagine. You will often hear, on the other hand, about sports teams deciding not to pay a veteran $40,000,000 if there is $400,000 rookie who can do the job. One of those "minimum wage" players was the quarterback who won the Super Bowl this year, in fact. The guy he replaced was obscenely overpaid and the rookie showed promise and the owners gave him the job.
And there are plenty of other ways in which income disparities directly hurt most people. Just have a look at the work of Richard Wilkinson and co, who have done a lot of work on this issue. Yes, when people at the top make a lot of money and their incomes increase out of proportion to the rest of society, it takes money away from the people flipping burgers and making cars. And writing code.
http://www.ted.com/talks/richa... [ted.com]
Re:tl;dr (Score:4, Insightful)
Not to mention that both actors and athletes have benefited from being unionized workforces, which is one of the reasons they've been able to negotiate a percentage of profits in the first place.
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Steve... Steve.... The name rings a bell. Wasn't he the guy who earned one dollar a year [wikipedia.org]? What a fantastic counter example you have found. Clearly more companies need to follow this philosophy.
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.
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So, basically, most people should quit their jobs.
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No problem. Reuters says there are at least 2700 companies with such arrangements.
http://www.csmonitor.com/Comme... [csmonitor.com]
http://thinkprogress.org/econo... [thinkprogress.org]
http://www.huffingtonpost.com/... [huffingtonpost.com]
Re:tl;dr (Score:5, Insightful)
Because if you indoctrinate people into believing income should be earned, they don't conveniently forget all about that when it comes to your income. CEOs are not perceived as pulling their weight, producing nothing but seemingly endless bankruptcies and layoffs, so all that "welfare queen" rhetoric is now turning against them.
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. And if your share is perceived to be unfairly large, then you can expect other people to act against you, driven by both self-interest and a desire to right an apparent wrong.
Of course it's possible to justify larger share as an incentive to grow the pie a a whole. The problem is, the CEOs haven't done so. The 1% are the modern nobility; the accusations about overcompensation are simply the warning rumbles of a good old peasant revolution every king who fails continuously risks facing.
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Money is power ... and people are very good at rationalizing how hanging on to their power is in everyone's best interest even when it isn't. By creating this political ruling class of the uber rich we are simply rebuilding feudalism.
Re:tl;dr (Score:4, Insightful)
You don't? That's sad really and I guess explains why they get away with it.
Re:tl;dr (Score:5, Insightful)
Ah yes, the glories of the free market will cure all ills.
Do you really believe this or are you just trolling?
"Because if you don't like the job, you can leave, and they can replace you in a couple hours. I fail to see how that is greed when so many people are willing to work for that, and get by on it."
Are you aware:
- Most people don't have an option to just leave and get a better job. Have you heard about the unemployment problem?
- People aren't "getting by" on minimum wage jobs. They need food stamps to eat and Medicaid for health care (if they can get these programs).
- Average Walmart / fast food worker is not a teenager but is a 30 year old trying to support a family and is not "getting by".
Do you actually know any minimum wage workers or unemployed people?
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Are you aware that the current US unemployment rate is just slightly over HALF the european unemployment rate, and is almost (but not quite) back to normal pre-collapse levels?
Are you aware, that if you are working a minumim wage job, and you skip starbucks, iPhones, and live with either your parents, or roommate(s), that you can indeed get by quite well?
Yes, I know minimum wage workers, all of them have iPhones or iPads, cable tv, cars, etc and don't collect food stamps or use medicaid for health care, do
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Lazy, lazy people. You'd rather believe your random observations (which are worthless) than actual facts and won't take a minute to just Google it.
Here, bozo, I Googled it for you (try "average fast food worker") and the first page has all the answers (and more):
Take the first result on the page:
http://www.motherjones.com/pol... [motherjones.com]
Median age of fast-food workers:
29
Median age of female fast-food workers:
32
Percentage of fast-food workers who are women:
65%
Percentage of fast-food workers older than 20 who have kid
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Please give an example of a journalist in any media who makes $20+ million. Not a "personality" mind, but an actual journalist.
