Just to point out a demonstrated, viable, successful reality achieved under different values and assumptions, the Mondragon Corporation/cooperative produces car parts, among many other things, and has pre-agreed ratios for wages for executives relative to the lowest wages paid to workers, and this tops out at 9:1. Studies have found that worker-owned coops have a greater survival rate than conventional businesses, and that they have higher productivity.
Mondragon is not a worker cooperative. They have a three-tiered worked system[0] with clear hierarchical structures and differences in voting power. The temporary worker tier (largest) having no voting power whatsoever.
The paradox of worker-coops is that workers capable of successfully running businesses together are also capable of running businesses independently, so why create more failure points?
I don't think it's a given that what a group can do, the constituent individuals can do? You probably need a team to build and ship a meaningful product regardless of the type of organization that develops it.
It's a little weird that tech-folk are generally ok with the idea that groups can yield good predictions in the context of a non-owner community that is harnessed to improve a product, or in the context of a prediction-market, where people placing bets in disagreement can lead to a more accurate outcome than the participants taken separately would produce -- but somehow think this mechanism will fall apart if workers who have an interest in a firm's ongoing revenue are able to vote.
Good episode of Bloomberg's Odd Lots podcast from a little while ago on the topic:
> On September 14, the contract between the United Auto Workers and the Big Three carmakers (GM, Ford and Stellantis) is expiring — and the possibility of a strike is real. This comes at a delicate time for multiple reasons. The labor market is tight, which means workers have other options. Inflation is high. And the auto industry is undergoing a major shift to the electric vehicle market, which may change the composition and pay of the labor force. The stakes are high. So what does the union want and how does it fit into the goals of the broader labor market? To understand more, we speak with Dan Vicente, the director of UAW Region 9, as well as Alex Press, a labor reporter at Jacobin magazine.
40% over 4 years isn't as crazy (especially when you consider that they had some concessions back in '08). typical clickbait when you consider this is a high value for negotiation and they're likely looking for anywhere between 20-30% over 4 years when it's all said and done. barely above inflation YoY.
It’s not entirely on the media for using these headline numbers. The Unions like these numbers being used. It sounds better to their members that they’re getting a 40% pay rise.
Shawn Fain (UAW President) has outright rejected a 20% offer. Not to say they won't agree to 30% but for context - UAW workers gave up a LOT of pay and rights in the 2010 auto bailout - the workers essentially helped to bail out management in that case along with the USG.
> From 1978 to 2021, CEO pay grew by 1,460%, adjusted for inflation, versus just 18.1% for the typical worker.
Why has the supply of CEOs not kept up with the demand for them? Surely, with the improvement in education and in increase in MBA programs, there must be far more CEOs today than in 1978. Why has the ratio of CEOs to Companies fallen by 14x for their wages to rise this much? /s
As many argue, wages are only set by supply and demand. And if workers are underpaid, then it is because they are replaceable. Use the same framework to explain CEO pay.
> As many argue, wages are only set by supply and demand.
Most of the time that I see people invoke "Econ 101" concepts, they are wrong. Supply and demand does not account for the power imbalance between workers and leadership, which unions specifically attempt to address. It does not account for the class differences between workers trying to make ends meet and the board of directors who believe they deserve much higher pay than workers. We are free to change the perceived value of workers through the power of worker solidarity - ensuring that individual workers are not so easily replaced to keep wages suppressed. You can simply say "it's supply and demand" and do nothing to support the workers whose labor is so clearly needed for our economy to function, or we can support collective bargaining rights to make sure that individual workers are not crushed under the power of company leadership. How you view this is up to you, and not a simple fact of natural laws of economics.
My econ 101 talked about the difference between commodity and illiquid markets which explains the difference between worker and CEO pay. The CEOs are coming from a restricted group of insiders and can't be replaced because of their relationships which make them unique. Workers in the sectors most often unionized have few distinguishing characteristics from the perspective of the company and are thrown around by the same laws as the price of corn. The black death is a well-documented example of a restriction in the labor supply raising the price of labor and improving the wellbeing of laborers. There is no indication anywhere that supply and demand is wrong about the job market.
> We are free to change the perceived value of workers through the power of worker solidarity
It's more like using the power of government to ensure the company has no alternative to the union.
Company leaders have no actual power over the workers. They cannot force anyone to come to work. They cannot have you arrested. They cannot confiscate your property. They cannot beat you. They cannot prevent you from accepting a job at another company. They cannot prevent you from leaving. They cannot extort, libel, slander, blackmail, or threaten you. They cannot put a hit on you.
All they can do is offer you money in exchange for your labor. That's it.
> Supply and demand does not account for the power imbalance between workers and leadership, which unions specifically attempt to address.
You’re both right. Power dynamics and supply and demand are interrelated.
Most forms of human organization involve hierarchy. Even co-ops have a CEO and that CEO makes a multiple of base worker pay.
What that multiple is and how it gets decided is a fair question: in co-ops, voting rights are built-in, but for private corporations you need collective bargaining
I have bad news for you. Those workers who demand 40% wage increases and 32 hour work weeks will be "easily replaced" by auto factories in the South who have right to work laws.
> Supply and demand does not account for the power imbalance between workers and leadership
Supply and demand is the imbalance. The workers, individually have no control over supply. The whole point of a union is to control the supply of labour and shift the balance of power.
There was an example in Money Stuff this week where a CEO got a pay package "worth $110 million". It's actually made of stock options that vest if the share price went above $150, but the expected value was $110 million so that's what was reported.
…But the share price only reached $66. So in fact he was paid zero, and he quit. (Well, $1.5 million in cash.)
> It's actually made of stock options that vest if the share price went above $150, but the expected value was $110 million so that's what was reported.
It gets a little weirder than that I suppose since you might have a great deal of shares in a company, which you never exercise so you could say that money doesn't really exist until exercised.
You can however use those shares as collateral for a mortgage or other line of credit which is a pretty common tactic for wealthy people to avoid paying income tax that they otherwise would if they were to sell said shares.
As someone pointed out "1.5 million in cash" for not doing the job you were hired for is .. not zero.
I'm fairly sure I could achieve the same results for considerably less.
Moreover making compensation dependent on stock price movement encourages corruption and fraud - look at the numerous Enrons and other financial claims. All of which left the majority of those responsible enriched while destroying the lives of others.
Right, but in general the CEO doesn’t really do much to the stock price. If the general market is up, it’s going up. If the market is down, it’s going down.
How many companies really break that relationship in their market sector?
So tldr, ceo pay is based on the economic cycle rather than how the company does.
Not all jobs have quantitative measures for impact. The more a job is decoupled from a measurable value, the more likely that job is to be bid up to "as much as the company can afford."
I've seen this in my career, the closer I get to "SRE" or "platform engineer" the more decoupled my salary has become from my actual measurable value.
I'd articulate the thinking as, roughly:
We know this role is important. We know that having a bad SRE team (or CEO or platform team) is expensive, it could cost us the 100% of the business. And we don't know how to measure the value a good one provides. Therefore we are willing to spend as much as we can afford to make sure we get a good one.
SREs aren't on the board of directors setting the pay for other SREs who are on their board of directors though.
