Ship of Fools: Are CEOs worth it?

Thread: Are CEOs worth it? Board: Purgatory / Ship of Fools.

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Posted by Ian Climacus (# 944) on :

I think not.

Not 78 x the average way in Australia. 10 x maybe. But you're pushing it. 7? Perhaps. 5? better.

I know this isn't going to change. And I know they have million, billion, dollar companies they must steer. But I find this, frankly, a bit obscene.

Is it a case of what the market will pay? What the market will pay to ensure their CEO does not go elsewhere even?

Is it the fact they hold a lot of risk and accountability in these million-dollar plus corporations? Though as a counterpoint see one example Google threw up here.

I am ready to be convinced they are. But I have trouble seeing it.

Posted by mousethief (# 953) on :

And if they steer those companies onto the shoals, they take their $30M golden parachute and drop safely in another company for them to wreck.

Posted by cliffdweller (# 13338) on :

...or run for president.

Posted by sharkshooter (# 1589) on :

quote:
Originally posted by Ian Climacus:
...
Is it a case of what the market will pay? ...

That's the way it works. One party has to be willing to pay it, and the other party willing to accept it. That makes it fair market value. Whether third parties (like you and I) think it is fair or reasonable is irrelevant.

Posted by mousethief (# 953) on :

Why is "fair market value" such a god? Why do we have to put up with that?

Posted by lilBuddha (# 14333) on :

It is market value, but it isn't fairly decided. CEO compensation is a closed loop, decided by a component of the board or directors which reports to the CEO. Often times consultants are employed and recommending a high salary to one CEO results in hiring by others.

Posted by Rossweisse (# 2349) on :

It's not "fair," nor is it right. Company heads get placed on other companies' boards, and then do reciprocal pay-raising, whether the stockholders' dividends justify it or not.

One particularly egregious example may be found in the newspaper business. Newsrooms have been emptied out because of declining profits, but top management still brings home unseemly millions.

It is indeed obscene.

Posted by Karl: Liberal Backslider (# 76) on :

quote:
Originally posted by sharkshooter:

quote:
Originally posted by Ian Climacus:
...
Is it a case of what the market will pay? ...
That's the way it works. One party has to be willing to pay it, and the other party willing to accept it. That makes it fair market value. Whether third parties (like you and I) think it is fair or reasonable is irrelevant.

Isn't accepting that the naturalistic fallacy applied to economics? This is what happens, therefore it's right?

I'm not sure it looks right from heaven. I'm not one for pulling texts out of the Bible as you know, because some bugger can always pull an opposite one out, but there does seem to be a lot in there about it not being a good thing for some people to have more than they know what to do with and others having bugger all.

Posted by Schroedinger's cat (# 64) on :

No they are not, but when businesses are seen primarily as money generators - money which goes to the directors and shareholders - this will always be the case. That is what is wrong (Charles Handy made this point very well).

It is a core principle of economics - and a wrong one - that the purpose of a company is to make money for the shareholders. That is, I believe, enshrined in company law in the UK. But the purpose of a company should be to produce benefit, to make something that is of value.

One answer is to enforce a wage differential. So, for example, the top paid person in a company - including bonuses - should not be paid more than 50x the lowest paid (including, IMO, contracted staff like cleaners, who have to be present). This does not stop the CEO earning stupid money, but it means that everyone in the company benefits, and that is something that many of them would resist.

Posted by Dafyd (# 5549) on :

quote:
Originally posted by sharkshooter:

quote:
Originally posted by Ian Climacus:
...
Is it a case of what the market will pay? ...
That's the way it works. One party has to be willing to pay it, and the other party willing to accept it. That makes it fair market value. Whether third parties (like you and I) think it is fair or reasonable is irrelevant.

Strictly speaking, we're second parties. The CEOs are the party who are willing to pay, and they are also the party who are willing to accept. It is possible that the CEOs when deciding what to pay themselves engage in hard bargaining with themselves to drive their salaries and bonuses down.

Posted by Dafyd (# 5549) on :

quote:
Originally posted by Schroedinger's cat:

It is a core principle of economics - and a wrong one - that the purpose of a company is to make money for the shareholders.

I believe that's a recent principle, as in late seventies or early eighties. It's not a core principle. I also believe that even the person who originally proposed it is not so sure of it now.

Posted by Snags (# 15351) on :

quote:
Originally posted by Dafyd:

quote:
Originally posted by Schroedinger's cat:

It is a core principle of economics - and a wrong one - that the purpose of a company is to make money for the shareholders.
I believe that's a recent principle, as in late seventies or early eighties. It's not a core principle. I also believe that even the person who originally proposed it is not so sure of it now.

It's also not enshrined in law.

The purpose of a business is to do whatever it says is the purpose in the Articles of Association. So if the Articles say that money is god over all, so be it. Generally they don't.

The "you have to maximise monetary profit and not consider social good or other less tangible benefits, it's Da Law" mantra is a Big Lie generally spouted by people wishing to justify a somewhat right-wing economic position without having to actually justify it. Because you can't.

