6 ms·

That doesn't mean it's not worth discussing. I could get hired to be the CEO of Ford and get a contract for a ton of money. But I'd do a poor job probably. It w

by ebbv 9y ago

That doesn't mean it's not worth discussing. I could get hired to be the CEO of Ford and get a contract for a ton of money. But I'd do a poor job probably. It would be worth discussing afterward; how did this happen? Why are executive salaries so incredibly disproportionate to their impact and benefit to the company? What can be done? What should be done?

korrach 9y ago
Eat the tich comrade.
edanm 9y ago
It isn't clear that the salaries are in fact disproportionate. The article makes the case that there were many mistakes, but that it's hard to say if anyone else could've done better. And the shareholders did end up making a lot of money. I'm not sure anything should be done here. The shareholders chose to pay a lot to get her as CEO. Even if they lost out, it's not a reason to intervene. People make bad bets all the time.
- pooper 9y ago
  Something must be done to rein in executive pay though. I am not talking about MM in particular. She is probably a fine executive. However, my point is that unchecked executive pay is not good for anyone. We don't live in a free market. There ought to be some way to cap pay. A progressive income tax that caps out at 90% of income above $3M a year? So if you make $3,000,001, you pay 90 cents in taxes on the last dollar you earned sounds fair to me.
  - tossaway1 9y ago
    > income tax that caps out at 90% Kind of like it was in the 50s back when America was "great again"?
    - rsync 9y ago
      I am obligated, any time these very high historical tax rates are mentioned, to point out that these were very special, very specific actions taken to discourage war profiteering during world war two. The extremely high marginal rates that did indeed exist were not implemented as part of a tax regime nor were they enacted to redistribute wealth - they were a patriotic wartime measure enacted to ensure nobody got rich on war contracts. They have almost no relation to our current discussion of tax rates and taxation.
      - tossaway1 9y ago
        Maybe so, I'm not an expert on such matters, but the highest tax rate was 50% or higher from 1932-1986. I would say that is relevant to our current discussion.
    - valuearb 9y ago
      You realize that almost no one ever paid 90% or anything close to that, don't you? The tax code that had a 90% rate also had massive deductions.
  - jdmichal 9y ago
    I think you would need to start taxing equity grants for that to have the effect you want. Otherwise, executives just won't sell more equity than $3m a year. And when they found new companies and non-profits, they'll just grant the equity directly and never have paid any personal taxes on it.
  - edanm 9y ago
    "However, my point is that unchecked executive pay is not good for anyone. We don't live in a free market. There ought to be some way to cap pay." Why? To all those questions. I mean, in some specific cases you might be right, but in the case of shareholders, who own a company, deciding how much to pay to the executive that they choose to run that company, why would someone else need to be involved in that decision? Who is supposedly losing out here? The shareholders themselves? They (vicariously) own the money in the company, and choose how much of it to pay to the executive, because they believe that's the best way to make more money in the long run. Why do you think you know better than them, when they're actually betting money on it? Or is someone else being hurt here? Also, as far as I understand it, you're mixing two different things by proposing to "fix" this with an income tax. You said in the paragraph above that executive pay is not good for anyone, which I presumed to be about (or at least to include) the shareholders of the company. But by introducing taxing, you are quite literally talking about taking money from the shareholders and giving it to the government. So at least in this way of doing it, you're quite literally not protecting the shareholders but rather "harming" them. (This doesn't make income taxes bad or anything, I'm just pointing out that one thing they're not good for is to protect shareholdres, IMO).
    - ebbv 9y ago
      The idea that shareholders own the company and are therefore good, objective arbiters of CEO pay sounds good on paper but even the simplest of examinations of how this functions in reality should tell you what the problems are. First, the board who decides the CEO pay are not objective. They are friends with the CEO. They are not objective. The social circles of boards of large companies and the CEOs they hire is not that big, and they do not think objectively about each other. Second, there's no real motive for them to be strict with the CEO; there's every motive to be overly generous. If they give the CEO ultra generous pay and bonuses, they then expect (and receive) to be treated in the same way when the shoe is on the other foot. When the CEO is on a board for a company they are an executive at. Executve pay has been on an insane runaway explosion for years. You can say "That's because the companies are so successful!" But Yahoo is evidence success has nothing to do with it. And I would argue even if it were due to success; the workers should be benefit at least as much as executives, and they don't.
  - analog31 9y ago
    A progressive income tax that caps out at 90% of income above $3M a year? So if you make $3,000,001, you pay 90 cents in taxes on the last dollar you earned sounds fair to me. Sounds fair to me too. My attitude is that the CEO of a business is homo economicus. Their job is to grab as much value from the company as possible for themselves, just like every other shareholder, employee, supplier, customer, etc. It's none of my business how many billions they take home, but they should be taxed up the wazoo.