The elite/ownership/"capitalism winner" class are playing on an entirely different level with their power and influence. Don't kid yourself into drawing comparisons with your situation and miniscule in comparison compensation. It's always heads they win, tails you lose.
> We know this role is important. We know that having a bad SRE team (or CEO or platform team) is expensive, it could cost us the 100% of the business. And we don't know how to measure the value a good one provides. Therefore we are willing to spend as much as we can afford to make sure we get a good one.
And who are "we" in this train-of-thought? If it's shareholders, that's where the root of any problem lies. If shareholders are real businessmen and entrepreneurs who built up the company or similar companies, they will have a clue as to what is a good CEO. If the shareholders are real workers who believe in the company they're working for, they will have a clue as to what is a good CEO.
Today, shareholders are no longer real businessmen or real workers, but retirees represented by bureaucratic investors. That's why they have no clue as to what is a good CEO.
100% this. Leadership gets to decide how insanely hooked up they will be. Same as congress. Remember when they carved themselves out their own Health Insurance requirements? Same thing.
I support the workers' decision and negotiating on labor rates is the basis of our economic system. Get what you deserve.
That said, the CEO pay is easily explainable:
> Profits at the struck auto companies increased 92% from 2013 to 2022, totaling $250 billion, according to EPI
> CEO pay at the Big Three has grown 40% in the last decade, according to EPI
If you're the CEO of a company and you increased profits by 92%, I don't know seems pretty fair to me. There's a lot of other businesses that suck and haven't raised their profits in the meanwhile.
I think talking about the CEO pay is the wrong path (though I do admit it's marketable in the mainstream news). Just ask for what you think you deserve and don't work if you don't get it. It's as simple as that.
> If you're the CEO of a company and you increased profits by 92%
Did you? Attributing all the success a company achieves to the CEO feels shortsighted.
Aside from anything else: if all these companies saw their profits grow by so much surely there’s an external commonality there? “The CEO did it all” would be slightly more plausible if only one company experienced that success.
> If you're the CEO of a company and you increased profits by 92%,
If it's a company of one than I agree. In any other scenario the CEO led the company to a 92% increase. The CEO didn't do this alone. They maybe managed that increase and had a part in it but others most likely did the vast majority of all the work.
Now, how do you feel if the CEO fired 50% of the workers and maybe the remaining work twice as much to make up the slack. This leads to a 92% increase in profits and the CEO deserves the vast rewards?
There is a big difference between "CEO responsible for increasing profits" and "CEO while profits increased", and it's not at all clear that this is one or the other. (Although in fact, if all competitors in an industry all had their profits grow, I think that's actually likely excellent proof that the CEOs weren't responsible at all.)
That's assuming that the CEO has anything to do with the growth in profits. Average US GDP looks to have grown by ~66% in the past decade. Do some spreadsheet shenanigans and it wouldn't take much to drastically outperform that number.
Who's to say that the various attempts to "chart a new course" and change business strategy for the shareholder's benefit during that time didn't actually make these corporations underperform vs locking the executives in the boardroom and cutting off all their decision making ability for the same time period?
> If you're the CEO of a company and you increased profits by 92%
YOU, the CEO, didn't single-handedly increase profits by even a single percentage point. One employee out of 1 million, take your millionth of a cut of the profits, that's still $150K.
gross growth should be less important than relative growth.
From 2013 to 2023 GM was beat in innovation by both Tesla (Model s,X , Y, and 3) and Ford (aluminum f150 and electric f150, mustang mach e) and has only recently been producing vehicles that look like their 2030 lineup - on the competitor's charging network technologies.
GM was even particularly slow on ice adoption of things like independent rear suspension. Or, the Corvette - where they basically pulled a Nissan and bought the competitor's engine.
Slow to innovate, early to fail (Volt/bolt), purchase from the competition is not what we should define as a good CEO.
Absolute lukewarm take here. Wages are not only set by supply and demand. Institutional power, regulatory concerns, etc... are huge factors in compensation, too. You can argue they're abstracted over by the market anyway, but you're not saying anything interesting until you dive into the tensions between those concerns.
And that's not even touching the fact that the workers are clearly valuable and irreplaceable enough that they can halt production like this.
the supply of prospective management people definitely has kept up. there are literally tens of thousands of MBAs graduating every year, to say nothing of managers at existing F500 companies. there are only so many large companies, and thus so many CEOs.
look at tiny barely profitable companies, the gap between median wage and CEO is sometimes less than 2X.
all these takes on CEO pay when the reality is simple - CEOs are paid a lot because they the cost of being wrong is more than their pay. this results in companies that have a lot of money competing, driving up the price. the end. it's the same reason lebron james is paid 10X more than NBA average.
> there are only so many large companies, and thus so many CEOs
This is a statement that there is low quantity demanded by the market. It's actually a great example of how the naive supply-and-demand argument doesn't make a lot of sense.
Stellantis has 270,000+ employees across 16 brands. I'm not saying their CEO does or doesn't deserve $20m in compensation but at some point you're going to run into a problem where... nobody wants to do that job for $1m/yr and they wouldn't be qualified or very good at it.
True, although if you're getting above $1M/year as a CEO, it's not because "the job is really hard." In fact, the bigger the company, the more layers of management to keep you from any real work.
Instead, the board has approved that compensation based on very real business needs: growing the company, acquiring competitors, changing business models, etc. It's actually hard to find a leader who has experience doing that thing and is also the right fit. Hiring the wrong CEO is a quick way to kill the whole company. On the flip side, to the board, a CEO that can drive meaningful growth is worth the risk, even if they have to fire with a golden parachute two years later.
I'm not trying to justify pay disparity (in fact I think there should be minimum AND maximum FT salaries when currently there are neither), but that's what's going through the board's mind when they set CEO compensation.
The fact that terrible CEOs obviously exist is what drives up the prices for the ones that are not obviously terrible. It is an extremely high leverage role (see also: Microsoft).
What separates the good CEOs from the poor CEOs isn't something you can readily teach. Some of the best ones have a preternatural ability for the role in the same sense that Lionel Messi has a preternatural ability at his sport, and are equally rare. The majority of CEOs are journeymen with the skills to do the job but not to be great at it. This doesn't mean that average employees are fit to be CEOs; you don't have to look further than startup CEOs, which are pulled from an above average pool of semi-random people, to discredit that notion. It is a highly specialized skill set that is difficult to acquire and most people aren't mentally cut out for what is required to be good at it. The experiment of promoting rando employees to CEO has been tried on occasion across industry with almost universally poor results.
This is true of most professions that command a high wage. Thinking that anyone could be a CEO is like thinking any dev can be Fabrice Bellard. Even if that turned out to be the case in a specific instance, no one should expect it to generalize.
If you ignore Pelé, the top soccer player had a similar increase in the same period. https://www.expensivity.com/soccer-salary-inflation/ Compared with the median income, they went from 10x in 1979 to 1300x in 2020. Why has the supply of Messis not kept up with the demand for them?
Thanks, I think this is the best answer and really gets at what is going on.
