The ceo being paid a lot doesn't imply they have to have worked harder to obtain it.
The board determined the ceo pay , and the board represent the shareholders, who ultimately are the final arbiters of the value being generated by the ceo.
And the board often delegates compensation decisions to a third party. Said third party is incentivized to rationalize a higher compensation for the executive class, because that best ensures that they’ll be hired to do so again in the future.
And the auditors are paid by the company that they audit.. For risk of material misstatement, not fraud. A fraudulent company can still pay an auditor a significant sum, and the auditor won't look for fraud, only material misstatement. It's the "audit expectations gap."
Yeah friend worked for an executive compensation firm for a while. It was all about justifying increasing the CEO's compensation to match what other companies were paying. There is also the problem of the incestuous you scratch my back I scratch yours nature of board membership.
Most boards I've looked at are composed of people with C-level titles. While members of the board might not have a direct conflict of interest for a particular CEO, most have an interest in normalizing extreme CEO salaries.
Let's be honest; most CEOs work smarter and lead these large companies to immense profitability. They, as leaders, are entitled to (in essence) a commission - a reward for the work they've done, the leadership, the right decisions, and pivoting necessary to realize opportunities. The "worker" doesn't and in many cases, can not do any of what I described. They are paid for a job at a fair market rate. To compare the two is to do two things. 1) display a willing ignorance of the dynamics and 2) telegraph a tired political whine.
15 years ago Paul Graham declared Microsoft dead [1]. Today it is a 2 trillion dollar company, behind only Apple.
How did that happen? 15 years ago Microsoft was the master of a technology that was already passee, the desktop OS. The new money-making technologies (search, social networks, internet commerce, smartphones) were dominated by other players (Google, Facebook, Amazon, Apple). They tried to compete (anybody remembers Zune?) but they just could not execute.
Then they changed their CEO, and under Nadella they pivoted to cloud. Big time. So now they are one of the 3 big names in cloud (Amazon and Google being the other ones).
Maybe there are other reason (Microsoft is an immensely complex company), but few could argue that Nadella had nothing to do with the turnaround.
If he just worked as much as 670 regular engineers, then Microsoft would still be dying, if not already dead today.
Exactly this. 670 people pointed in the wrong direction aren’t going to be effective.
The turnaround of Apple under Jobs was another example. They went from 3 months away from bankruptcy to the most valuable company in the world. The value multiplier of a world class CEO is huge.
They being said, some of them suck and should be forced to pay the company back for how much harm they have done. Like Léo Apotheker, who spent a brief period as the CEO of HP… selling off the recently acquired WebOS and almost selling off their PC division. I can’t help but ponder what might have been if he didn’t sell WebOS and they had a CEO that invested hard in mobile and integrations with the desktop. We might have another viable mobile platform. That one bad decision likely cost HP more than their entire staff salary.
“CEOs pandemic greed grab has sparked outrage among Americans across the political spectrum”
Guess what the wage gap is between a software engineer in the US and the average worker in Cambodia? About 100x. The average salary in Cambodia is about $2000 per year.
Is that wrong? Are engineers too greedy? No. Supply & demand for specific skills drive the rates in each market.
I think many engineers would gladly say that Cambodians deserve to, and should be paid a lot more.
Your argument is also a comparison between two different economies.
The comparison here is between two groups of people living in the same country, even working for the same company. I did the math at a previous job - the CEO would make in 20 minutes what I made in a year. Would that CEO say they I should get paid more?
Also, many CEOs in the US might make what they do precisely because the laborers in Southeast Asia make such low wages.
If you feel like your salary is too high compared to Cambodian workers, why don’t you do something about it? For example, donate 50% of it to a charity in Cambodia helping poor people?
>If you feel like your salary is too high compared to Cambodian workers, why don’t you do something about it?
I can't because the systemic change required to implement a solution is lobbied against by the people who already have the wealth in a world where money is free speech.
I don't think, given the often higher proportion of high earners here and those only inclined to technical articles, that one will find a receptive audience on this forum to arguments decrying high earners. As WisNorCan can so understandably attest and exemplify.
You might be surprised. I suspect people will be quick to identify the problem with CEO pay but not use the same logic to identify the problem with SWE pay.
SWE pay might be high, but in the same market it is 4 to 10x median earnings compared with 200 to 600x for a CEO. Even the gap between a CEO and a SWE is 6 times bigger than the gap between a SWE and a factory worker.
