thegreekdog wrote:No offense intended Player, but you didn't answer any of my questions. You merely restated your positions on issues. I think it would be more helpful for a discussion if you actually answered the questions. They will at least make you think about your position. I'm not coming at this from the idea that officer salaries are where they should be, I'm wondering what the benefits would be if officer salaries were more in line with where they were 50 years ago.
I did, by saying that your questions are basically irrelevant... and well, that is a big part of the problem. Folks one one side want to say "but...." and look at a very narrow set of issues, never even consider that the problem might lie elsewhere. That happens on ALL sides. I am, at times guilty, though in this case I really don't believe I am.
That said, I will take your questions point by point -- but I think the real answer is in the last few paragraphs I wrote above.
(oops.. started answering without copying your questions first, so will post this, then go back and edit.. apologies)
I would guess that you would have to go back further than 40 years to find the real differentiation, but yes. Maybe the 60's, though without doing more research, which I am too lazy to do at the moment (well, too lazy and still rather inept at finding such answers effectively), I hesitate to pinpoint an exact time.thegreekdog wrote:stahrgazer wrote:While this is true, it's also true that in the past 4 decades, CEO salaries have risen until they make like 100x of what their lowest worker makes, whereas before that, they made only about 10X what their lowest worker made.
It started around the same time Congress voted themselves a 100x raise. Coincidence? Maybe not.
Anyway, that's why groups like "Occupy Wall Street" are protesting, and that's why liberals and some otherwise-conservatives (like me) think there's something wrong with the US economic portrait.
Each ceo that makes 100x his lowest worker is taking up the funds that could provide for 25 or more jobs, and in many cases, they have laid off workers in order to meet their "profit" quota to get their bonuses.
I guess I have a few questions for you:
(1) Do you think if CEO salaries now were more in line with CEO salaries 40 years ago, there would be a recognizable difference in the incomes of the large majority of people in the United States?
In some ways that alone is irrelevant because so very much has changed. The ratio of healthcare cost, for example, the amount of employment over seas, etc all change the basic ratio of CEO bonuses and salaries to the salaries and bonuses of average employees.
One interesting "case study", if you will, in this debate is Ben and Jerry's Ice cream. You may be aware that they began with the idea that the CEO should not be paid more than a certain percentage more than the lowest paid employee. When the original owners stepped down, then they had trouble finding competent CEOs willing to work for that low of a wage. I don't know the specifics, but I do remember hearing that they were using way too low of a ratio.
Anyway, I would argue that while their ratio may have been too low, the current ratio is too high. However, more to the point, in my arguments, is that even just looking at a straight ratio is wrong. Often times CEO compensation comes in a variety of "unseen" ways that boost their income artificially... and much of the income that lower level employees get is more and more being cut into in similarly unseen ways. Just to pick 2 minor examples, many CEOs get a lot of free dining and entertainment rewards. Employees, to contrast often find that they have to pay more and more for basic healthcare, may have to buy more and more of the basic supplies they need to do their jobs -- be it something like cleaning supplies and toilet paper (not joking there, by-the-way) or uniforms. CEOs like to almost dismiss the banquets and such they attend as minor perks, not any real kind of compensation, even if the $20-30 bare minimum cost (more often much, much more) would make a huge difference in the salaries of lower level employees. To contrast, employees being asked to pay even $30-50 a month to clean uniforms can make the difference between their child playing baseball or not.
In many ways, more than the actually money amounts, the attitude difference is what really burns.
thegreekdog wrote:(2) If companies did not pay their CEOs such exorbitant salaries, where do you think the money would go? Do you think companies would spend on infrastructure or more employees or better employees salaries? See question (4).
Right now, it would most likely either be store-housed for the future or go to pay off shareholders.
When I look at the disparity of salaries, it is not because CEOs getting high salaries is in and of itself the problem, rather its a very tangible symptom of a system that is broken. (and that is why I said your questions were basically irrelevant)
That, alone, won't do it. Rather, the way CEOs and shareholders currently calculate their "just returns" is skewed in ways that harm both the companies themselves in many cases and certainly society.thegreekdog wrote:(3) How do you propose to get companies to pay their CEOs less money?