"Star" pay has exploded across all industries (entertainment, sports, and yes, business) and it's not hard to see why. Technology has vastly grown the size of markets, and the "winner take all/most" dynamics of these star-driven occupations means the winners are able to take an outsize chunk of the revenue.
I think there are some other things going on with CEO pay (CEO salaries are basically set by other CEOs, for example), but the parent comment absolutely gets it wrong when they say "the supply of potential CEOs has increased". In the competitive market for CEOs (as well as actors, musicians, sports stars, etc.), people are not interchangeable commodities. Someone who is only slightly better can be responsible for their corporation completely "winning" in some industry, and thus companies are willing to pay top dollar for this chance at getting the brass ring.
CEO pay is adjusted based on another CEOs in the market. Since every board members has already markup their CEO pays higher and then higher, the increases are what you see today for CEO pay. Not every CEO skills at Steve/Tim/Jensen but they all delude themselves by paying high, hoping they will eventually get Elon-quality CEO into their company and make their stock the next Tesla-NVIDIA-Netflix. Most of the time, they get Stephen Elop type of CEO, unconsciously destroying company in the name of strategic stakeholder value maximization (MBA lingo). Now what about workers? The good one will just hop away. They then will tell everyone "no one is replaceable" and then go on to mis-hire even more incompetent or noob staff in. Or they will outsource it just like Dell and others during Bush Jr time.
What they need to do is to publicly disclose the performance of their CEO. Have CEOs rated by staff and publicly distribute this info worldwide. They also need to implement clawback dating as far as a decade depending whatever products they in charge during their tenure. And lastly, always put full jail offenses directly on CEO without any plea bargain. Not doable? Then workers need to get retrenched as they rightly deserve it when they didnt bother to hop away.
CEOs are an illiquid market, and demand for CEOs is pretty inelastic (companies need but one CEO after all). It's not a market which can reach price equilibrium.
If you expand your horizon somewhat to C-suite in general, it seems that demand for C-suite has tended to increase over time. If you also consider that C-suite is to some degree a Veblen good (demand increases as price goes up) [1], that makes sense under economic laws. Worker pay, unlike executive pay, is going to be considered a significant cost center, and business will higher fewer workers if individual pay is growing too quickly, making worker pay act like regular goods and not Veblen goods.
[1] The framework for setting CEO salaries tends to be "take the median CEO pay, add a little extra because our CEO's clearly better than average..."
Sure. It's the same framework that explains the pay of Lebron James. The NBA became a massively popular global game during the era of fast growth globalization, in which billions of consumers entered into the active global economy.
Now you've got like 50 players earning $30m or more per year in the NBA. To play a game in just the US market.
~450 active players earning around $5 billion per year in just league salary (not counting endorsements).
Now do it for global football, NFL football, Nascar, Major League Baseball, Hockey, F1, and so on.
Who knows the insane total compensation figure. $30 billion?
The economic force producing that comically massive figure, is the exact same reason Tim Cook is worth every dollar he's getting paid to operate the juggernaut that is Apple. The same goes for Nadella at Microsoft.
The top 450 NBA players earn more in salary every year than the CEOs of the S&P 500. Why shouldn't a CEO get paid extraordinarily well, as well as an NBA all-star, for operating a $10 or $20 billion market cap corporation? Obviously they should.
The only time I see arguments against high CEO pay (speaking generally), it's from people that know absolutely nothing about what a CEO does or how exceptionally difficult it is to operate a very big company.
And should mediocre CEOs that fail or otherwise perform poorly get golden parachutes? No, of course not. Exceptional CEOs should get properly exceptional pay. They deserve to earn drastically more than the average worker.
The common Redditor railing against CEO pay, looks at a Tim Cook and thinks they can maybe do what Cook does (he just sits in his chair in a big office while other people do all the work, dur dur dur), or what Nadella does, or a random S&P 500 CEO does. In reality they can barely do their own basic job, much less one ten tiers above them. The average Redditor is further away from being able to do Tim Cook's job than they are being able to do the job of Lebron James. The issue is the average person doesn't know anything about what a CEO does at all, they're entirely ignorant of it. However they can watch Lebron James play basketball and immediately understand they can't do anything like what James can do, because they get the physical visual display immediately, meanwhile they know zip about the job of a CEO at a big company. As usual the issue is extreme ignorance and mediocre education.
> The only time I see arguments against high CEO pay (speaking generally), it's from people that know absolutely nothing about what a CEO does or how exceptionally difficult it is to operate a very big company.
The most common argument I see is that the ceo pay has increased relative to the common or average employee salary. I doubt being a ceo has become that much more difficult over the same time period though.
I can follow your logic for basketball players beause I know the players compete with each in grade school, middle school, high school etc.. until being recruited to play in the NBA.
Does this mean that I have been missing the CEO tournaments? surely they must compete with one another after all how else can you compare who is better without a direct face off?. It seems like the big companies always get the best CEOs so they must have scouts all over the place on the lookout for that great undiscovered CEO talent.
Or could it be that big companies always produce "great" CEO because its a lot harder to fail and a lot easier to win when you are stearing the biggest ships.
One big difference is with a NBA team there are only about 9 - 11 other primary contributors, maybe some coaches and back office staff. At any large company there are tens of thousands pulling the boat (pick your metaphor), however the rest have limited bargaining power (without a union). CEOs sit on the board and are good friends with board members and often return the favor on other boards and networks.
CEO wage negotiations have nothing in common with employee wage setting.
>And should mediocre CEOs that fail or otherwise perform poorly get golden parachutes? No, of course not
So start there instead of making it seem like your few specific examples speak for the entire population of CEOs. Talk about the CEOs who fumbled completely during COVID despite having a great position, demanded benefits despite their huge reserves and are now crying about having to pay it back while their profits are up.
Talk about the CEOs dumping their toxic waste straight into the rivers to avoid having to pay costs. And the CEOs who push for every trick in the book to pay a close to zero net tax. And the ones who will lobby and keep almost any potential upstart from ever becoming a threat. And those who have solidified themselves in their branch thanks to first mover advantage, and can do whatever they want and still succeed despite our 'competitive free market' (yeah right).
>They deserve to earn drastically more than the average worker.
They already did in absolute terms. Percentages compound. How about explaining why CEOs need an even bigger advantage in both absolute and relative terms than they had before? Did the workers not contribute to their success?
And why are the workers the first to feel the headwind whereas the CEOs are the first to feel the tailwind?
> And should mediocre CEOs that fail or otherwise perform poorly get golden parachutes? No, of course not.
Oh but they do! That’s the rub. Also it’s very hand wavy to say “the CEO’s job is exceptionally difficult”. But that person has a whole bunch of people bringing him ideas and trying to improve the company. In fact, that’s how you even get promoted. So they pick a bunch of things to do. If it doesn’t go well and the stock tanks, the first person to leave are the workers and not the CEO. In fact, in almost every case the CEO is the last to get affected. Win or lose for the company, the CEOs only win.
The CEO's of the banks that went bankrupt in 2008 carried on "earning" 10´s of millions of dollars for years after they were bailed out by the government.
What we choose to value as society is entirely subjective. While supply and demand influence the change in the mid point of the bid/ask spread - it doesn’t set the absolute clearing price.