Re: (Score:3)
http://www.huffingtonpost.com/... [huffingtonpost.com]
You probably consider Matt Lauer a "personality" at 25M.
Not listed on that report is Brian Williams who makes 10M/year now.
Diane Sawyer makes 12M/year.
Scott Pelley rounds out the nightly news anchors at a paltry 5M/year.
Leading up cable is Maddow at 7M/year.
CNN says the average anchor makes between "$40,000 and several million" depending on tenure and experience.
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You have an extremely broad definition of "journalist".
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:tl;dr (Score:4, Insightful)
I find having a bank account very handy for handling my money. Banks do contribute to society.
Re:tl;dr (Score:5, Informative)
I find having a bank account very handy for handling my money. Banks do contribute to society.
Bear in mind that investment banks and savings banks used to have huge firewalls between them, so that the one you find useful wasn't the one taking huge risks (it is, or was, also the smaller banks that typically extend credit to local businesses, not the huge investment banks)
Re:tl;dr (Score:5, Insightful)
It's not like repealing glass-steagall gave us the internet, smart phones, and a cure for cancer. All that I can see it did was continue a feedback loop whereby the super-rich get richer, get more power, and change the laws to make themselves richer at our expense.
Credit unions serve the purpose you mention, yet they don't at the moment leech off society like chase does. We could do away with the too-big-to-fail entities, and it wouldn't hurt you or me too much. Well, in theory, anyway, I'm sure the extraction process in reality would leave something worse, be it through reform in the current political climate or violent revolution.
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I suspect that a simple change such as requiring a bank be contained to just the state their HQ is located (and break up or spin off the out-of-state assets/customers into separate companies) would be plenty enough to retract a lot of the damage that they've wreaked over the years... plus there would be no more "too big to fail!!!111OMGBBQ!one!" banks.
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I find having a bank account very handy for handling my money. Banks do contribute to society.
I find that Credit Unions do a far better job of it, and without the rapacious fees, policies, and hassles. They also happen to have better rates (for what that's worth nowadays).
For awhile, I even experimented with using just a simple pre-paid debit card, where my paycheck was deposited into an account tied to the card. It cost me something like $7/mo flat-fee, and I could even have the one I used generate and mail certified checks if needed (I think some of them have online bill-pay services now on top of
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An interesting thing about bitcoin is that mining is required to validate transactions, and as mining becomes less (and eventually un-) profitable, the only financial incentive for miners to run their 1TH space heaters is transaction fees.
In other words, a little off the top of every transaction to the guy who helps you move your money.
It's worth noting, however, that these are less likely to be "millionaire money pimps" and more likely large pools of many individuals.
Finance is a valuable activity (Score:5, Insightful)
Bankers earn a profit by moving other peoples' money around and taking some off the top.
True, and the reason they can make money at this is because it is a VERY valuable activity to society. Far more valuable than the bit they keep for themselves most of the time. If you need evidence of how valuable it is, merely look at our recent financial crisis when the flow of money froze up.
There are plenty of jobs that don't involve making things but nevertheless are very valuable. Don't confuse the value of the activity with the behavior of the parties involved.
One of those jobs is necessary for us to progress.
Think so? Try building a company without access to banking or financial services. You won't get very far. Anyone who thinks banking and financial services aren't necessary for progress doesn't understand finance. It's like saying your car doesn't need oil. Technically true for a little while but it won't work very well or for very long.
Re:Finance is a valuable activity (Score:4, Insightful)
I'm sorry, but I don't see a reason why I should necessarily need the services of a banker to run my company.
If we're talking reality, then in this reality the bankers have paid the lawyers and the lawmakers to make sure that all of them are needed for everything. But just because that's the way it is, doesn't mean that's the way it has to be. The American financial system is not necessary in and of itself (proof: the world got along fine before there was an American financial system), all of the necessity in the system has been created by the people in the system. We need to bring back Glass-Steagall and take a step back from the cliff.
