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comment by goobster
goobster  ·  374 days ago  ·  link  ·    ·  parent  ·  post: No one should be a billionaire

Thanks for your thoughts! I like getting the European thinking in here, as well. (FYI - I lived in Budapest for 7 years, only a decade after the Berlin Wall came down. So I watched as Eastern Europe awoke from Communism, and moved into parliamentary democracies. It was an eye-opening time.)

There are several issues you are glossing over, to make easy points. But they all stem from the core underlying element of everything I have said in this conversation: CEO's are not properly incentivized by their Boards of Directors and shareholders. They are doing EXACTLY the job they are hired to do, and hitting their targets, so they are getting the bid paydays.

The reason, as you say, "CEO pay correlates negatively with employees' share of the companies' profits" is because of the short-term profit focus of American corporate governance. It has nothing to do with the CEO. They are given targets to hit, and incentives for hitting those targets. Blame them for doing their job well...? Ok. But it misses the entire point.

If a company incentivized their CEO to build a business with a strong Triple Bottom Line, that doesn't externalize their cost of operations onto government and charity aid programs, and still makes a solid profit for the company, then I don't care if that CEO gets a BILLION dollars a year in compensation.

Being upset about CEO pay is myopic and ultimately a waste of time. "Too much" is a sliding scale that has infinite settings; none of which will make everyone happy.

Shareholders and Boards need to be held to a higher standard of performance than just quarterly earnings or EBIT. If a company is hurting because the public won't buy their products, they will change the way they do business. They will change how they measure the success of their CEO.

If a board incentivized a CEO to make the entire company carbon-neutral in a year, and promised them a $500m bonus for doing so, they'd make it happen. Period.

The incentives are set wrong. Not the pay scales.





CrazyEyeJoe  ·  371 days ago  ·  link  ·  

Um... So if I understand you correctly, you're saying that the problem isn't that CEOs are paid too much, but rather that they're asked to do the wrong thing.

First of all, I don't really think the CEO is the problem either, per se. The deeper problem is the way companies are structured, and how the profit motive is seen as the only reason for a company's existence. In the US, it's even part of the law that a company must maximise shareholder profit, which I think it's absolute lunacy. On this point it sounds like we agree.

However, if CEOs continue to receive their outlandish salaries at the expense of the remaining employees of the company, how is that not a problem? It get the impression that you don't think there's any correlation between top executive salaries and those of the remaining employees, but I don't see how you can think that. Within a corporation, the amount of profit quite clearly IS a pie, out of which salaries must be divided.

You used the example of McDonald's earning several billions, while "only" paying their CEO $21m. This is indeed the case for McDonald's, but clearly a certain amount of their budget is allocated to salaries, and if CEOs receive a disproportionate amount of that budget, it has a real effect on their other employees' wages. Furthermore the CEO is NOT the only executive receiving a much higher wage than the lower employees. The average McDonald's executive compensation is $235,641 a year. Accepting ludicrous salaries for executives as a fact of life merely propagates this inequality.

Of course it would be better if companies spontaneously decided to make a better world, and stop focusing exclusively on profits, but what makes you think there's any chance that would ever happen all on its own? And don't you think people in power (i.e. in part CEOs) have any influence on whether or not that happens?

Maybe, for example, limiting executive pay to a certain multiple of the salary of their lowest paid employees is an imperfect solution, and certainly it does nothing to fix the deeper problem of company structure, but it would probably have the effect of raising the lowest salaries. How is this not important in its own right?

You don't like the solutions proposed in this article, I take it. So far, I don't think I've seen any proposed solutions coming from you, so what would you prefer?

I think you're also missing a rather important point of the article; that billionaires also end up with POLITICAL power due to their massive wealth. I personally think that's the most important aspect; these people have enormous power and influence, which is completely democratically illegitimate.