Yes. But now take CEOs and their pay and map it to company performance and stock performance. Are they skilled at bringing out the best in their company, or squeezing staff wages more and more?
> From 1978 to 2021, CEO pay grew by 1,460%, adjusted for inflation, versus just 18.1% for the typical worker.
We should remember that CEO pay is often equity linked, and thus can vary. Not sure if workers want large portions of pay equity linked. I remember I was once in discussion with a hedge fund for a job and they offerred a sliding scale of pay that was cash vs equity. The more equity I opted for, the greater the pay, since of course there was risk involved.
There are two determinants of your pay. One is supply and demand, and the other is how much could your potential replacement screw things up. For most workers the supply/demand is the only part that matters because if you are a line worker, you don't really have the potential to do much damage if you screw up. So if Ford needs to replace a competent line worker, their potential bad replacement won't be able to cost the company much even in the worst case, so this does not grant the worker any leverage.
CEOs are much different. A bad CEO can cost a large company 10s of billions in stock valuation. If you have a decent CEO, and you fire and replace him with a poor replacement, the damage to the company will be tremendous, so the board won't want to risk it. This gives good CEOs the leverage to demand massive compensation. A CEO can basically hold the company hostage by saying "I want a $10 million raise this year, and if I don't get it I'll quit. Have fun rolling the dice with my replacement!" (Though they would never actually say it that way) And the company will basically have to choose to pay an extra $10 million or roll the dice on potentially losing billions. This is why they almost always pay CEOs a massive amount.
“Supply and demand” is a very limited special case of a broader principal, which is that pay reflects power. CEO’s power and control over their own pay has increased, and the power of regular workers has decreased. There are a myriad of reasons for this but it’s certainly deliberate.
Because the board and the investors don't want just any MBA to be their CEO: they want a person with a record of success in leading organizations (or at least collaborating closely with such a leader).
Because the number 1 quality that you want in a CEO is that he has experience being CEO, and there aren't that many openings for you to get in on it, and the ones that are are given to people who's been CEO before.
There is no academic training to be a good CEO. They are not easily replaceable. If they were, board members wouldn’t bother offering such high pay. Shareholders don’t appreciate wasting money.
> There is no training to be a good CEO. They are not easily replaceable.
If Steve Jobs—who first created and then basically rescued Apple and started it on the path to where it is today—can be 'replaced' then any other leader can be replaced.
Similarly there are plenty of CEOs that are paid oodles of money that were or are absolute garbage: see Boeing for the last 15+ years as Exhibit A.
The argument is not that CEOs are not valuable. The argument is that there's no obvious increase in their value since the 70s that might justify their relative pay increase.
Since there's no pay penalty for being a bad CEO (pay correlates almost exclusively with company size) I guess we can assume that being good at the job is not the quality most important to those who do the selection.
Is that an apples to apples comparison? Is the mean inflation-adjusted market cap of all the companies in both their 1978 dataset and 2021 dataset the same?
It's actually hard to find people who will reliably break unions, and generally do whatever it takes to de-prioritize line workers and eliminate "cost centers" - while also showing pure allegiance to the board without defecting.
That's the entire process of creating the professional corporate managerial class - you have reliably shown that you care more about the financial success of the company, and yourself, than you care for your employees and coworkers.
I mean how many movies and characters have we made that are precisely calling out this exact behavior:
Gordon Gekko
Bill Lumburgh
Mr "Coffee is for closers" Blake
Richard Chesler (Fight Club boss)
etc...
Like...we've been roasting this precise kind of corporate myopic psychopathic forever as what precisely not to be yet it's like an entire generation used them as pathfinders
Because the pool for a CEO hire is much smaller, than "people with MBAs" as has been floated in thread elsewhere.
If you want to hire a CEO, you either usually are looking either at A) A CEO of another company with experiences relevant the current situation, at a size similar to the current company's size. Or B) A senior exec (CFO, COO, etc ...) at the same company, or more rarely an involved board member.
It's obviously wrong. NBA teams are a good counter-example. Nobody talks about the team's president/CEO/etc when prognosticating which team will be the best.
If the CEO go on strike and don't come to work for a month, how many cars will not be built, and how money will the company lose?
If the union factory workers go on strike and don't come to work for a month, how many cars will not be built, and how much money will the company lose?
Therefore, who is actually more important to the earnings and success of the company?
That's not an interesting thought experiment at all. The workers in aggregate are clearly more valuable than the CEO alone. That's why their cumulative salary is way higher than the CEO's.
That's just the nature of the work though. If the CEO of a film camera business decided that digital cameras weren't going to be a thing, and refuses to pivot, that'll doom the company, but it'll take decades to realize his mistake. The company will lose all its money all the same. If the CEO of the car company decides not to build any factories to make electric vehicles, that decision's also going to take years to play out. They're both important, in different ways.
Depends on what executive actions only the CEO can perform. I've seen this happen in a microcosm, where the managing director just refused to do things, and due to tasks only he had authority to do, contracts went unsigned.
Obviously large corporation will be more robust, and have things like attorney of power that - so that there's no single point of failure. But, these things happen.
Permanently losing one line worker vs one CEO? You don't have to be a disciple of Ayn Rand to think the latter would have a greater negative impact on productivity.
Not really true. They have the most people beneath them that can take the fall for them. Finance shenanigans? CFO takes the fall. Missed targets? COO or CMO. Major hack? CTO. Etc.
We've been conditioned to think it's not fair somehow, but the discrepancy is just....engorgingly terrible. I'm not arguing for how this metric would be enforced, only that it would be a good one to have. Especially in a time when greed is the lowest common denominator in the race to the bottom for some of these large corporations.
It wouldn't fix the stockholder "value" chase, but at least it would shore up one part of the system weak to corruption.
If you underpay elected officials then 1. they just start taking bribes 2. only rich people will run in the election.
This is why Singapore pays them even more than we do.
Anyway, minimum wages (despite being ok policies) aren't what people are actually paid, and of course aren't especially what non-working people are paid. And remember that non-working people, namely children and the elderly, are poorer than workers.
People in congress are millionaires, and it's not from congressional salaries. It's due to it being somehow legal for them to insider trade, and bribes in other guises.
Serving in public choice should for duty, not a career.
Make a fixed salary. If you dont like it, get a job elsewhere just like everyone else.
And oh, you wont get qualified candidates - nonsense. We had a movie actor, a silver spoon heir, a community organizer, a real estate broker and a lifelong politician as presidents.
There's nothing in technical expertise that they have in common. They were just good orators with some charistma and a penchant to lie with a smile...on their face.
Oh, you are worried of a bribe? Good thing we have FEC disclosure forms etc. Make them audited every year. Have more bite. Increase sentences. Put bounties on whistleblowing. Then sit back and relax
> suggested that Congressional salaries be a fixed multiple of minimum wage
That's insane no matter how you look at it.
Minimum wage is paid by individuals, private businesses and their owners. Congressional pay is paid for with your money - an effective infinite of your money, or they'll just poof new money out of nowhere to continue to pay themselves.