Snags
Company director & shareholder who regularly makes decisions that do not maximise profit for the company or returns for the shareholders, because Other Shit Is More Important.

Also not yet in jail for it.

Posted by Kwesi (# 10274) on :

quote:
Sharkshooter: That's the way it works. One party has to be willing to pay it, and the other party willing to accept it. That makes it fair market value. Whether third parties (like you and I) think it is fair or reasonable is irrelevant.

Karl Liberal Backslider: Isn't accepting that the naturalistic fallacy applied to economics? This is what happens, therefore it's right?

Part of the problem or fraud is the assumption that “the market” is some sort of black box sent down from heaven which impartially distributes rewards, rather than a man-made construct designed to protect the interests of those who determine its rules. Executive pay seems to be determined by pay review boards composed of people in the same line of work scratching each other’s backs. How many of these executives would fare in a more open market is anyone’s guess. To my mind some CEO’s deserve every penny they get, but many don’t.

Posted by sharkshooter (# 1589) on :

quote:
Originally posted by Kwesi:
...Part of the problem or fraud is ...

Not sure why you think there is fraud in executive compensation.

If the Board of Directors feels the CEO is worth $xx million, they will pay it, otherwise, they won't. If the shareholders disagree, they can replace the board of Directors. If employees are offended they can seek employment elsewhere. If customers are offended, they can boycott. Sounds like everyone has a chance to voice their opinion, and to act on it.

I can't see why government intervention makes the market more free.

Posted by cliffdweller (# 13338) on :

quote:
Originally posted by sharkshooter:

quote:
Originally posted by Kwesi:
...Part of the problem or fraud is ...
Not sure why you think there is fraud in executive compensation.

If the Board of Directors feels the CEO is worth $xx million, they will pay it, otherwise, they won't. If the shareholders disagree, they can replace the board of Directors. If employees are offended they can seek employment elsewhere. If customers are offended, they can boycott. Sounds like everyone has a chance to voice their opinion, and to act on it.

I can't see why government intervention makes the market more free.

The point being made here is that a so-called "free market" is not the unequivocal greatest good we've been led to believe it is. The goal is not an absolutely free market, the goal is human flourishing. Sometimes a "more free" market aids that, sometimes it does not. In either case, a free market is at best a means to an end, not the goal in and of itself

Posted by Karl: Liberal Backslider (# 76) on :

quote:
Originally posted by sharkshooter:

quote:
Originally posted by Kwesi:
...Part of the problem or fraud is ...
Not sure why you think there is fraud in executive compensation.

If the Board of Directors feels the CEO is worth $xx million, they will pay it, otherwise, they won't. If the shareholders disagree, they can replace the board of Directors. If employees are offended they can seek employment elsewhere.

Because of course that's not at all hard to do, jobs aren't at all hard to come by, and one can always manage without one whilst one is looking.

People often say this, but in reality employees are generally stuck where they are until someone else makes them an offer.

But this is a side issue. We're not asking whether any of these groups object. We're asking whether it's OK for one fat bastard to have nearly all of the pie, while other people are starving and have no pie at all.

[ 06. December 2017, 14:05: Message edited by: Karl: Liberal Backslider ]

Posted by Doc Tor (# 9748) on :

quote:
Originally posted by sharkshooter:

quote:
Originally posted by Kwesi:
...Part of the problem or fraud is ...
Not sure why you think there is fraud in executive compensation.

If the Board of Directors feels the CEO is worth $xx million, they will pay it, otherwise, they won't.

No CEO is worth $xx million.

What it is, is willy waving. "We're so successful, we're so powerful, we can afford to spunk $xx million on the top job. That's more than MegaCorp and BigBox Group because we're the best."

It's a competition, not remuneration. Once you get that, it all falls into place.

[ 06. December 2017, 14:09: Message edited by: Doc Tor ]

Posted by L'organist (# 17338) on :

Its not just in business.

The Vice Chancellor of Southampton University has just been shown to have been a member of the remuneration committee which decided on his salary, boosting him to be one of the highest paid VCs in the UK. Is he worth it? Dunno, but it leaves a nasty taste in the mouth, especially after the unedifying spectacle of the VC of Bath, on over £430k a year, apparently not only being so strapped for cash she couldn't pay her own cleaner but needing a loan to buy a car.

As many people have pointed out, its not just the differences in salary, its the difference in the overall package: perhaps if every employee got generous pension provision, private health insurance, share options, etc, etc, etc, it wouldn't feel quite so inequitable but at the moment it sure looks like the rich provide for each other richly and the poor can just get lost.

Posted by mousethief (# 953) on :

quote:
Originally posted by sharkshooter:
I can't see why government intervention makes the market more free.

This is, of course, bullshit. Without government intervention there would be no market at all. Further free markets tend toward monopoly, which is the most unfree-est market of all. Without government intervention to prevent monopoly, the market cannot possibly be free. One of the purposes of government is to prevent power from overpowering. I can't see why the market should be any different in this respect than any other part of society.