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That's very true, except for the fact that it's totally false. From an investors point of view, the fees from certain types of financial institutions outstrip their supposed returns. Not, returns relative to index funds, or returns relative to inflation, but nominal returns. And not for "bad mutual funds" but for things like "the entire hedge fund industry from conception til now".
Re:Finance is a valuable activity (Score:5, Insightful)
That's just about the dumbest thing I've ever heard.
I guess you don't recall the August 1981 strike air-traffic controllers strike [wikipedia.org]. Most of those wealthy bankers could be replaced by people being paid 10% as much, and after a few years we'd hardly notice the difference, except perhaps that the new lot wouldn't be nearly so adept at screwing the system over.
I guess if you were running NASA you'd pay a billion dollars per o-ring, because--gosh--look at what happens if it won't deform, and the size of the bill if we need to replace the dumb thing. Ten thousand parts at a billion dollars each sure adds up. When you think about it, with each o-ring protecting the safety of a ten-trillion dollar shuttle, a mere billion dollars per ring is a screaming deal, wouldn't you say?
Finance wasn't rocket science until the inmates figured out that astrobucks are a good living. It doesn't need to be rocket science any more than an o-ring needs to cost a billion dollars.
The controllers had Washington by the balls. Big mistake. The bankers have Washington by the carotid artery. We can therefore infer from this that bankers do more important, more productive, more difficult work. Or we can infer that bankers are better at pouring over Grey's Anatomy if it serves their personal interests.
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.
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Banking and financial services are clearly necessary for progress.
But the winner-take-all profit skimming model certainly isn't necessary. We could be just as prosperous and successful with a national banking model that treats this function as a utility, rather than an easy method for entitled white-collar crime.
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Compensation is whatever you negotiate.
Fairness is an interesting concept. "Fair" and "Equitable" are different. "Fair" and "Equal" are different. Is it fair that you can have two similarly-skilled, similarly-trained, similarly-experienced programmers working side by side but they have a difference in pay?
If you think it is unfair, then push for labor unions and publicly shared compensation details at every level. Most (all?) state already do this, publishing the salary tables for every job from governor
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Is it fair that you can have two similarly-skilled, similarly-trained, similarly-experienced programmers working side by side but they have a difference in pay?
The problem there is people often have an inflated sense of self-worth, or skill in any particular area. I remember reading one study that showed that when asked a large pool of people how well they knew a subject, the people that rated themselves the highest actually knew the least. As people actually get better at their field, they understood better what they didn't actually know, and rated themselves much lower.
I have really never met two similarly skilled, similarly trained, similarly experience progr
Re:Fair v. Equitable: Who cares? (Score:5, Insightful)
Note that the CEO is trying to get the most out of his (almost always "his") employer, too. Who's his employer? Why, the board, usually full of banking CEOs who love to negotiate their high salaries, bonuses, etc., from their boards. It's largely a big circle jerk.
Re: (Score:3, Insightful)
If I own a company and I hire someone I can pay them as much as I want. If I pay them too much my company suffers. That is my problem. In the case of bankers, their salary comes from the profits of the banks and therefore is paid for by the people on the board. It is their choice. If you do not like the fact that taxpayers are bailing them out then take that up with your idiot, beholden senators and repr
Comment removed (Score:4, Insightful)
Re: (Score:3)
Bailing out the banks was not optional.
There were other options such as nationalizing the banks, breaking them into smaller pieces and reselling them after the crisis calmed down.
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Summoning Zeus to smite the offending banksters.
Riding the invisible pink unicorn to a world with a sane banking system.
Abandoning currency and moving to a Star Trek economy instead.
Of course, if we restricted this conversation to plausible options, none of our suggestions apply.
Re: (Score:3)
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.