IMO an equation like that would be fine as long as you made it possible for CEOs of larger companies to make more money than CEOs of small and medium sized companies.
There’s a job market for C-Suite employees (whether we care to admit it or not). At a certain point you won’t get qualified candidates if you can’t reward them enough, same as engineers or any other role.
The answer for how much CEOs should be paid is the amount of money you would need to pay to employ the most optimal person to run the company. Figuring out what that number is is difficult.
And it can sometimes be VERY illiquid. Headhunters help to provide this liquidity and get paid for it.
Sometimes C-suite career people can go years without a job. Not every CEO or CFO makes fortune 500 comp and many people falsely assume low compensation volatility as e.g. a "career CFO". It can be extremely stressful, especially with family/dependents.
And hence median vs minimum, median scales well, but minimum is more aggressively equitable -- after all, it's a nice 'soft scaling lock', which we currently seem to struggle with.
If we can hit a nice logarithmic return on investment for company size, I think that would be nice. Like many things, perhaps impossible to easily achieve, but it's a nice thought in idea at least methinks <3 :'))))
The problem with this is that the CEO of Walmart is a much more important job than the CEO of McKinsey but under this formula they would get paid a fraction of the amount, no matter how well they did for Walmart workers.
The end result of this situation would probably be a mad dash to automate away any blue collar work, which may not be such a great thing.
I always think "I can clock out at 5pm" or "If I screw up it'll only cost me my job and not 1,000 people their jobs"
C levels deal with stuff I am not interested in and the while the pay is appealing the added life complexity is not. Thus I W2 while seeing my kids 90+ hours a week.
I always see people show this equation and it never made sense to me.
No one is saying the CEO is taking money the employees would have otherwise earned. When you divide it out like that of course its a pittance per employee.
The statement is about the relative scale of the CEO pay to one employee. I don't care about the difference applied to all employees.
An absurd parody I always imagine: John is 7ft tall. His group of 6 other other friends are only 6ft tall. Wow John is really tall! Nah, if you distribute his tallness between his friends they would only gain 2 inches! That has nothing to do with John being 12inches taller than any one of them.
It frequently doesn't matter how much the CEO makes. It's not why the other employees aren't making more money. It's just a distraction. It boils down to "it's not fair". If what is important is the ratio between CEO pay and employee pay, then the board can cut CEO pay, and call it a day. That doesn't improve employee pay.
If the employees really only care about that ratio, then they should accept that outcome from their strike. That's not why they are on strike, they also want to be paid more, just like the CEO.
yes, you're right, if you distributed john's height across his 6 friends, they'd all still be normal height, and nothing would really change for them, except that john would no longer be abnormally tall. you've taken a situation where there's something noteworthy, and made that noteworthiness disappear.
the same logic applies to CEO pay. you can either pay the CEO a lot, or you can pay everybody else an amount so slightly different that it's unnoticeable. there's value in paying a CEO a lot, or you can not pay them a lot, and not pay anybody else any more either. surely you can see how there might be value in offering a high salary for a role that can have a big impact on the company, and how simply not doing that and essentially erasing that money instead would be a bad decision?
> “Obviously, CEOs should be the highest-paid person in an enterprise, but then the question is exactly just how much higher than everyone else,” Josh Bivens, chief economist at EPI, told NPR.
Are there any examples where this isn’t true?
I know someone who works as an engineer cleaning up nuclear waste. The workers who do the job he engineers are paid more than him. He is ok with that but did pass the comment that it’s an unusual situation.
The football coach is often the highest paid employee at the university. I wouldn’t be surprised if many rockstar doctors made more than some of their hospital CEOs.
I’d imagine Linus Sebastian (of YouTube Linus Tech Tips fame) is taking home more money than the recently appointed CEO of the Linus Media Group. But that’s also a weird situation because he basically hired the CEO to free himself up to do the parts of the job he likes.
He said someone offered to buy the company for $60M cash I think it was? Which is astounding.
He and his wife own 100% the company so it might be better to hold on to the cash for tax purposes than pay themselves a lot because tax on payroll is pretty high compared to company's cash sitting in the bank.
In banks and financial companies it's relatively common that some rock star trader or quant that has an exceptionally good year might make more than the CEO.
Readit News
https://en.wikipedia.org/wiki/Mondragon_Corporation#Wage_reg...https://en.wikipedia.org/wiki/Worker_cooperative#Longevity_a...
[0] https://www.researchgate.net/publication/290978631_The_Mondr...
some ideas about how to offer "founder incentives" in workers cooperatives."
From a recent HN comment: https://news.ycombinator.com/item?id=37304911
It's a little weird that tech-folk are generally ok with the idea that groups can yield good predictions in the context of a non-owner community that is harnessed to improve a product, or in the context of a prediction-market, where people placing bets in disagreement can lead to a more accurate outcome than the participants taken separately would produce -- but somehow think this mechanism will fall apart if workers who have an interest in a firm's ongoing revenue are able to vote.
There is also the thrill of making something happen together. Like barn raising with 200 people is quite different from building a shed alone.
> On September 14, the contract between the United Auto Workers and the Big Three carmakers (GM, Ford and Stellantis) is expiring — and the possibility of a strike is real. This comes at a delicate time for multiple reasons. The labor market is tight, which means workers have other options. Inflation is high. And the auto industry is undergoing a major shift to the electric vehicle market, which may change the composition and pay of the labor force. The stakes are high. So what does the union want and how does it fit into the goals of the broader labor market? To understand more, we speak with Dan Vicente, the director of UAW Region 9, as well as Alex Press, a labor reporter at Jacobin magazine.
* https://omny.fm/shows/odd-lots/what-the-uaw-wants-from-its-f...
* https://www.youtube.com/watch?v=LBP8_8_S7Ls
There were some items that the unions conceded in 2008 when the US automakers were going bankrupt that have still have not been restored.
When they get it - right now every reports that they are asking for 40%
TFA conveniently points out to you that 20% has been offered to them and was rejected.
40% is table stakes.
Why has the supply of CEOs not kept up with the demand for them? Surely, with the improvement in education and in increase in MBA programs, there must be far more CEOs today than in 1978. Why has the ratio of CEOs to Companies fallen by 14x for their wages to rise this much? /s
As many argue, wages are only set by supply and demand. And if workers are underpaid, then it is because they are replaceable. Use the same framework to explain CEO pay.
Most of the time that I see people invoke "Econ 101" concepts, they are wrong. Supply and demand does not account for the power imbalance between workers and leadership, which unions specifically attempt to address. It does not account for the class differences between workers trying to make ends meet and the board of directors who believe they deserve much higher pay than workers. We are free to change the perceived value of workers through the power of worker solidarity - ensuring that individual workers are not so easily replaced to keep wages suppressed. You can simply say "it's supply and demand" and do nothing to support the workers whose labor is so clearly needed for our economy to function, or we can support collective bargaining rights to make sure that individual workers are not crushed under the power of company leadership. How you view this is up to you, and not a simple fact of natural laws of economics.
Yes, it does, in each scenario you presented.
> We are free to change the perceived value of workers through the power of worker solidarity
It's more like using the power of government to ensure the company has no alternative to the union.