Posted by mousethief (# 953) on :

quote:
Originally posted by sharkshooter:
If the Board of Directors feels the CEO is worth $xx million, they will pay it, otherwise, they won't. If the shareholders disagree, they can replace the board of Directors.

The major shareholders and the Board are all members of the same elite, bilking the economy as a whole to line their Cayman Island bank accounts to no apparent end (meant in both senses of the term). When your board is made up of CEO's of other major corporations, are they going to vote to keep your salary low? Come on, you know better.

Posted by Karl: Liberal Backslider (# 76) on :

quote:
Originally posted by Doc Tor:

quote:
Originally posted by sharkshooter:

quote:
Originally posted by Kwesi:
...Part of the problem or fraud is ...
Not sure why you think there is fraud in executive compensation.

If the Board of Directors feels the CEO is worth $xx million, they will pay it, otherwise, they won't.
No CEO is worth $xx million.

Indeed. We have, as a society, bought into the idea that these people have a rare talent which needs to be competed for by higher and higher renumeration offers until someone is blessed by having this great and sainted CEO by offering more than anyone else.

Who then does what, exactly, that virtually no-one else can do?

One is reminded of football team managers who I gather get sacked every time the players prove unable to put the ball in the net. Only in reverse.

[ 06. December 2017, 14:27: Message edited by: Karl: Liberal Backslider ]

Posted by lilBuddha (# 14333) on :

quote:
Originally posted by Karl: Liberal Backslider:

One is reminded of football team managers who I gather get sacked every time the players prove unable to put the ball in the net. Only in reverse.

Who gets sacked is not always the one who is the problem, but there are times when players not making goals is the coach's fault.

Posted by no prophet's flag is set so... (# 15560) on :

quote:
Originally posted by sharkshooter:
If the Board of Directors feels the CEO is worth $xx million, they will pay it, otherwise, they won't. If the shareholders disagree, they can replace the board of Directors. If employees are offended they can seek employment elsewhere. If customers are offended, they can boycott. Sounds like everyone has a chance to voice their opinion, and to act on it.

I can't see why government intervention makes the market more free.

Because many corporations are the only show in town or one of a very few. In Canada there are, for example, 5 (if I have the count right) banks. There really isn't any competition per se. Neither for telecommunications, much of manufacturing, grocery distribution.

Prior to the neo-liberal economic ascendency in the late 1970s, we taxed very high incomes quite aggressively. I believe the highest federal/provincial level was 72% in my province. It's no where near that now.

It has been repeated so frequently over 40 years that it is considered received wisdom: that government is bad, government control is big government, that there are too many regulations and so forth. Of course it is ideology and not fact. The executive compensation issue is one of the resulting problems where there isn't sufficient government control and supervision of the economy, the tax system is set to tax improperly.

At some point in the past we lost the basic idea that a business was there to serve a public need, employers took interests in their employees' wellbeing, their families, and the companies thought about their contributions to the community. Today, most often, the CEO is parachuted in, expects to last max 5 years, and the only goal is money. This is hyper-capitalism, except that the CEO is exposed to NONE of the risks of capitalism, collecting the huge pay without any risk of their own fortune. The idea that it is market forces that govern CEO salaries just isn't true. It's a scam, and the shrinking middle class gets screwed.

What's interesting about it, is as the middle class feels the squeeze and the CEOs collect more, and the middle class complains, the ready explanation that it is immigrants causing it, or the Chinese, or other third world countries. Toads then successfully sell this idea to the public who are fed falsehoods and they vote for the Toads who successfully blame things other than the actual cause.

Posted by Kwesi (# 10274) on :

sharkshooter

quote:
Not sure why you think there is fraud in executive compensation.

The ‘fraud’ is the notion that executive remuneration is someway ‘fair’ in terms of a supposed ‘free market’ . The determination of executive pay is by small cabals representing the corporate shareholders who dominate the larger public companies, and man (sic) the remuneration committees. What is being rewarded is more an individual’s institutional power and status rather than a demonstrated capacity to grow a business: bankers and university vice-chancellors in the vanguard. It’s not that some don’t deserve their riches, but one is not convinced that the general distribution of corporate rewards are market-determined in more than a formal sense.

Posted by Karl: Liberal Backslider (# 76) on :

quote:
Originally posted by lilBuddha:

quote:
Originally posted by Karl: Liberal Backslider:

One is reminded of football team managers who I gather get sacked every time the players prove unable to put the ball in the net. Only in reverse.
Who gets sacked is not always the one who is the problem, but there are times when players not making goals is the coach's fault.

Coaches are not managers.

Posted by sharkshooter (# 1589) on :

quote:
Originally posted by Karl: Liberal Backslider:
We have, as a society, bought into the idea that these people have a rare talent which needs to be competed for by higher and higher renumeration offers until someone is blessed by having this great and sainted CEO by offering more than anyone else.