Comparing between labor markets is not needed when there is a clear and present problem in a single market. Fixing a local problem should be more tractable than addressing global inequality.
There are substantially fewer CEOs relative to SWEs. If your goal is to help the most impoverished, you are better off reallocating salary from SWEs than CEOs.
> This article compares the wages not of all CEOs, but of 300 of the best paid ones.
That is not true. The report analyzes “publicly held companies with the lowest median worker pay.” They describe the sample probably a dozen or so times in the report.
> tiny fraction of one side to millions
You are making this out to be a random sample of irrelevant companies. These are publicly traded companies of which there are a few thousand in total. The list includes companies such as Amazon, Target, Best Buy, Lowe’s, Estee Lauder, etc.
Me: "This article compares the wages not of all CEOs, but of 300 of the best paid ones."
You: "That is not true."
The article: "Report on 300 top US companies...."
Tell me again this is not 300 of the best paid CEOs? After all, the fact is CEO average pay is only 212k. BLS is a much better source than the Guardian for salary data, after all.
>You are making this out to be a random sample of irrelevant companies.
It is most certainly not a random sample of companies, otherwise the result would mimic the actual data from BLS. This is specially selected data to get this result.
It is a cherry picked sample of the very top end of the CEO salaries (300 of them out of over 200,000 of them that exist) compared to workers, but not all workers, only those that are among the lowest paid, again, to reach a shocking headline that creates outrage.
Here's [1] the actual report. Note in the report they compare part time worker wages to fulltime CEOs - not an hourly rate or something a tiny bit more defensible - for example, they compare an annual wage of $224 (yes, you read that correct) for a part time worker at NuSkin to the CEO wage of $4m. They repeat this type of nonsense throughout the report. The dishonesty in the report to me is astounding - and it explains how they get the numbers to drive their headlines.
Comparing a tiny fraction of top values from one dataset to all of another dataset is not exactly a valid statistical technique. Doing everything you can at each step to widen the result to get what you want is beyond simple stats misunderstanding - it's nutjob agenda driven lying.
If someone did this to claim global warming was not real, or any of a zillion other false claims, people would (and should) cry foul.
If I did this, picking the top 300 employee wages in the country (all well into the millions) and compared to all CEOs (avg pay 200k), obtaining the claim that workers make many multiples of CEO wages, you'd rightfully cry foul.
So why the pitchforks and intellectual dishonesty when the data is manipulated this way? Because it gets a result you want to see?
The reason I don't find it so ridiculous is that 1. The income gap from top to bottom directly correlates with violence/unrest and 2. These corporations are usually huge conglomerates with immense reach and power.
So you're ok with lying as long as it matches your likes?
This is how we get terrible public policy - enough people believe the fake items of the day elect people that act on those items, "solving" the wrong problems, allocating resources inefficiently, and creating more problems.
Why not simply call for accurate information to help people make better decisions?
As to unrest, which causes more, social inequality or people acting out after being fed bad information? Which caused more attacks and deaths in the US over the past 4 years? Which causes more damage to the planet?
I am definitely not okay with lying. I didn't read the article :) but from your description it didn't sound like lying.
> As to unrest, which causes more, social inequality or people acting out after being fed bad information? Which caused more attacks and deaths in the US over the past 4 years? Which causes more damage to the planet?
I don't know which is worse. I would say people definitely need given proper context, but social inequality is probably the problem I would fix first if I had the choice.
>social inequality is probably the problem I would fix
I would too, but I would deal with based on correctly sourced evidence. The majority of the anti-inequality articles I see are filled with bad math, bad analysis, and would lead to solutions that end up hurting more people.
Burning down things for which one does not understand the reasons they work the current way is a sure way to get worse outcomes. Two examples - tons of people wanted to burn down banking during the 2008 crisis, but those naive solutions would have vastly hurt the least able. Naive ham-handed making a fed min wage $15/hr would put (middle CBO estimate) over a million people out of work, because they could not add $15/hr in value to an employer. A better solution is using targeted assistance of scarce tax money to help people that need it and not just shovel it anywhere.
But the layman seems to fill themselves with outrage by poorly written or analyzed articles and then brings pitchforks out, electing people with bad understanding or reason, and we're all worse off.
Also, the poor in the US are vastly richer than pretty much any other poor on the planet. Would you lower the US standard of living, including making our poor poorer, to help the rest of the planet? (or replace US with whatever country you're in).