I am not going to pretend I know enough about business models and such to come up with specific formulae. I will say that a few basic principles should apply.
#1. NO employee.. not the most menial, should be paid less than it takes a full time employee at that wage to live in that area. A few, and only a few exceptions should be allowed for trainee kids... However, unless we are talking high school students who still live at home, the compensation should include some kind of residence provision. This might require some creativity... I mean, some employees maybe could put a student up for a few months in the summer (with parental approval, etc, etc,) or things like that. Also, I have no problem with saying a college student even should stay in a tent in a local campground (well... depends on the job, rather hard to keep tuxes neat when you are living in a tent) or even bunking on a couch in the office, if there is a shower nearby. HOWEVER, note that these are all short term things for real kids who are truly training, not things that would work for older people. Allowing companies to pay less means that the employer is depending on someone else to support this person. IF its another part-time job.. maybe OK. (note I specified fulltime). However, we all know that a lot of companies use that "part-time employee" bit to hire people for 39.99 hours.. or whatever the state mandates for turning someone full time. AND, many jobs just don't allow "double dipping" if one wants to really have any kind of life at all. Restaurants, in particular are notorious for having varied shifts. While that is understandable, it means that working part-time at more than one job can be problematic. In some of those cases, people really should get at least minimum basic compensation that would amount to fulltime employment (and many actually do in the restaurant business, because it is one of the few businesses with a very direct customer appreciation/service -compensation link).
#2. No perks for anyone that are not directly counted. In particular, things like taking a client out to dinner should not be a tax deductable item. If its worth the business to take them out and "wine and dine" them.. fine. If not, then not. There should be a minor limit for the individaul. If a company wants to give its employees a chicken bar-b-que as a thank you for so many days without injuries or whatever, the employee should not be taxed on that minimal amount. Also, if a higher level employee is actually required to go to a function, then I don't think they should have to report even a high-priced meal as compensation (i could see someone such as yourself basically being required to go to a $500 plate dinner on behalf of your company.. and that that would be a significant chunk of change you would choose to use otherwise if you could. However, the company should not be able to deduct that as a "business expense"). The result of this is that a lot of catering and meals would stop. That would impact the entertainment industry, but its the kind of thing that has just spun way out of control and that really, really grates on lower level employees.
I mean, just as an example, my company is over budget. The CEO stated that ALL departments, even those already under budget and already working as cost effectively as they can have to cut 6%. So, kitchen employees are being told things like reuse hair nets .. but when it was suggested that catered meals for the muckity mucks be cut out... nope, no dice. I am not joking! Not even snacks (which amount to several hundred dollars a month) can possibly be shifted to off brand types or just the less expensive items! Meanwhile, every employee in the kitchen is given a workload that requires them to show up 10-15 minutes before their paid shift starts, sometimes more than that. Note, employees can clock in 10 minutes in advance of their shift and no sooner. IF they get injured without clocking in, the company will not pay. This HAS happened! That is the type of stuff that really winds up making lower level employees feel put upon. It is already illegal, in fact. Yet, with the unemployment rate so high in our area, no body feels they can complain. Unless and until CEOs, managers of all levels are held more accountable for such things, then nothing will change. That is what unions used to do, but unions have been attacked and marginalized. In the meantime, the CEO brings in over 300K... and is not taking a penny off his paycheck. (note that you can buy a very, very fancy house with an indoor pool and so forth for under $200K in my area, just to give you an idea of what that kind of salary buys).
#3. CEO and stockholder compensation should be tied only to real and true profits that a company generates. Of course, startup companies need to pay CEOs before they actually make a profit, but there should be a time limit or "situational" limit. (that last might apply most for some brand new esentially research firms -- its OK to support some research and product development even if it doesn't immediately pan out, but there have to be specific goals -- not necessarily production goals, but do xyz type goals, with the understanding that xyz has to be tried and may or may not become profitable)
(4) How do you propose to get companies that pay their CEOs less money to pay more money to employees? Could companies pay shareholders more? Could companies keep more cash on hand?
