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I never really understood why people think the pay gap between the CEO's and the rank-and-filers is such a negative thing. If you look at walmart for example,

I never really understood why people think the pay gap between the CEO's and the rank-and-filers is such a negative thing. If you look at walmart for example, and entirely eliminated the compensation of the CEO (19.4 million), and all executive vice presidents and CFOs (2.8, 10.8, 8.4, 10.1, 11.5, and 8.5 million respectively) and total them all up you get ~$71.5 million. 71,500,000 / 2,000,000 million employees = $34 dollars per employee per year of a raise. That's almost negligible, and if you assume minimum wage (7.25) 50 weeks a year, for 40 hours a week gives $14,500 / year, you get $35 / $14,500 = a .24% raise. That's less than a 2 cent per hour raise per employee if you completely slashed the salaries and compensations of the top executives.

kornish 10y ago
When people talk about pay gaps between executives and rank-and-filers, they generally mean pay gaps between individuals, not pay gaps between collectives (in this case, the 7 executives vs the 2 million employees).
- brbsix 10y ago
  There's a popular narrative that CEO compensation is at the expense of workers, that workers could be paid a livable wage if only executives could do without their extravagent bonuses. It's commonly referenced with respect to Walmart. I believe this is the myth the OP was attempting to dispel.
jdavis703 10y ago
Walmart is an extreme example. If you read "Capital in 21st Century" you'll see a lot of the worries of inequality is caused by the general rise of "super managers." If you don't have time to read that massive book, I think this is a good summary: https://jesiwagle.wordpress.com/2015/01/16/super-managers-do-not-produce-wealth-but-get-highest-income/ https://jesiwagle.wordpress.com/2015/01/16/super-managers-do....
wpietri 10y ago
You picked the an extreme example there. Walmart employs a zillion unskilled people. Similar numbers for Google would yield something like an extra $6,000 per employee per year. But I think it's a negative thing because it's a sign of a shift in behavior. Look at the graph here: https://en.wikipedia.org/wiki/Executive_compensation_in_the_United_States https://en.wikipedia.org/wiki/Executive_compensation_in_the_... CEOs have gone from making 20x the average worker to 200x. Are CEOs ten times more amazing? If anything, I think they're worse. I think that, broadly, they've shifted their focus from economic value creation to generating the numerical appearance of success in ways that let them extract lots of money. There's also the problem of worker motivation. Companies are human enterprises. The greater the wealth differential, the less the people doing most of the work will feel part of something bigger than themselves. As with Walmart, they may show up and do what they're told, but they are less likely to actually give a shit.
- charrondev 10y ago
  I definitely agree that they are not 10x more amazing, but I also find that in the case of a company like google any kind of pay differential has far less of an impact. Employees at google get paid enough, and have such great benefits that they are easily in the top few percentages of the economy. The same can be stated about many tech companies and their employees. Engineer salary and benefits are very comfortable at this particular point in time, because it is very in demand, and requires high levels of skill. It seems at least from what I've noticed that the companies with the highest differential in terms of rank and file -> CEOs, tend to be the ones with some of the lowest barriers to entry and the lowest skill levels. This is a subject that I would love to see a detailed study on because what "it seems like" is not always the reality of the situation. I used Walmart precisely because besides being an extreme example, it is one of the largest employers in North America by a good margin. Edit: forgot a word.
  - wpietri 10y ago
    Reasoning from extreme examples is unhelpful when you are asking people to consider the general case.
  - deleted 10y ago
xorcist 10y ago
I believe the reasoning is that it is negative if it hurts the company's bottom line. It's hard, if not impossible, to causally correlate CEO compensation with company profits so there is no reason to assume for example that "golden parachutes" pay for themselves. They don't. If company profits scaled with C-level compension, why not double their bonuses already? That's silly. And what would compensation per employee be indicative of? Nobody is criticizing that. There can be tension in public companies between the board's interests and the shareholders'. Questions of compensation is a common source.

kornish 10y ago

When people talk about pay gaps between executives and rank-and-filers, they generally mean pay gaps between individuals, not pay gaps between collectives (in this case, the 7 executives vs the 2 million employees).

brbsix 10y ago
There's a popular narrative that CEO compensation is at the expense of workers, that workers could be paid a livable wage if only executives could do without their extravagent bonuses. It's commonly referenced with respect to Walmart. I believe this is the myth the OP was attempting to dispel.

jdavis703 10y ago

Walmart is an extreme example. If you read "Capital in 21st Century" you'll see a lot of the worries of inequality is caused by the general rise of "super managers." If you don't have time to read that massive book, I think this is a good summary: https://jesiwagle.wordpress.com/2015/01/16/super-managers-do-not-produce-wealth-but-get-highest-income/ https://jesiwagle.wordpress.com/2015/01/16/super-managers-do....

wpietri 10y ago

You picked the an extreme example there. Walmart employs a zillion unskilled people. Similar numbers for Google would yield something like an extra $6,000 per employee per year. But I think it's a negative thing because it's a sign of a shift in behavior. Look at the graph here: https://en.wikipedia.org/wiki/Executive_compensation_in_the_United_States https://en.wikipedia.org/wiki/Executive_compensation_in_the_... CEOs have gone from making 20x the average worker to 200x. Are CEOs ten times more amazing? If anything, I think they're worse. I think that, broadly, they've shifted their focus from economic value creation to generating the numerical appearance of success in ways that let them extract lots of money. There's also the problem of worker motivation. Companies are human enterprises. The greater the wealth differential, the less the people doing most of the work will feel part of something bigger than themselves. As with Walmart, they may show up and do what they're told, but they are less likely to actually give a shit.

charrondev 10y ago
I definitely agree that they are not 10x more amazing, but I also find that in the case of a company like google any kind of pay differential has far less of an impact. Employees at google get paid enough, and have such great benefits that they are easily in the top few percentages of the economy. The same can be stated about many tech companies and their employees. Engineer salary and benefits are very comfortable at this particular point in time, because it is very in demand, and requires high levels of skill. It seems at least from what I've noticed that the companies with the highest differential in terms of rank and file -> CEOs, tend to be the ones with some of the lowest barriers to entry and the lowest skill levels. This is a subject that I would love to see a detailed study on because what "it seems like" is not always the reality of the situation. I used Walmart precisely because besides being an extreme example, it is one of the largest employers in North America by a good margin. Edit: forgot a word.
- wpietri 10y ago
  Reasoning from extreme examples is unhelpful when you are asking people to consider the general case.
- deleted 10y ago

xorcist 10y ago

I believe the reasoning is that it is negative if it hurts the company's bottom line. It's hard, if not impossible, to causally correlate CEO compensation with company profits so there is no reason to assume for example that "golden parachutes" pay for themselves. They don't. If company profits scaled with C-level compension, why not double their bonuses already? That's silly. And what would compensation per employee be indicative of? Nobody is criticizing that. There can be tension in public companies between the board's interests and the shareholders'. Questions of compensation is a common source.