Unless/until humanity overthrows the global captialist/monetary economic system, banking is just as necessary for 'progress' as the tech sector.
Banking is not inherently evil...the problem arises when the financial sector grows too politically powerful and can twist the laws to permit them greater and greater capacities for rent-seeking [wikipedia.org]. This is not limited to the financial sector, they just seem to be in a better position to do so than most other enterprises.
The problem is with an electorate that is p
Comment removed (Score:5, Insightful)
Re: (Score:3, Insightful)
Bankers should not be in the business of buying and selling companies. A banker's job is to store your money until you need it again. What they actually do is move your money around and take points off the top, and enrich themselves. And yes, without Glass-Steagall they most certainly do buy companies, but that should not be the job of a banker.
They are all paid too much (Score:4, Insightful)
Re:They are all paid too much (Score:5, Insightful)
At the top tier (VP, Pres, CxO), pay should be capped as some (documented) multiplier of the lowest level salary. Bonuses should be tied to company performance. That's it. If the CIO wants to get paid more, he either needs to raise the rates of those below him or improve the performance of the company in some meaningful way. When a company making billions pays its executives $50M but lays off thousands making $40K, it feels really crappy. Sure, I understand that sometimes those layoffs boost performance and what not, but there really is a point where having MORE money doesn't really do much for you.......whereas losing your job is VERY disruptive.
Re: (Score:3, Insightful)
*devils advocate*
Why should they be capped?
It would distort the free market and no one would take the risk or the very hard work like 70 hour work weeks, MBAs, and other things for dozens of years without the compensation.
Doing so would make great talent do something else or not try as hard and everyone looses out.
If someone is paid too much the market takes care of that with something called a firing. Losing your job does suck and is very disruptive but the shareholders need a return and who is the shareho
Re: They are all paid too much (Score:5, Insightful)
Too bad that free markets are a theoretical ideal that doesn't really happen in real life. Sure, market forces shape outcomes. But market failure is a real thing that happens. You can't rely on the market to correct it's own failure.
Re: (Score:3, Insightful)
Too bad that free markets are a theoretical ideal that doesn't really happen in real life. Sure, market forces shape outcomes. But market failure is a real thing that happens. You can't rely on the market to correct it's own failure.
Too bad that fairness is a theoretical ideal that doesn't really happen in real life. Sure, government force shape outcomes. But government failure is a real thing that happens. You can't rely on the government to correct it's own failure.
Re:They are all paid too much (Score:4, Insightful)
You are right since the devil is right as well.
There is absolutely no reason to cap the CEO or anyone else salary based on whatever equation anyone can come with thinking he is clever than the next door guy.
CEO salary is determined by investors, those who are taking risks in the company and hired him to take care of their investment in that company.
If the investors believe this guy to earn that salary, it is up to them to reduce the salary and compensations or to fire him to hire someone else capable to take care of the investors' money.
It is not a matter of how much money someone needs to be comfortable, it is a matter of how much money this guy will bring to the investors and shareholders.
No investor wants the CEO to spend more money than needed in employees wage and salary. No investor wants the CEO to not spend enough money that the company will be put at risk or go to bankrupcy lacking the talented people it needs to make money. You can disagree with what the investors think and their strategy for the company, that's fair. However, it is not to someone which have no money in the company and who risks nothing in the enterprise to decide.
Re:They are all paid too much (Score:5, Insightful)
Re:They are all paid too much (Score:4, Insightful)
Re: (Score:3)
Wrong. CEO pay is determined by the board, not investors.
Re: (Score:3)
Re:They are all paid too much (Score:5, Insightful)
"Say on pay" wouldn't be such a hot topic in corporate governance (it even has its own wikipedia page) if investors actually had that much influence over executive compensation.
Most top executive compensation is detrmined by compensation committees made up of board members, many of whom are also top executives elsewhere. I don't want to risk you limiting my compensation if it exposes me to a risk you might limit mine. There's a moral hazard for these people.