Who then does what, exactly, that virtually no-one else can do?

Substitute baseball player or basketball player for CEO.

Posted by Schroedinger's cat (# 64) on :

It is a recent view, but recent as in 30 years old, so has heavily influenced business and the current situation - bear in mind we are only talking about comparatively recently where a CEO can take massive salaries irrepective of the performance of the company.

I accept the point about it being enshrined in law, but it is not about the purpose of the company, as the legal restriction over issuing shares. IANAL, so am talking from what I have heard.

Companies who don't have shareholders tend not to have the same astronomic CEO salaries.

Posted by lilBuddha (# 14333) on :

quote:
Originally posted by sharkshooter:

quote:
Originally posted by Karl: Liberal Backslider:
We have, as a society, bought into the idea that these people have a rare talent which needs to be competed for by higher and higher renumeration offers until someone is blessed by having this great and sainted CEO by offering more than anyone else.

Who then does what, exactly, that virtually no-one else can do?

Substitute baseball player or basketball player for CEO.

No. players generate money based on their performance and popularity and they all do far more in their chosen profession than you, sharkshooter, could do if you were substituted in for any of them. They are paid directly in proportion to their affect on the team's revenue. Well, more directly.

Posted by sharkshooter (# 1589) on :

quote:
Originally posted by lilBuddha:
they all do far more in their chosen profession than you, sharkshooter, could do if you were substituted in for any of them.

Nor could I lead a large corporation.

Posted by sharkshooter (# 1589) on :

quote:
Originally posted by Doc Tor:
...No CEO is worth $xx million.

...

No car is worth $3 million.

I agree with both statements. "Worth" is relative and subjective.

Posted by lilBuddha (# 14333) on :

quote:
Originally posted by sharkshooter:

quote:
Originally posted by lilBuddha:
they all do far more in their chosen profession than you, sharkshooter, could do if you were substituted in for any of them.
Nor could I lead a large corporation.

Many CEOs do not do any actual leading. That isn't hyperbole or insult but a bare statement of fact.

Posted by Crœsos (# 238) on :

quote:
Originally posted by sharkshooter:

quote:
Originally posted by lilBuddha:
they all do far more in their chosen profession than you, sharkshooter, could do if you were substituted in for any of them.
Nor could I lead a large corporation.

I don't know about that. You seem just as capable of cratering a large corporation as Carly Fiorina (paid US$21M by Hewlett-Packard to just go away) or James Cayne. I bet you'd be able to destroy (or nearly destroy) a company for half that much (at most)!

Posted by cliffdweller (# 13338) on :

quote:
Originally posted by no prophet's flag is set so...:

quote:
Originally posted by sharkshooter:
If the Board of Directors feels the CEO is worth $xx million, they will pay it, otherwise, they won't. If the shareholders disagree, they can replace the board of Directors. If employees are offended they can seek employment elsewhere. If customers are offended, they can boycott. Sounds like everyone has a chance to voice their opinion, and to act on it.

I can't see why government intervention makes the market more free.
Because many corporations are the only show in town or one of a very few. In Canada there are, for example, 5 (if I have the count right) banks. There really isn't any competition per se. Neither for telecommunications, much of manufacturing, grocery distribution.

Prior to the neo-liberal economic ascendency in the late 1970s, we taxed very high incomes quite aggressively. I believe the highest federal/provincial level was 72% in my province. It's no where near that now.

It has been repeated so frequently over 40 years that it is considered received wisdom: that government is bad, government control is big government, that there are too many regulations and so forth. Of course it is ideology and not fact. The executive compensation issue is one of the resulting problems where there isn't sufficient government control and supervision of the economy, the tax system is set to tax improperly.

At some point in the past we lost the basic idea that a business was there to serve a public need, employers took interests in their employees' wellbeing, their families, and the companies thought about their contributions to the community. Today, most often, the CEO is parachuted in, expects to last max 5 years, and the only goal is money. This is hyper-capitalism, except that the CEO is exposed to NONE of the risks of capitalism, collecting the huge pay without any risk of their own fortune. The idea that it is market forces that govern CEO salaries just isn't true. It's a scam, and the shrinking middle class gets screwed.

What's interesting about it, is as the middle class feels the squeeze and the CEOs collect more, and the middle class complains, the ready explanation that it is immigrants causing it, or the Chinese, or other third world countries. Toads then successfully sell this idea to the public who are fed falsehoods and they vote for the Toads who successfully blame things other than the actual cause.

A very hellish ditto to all of the above, and mousethief's comments as well.
[Mad]

Posted by cliffdweller (# 13338) on :

quote:
Originally posted by lilBuddha:

quote:
Originally posted by sharkshooter:

quote:
Originally posted by lilBuddha:
they all do far more in their chosen profession than you, sharkshooter, could do if you were substituted in for any of them.
Nor could I lead a large corporation.
Many CEOs do not do any actual leading. That isn't hyperbole or insult but a bare statement of fact.