It is conventional to blame COVID for this ("billionaires got 40% richer during lockdown") but it really makes more sense to blame deliberate changes in policy enacted by the government in power over the past few years.
Some of those take a while to manifest fully, and others are not rooted out immediately by the successive government. There can be a lot to clean up. The current administration is anyway not especially motivated to really turn things around.
Yes and: bickering over policy choices serves to distract from reform, eg getting lost in the weeds.
So I've settled on managing towards a number. I choose the gini coefficient, until a better measure of inequity (wealth distribtion) is apparent.
I prescribe restoring the USA to its 1970s era value of 35. It was a reasonable deal working white men. Today, if we could loop in everyone, that'd be huge. Sure, lower is better; Norway's contemporary value of 25 is pretty sweet. By every (non-libertarian) account, Norwegian society is enviable.
Any way. I don't care how we get back to 35. Repeated radical cachectomies is straightforward. I also support proposals for UBI, universal insurance, childcare support, pretty much every modern anti-proverty strategy, etc.
--
Helpful chart showing wealth distribution across countries:
34 comments
[ 3.1 ms ] story [ 68.8 ms ] threadThe ceo being paid a lot doesn't imply they have to have worked harder to obtain it.
The board determined the ceo pay , and the board represent the shareholders, who ultimately are the final arbiters of the value being generated by the ceo.
The board represents only some shareholders.
which is what market rate means right? If a good CEO is poached to a competitor, the company will lose out.
15 years ago Paul Graham declared Microsoft dead [1]. Today it is a 2 trillion dollar company, behind only Apple.
How did that happen? 15 years ago Microsoft was the master of a technology that was already passee, the desktop OS. The new money-making technologies (search, social networks, internet commerce, smartphones) were dominated by other players (Google, Facebook, Amazon, Apple). They tried to compete (anybody remembers Zune?) but they just could not execute.
Then they changed their CEO, and under Nadella they pivoted to cloud. Big time. So now they are one of the 3 big names in cloud (Amazon and Google being the other ones).
Maybe there are other reason (Microsoft is an immensely complex company), but few could argue that Nadella had nothing to do with the turnaround.
If he just worked as much as 670 regular engineers, then Microsoft would still be dying, if not already dead today.
[1] http://www.paulgraham.com/microsoft.html
The turnaround of Apple under Jobs was another example. They went from 3 months away from bankruptcy to the most valuable company in the world. The value multiplier of a world class CEO is huge.
They being said, some of them suck and should be forced to pay the company back for how much harm they have done. Like Léo Apotheker, who spent a brief period as the CEO of HP… selling off the recently acquired WebOS and almost selling off their PC division. I can’t help but ponder what might have been if he didn’t sell WebOS and they had a CEO that invested hard in mobile and integrations with the desktop. We might have another viable mobile platform. That one bad decision likely cost HP more than their entire staff salary.
“CEOs pandemic greed grab has sparked outrage among Americans across the political spectrum”
Guess what the wage gap is between a software engineer in the US and the average worker in Cambodia? About 100x. The average salary in Cambodia is about $2000 per year.
Is that wrong? Are engineers too greedy? No. Supply & demand for specific skills drive the rates in each market.
* https://ips-cambodia.com/cambodia-average-salaries-2022/
Your argument is also a comparison between two different economies.
The comparison here is between two groups of people living in the same country, even working for the same company. I did the math at a previous job - the CEO would make in 20 minutes what I made in a year. Would that CEO say they I should get paid more?
Also, many CEOs in the US might make what they do precisely because the laborers in Southeast Asia make such low wages.
I can't because the systemic change required to implement a solution is lobbied against by the people who already have the wealth in a world where money is free speech.
Comparing between labor markets is not needed when there is a clear and present problem in a single market. Fixing a local problem should be more tractable than addressing global inequality.
There are substantially fewer CEOs relative to SWEs. If your goal is to help the most impoverished, you are better off reallocating salary from SWEs than CEOs.
Comparing the top tiny fraction of one side to millions on the other is sure to get headlines for outrage.
BLS lists CEO pay avg as $200k. [1]
I suspect if you compared the top 300 compensated employees you'd find they get massive multiples of median CEO pay too.
[1] https://www.bls.gov/oes/current/oes111011.htm
That is not true. The report analyzes “publicly held companies with the lowest median worker pay.” They describe the sample probably a dozen or so times in the report.
> tiny fraction of one side to millions
You are making this out to be a random sample of irrelevant companies. These are publicly traded companies of which there are a few thousand in total. The list includes companies such as Amazon, Target, Best Buy, Lowe’s, Estee Lauder, etc.