Shareholder and CEO profits should be directly tied to profits from the product the company sells. BUT... the real problem is that a lot of gimmics are used to calculate that profit. Further, the real product that interests most managers is the stock price. I could see reason for some kind of statuatory limit based on profits, but I can also see a lot of potential for problems with such a system.
I am more comfortable with requiring better accounting of real costs, including that when companies pay very low wages they are putting additional burden on taxpayers to support those employees. I have said it before, but will reiterate in case you forget, but that is OK if we are talking about specific groups -- true trainees (with definite limited training periods that lead specifically into real jobs in one way or another); ex prisoners and work release folks; some disabled individuals, particularly the developmentally disabled. In most of those cases we are either talking about a temporary loss to the individual that will result in an ultimate gain for them and society (training leads to better paying jobs overall; prisoners who need to be given some chance) OR we are talking about people who need help and thus any compensation they get really is a bonus to society.
thegreekdog wrote:(5) How many CEOs make too much money?
I am not even going to try to come up with a set number, because this is not about x number of CEOs, it is about an overall mentality that has led to a plain broken system and distorted idea of what compensation should be for those at the top.
Have you ever watched the show undercover Boss? Its stupid and mamby-pamby, but it also points out some common threads.. specifically that virtually every one of the bosses is legitimately shocked by the amount of work and effort required of lower level employees and the fact that they generally do not feel appreciated -- not just that they are not being paid well, but that they don't feel appreciated or supported in practical or esoteric ways. Sometimes janitors have to buy their own supplies, training and advancement opportunities are often non-existant, etc, etc.
This is not about absolute compensation, even aside from inflation and profit variables. Rather, it is about an attitude of value.thegreekdog wrote:(6) How much money is too much money?
One way to look at the problem is to say that most people over value their own impact/value. The more powerful a person is, the more they tend to overvalue themselves in an objective sense. This sometimes gets labeled a "prima donna" effect, but people tend to use that term more for flamboyant stars, not CEOS in suits. In both cases, there can be some legitimacy. I would actually suggest that it is more true for the stars than CEOs, simply because their entire operations tend to truly depend upon that star's success. CEOs are, to some extent, tradable. At least as much as any of the top people in a field might be.
However, the point is not that a CEO should make what a janitor makes. The point is that when it comes to cutting costs and efficiency, the thinking tends to (not always, but often) start with "OK, I need to make x amount..." "how can I keep that happening" (or the shareholders want to make x...). Pressure gets passed down. Lower level employees are considered basically like machines that have to be squeezed for efficiency. Competency is often dismissed as not pertinent. Just think of the title "unskilled labor" -- yet, the truth is that even menial jobs tend to involve some skill. A person who has done the job a long time performs better than one who doesn't. BUT... these people get squeezed and squeezed. At some point, they wind up doing things like coming in early in unpaid time, even if they know that they are at risk if they get injured in that time; buying their own supplies out of already limited incomes. Even things like time schedules are just not thought out by managers except as what is convenient for them. Many part-timers, for example wind up having to pay for fulltime childcare becuase childcare providers demand that you enroll for specified times and pay whether the child shows up or not. Sure, its understandable that they each do that.. but the worker winds up "taking it in the shorts". These types of issues just are rarely considered by upper management.
In some cases, there could be solutions that would work for everyone better, IF the managers were willing and encouraged to think more creatively, but there is no insentive. In some cases, the understanding of what fulltime labor and compensation should be needs to change. IF you are basically requiring your employees to leave open 60 hours a week.. even though you only are willing to pay them 15 hours, with expansions to 35 sometimes, then maybe you ought to have to pay a bit more for that 15 hours baseline. But, figuring out how to do that in a way that is equitable to all is the catch. Mostly, such things are not even considered unless unions are involved because there is absolutely no incentive for upper management to even consider the needs of lower level employees beyond the legal requirements (and often there is a lot of thought about getting around and stretching those rules)
thegreekdog wrote: (7) Multiply (5) by (6) and we have the amount of available money for spending by companies on something other than CEOs. How much do you think that is?