Company leaders have no actual power over the workers. They cannot force anyone to come to work. They cannot have you arrested. They cannot confiscate your property. They cannot beat you. They cannot prevent you from accepting a job at another company. They cannot prevent you from leaving. They cannot extort, libel, slander, blackmail, or threaten you. They cannot put a hit on you.
All they can do is offer you money in exchange for your labor. That's it.
You’re both right. Power dynamics and supply and demand are interrelated.
Most forms of human organization involve hierarchy. Even co-ops have a CEO and that CEO makes a multiple of base worker pay.
What that multiple is and how it gets decided is a fair question: in co-ops, voting rights are built-in, but for private corporations you need collective bargaining
It's not that they're wrong. Worse, they're thought-stopping.
They're mantras we all know and we are trained to "accept their wisdom" and stop questioning.
Supply and demand is the imbalance. The workers, individually have no control over supply. The whole point of a union is to control the supply of labour and shift the balance of power.
Dead Comment
There was an example in Money Stuff this week where a CEO got a pay package "worth $110 million". It's actually made of stock options that vest if the share price went above $150, but the expected value was $110 million so that's what was reported.
…But the share price only reached $66. So in fact he was paid zero, and he quit. (Well, $1.5 million in cash.)
https://www.wsj.com/business/ceo-with-110-million-pay-packag...
> paid $1.5 million in cash
These are two wildly different things.
It gets a little weirder than that I suppose since you might have a great deal of shares in a company, which you never exercise so you could say that money doesn't really exist until exercised.
You can however use those shares as collateral for a mortgage or other line of credit which is a pretty common tactic for wealthy people to avoid paying income tax that they otherwise would if they were to sell said shares.
I'm fairly sure I could achieve the same results for considerably less.
Moreover making compensation dependent on stock price movement encourages corruption and fraud - look at the numerous Enrons and other financial claims. All of which left the majority of those responsible enriched while destroying the lives of others.
How many companies really break that relationship in their market sector?
So tldr, ceo pay is based on the economic cycle rather than how the company does.
I've seen this in my career, the closer I get to "SRE" or "platform engineer" the more decoupled my salary has become from my actual measurable value.
I'd articulate the thinking as, roughly:
We know this role is important. We know that having a bad SRE team (or CEO or platform team) is expensive, it could cost us the 100% of the business. And we don't know how to measure the value a good one provides. Therefore we are willing to spend as much as we can afford to make sure we get a good one.
The elite/ownership/"capitalism winner" class are playing on an entirely different level with their power and influence. Don't kid yourself into drawing comparisons with your situation and miniscule in comparison compensation. It's always heads they win, tails you lose.
This is pretty much it. Everyone wants to avoid hiring a bad CEO so it’s a bidding war for executives with track records at large companies.
And when you’re making billions a year the CEO compensation is a drop in the bucket.
And who are "we" in this train-of-thought? If it's shareholders, that's where the root of any problem lies. If shareholders are real businessmen and entrepreneurs who built up the company or similar companies, they will have a clue as to what is a good CEO. If the shareholders are real workers who believe in the company they're working for, they will have a clue as to what is a good CEO.
Today, shareholders are no longer real businessmen or real workers, but retirees represented by bureaucratic investors. That's why they have no clue as to what is a good CEO.
Worker pay is set by the leadership, leadership pay is set by the leadership.
Public unions seem more undesirable. There we have the gov negotiating with itself with no external accountability, unlike your example.
Dead Comment
That said, the CEO pay is easily explainable:
> Profits at the struck auto companies increased 92% from 2013 to 2022, totaling $250 billion, according to EPI
> CEO pay at the Big Three has grown 40% in the last decade, according to EPI
If you're the CEO of a company and you increased profits by 92%, I don't know seems pretty fair to me. There's a lot of other businesses that suck and haven't raised their profits in the meanwhile.
I think talking about the CEO pay is the wrong path (though I do admit it's marketable in the mainstream news). Just ask for what you think you deserve and don't work if you don't get it. It's as simple as that.
Did you? Attributing all the success a company achieves to the CEO feels shortsighted.
Aside from anything else: if all these companies saw their profits grow by so much surely there’s an external commonality there? “The CEO did it all” would be slightly more plausible if only one company experienced that success.
This assumes that the increase in profit is attributable primarily to the CEO. Well, that at least 43% (40/92) of it is.
> Just ask for what you think you deserve and don't work if you don't get it. It's as simple as that.
This only really works with unions. Fortunately, these workers have one.
If it's a company of one than I agree. In any other scenario the CEO led the company to a 92% increase. The CEO didn't do this alone. They maybe managed that increase and had a part in it but others most likely did the vast majority of all the work.
Now, how do you feel if the CEO fired 50% of the workers and maybe the remaining work twice as much to make up the slack. This leads to a 92% increase in profits and the CEO deserves the vast rewards?
Who's to say that the various attempts to "chart a new course" and change business strategy for the shareholder's benefit during that time didn't actually make these corporations underperform vs locking the executives in the boardroom and cutting off all their decision making ability for the same time period?
If a ceo grew front line employ pay and also profits at the same rate, the ceo pay should naturally follow that rate.
On the other hand, if they grow profits by suppressing wages, then they should eat the same pudding they served everyone else.
YOU, the CEO, didn't single-handedly increase profits by even a single percentage point. One employee out of 1 million, take your millionth of a cut of the profits, that's still $150K.
From 2013 to 2023 GM was beat in innovation by both Tesla (Model s,X , Y, and 3) and Ford (aluminum f150 and electric f150, mustang mach e) and has only recently been producing vehicles that look like their 2030 lineup - on the competitor's charging network technologies.
GM was even particularly slow on ice adoption of things like independent rear suspension. Or, the Corvette - where they basically pulled a Nissan and bought the competitor's engine.
Slow to innovate, early to fail (Volt/bolt), purchase from the competition is not what we should define as a good CEO.
And that's not even touching the fact that the workers are clearly valuable and irreplaceable enough that they can halt production like this.
look at tiny barely profitable companies, the gap between median wage and CEO is sometimes less than 2X.
all these takes on CEO pay when the reality is simple - CEOs are paid a lot because they the cost of being wrong is more than their pay. this results in companies that have a lot of money competing, driving up the price. the end. it's the same reason lebron james is paid 10X more than NBA average.
This is a statement that there is low quantity demanded by the market. It's actually a great example of how the naive supply-and-demand argument doesn't make a lot of sense.
I invite everyone here to raise their hand if they're just as hard-pressed as me to think of any job that they wouldn't do for a million per year.
Instead, the board has approved that compensation based on very real business needs: growing the company, acquiring competitors, changing business models, etc. It's actually hard to find a leader who has experience doing that thing and is also the right fit. Hiring the wrong CEO is a quick way to kill the whole company. On the flip side, to the board, a CEO that can drive meaningful growth is worth the risk, even if they have to fire with a golden parachute two years later.
I'm not trying to justify pay disparity (in fact I think there should be minimum AND maximum FT salaries when currently there are neither), but that's what's going through the board's mind when they set CEO compensation.
https://www.motorbiscuit.com/how-much-money-does-ceo-of-hond...
