February 11, 2013 at 5:23 pm #606481
Hey, all you free-marketers, you defenders of the “invisible hand”, you champions of the private sector meritocracy, respond please to the following bit of data:
“…despite the low turnover rates, pay for chief executive officers is rising at a rate that far outstrips the perfunctory raises seen among the corporate rank-and-file. Pay for CEOs in the U.S. rose 725 percent between 1979 and 2011. Worker pay rose 5.7 percent during the same time period…”
Through good times and bad, through gross incompetence and malfeasance, reward and enshrinement continue.
HMCRich, Skeeter, et al, does this work for you? If not, how do we fix? ‘Splain please?February 11, 2013 at 5:33 pm #784389
Oh, and while you’re pondering just how productive those nutty CEO’s were to “earn” those wheelbarrows of bonuses, let’s not forget that worker output per hour rose 87% between 1980 & 2010.February 11, 2013 at 9:03 pm #784390
1) Who cares what someone else makes? It is not a “zero sum” game.
2) If you want to make CEO type money then go be a CEO……
Or and actor (what is the wage growth of lead actors compared to key grips over the same time frame?)
Or an athlete (what is the wage growth of starting pitchers compared to umpires over the same time frame?)February 11, 2013 at 9:59 pm #784391
CEO pay is completely out of control. I have no idea why these boards are setting CEO pay so darn high. It’s almost some sort of “race to the top” when it comes to compensating CEOs. Every board is trying to outdo the competition so they keep raising CEO pay. That increased pay becomes the new benchmark, so the competitor has to raise CEO pay accordingly. It’s a sickness and I hate it.
As a shareholder in several publicly owned companies, I think part of my money is being wasted on excessive CEO pay.
It’s not just CEO payroll where my money is being wasted. It’s also frivolous expenses. When I learned that Coca Cola had an early order for a Gulfstream G650 aircraft (google it) I wrote the shareholder relations contact an email explaining that I am a shareholder and I thought it was a waste of my money. There are other corporate aircraft that are 95% as fast with 95% of the range but cost half the price of the G650. I guess these guys just want to show off or something by having the latest and greatest aircraft and they don’t give a **** if there is a less expensive alternative. Every shareholder ought to be mad.
How do we fix it though? I have no idea.
I did just read that with the increased federal income tax on high earners, the increased state income tax in CA, and the new ACA medicare tax on high earners, the marginal individual tax rate is something like 51 or 52% in California. So if it makes you feel better, over half of the pay is going “back to the people.”February 11, 2013 at 10:01 pm #784392
Smitty – I care what someone else makes if I have an equity position in the company.February 11, 2013 at 10:01 pm #784393
<<CEO pay is completely out of control. I have no idea why these boards are setting CEO pay so darn high. >>
Because boards are mostly made up of CEOs of other companies, so its completely in their interest to inflate the “market rate” for a CEO.February 11, 2013 at 10:04 pm #784394
Who cares what anybody else makes, Smitty? Really? Excellent!
Then let’s raise the minimum wage to levels recommended by a number of economists and put forth in jointly sponsored bills to the inflation adjusted $14/hr.
Oh wait, those things get filibustered and buried by somebody. Lemme’ check and see who does that. I know I can find it somewhere around here… ;-)February 11, 2013 at 10:06 pm #784395
The data you’re quoting comes from http://www.epi.org/publication/ib331-ceo-pay-top-1-percent/ whose reliability I can’t vouch for, but at least it’s cited correctly now.
The rise in CEO pay looks about an annual 6% through 1989, and then both higher and more variable since then. All in all, it’s not an insane average rate.
The question you might really ask is why worker pay is so flat, to the point of not even matching inflation. Again, that’s assuming the EPI numbers are valid.February 11, 2013 at 10:27 pm #784396
I think it’s perfectly appropriate to ask both questions. Simply because it’s not “insane” by your estimate doesn’t mean it’s indicative of a rational ratio. And I lived through the 80’s, as I’m sure you did. Not thinking I averaged anywhere CLOSE to 6% annual increases. I got great reviews and was usually told to be STOKED about 4% cuz that’s more than most of my cohorts got.
But back to the question of why this matters. It’s more than just the $. It’s indicative of a growing sense that the CEO class is infallible. It doesn’t matter how your company performs, if it tanks you just get less than a boatload of compensation. You don’t step down in shame. You don’t admit fault. If anything, you claim victory and move on to the next “failing upward” gig. These folks are so insulated from reality as to not even dare recognize when they hose something up. THAT’S the root of the issue.
And it leads to all sorts of poor decisions that are predicated on their basic assumption of infallibility. Outsourcing and losing core competencies while producing poor quality. Buying other companies to reduce competition and gain monopolies instead of building better mousetraps. The list goes on.
And not the least of which, is deciding that those profits are better spent buying legislation, giving each other bonuses and virtually anything but major profit sharing with the folks in the trenches.
But it’s all good. Got a new house in the Hamptons. Hope to get there sometime…February 12, 2013 at 1:21 am #784397
Yah, this isn’t really about the numbers anyway. It’s about the attitude, where people think the rules don’t apply to them and that huge compensation is appropriate just because their title says C and not because their company is improving.
Looking at CEO pay vs the S&P 500 as a metric of how much they’re getting paid relative to shareholder value, CEO pay tripled 1965-1978, was flat through the 80’s, doubled quickly in the early 90’s, and has been flat since. But there are enormous holes in that line of reasoning; I don’t have nearly the right data to do anything valid.February 12, 2013 at 3:01 am #784398
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