The consultancies who get involved in executive compensation face the same risks -- those that come out and say that compensation should be decreased will likely find themselves losing business. Another moral hazard where self-interest keeps them from advocating for anything but the status quo.
The end result is that rank and file investors have little to no control over this and many barriers are erected to prevent shareholders from voting in more than an advisory way on this, let alone an up/down vote or even less likely, dictating compensation strategies.
Even in situations where CEOs have the concentrated authority to make big decisions unilaterally, I find it hard to believe that they are *individually* performing all the work required to make them. They are instead relying on legions of experts and other labor to make a decision, something which I don't think is magical enough to warrant the sheer scale of pay they recieve because they individually aren't doing the work but are demanding the scale of pay as if they were.
Even then, when they make terrible decisions that cost billions of dollars or oversee others who lose this and they lose their jobs, they still walk away with so much money its difficult to see any accountability they face. Maybe if you face the prospect of earning $20 million dollars you should also face the risk of losing $20 million dollars personally. But the current system is just win-win for them outside of bragging rights at the club.
Re:They are all paid too much (Score:5, Informative)
It would distort the free market and no one would take the risk or the very hard work like 70 hour work weeks, MBAs, and other things for dozens of years without the compensation.
Huh? People do work very hard for 70 hours a week without making 20 million dollars for it. It happens all the time. Sometimes because they have to, and sometimes because they enjoy their jobs. And getting MBAs? Do people actually need to get MBAs?
If someone is paid too much the market takes care of that with something called a firing.
Are you sure about that?
the shareholders need a return and who is the shareholder? Your elderly mom, YOU, etc.
Except often they're not, at least not to a meaningful degree. Your elderly mom probably has a 401k that gives her a 0.001% share in the company without knowing it. Mostly "the shareholders" are rich people.
The sky is the limit and the CEO didn't start out like this overnight. It was not luck. Even company founders are poor. It took Zuckerberg 10 years before he became very wealthy.
You're conflating some different issues here. The sky is the theoretical limit, in abstract, but not really so much for everyone. Zuckerberg did not start off poor. He started out upper-middle class. And he was lucky. He found himself with a good idea at the right place and at the right time and with the right help. Any number of things could have gone against him, resulting in Facebook never becoming the company that it is today.
So while it wouldn't be fair to claim that Zuckerberg sat around doing nothing and just happened across success, like finding the winning lottery ticket, it's also not fair to everyone else to paint the picture as though Zuckerberg created his own success through pure brilliance and hard work. He made smart decisions and worked hard, but others made equally smart decisions and worked equally hard without ever making a million dollars.
Re:They are all paid too much (Score:5, Insightful)
Jobs was worth every penny after what he brought to Apple.
Apple didn't magically invent the iphone, imac, ipod, appstore, and Steve led the way. It brought value to hundreds of millions of people.
Yes if you are skilled doing programming/network design/chip design/ you can get wealthy. The key is to not work for someone elses dream.
Think of a product or server you and your fellow coworkers can provide? Start a company with your partners and make something. Or move to a place with startups in Silicon Valley where you make less starting out but have options in owning shares of the company. Many will fail but you will have many clients on your resume fast until one sticks and you strike gold.
You are more valuable than you think. Just because your current company doesn't value what you do as part of the bottom line, doesn't mean your skillset wont benefit someone else more greatly. ... of course if you have a baby and a wife there is also risk. Are you willing to take that? If not then being paid a lot less is worth the price in terms of job security and benefits.
Re:They are all paid too much (Score:5, Insightful)
The fact that executive pay being so disproportionate to employee pay "feels really crappy" is not a problem. The fact that executive pay being so disproportionate to employee pay destabilizes society by destroying the middle class is a problem!
Re:They are all paid too much (Score:4, Insightful)
The middle class is being destroyed in western nations due to not being as valuable as they once were due to globalization and an over supply of college educated folks
Not because the rich can force us all to work for less. The middle class is growing in Asia and in India at an exponential rate. It will return back again as the price of dollar declines and inflation goes up in these countries. Some companies are manufacturing back in the US as the cost savings have dwindled.