Irrelevant, because the system will flex to meet the needs. That means that businesses that cannot provide reasonable compensation will fold, as many businesses do anyway and those that can will continue to fourish. The difference is that because compensation is truly trickling down, more money will flow into the market and thus up. Its a cycle that moves our country up, not down. The current "trickle down", think of the top first and everyone else after... is why our country is sliding.
Stargazer got this correct. "Because they could".thegreekdog wrote:(8) How do you think CEO salaries got so high?
People who get to be CEOs are probably more prone to pay themselves more than deserved because they are inherently people who value money and who are skilled at manipulating people and money systems. As I said before, this is true, to some extent for a lot of people, but in CEOs the particular issue is that the very skills and values that make them good CEOs tend to make them value money and power more than most people (at least while they are still working). Also, its more evident when they are because the amounts of money involved are so great.
Anyway, even without any bias or skewing, people tend to value their own value more, those at the top are the ones setting the value for a structure and so its really no wonder that the value of CEOs and higher level executives of all types keeps growing while the compensation for lower employes stagnates or shrinks. This doesn't hold true for a middle realm I will call "skilled labor" or "professions", because these tend to have more inbuilt systems to judge their value. For example, a doctor and nurse bring an inherent and quantifiable value to an organization. Identifying the value of the janitor is much harder. Ironically, though, if you look at how patients really value a hospital, you find that cleanliness is pretty high.
What happens is that hiring and firing janitors is a royal pain, so the manager tends to say "let's just contract out". Then they no longer have to worry about how much work each janitor is doing, the pay rate they should get or any of the other messy details. They don't have to worry about hiring and firing. They just pay the contract bill, set the standards and smile at the employees of the janitor firm (if they happen to see them)... and "all is good", problem solved. Now.. IF it happens that the janitorial service is keeping its wages low by hiring illegal immigrants or just hiring people for barely above minimum wage, or is a family operation that uses its own underage kids to get the work done, then that is no concern of the hospital management. If the hospital gets complaints about cleanliness, then that gets passed on. The janitorial company then demands more of its workers... often to the point that the workers are working unpaid time or buying supplies or whatever. The CEO/management (of course the CEO usually doesn't make direct decisions about janitorial services) crows about the money saved, the efficiency... and society takes it in the shorts.
Anyway, all of that has always happened. In the 1980's things got skewed by a couple of factors. First, Reagan raided the social security trust, "borrowed" the money to pay down the debt. About the same time, the idea that average people needed to invest in the stock market and that this was where they should get their retirement money began to take hold. People began to invest in mutual funds, pensions got fewer and fewer and things like IRAs and 401Ks came onto the horizon (IRAs were around back then, not sure when 401K's came about, though there were things like that earlier). This was OK in the 80's and even into the 90's.. or SEEMED OK becuase so many people really did make so much money.
THEN... the bust. Millionaires, the well off did fine. They had enough put aside in their tax funds (other than a few major rip-offs like Enron, etc) to largely ride the tide, but many, many more average people found that instead of retirement, they had poverty. EXCEPT... instead of social security becoming the saving grace it became the promise that we should not rely upon.
Anyway, during the good times, no one really cared if CEOs were making huge amounts of money. EVERYONE was making money and it all seemed good, at least on the surface. You did have more than a few nay-sayers, even then complaining that things were off. You absolutely had a lot of criticism from the broad environmental movement, but also folks like Warren and Susan Orman warning people to be more careful in their expectations and money management, but also saying that CEOs and companies were driving things in worng directions. Health care sort of got mixed in because technological advances drove, continue to drive costs up so very high and yet the compensation models for most people for health care coverage were shrinking in comparison. (that is, even when they did not shrink, they did not keep up with the costs)