Yes. While it's nice of sharpshooter to sound so humble, I'm less and less convinced that is a fact. I'm more and more wondering if we'd have at least a 50/50 chance of a better outcome (depending on how you measure "better outcome") if we just grab some random minimum-wage earner off the factory floor who knows a lot more about widgets you're manufacturing than the guy parachuted in who last week was CEO of a sprocket company.

Posted by Karl: Liberal Backslider (# 76) on :

quote:
Originally posted by sharkshooter:

quote:
Originally posted by Karl: Liberal Backslider:
We have, as a society, bought into the idea that these people have a rare talent which needs to be competed for by higher and higher renumeration offers until someone is blessed by having this great and sainted CEO by offering more than anyone else.

Who then does what, exactly, that virtually no-one else can do?

Substitute baseball player or basketball player for CEO.

No. CEOs are analogous with the managers.

Posted by Dafyd (# 5549) on :

quote:
Originally posted by no prophet's flag is set so...:
Today, most often, the CEO is parachuted in, expects to last max 5 years, and the only goal is money.

That's the other problem: the market for share buyers is at the moment heavily slanted towards hedge funds and financial institutions with lots of liquid capital seeking short-term profits. That means that a company are being run to boost their share price by selling off assets and cutting its workforce to levels that are unsustainable in the long term. It's more difficult for a company to raise money for long-term investments.
A CEO who pays themselves in shares isn't necessarily tied to the fortunes of the company, since the expectation is that shares will be easily sold on.

Posted by sharkshooter (# 1589) on :

quote:
Originally posted by Karl: Liberal Backslider:

quote:
Originally posted by sharkshooter:

quote:
Originally posted by Karl: Liberal Backslider:
We have, as a society, bought into the idea that these people have a rare talent which needs to be competed for by higher and higher renumeration offers until someone is blessed by having this great and sainted CEO by offering more than anyone else.

Who then does what, exactly, that virtually no-one else can do?

Substitute baseball player or basketball player for CEO.
No. CEOs are analogous with the managers.

Not pay-wise.

Do I take it you are ok with some employees (baseball players) making $33 million a year, but not other employees (CEOs)?

Posted by cliffdweller (# 13338) on :

No one is suggesting all employees be paid the same regardless of responsibility or ability or effort. The general thrust of the thread seems to be that there ought to be some reasonable mathematical relationship (20x, 50x, something other than the current 500x) between the highest paid employee-- whether that be the "talent" (e.g. well-paid athletes and actors) or the CEO-- and the lowest paid. There is no upper limit on compensation for those upper wage earners, but forcing them to consider that mathematical relationship and calculate the cost of bringing up 1000s of employees to a wage that allows their desired raise helps guard against a sort of feudal arrangement with a very small number of land(business) owners profiting off the backs of a large number of economically oppressed people trapped in poverty. This is very very nearly the situation now in the US, with no hope of turning that around without some sort of govt intervention.

Posted by sharkshooter (# 1589) on :

So a baseball team that pays minimum wage to certain employees in, say, the mail room of the head office, is restricted on what they can play their superstars? If minimum wage is $20,000/year, the player salary would be capped at, for example, $1,000,000?

Is that what you are proposing?

Posted by lilBuddha (# 14333) on :

quote:
Originally posted by sharkshooter:

quote:
Originally posted by Karl: Liberal Backslider:
No. CEOs are analogous with the managers.
Not pay-wise.

Do I take it you are ok with some employees (baseball players) making $33 million a year, but not other employees (CEOs)?

A CEO would be more analogous to the owner of a team than the manager, but analogies are not always perfect.
How about sticking to trying to prove that CEO's are worth their pay?

[ 07. December 2017, 16:21: Message edited by: lilBuddha ]

Posted by Kwesi (# 10274) on :

cliffdweller

quote:
The general thrust of the thread seems to be that there ought to be some reasonable mathematical relationship (20x, 50x, something other than the current 500x) between the highest paid employee-- whether that be the "talent" (e.g. well-paid athletes and actors) or the CEO-- and the lowest paid.

I don't think well-paid sportsmen should be treated the same way as CEOs because their remuneration is closely allied to their market value: the amount the fans are prepared to pay to watch them, their value to the club in getting them trophies and into prestigious competitions (more gate money and better TV rights), and the number of shirts and other items their names shift. If their income is artificially restricted then the benefit is to the shareholders of the club, and there may be a drop in performances with the removal of incentives. Once their talents and value recede market forces quickly ensure that is reflected in their pay and terms of future contracts. Similar criteria apply to actors and entertainers. CEO pay is not linked to performance in anything like the same way, as I've suggested before.

Posted by Crœsos (# 238) on :

quote:
Originally posted by cliffdweller:
There is no upper limit on compensation for those upper wage earners, but forcing them to consider that mathematical relationship and calculate the cost of bringing up 1000s of employees to a wage that allows their desired raise helps guard against a sort of feudal arrangement with a very small number of land(business) owners profiting off the backs of a large number of economically oppressed people trapped in poverty.

quote:
Originally posted by sharkshooter:
So a baseball team that pays minimum wage to certain employees in, say, the mail room of the head office, is restricted on what they can play their superstars? If minimum wage is $20,000/year, the player salary would be capped at, for example, $1,000,000?