The market determines your salary and it goes up and down for each individual/company. My example in another post was you can get rich programming. ... at a .com or inventing a new app rather than POS code at pizza hut, where food production is valued higher.
You can't pay an engineer minimum wage. He will find a job elsewhere where he is valued more.
Some is true with the middle class here. Many jobs were lost because India can do them for a fraction of the price and Americans are lazy (seriously not flamebait) and do not work as many hours as foreign counterparts.
Re:They are all paid too much (Score:4, Insightful)
Nothing in your post explains why executive pay has risen from 50x average pay (in the 60s) to 500x average pay now.
Re: (Score:3, Insightful)
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Gee.. (Score:4, Insightful)
I'm guessing people are focusing on the bankers because google didn't fuck the world's economy.
I still think it's bullshit.
Because (Score:5, Insightful)
Because the tech sector hasn't crashed the world economy...yet?
Re:Because (Score:4, Insightful)
Because the tech sector hasn't crashed the world economy...yet?
In addition to that, I think there's a perception that bankers make their money by exploiting the people, by charging them more for mortgages, paying them less in interest, etc. Basically, by sucking money out of these common transactions that everyone has to make. The money paid to bankers could, the argument goes, have been left in the pockets of the average person.
In contrast, doing business with tech companies is more voluntary. No one has to buy an iPhone or an iPad, while buying a house or condo is more mandatory (even renters get hit, since their landlords have mortgages and pass the costs along). Using Google is perhaps harder to avoid, but the average person's perspective is that they don't pay Google anything, so the money paid to Eric Schmidt doesn't come out of their pocket. In fact, the advertisers who pay Google get their income from the people, so the average person actually does contribute to Schmidt's income, very indirectly (though there's a good argument that the advertisers would have needed to advertise regardless and since Google has made advertising more efficient the net effect of Google's work has been to reduce the amount consumers pay).
Anyway, without getting into the degree to which these perceptions are accurate (not very), banks are seen as parasites, while tech companies are seen as adding value, and that has a strong impact on whether people feel the companies have the right to pay their people exorbitant amounts of money.
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.
ELOP (Score:3)
One word ELOP.
See what happens when one bad CEO comes into a great innovating company like Nokia?
Another word JOBS.
Even if you hate Apple look what happened to Apple since 1997 when Steve Jobs came back who is considered one of the best CEOs? CEO's get paid a lot because they have a HUGE impact on stock price and company performance. You can argue how unfair it is until you are blue in the face. Fact of tthe matter they are worth every penny and have a huge pull that the average slashdot reader and I can only dream of in terms of benefits and compensation from our jobs.
Bankers on the otherhand is tricky. Bankers get paid like they were before deregulation. That is they were once paid only on interest grown. Not principal plus interest accured like today saying yeah I earned that 6 million today and need 10% of that NOW! ... in reality the customer put down 5.99 million and you made $10,000 but claim it was really 6 million in assets. This was because of the way paperwork used to handled prio to the mid 1980s.
So yes many are worth every penny but something should be done but wont because that is evil socialism that we can't allow etc. Politicians need that money to fool stupid voters with fancy commercials every 2 years.
Re:ELOP (Score:5, Insightful)
Another word JOBS.
Even if you hate Apple look what happened to Apple since 1997 when Steve Jobs came back who is considered one of the best CEOs? CEO's get paid a lot because they have a HUGE impact on stock price and company performance.
Steve Jobs had a salary of $ 1 per year. He shared in the success of the company because he owned a good chunk of it.
That, I have no problem with.
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Steve Jobs had a salary of $ 1 per year. He shared in the success of the company because he owned a good chunk of it.
That, I have no problem with.