What separates the good CEOs from the poor CEOs isn't something you can readily teach. Some of the best ones have a preternatural ability for the role in the same sense that Lionel Messi has a preternatural ability at his sport, and are equally rare. The majority of CEOs are journeymen with the skills to do the job but not to be great at it. This doesn't mean that average employees are fit to be CEOs; you don't have to look further than startup CEOs, which are pulled from an above average pool of semi-random people, to discredit that notion. It is a highly specialized skill set that is difficult to acquire and most people aren't mentally cut out for what is required to be good at it. The experiment of promoting rando employees to CEO has been tried on occasion across industry with almost universally poor results.
This is true of most professions that command a high wage. Thinking that anyone could be a CEO is like thinking any dev can be Fabrice Bellard. Even if that turned out to be the case in a specific instance, no one should expect it to generalize.
If you ignore Pelé, the top soccer player had a similar increase in the same period. https://www.expensivity.com/soccer-salary-inflation/ Compared with the median income, they went from 10x in 1979 to 1300x in 2020. Why has the supply of Messis not kept up with the demand for them?
"Star" pay has exploded across all industries (entertainment, sports, and yes, business) and it's not hard to see why. Technology has vastly grown the size of markets, and the "winner take all/most" dynamics of these star-driven occupations means the winners are able to take an outsize chunk of the revenue.
I think there are some other things going on with CEO pay (CEO salaries are basically set by other CEOs, for example), but the parent comment absolutely gets it wrong when they say "the supply of potential CEOs has increased". In the competitive market for CEOs (as well as actors, musicians, sports stars, etc.), people are not interchangeable commodities. Someone who is only slightly better can be responsible for their corporation completely "winning" in some industry, and thus companies are willing to pay top dollar for this chance at getting the brass ring.
What they need to do is to publicly disclose the performance of their CEO. Have CEOs rated by staff and publicly distribute this info worldwide. They also need to implement clawback dating as far as a decade depending whatever products they in charge during their tenure. And lastly, always put full jail offenses directly on CEO without any plea bargain. Not doable? Then workers need to get retrenched as they rightly deserve it when they didnt bother to hop away.
If you expand your horizon somewhat to C-suite in general, it seems that demand for C-suite has tended to increase over time. If you also consider that C-suite is to some degree a Veblen good (demand increases as price goes up) [1], that makes sense under economic laws. Worker pay, unlike executive pay, is going to be considered a significant cost center, and business will higher fewer workers if individual pay is growing too quickly, making worker pay act like regular goods and not Veblen goods.
[1] The framework for setting CEO salaries tends to be "take the median CEO pay, add a little extra because our CEO's clearly better than average..."
Sure. It's the same framework that explains the pay of Lebron James. The NBA became a massively popular global game during the era of fast growth globalization, in which billions of consumers entered into the active global economy.
Now you've got like 50 players earning $30m or more per year in the NBA. To play a game in just the US market.
~450 active players earning around $5 billion per year in just league salary (not counting endorsements).
Now do it for global football, NFL football, Nascar, Major League Baseball, Hockey, F1, and so on.
Who knows the insane total compensation figure. $30 billion?
The economic force producing that comically massive figure, is the exact same reason Tim Cook is worth every dollar he's getting paid to operate the juggernaut that is Apple. The same goes for Nadella at Microsoft.
The top 450 NBA players earn more in salary every year than the CEOs of the S&P 500. Why shouldn't a CEO get paid extraordinarily well, as well as an NBA all-star, for operating a $10 or $20 billion market cap corporation? Obviously they should.
The only time I see arguments against high CEO pay (speaking generally), it's from people that know absolutely nothing about what a CEO does or how exceptionally difficult it is to operate a very big company.
And should mediocre CEOs that fail or otherwise perform poorly get golden parachutes? No, of course not. Exceptional CEOs should get properly exceptional pay. They deserve to earn drastically more than the average worker.
The common Redditor railing against CEO pay, looks at a Tim Cook and thinks they can maybe do what Cook does (he just sits in his chair in a big office while other people do all the work, dur dur dur), or what Nadella does, or a random S&P 500 CEO does. In reality they can barely do their own basic job, much less one ten tiers above them. The average Redditor is further away from being able to do Tim Cook's job than they are being able to do the job of Lebron James. The issue is the average person doesn't know anything about what a CEO does at all, they're entirely ignorant of it. However they can watch Lebron James play basketball and immediately understand they can't do anything like what James can do, because they get the physical visual display immediately, meanwhile they know zip about the job of a CEO at a big company. As usual the issue is extreme ignorance and mediocre education.
The most common argument I see is that the ceo pay has increased relative to the common or average employee salary. I doubt being a ceo has become that much more difficult over the same time period though.
Does this mean that I have been missing the CEO tournaments? surely they must compete with one another after all how else can you compare who is better without a direct face off?. It seems like the big companies always get the best CEOs so they must have scouts all over the place on the lookout for that great undiscovered CEO talent.
Or could it be that big companies always produce "great" CEO because its a lot harder to fail and a lot easier to win when you are stearing the biggest ships.
CEO wage negotiations have nothing in common with employee wage setting.
The NBA compensates workers based on the value they bring to the team. Isn't that what the UAW is arguing for?
The top 450? There's only 450 players. 30 teams, 15 players on the roster.
> earn more in salary every year than the CEOs of the S&P 500.
No, they don't.
There are 30 teams, with a salary cap of $136M, i.e. $4.08B.
I'm looking at the top CEO salaries and I'm already at $2.6B and I'm only at number 20.
So start there instead of making it seem like your few specific examples speak for the entire population of CEOs. Talk about the CEOs who fumbled completely during COVID despite having a great position, demanded benefits despite their huge reserves and are now crying about having to pay it back while their profits are up.
Talk about the CEOs dumping their toxic waste straight into the rivers to avoid having to pay costs. And the CEOs who push for every trick in the book to pay a close to zero net tax. And the ones who will lobby and keep almost any potential upstart from ever becoming a threat. And those who have solidified themselves in their branch thanks to first mover advantage, and can do whatever they want and still succeed despite our 'competitive free market' (yeah right).
>They deserve to earn drastically more than the average worker.
They already did in absolute terms. Percentages compound. How about explaining why CEOs need an even bigger advantage in both absolute and relative terms than they had before? Did the workers not contribute to their success?
And why are the workers the first to feel the headwind whereas the CEOs are the first to feel the tailwind?
Oh but they do! That’s the rub. Also it’s very hand wavy to say “the CEO’s job is exceptionally difficult”. But that person has a whole bunch of people bringing him ideas and trying to improve the company. In fact, that’s how you even get promoted. So they pick a bunch of things to do. If it doesn’t go well and the stock tanks, the first person to leave are the workers and not the CEO. In fact, in almost every case the CEO is the last to get affected. Win or lose for the company, the CEOs only win.
Is that performance related pay?
Or is it Crony Capitalism?
We should remember that CEO pay is often equity linked, and thus can vary. Not sure if workers want large portions of pay equity linked. I remember I was once in discussion with a hedge fund for a job and they offerred a sliding scale of pay that was cash vs equity. The more equity I opted for, the greater the pay, since of course there was risk involved.