Is that what you are proposing?

That actually seems to be the opposite of what cliffdweller is actually proposing. I also question why an organization that pays multi-million dollar salaries to others is paying a poverty-level wage to an important member of its communications staff. Seems like a free rider problem, sloughing off some of an employee's upkeep onto the social safety net. (For reference, a married couple in the U.S. living on $20,000/year is qualified for Medicaid.)

[ 07. December 2017, 16:27: Message edited by: Crœsos ]

Posted by sharkshooter (# 1589) on :

quote:
Originally posted by lilBuddha:

How about sticking to trying to prove that CEO's are worth their pay?

Because I think the proposition is too restrictive.

I have no inclination to prove anyone is worth that kind of money: CEO, baseball player, or Roger Goodell.

Posted by Crœsos (# 238) on :

quote:
Originally posted by sharkshooter:

quote:
Originally posted by lilBuddha:
How about sticking to trying to prove that CEO's are worth their pay?
Because I think the proposition is too restrictive.

I have no inclination to prove anyone is worth that kind of money: CEO, baseball player, or Roger Goodell.

The thread title is literally "Are CEOs worth it?" If you don't want to discuss that, why are you here?

Posted by hatless (# 3365) on :

Sports stars do at least seem to be a meritocracy. Footballers in the UK are not usually from privileged backgrounds. They may be overpaid, but there is more sense that they’re worth it than with CEOs. I couldn’t do Harry Kane’s job, but I could do a CEO’s job, at least long enough to never need to work again.

No one yet has mentioned that money is power. Rich people have more influence in politics, greater access to law, healthcare, education, etc. Their children and any others they support can jump queues to get jobs, places at university, opportunities at those sports, unlike football, which are strongly skewed to the rich.

An author may sell millions of books, and you could say they have earned it and are worth it, but still, it is wrong for one person to count for so much more than others.

[ 07. December 2017, 17:11: Message edited by: hatless ]

Posted by Crœsos (# 238) on :

quote:
Originally posted by hatless:
Sports stars do at least seem to be a meritocracy.

Not always. Sometimes players are blackballed for political (or other non-merit-based) reasons.

Posted by cliffdweller (# 13338) on :

quote:
Originally posted by sharkshooter:
So a baseball team that pays minimum wage to certain employees in, say, the mail room of the head office, is restricted on what they can play their superstars? If minimum wage is $20,000/year, the player salary would be capped at, for example, $1,000,000?

Is that what you are proposing?

Some variation on that, yes. 100s of successful companies (most notably, Costco) work this way. It's the sort of thing that works best when mandated across the board so you're not at a disadvantage with your competitors

Posted by Karl: Liberal Backslider (# 76) on :

quote:
Originally posted by sharkshooter:

quote:
Originally posted by Karl: Liberal Backslider:

quote:
Originally posted by sharkshooter:

quote:
Originally posted by Karl: Liberal Backslider:
We have, as a society, bought into the idea that these people have a rare talent which needs to be competed for by higher and higher renumeration offers until someone is blessed by having this great and sainted CEO by offering more than anyone else.

Who then does what, exactly, that virtually no-one else can do?

Substitute baseball player or basketball player for CEO.
No. CEOs are analogous with the managers.
Not pay-wise.

Do I take it you are ok with some employees (baseball players) making $33 million a year, but not other employees (CEOs)?

No, and I think you've spectacularly missed my point.

Posted by Dafyd (# 5549) on :

quote:
Originally posted by sharkshooter:
So a baseball team that pays minimum wage to certain employees in, say, the mail room of the head office, is restricted on what they can play their superstars? If minimum wage is $20,000/year, the player salary would be capped at, for example, $1,000,000?

The team isn't forced to pay minimum wages to its employees. If it can find enough down the back of the sofa to pay its star player $2,000,000 it can probably find another $1,000,000 to pay its fifty minimum wage employees another $20,000 each.

That is especially true if all the other teams in the competition have to do the same.

Posted by Jay-Emm (# 11411) on :

Entrepreneurs and Author's of various media, in certain respects are responsible for what they've done and have often taken a real risk. On the other hand it's not done in a vacuum. Bill Gate's didn't create the software he sold, he did well in selling it to IBM, but didn't create them and their strength. He didn't pay for the school IT staff who taught Office, but he did a lot to make it that way. Technically uncapped but logrithmically harder sounds superficially right (if impossible to arrange in practice).

Sports Stars (and possibly other Stars) are arguably the best, but the market is rigged so that being the best is much better than being 2nd.
Ronaldo might be better than 2 of me, but not 5,000 but that isn't allowed to be an option.
If they want that protection, then they can take some limits in exchange.