Yes, but that salary structure wasn't because of some nebulous "belief in the company" it was structured that way to avoid taxes and for public relations purposes. link [msn.com]
Re:ELOP (Score:4, Insightful)
It's a nice little fantasy to think of the $1 CEO as a brave soul who is willing to risk all for their dog food but the reality is that it's a tax avoidance scheme that only wealthy people can indulge in.
Re:ELOP (Score:5, Insightful)
Steve Jobs had a salary of $ 1 per year. He shared in the success of the company because he owned a good chunk of it.
That, I have no problem with.
Until you understand that the $1 a year is one of the most egregious tax dodges today. You pay tax on salary, not on "capital gains." You then borrow against your stocks if you need cash.
The larger question is... (Score:3, Insightful)
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It's not about how much money someone needs. It's about how much money someone is worth to a company.
CEOs are much harder to replace than tellers. And the loss of a CEO is much more detrimental to a bank than the loss of a teller. This is what makes CEOs worth more than tellers (to a bank) and why it makes sense for banks to pay CEOs much more.
Are some CEO's overpaid? Yes, of course. But should CEOs make less money just because tellers make less money? No.
Re: (Score:3)
Are CEOs really that hard to replace though?
Even if you look at a bell curve distribution of intelligence and ability, there are still plenty of people who are capable of leading projects, making rational decisions and thinking strategically. Granted, I am only at the top levels of middle management, but I have worked with enough executives at this point to realize that they spend most of their time selling shit, and networking with their colleagues. The only reason that CEOs are hard to replace, IMHO, is
Re: (Score:3)
You get, what you negotiate (Score:3, Insightful)
The even bigger question is, why is this any of our business? As long as it is not the taxpayers footing the bill, count your own money...
Re:You get, what you negotiate (Score:5, Insightful)
The even bigger question is, why is this any of our business? As long as it is not the taxpayers footing the bill, count your own money...
Taxpayers are footing the bill. Or did you miss the recent media attention about all the people who work at Wal-Mart, McDonald's etc and have to get food stamps and other government assistance to make ends meet. This isn't the rhetorical lazy bum leeching off welfare or unemployment benefits, there are people being good citizens and actually working.
Re: (Score:3)
The point is that Walmart is not a company that is just scraping by. It is a hugely profitable company. Someone did the math awhile back and found that they could double the wages of their work force and it wouldn't affect their profits in a noticeable way. Instead Walmart keeps wages low, and over hires so that employees can't even count on a regular 40 hours. As a result their employees have to rely on government welfare programs to survive. So everyone else in the US that pays payroll taxes is footing pa
Perhaps... (Score:4, Insightful)
Perhaps if Google and Apple had done the same damage to the economy as bankers did a few years ago and had to be rescued with 700 billion dollars (from a government that argues that a few billion in homeless shelters is wasteful expending) people would be pissed at them too.
Of course they are. (Score:3, Insightful)
Re:Of course they are. (Score:4, Interesting)
Yes, but with a caveat (Score:4, Insightful)
CEO pay in general is too high I agree.
But I find it easier to stomach Silicon Valley CEO pay for a reason - they are producing an actual product whereas investment banks do not - they actually harm the economy, they don't help it.
http://en.wikipedia.org/wiki/F... [wikipedia.org]
http://www.huffingtonpost.com/... [huffingtonpost.com]
Furthermore, most Silicon Valley CEOs are either founders of the companies or were involved from an early phase. They put a lot of blood and sweat into these companies over the years. They are not just MBAs flown in for a couple of years to later on bail with golden parachutes when things get rough.
http://en.wikipedia.org/wiki/F... [wikipedia.org]
Comment removed (Score:3)
Control of information (Score:3)
Basically you have two factoids at play: One is that the CEO and those immediately surrounding them often even control such things as the candidates for board of directors election and those on the executive compensation committee. So there you have quite a bit of bias. Then after that you have literally nobody above the CEO. In theory board of directors answer to the shareholders and the CEO answers to the board but if the shareholders don't pick who is nominated for the board and the board is owned by the CEO then the CEO pay is limited to just how greedy he thinks he can be; not limited by other factors such as actually deserving his pay.