Who’s trying to elicit outrage, you or them?
You: "That is not true."
The article: "Report on 300 top US companies...."
Tell me again this is not 300 of the best paid CEOs? After all, the fact is CEO average pay is only 212k. BLS is a much better source than the Guardian for salary data, after all.
>You are making this out to be a random sample of irrelevant companies.
It is most certainly not a random sample of companies, otherwise the result would mimic the actual data from BLS. This is specially selected data to get this result.
It is a cherry picked sample of the very top end of the CEO salaries (300 of them out of over 200,000 of them that exist) compared to workers, but not all workers, only those that are among the lowest paid, again, to reach a shocking headline that creates outrage.
Here's [1] the actual report. Note in the report they compare part time worker wages to fulltime CEOs - not an hourly rate or something a tiny bit more defensible - for example, they compare an annual wage of $224 (yes, you read that correct) for a part time worker at NuSkin to the CEO wage of $4m. They repeat this type of nonsense throughout the report. The dishonesty in the report to me is astounding - and it explains how they get the numbers to drive their headlines.
Comparing a tiny fraction of top values from one dataset to all of another dataset is not exactly a valid statistical technique. Doing everything you can at each step to widen the result to get what you want is beyond simple stats misunderstanding - it's nutjob agenda driven lying.
If someone did this to claim global warming was not real, or any of a zillion other false claims, people would (and should) cry foul.
If I did this, picking the top 300 employee wages in the country (all well into the millions) and compared to all CEOs (avg pay 200k), obtaining the claim that workers make many multiples of CEO wages, you'd rightfully cry foul.
So why the pitchforks and intellectual dishonesty when the data is manipulated this way? Because it gets a result you want to see?
[1] https://ips-dc.org/wp-content/uploads/2022/06/report-executi...
So you're ok with lying as long as it matches your likes?
This is how we get terrible public policy - enough people believe the fake items of the day elect people that act on those items, "solving" the wrong problems, allocating resources inefficiently, and creating more problems.
Why not simply call for accurate information to help people make better decisions?
As to unrest, which causes more, social inequality or people acting out after being fed bad information? Which caused more attacks and deaths in the US over the past 4 years? Which causes more damage to the planet?
> As to unrest, which causes more, social inequality or people acting out after being fed bad information? Which caused more attacks and deaths in the US over the past 4 years? Which causes more damage to the planet?
I don't know which is worse. I would say people definitely need given proper context, but social inequality is probably the problem I would fix first if I had the choice.
I would too, but I would deal with based on correctly sourced evidence. The majority of the anti-inequality articles I see are filled with bad math, bad analysis, and would lead to solutions that end up hurting more people.
Burning down things for which one does not understand the reasons they work the current way is a sure way to get worse outcomes. Two examples - tons of people wanted to burn down banking during the 2008 crisis, but those naive solutions would have vastly hurt the least able. Naive ham-handed making a fed min wage $15/hr would put (middle CBO estimate) over a million people out of work, because they could not add $15/hr in value to an employer. A better solution is using targeted assistance of scarce tax money to help people that need it and not just shovel it anywhere.
But the layman seems to fill themselves with outrage by poorly written or analyzed articles and then brings pitchforks out, electing people with bad understanding or reason, and we're all worse off.
Also, the poor in the US are vastly richer than pretty much any other poor on the planet. Would you lower the US standard of living, including making our poor poorer, to help the rest of the planet? (or replace US with whatever country you're in).
It's a tough problem.
Some of those take a while to manifest fully, and others are not rooted out immediately by the successive government. There can be a lot to clean up. The current administration is anyway not especially motivated to really turn things around.
So I've settled on managing towards a number. I choose the gini coefficient, until a better measure of inequity (wealth distribtion) is apparent.
I prescribe restoring the USA to its 1970s era value of 35. It was a reasonable deal working white men. Today, if we could loop in everyone, that'd be huge. Sure, lower is better; Norway's contemporary value of 25 is pretty sweet. By every (non-libertarian) account, Norwegian society is enviable.
Any way. I don't care how we get back to 35. Repeated radical cachectomies is straightforward. I also support proposals for UBI, universal insurance, childcare support, pretty much every modern anti-proverty strategy, etc.
--
Helpful chart showing wealth distribution across countries:
https://en.wikipedia.org/wiki/Gini_coefficient#Of_income_dis...