CEO's on the other hand. There's little evidence they provide a greater contribution than any other employee. Most of them didn't create the institution they run (or in modern cases even work for it). Few of them have taken serious risks. It's just that they are more or less in charge of they're own pay from the shared pot and their successors recruitment.

Posted by sharkshooter (# 1589) on :

quote:
Originally posted by Crœsos:
If you don't want to discuss that, why are you here?

I'm on your side here.

quote:
Originally posted by sharkshooter:

quote:
Originally posted by Doc Tor:
...No CEO is worth $xx million.

...
No car is worth $3 million.

I agree with both statements. "Worth" is relative and subjective.

I simply wanted to expand the concept beyond CEOs.

Posted by Leorning Cniht (# 17564) on :

quote:
Originally posted by Rossweisse:
It's not "fair," nor is it right. Company heads get placed on other companies' boards, and then do reciprocal pay-raising, whether the stockholders' dividends justify it or not.

What is it's a privately-owned company. No board of cronies - just a small number of owners deciding how much to pay someone to run their company. Does that change your argument?

Posted by Leorning Cniht (# 17564) on :

quote:
Originally posted by sharkshooter:
So a baseball team that pays minimum wage to certain employees in, say, the mail room of the head office, is restricted on what they can play their superstars? If minimum wage is $20,000/year, the player salary would be capped at, for example, $1,000,000?

Sounds like an invitation to contract out all your cleaning, mail room operations and so on to "Big Sports Servicing Ltd.", leaving "Big Sports Team Ltd." to employ the players and coaches.

Posted by cliffdweller (# 13338) on :

quote:
Originally posted by Leorning Cniht:

quote:
Originally posted by sharkshooter:
So a baseball team that pays minimum wage to certain employees in, say, the mail room of the head office, is restricted on what they can play their superstars? If minimum wage is $20,000/year, the player salary would be capped at, for example, $1,000,000?
Sounds like an invitation to contract out all your cleaning, mail room operations and so on to "Big Sports Servicing Ltd.", leaving "Big Sports Team Ltd." to employ the players and coaches.

Sure. People will always find loopholes. But that doesn't mean the effort to combat income inequality isn't worth pursuing.

Posted by sharkshooter (# 1589) on :

quote:
Originally posted by cliffdweller:
... People will always find loopholes. But that doesn't mean the effort to combat income inequality isn't worth pursuing.

Lawyers are experts at finding loopholes in any legislation, be it taxation or otherwise.

Posted by Karl: Liberal Backslider (# 76) on :

quote:
Originally posted by Leorning Cniht:

quote:
Originally posted by sharkshooter:
So a baseball team that pays minimum wage to certain employees in, say, the mail room of the head office, is restricted on what they can play their superstars? If minimum wage is $20,000/year, the player salary would be capped at, for example, $1,000,000?
Sounds like an invitation to contract out all your cleaning, mail room operations and so on to "Big Sports Servicing Ltd.", leaving "Big Sports Team Ltd." to employ the players and coaches.

I think the proposal included provisions to address that.

Posted by cliffdweller (# 13338) on :

quote:
Originally posted by sharkshooter:

quote:
Originally posted by cliffdweller:
... People will always find loopholes. But that doesn't mean the effort to combat income inequality isn't worth pursuing.
Lawyers are experts at finding loopholes in any legislation, be it taxation or otherwise.

Again, yes. Which is a problem to be solved. But not a reason to abandon any attempt to address the dangerous income inequality that currently exists.

Posted by lilBuddha (# 14333) on :

quote:
Originally posted by sharkshooter:
I simply wanted to expand the concept beyond CEOs.

You are not expanding the concept. There are loads of things to which cost is not proportional to benefit. There are different reasons for each category of such. You have not yet shown any that fit in the same category as CEO.

Posted by Dark Knight (# 9415) on :

As mousethief and others have pointed out, sharkshooter has a troublingly naive view of how neoliberal economics works. The idea presented to the hoi polloi is that markets are entirely free and subject only to the "pure" determinative forces of supply and demand. The reality is that a strong state is required in neoliberal dogma for one reason above all - to guarantee the sovereignty of the market. There is nothing free about these markets at all.

It is a bit older now, but the film Inside Job does a decent job at exploding this utterly absurd myth that CEOs are worth their despicable salaries. One of the greatest frauds of all is the destruction of legislation which made possible the "too big to fail" phenomenon. The issue is that massive finance corps face no consequences for their actions, as the state steps in to rescue them when they start to slide. The fallacy of the "free" market thus becomes evident.

And in the final insult, these failed leaders pocket enormous bonuses and golden handshakes for destroying the economy.

Are CEOs worth it? Only if "it" is a lengthy period of incarceration.

Posted by sharkshooter (# 1589) on :

quote:
Originally posted by Dark Knight:
As mousethief and others have pointed out, sharkshooter has a troublingly naive view of how neoliberal economics works. ...

Are CEOs worth it? Only if "it" is a lengthy period of incarceration.