So when you are being so foolish as to try and find a correlation between CEO pay and their performance then you are wasting your time. The only correlation should be between their pay and a combination of their level of narcissism and their level of psychopathy.
What this quite simply calls for is that shareholders need to have vastly more influence on who is nominated to a corporate board. Another thing that this screams for is a relationship between the typical pay within a company and the top executive pay. Quite simply the higher this ratio then the higher the taxes should be on the top executives. This way you can exploit the greed of the top executives in that they will rationalize paying the typical employee much more so as to lower their personal tax burden.
CEO pay IS based on performance (Score:5, Funny)
If a company succeeds, CEO pay increases because their super human abilities are solely responsible for corporate performance. If a company fails, CEO pay increases because their super human abilities limited the damage from incompetent workers and are needed to liquidate the company in an orderly fashion.
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...
My Question is Different (Score:3)
DavidHumus notes "Maybe the bigger question is why is CEO pay so entirely disconnected from company performance?"
My question, if we're considering how we as a society should respond, is how changes in CEO pay and tax rates correlate to changes in the long-run GDP growth rate. If we're paying more and getting more, I'm all for it. If we're paying more and getting less, I'm opposed. If we decrease the high income tax rate, and lower the highest income tax bracket, and GDP growth rate increases, it is the right decision for society. If we do that and the GDP growth rate stays the same or falls, we are wasting money.
The nice thing is that we have good records going back to 1917, and from about 1950 to present we have both a steady change in tax policy (reducing the top income tax rate and lowering the top income tax bracket) and no major external shocks to the economy other than the OPEC crisis and attendant massive increase in the price of energy in the early 1970s. We can actually come up with a pretty solid estimate of this simple question: Are we getting our money's worth?
It's really the same question a restaurant owner asks himself when deciding how much to pay a dishwasher -- if I pay less, will I still get sufficiently clean dishes? If I pay more, will the dishes be enough cleaner to justify the expense? As a society we need to apply the same standard at the top brackets: to pay as little as we can while still getting the GDP performance we desire. Paying more than that is wasting money. Paying less than that is leaving GDP growth on the table. That is what we as a society care about, when it comes to allocating GDP -- maximizing the ROI.
The real issue (Score:4, Insightful)
The real issue is the disconnect between company performance and executive pay. We're seeing a lot now of people who run a company into the ground and end up with a golden parachute, anyway. It's doubly insulting when people who make literally 1/1000th the CEO's pay end up with nothing.
My belief is that the real problem is that we're disconnected from the companies that we own. I own stock in a bunch of companies. Through mutual funds. In my Roth IRA. I can't show up at their annual meeting and vote because I don't directly own them.
In the old days, the board really represented the shareholders and shareholders often had bought the shares. As such, they had a closer stake in the company and the outcomes. The idea of a CEO ruining the company and then being compensated for it would have caused the board to be changed at the next annual meeting.
I'm not sure what the solution is but I believe this disconnect is a big part of the problem.
Re: (Score:3)
Most Roth IRAs allow you to buy individual shares. Consider selling your stake in the mutual funds and then buying back your position with individual shares. Save yourself the fund fees, earn your voting rights back. Of course, you're stuck handling your own allocation then, and you'll be responsible for all the trading fees, but such is life! I'm no day trader, and definitely of the buy-and-hold mentality, so for me this has pro
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:Pay Out of Whack (Score:4, Insightful)
The other problem is that the stockholders mostly aren't people. Instead, they're large mutual funds managed by a single person who is in the CEO/director good ol' boys club too.
Re: (Score:3)
Vision is a legitimate answer. A strong vision of what they want a company to be is needed.
Now, very few CEOs actually have a vision, or a plan to make their vision come to fruition, but that's a different issue.
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?