CEOs are much different. A bad CEO can cost a large company 10s of billions in stock valuation. If you have a decent CEO, and you fire and replace him with a poor replacement, the damage to the company will be tremendous, so the board won't want to risk it. This gives good CEOs the leverage to demand massive compensation. A CEO can basically hold the company hostage by saying "I want a $10 million raise this year, and if I don't get it I'll quit. Have fun rolling the dice with my replacement!" (Though they would never actually say it that way) And the company will basically have to choose to pay an extra $10 million or roll the dice on potentially losing billions. This is why they almost always pay CEOs a massive amount.
Obviously.
If Steve Jobs—who first created and then basically rescued Apple and started it on the path to where it is today—can be 'replaced' then any other leader can be replaced.
Similarly there are plenty of CEOs that are paid oodles of money that were or are absolute garbage: see Boeing for the last 15+ years as Exhibit A.
That's the entire process of creating the professional corporate managerial class - you have reliably shown that you care more about the financial success of the company, and yourself, than you care for your employees and coworkers.
I mean how many movies and characters have we made that are precisely calling out this exact behavior:
Gordon Gekko
Bill Lumburgh
Mr "Coffee is for closers" Blake
Richard Chesler (Fight Club boss)
etc...
Like...we've been roasting this precise kind of corporate myopic psychopathic forever as what precisely not to be yet it's like an entire generation used them as pathfinders
Why would it?
If you want to hire a CEO, you either usually are looking either at A) A CEO of another company with experiences relevant the current situation, at a size similar to the current company's size. Or B) A senior exec (CFO, COO, etc ...) at the same company, or more rarely an involved board member.
These are self-limiting pools.
Dead Comment
Hold on there chap! How is this obvious?
If the CEO go on strike and don't come to work for a month, how many cars will not be built, and how money will the company lose?
If the union factory workers go on strike and don't come to work for a month, how many cars will not be built, and how much money will the company lose?
Therefore, who is actually more important to the earnings and success of the company?
Obviously large corporation will be more robust, and have things like attorney of power that - so that there's no single point of failure. But, these things happen.
https://www.theverge.com/2015/10/8/9481651/volkswagen-congre...
I can imagine a bunch of roles that are more costly to replace than "someone with accountability".
So much for that whole capitalism thing.
CEO's pay rate = (some multiplier) * median salaried worker's pay rate
OR
CEO's pay rate = (some multiplier) * minimum salaried worker's pay rate
We've been conditioned to think it's not fair somehow, but the discrepancy is just....engorgingly terrible. I'm not arguing for how this metric would be enforced, only that it would be a good one to have. Especially in a time when greed is the lowest common denominator in the race to the bottom for some of these large corporations.
It wouldn't fix the stockholder "value" chase, but at least it would shore up one part of the system weak to corruption.
Honestly I think that would probably fix things a lot faster.
This is why Singapore pays them even more than we do.
Anyway, minimum wages (despite being ok policies) aren't what people are actually paid, and of course aren't especially what non-working people are paid. And remember that non-working people, namely children and the elderly, are poorer than workers.
Serving in public choice should for duty, not a career.
Make a fixed salary. If you dont like it, get a job elsewhere just like everyone else.
And oh, you wont get qualified candidates - nonsense. We had a movie actor, a silver spoon heir, a community organizer, a real estate broker and a lifelong politician as presidents.
There's nothing in technical expertise that they have in common. They were just good orators with some charistma and a penchant to lie with a smile...on their face.
Oh, you are worried of a bribe? Good thing we have FEC disclosure forms etc. Make them audited every year. Have more bite. Increase sentences. Put bounties on whistleblowing. Then sit back and relax
That's insane no matter how you look at it.
Minimum wage is paid by individuals, private businesses and their owners. Congressional pay is paid for with your money - an effective infinite of your money, or they'll just poof new money out of nowhere to continue to pay themselves.
Correlating the two is plain wrong.
There’s a job market for C-Suite employees (whether we care to admit it or not). At a certain point you won’t get qualified candidates if you can’t reward them enough, same as engineers or any other role.
The answer for how much CEOs should be paid is the amount of money you would need to pay to employ the most optimal person to run the company. Figuring out what that number is is difficult.
And it can sometimes be VERY illiquid. Headhunters help to provide this liquidity and get paid for it.
Sometimes C-suite career people can go years without a job. Not every CEO or CFO makes fortune 500 comp and many people falsely assume low compensation volatility as e.g. a "career CFO". It can be extremely stressful, especially with family/dependents.
If we can hit a nice logarithmic return on investment for company size, I think that would be nice. Like many things, perhaps impossible to easily achieve, but it's a nice thought in idea at least methinks <3 :'))))
"Should" by what standard? Minimizing deadweight loss?
Deleted Comment
The end result of this situation would probably be a mad dash to automate away any blue collar work, which may not be such a great thing.
It’s a tough problem.
More typically, this results in the outsourcing/contracting away of lower value work.
I would say it would be a huge upgrade to get rid of investor CEOs and put in a worker CEO in place instead.
I always think "I can clock out at 5pm" or "If I screw up it'll only cost me my job and not 1,000 people their jobs"
C levels deal with stuff I am not interested in and the while the pay is appealing the added life complexity is not. Thus I W2 while seeing my kids 90+ hours a week.
Google says: 167,000 GM employees Mary Barra salary: $29M
Distribute that salary across the whole workforce: $174 per employee
They should really be talking about it in terms of inflation or profit margin. GM profit for 2022 was $21B
No one is saying the CEO is taking money the employees would have otherwise earned. When you divide it out like that of course its a pittance per employee.
The statement is about the relative scale of the CEO pay to one employee. I don't care about the difference applied to all employees.
An absurd parody I always imagine: John is 7ft tall. His group of 6 other other friends are only 6ft tall. Wow John is really tall! Nah, if you distribute his tallness between his friends they would only gain 2 inches! That has nothing to do with John being 12inches taller than any one of them.
If the employees really only care about that ratio, then they should accept that outcome from their strike. That's not why they are on strike, they also want to be paid more, just like the CEO.
the same logic applies to CEO pay. you can either pay the CEO a lot, or you can pay everybody else an amount so slightly different that it's unnoticeable. there's value in paying a CEO a lot, or you can not pay them a lot, and not pay anybody else any more either. surely you can see how there might be value in offering a high salary for a role that can have a big impact on the company, and how simply not doing that and essentially erasing that money instead would be a bad decision?
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$2 million, actually. The $29 million is total compensation; mostly stock awards.
I suppose I should be paid 167,000 more per year as a software engineer at GM because it's only 1 dollar per employee?
Are there any examples where this isn’t true?
I know someone who works as an engineer cleaning up nuclear waste. The workers who do the job he engineers are paid more than him. He is ok with that but did pass the comment that it’s an unusual situation.
He said someone offered to buy the company for $60M cash I think it was? Which is astounding.
I think the offer he mentioned was $100M for LTT.
I think NPR does a lot of damage not questioning assumptions like this. Or, often times, putting them out there themselves.