Read for comprehension. I agree with you that they are not worth millions.

Posted by Dark Knight (# 9415) on :

Nice snip. If you read the rest of my post, it deals with your litany of errors.

Posted by sharkshooter (# 1589) on :

Whatever.

Posted by no prophet's flag is set so... (# 15560) on :

Dark Knight has it right: there is much wrong with the idea that markets are free. They are not. Part of business is to manipulate things with laws to your favour. Someone I understand that corporations are people, Thus it is not the people taking any form of risk in business. If something goes wrong, the corp needs the bailout, and individuals are not help responsible, must collect their pay. Then rinse, and repeat with than corp or another.

I had thought at one point we called such corporate control of the political economy fascism or totalitarianism, rather than "received wisdom".

In Saskatchewan, the neo-liberal government tried to put up the provincially owned telecommunications company (SaskTel, provides land lines and cellphone, cable TV, internet, home security systems) up for "partial sale". It had to back down when it became clear the costs were less here than in other provinces for the same services. Which begs the question of how the CEOs and management of Rogers, Bell, Telus etc can justify their compensation. But then, telecommunications is basically a monopoly, and when you privatize a monopoly, the results are probably predictable.

[ 09. December 2017, 18:01: Message edited by: no prophet's flag is set so... ]

Posted by Gramps49 (# 16378) on :

Ian is complaining CEO's in Australia are getting 78 times more than the average worker in their company.

Try 500 times more than the average worker in companies in the United States!

As I look across the pond, and elsewhere, countries that have a high progressive tax generally have a strong middle class because companies are forced to down pay to the workers rather than up pay to the CEOs

For that reason, I would want to see the US go back to the progressive tax structure of the Eisenhaur years when CEOs were getting about 15 times more than the average worker in their company.

Posted by Sober Preacher's Kid (# 12699) on :

It goes back to a paradigm shift that happened in the 1980's. Aside from taxes.

The question is: are corporate employers to be viewed as an institution with a long life expectancy, or are they 'ventures' with a five year lifespan?

From the 1930's to the late 1970's, corporations were viewed as institutions. They were long-lived, had broad time horizons, and CEO's were paid to be the chief administrator.

Then along comes the Takeover movement. Hostile takeovers, until this time, had been very, very rare. Now a CEO was now expected to boost profitability and share price over a five-year horizon, or face a hostile takeover.

CEO's became pirates, looking for a ship (company) to plunder for loot and then move on. And were paid for being pirates. Hence the premium.

Posted by wild haggis (# 15555) on :

When people who work hard are having to go to food banks to top up; when people can't afford to buy houses with both partners earning good wages; when children are living in B&Bs; when teachers who slog more than 60 hours a week get a pittance with no yearly rise; when nurses who work unsociable hours, care and save lives haven't had a rise within inflation for years and years........yet CEOs, sports stars etc are earning obscene salaries, it's unjust and obscene! No one is worth these salaries. Don't kid yourslef.

The market sucks. It's just used for the rich to get richer and ordinary folks to go to the wall. Where is this market anyway? It's controlled by the rich. So it is self-perpetuating.

CEOs get bonuses when they don't reach the targets that they are supposed to achieve to get the bonus. How can that be fair?

No one needs £500,000 a year to live on! But people need to be able to have roof over their heads and to feed themselves. Many of these CEOs pay their workers disgracefully and yet rake it in. No they aren't worth it - particularly the heads of banks that we, the British public bailed out. They are stealing from us.

Uni Vice -chancellors live a life of Reilly while students are landed with debts of tens of thousands of pounds and junior lecturers who work very hard get paid very little.

There is one word for it all.......GREED!

Posted by wild haggis (# 15555) on :

Let's be clear here not just economic theory or money. We are talking about people. People make these decisions about who gets paid what. There is a refusal to live in the real world by most CEOs.

When people who work hard are having to go to food banks to top up; when people can't afford to buy houses with both partners earning good wages; when children are living in B&Bs; when teachers who slog more than 60 hours a week get a pittance with no yearly rise; when nurses who work unsociable hours, care and save lives haven't had a rise within inflation for years and years........yet CEOs, sports stars etc are earning obscene salaries, it's unjust and obscene! No one is worth these salaries. Don't kid yourslef.

The market sucks. It's just used for the rich to get richer and ordinary folks to go to the wall. Where is this market anyway? It's controlled by the rich. So it is self-perpetuating.

CEOs get bonuses when they don't reach the targets that they are supposed to achieve to get the bonus. How can that be fair?

No one needs £500,000 a year to live on! But people need to be able to have roof over their heads and to feed themselves. Many of these CEOs pay their workers disgracefully and yet rake it in. No they aren't worth it - particularly the heads of banks that we, the British public bailed out. They are stealing from us.

Uni Vice -chancellors live a life of Reilly while students are landed with debts of tens of thousands of pounds and junior lecturers who work very hard get paid very little.

There is one word for it all.......GREED!

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