  - dsacco 9y ago
    > However, my point is that unchecked executive pay is not good for anyone. We don't live in a free market. There ought to be some way to cap pay. Why? This is not an axiom, it's a conclusion. Defend the premise.
    - pooper 9y ago
      > Why? This is not an axiom, it's a conclusion. Defend the premise. My basic premise is that shareholders do not have the tools to protect themselves from (to use inciting language) predatory management. Sometimes it looks like it works perfectly. Google seems to be doing just fine with a dual class arrangement and not all shares having the same voice. We have certain restrictions on freedom all the time. You may not consent to die* for example. I am not very good at explaining but the idea is that freedom of speech and freedom to carry arms have restrictions imposed on them. Even freedom to privacy is not absolute. I don't know what the legal words mean in practice but from what I've read even habeas corpus has the limitation of "unless when in cases of rebellion or invasion the public safety may require it". The point is that if all these rights are in some way capped, why can't the right to earn money and spend be capped as well? OK, I haven't answered your question so far. I don't have a good answer with formal proof. I just think an effective income cap is possible within our ethical/moral framework. * well this one is changing but I guess you could argue that the wording can be you cannot consent to die without adequate safeguards to make sure you know what you are consenting to.
- barrkel 9y ago
  It's funny, but when people talk about CEO compensation, they refer to the value created by the company, yet when they talk about e.g. office cleaner compensation, they talk about the market price of labour. The salary of a CEO could do with more reference to the cost of the next available substitute, rather than how much the CEO changes the stock price. That would require changes in how CEOs are compensated, but it could also change short-term perspectives. Options would seem to motivate CEOs to think with a longer term, but in fact they align with shareholder interests, which are more often short term with investment decisions reviewed quarterly. And shareholder interests are not the most important reasons why we, as a society, have companies.
  - rsync 9y ago
    "It's funny, but when people talk about CEO compensation, they refer to the value created by the company, yet when they talk about e.g. office cleaner compensation, they talk about the market price of labour." Inasmuch as we are talking about either of them, the discussion of CEO involves fairly high level abstractions about jobs and tasks that most people have never done at a scale they have never done it at. So I think it makes sense that you have a deeper, more abstract discussion of value. On the other hand, all of us have cleaned an office/room/building. We've all cleaned toilets and vacuumed floors and washed a kitchen. There's no reason for abstraction or analogy or depth - we all know how it works so we can just cut to the chase.
  - edanm 9y ago
    "The salary of a CEO could do with more reference to the cost of the next available substitute, rather than how much the CEO changes the stock price. That would require changes in how CEOs are compensated [...]" Would it? I assume that just like in every market, the pay of the CEO is based on exactly this. Supply & demand tend to be the cause of prices. When we talk about the value that CEOs bring, and quite specifically talk about how no one else could've done the job that Marissa Mayer did, we're implicitly talking about supply & demand - the supply of people who can do the job she did is very small, the amount of companies who would love to have a high-functioning CEO that can raise their stock price is very high, and therefore CEO pay is what it is. I assume that if Yahoo could've gotten some other succesfull figure at a fracftion of the price, they would've done so - it's in the shareholder's interests and they more-or-less make the decisions. Of course, I'm not naive enough to think that this is a purely technical matter - I assume a lot of human psychology, precedent and culture goes into this, e.g. the amount that exectuvies make is well-known, which causes other executives to raise their price to "compete", etc. This effectively makes wages higher than they "should have been". But I do assume that none of us are smart or knoweldgeable enough to say what CEO pay really "should" be, even assuming that's a well-defined concept. I think that most people just hear a big number, say "that's way too much" and have this as the bottom-line of their thinking, then come up with all sorts of arguments for why their bottom line is right, rather than questioning the core assumption and realising that maybe, CEOs are worth their price.

by ebbv 9y ago

korrach 9y ago

Eat the tich comrade.

edanm 9y ago

It isn't clear that the salaries are in fact disproportionate. The article makes the case that there were many mistakes, but that it's hard to say if anyone else could've done better. And the shareholders did end up making a lot of money. I'm not sure anything should be done here. The shareholders chose to pay a lot to get her as CEO. Even if they lost out, it's not a reason to intervene. People make bad bets all the time.

pooper 9y ago
Something must be done to rein in executive pay though. I am not talking about MM in particular. She is probably a fine executive. However, my point is that unchecked executive pay is not good for anyone. We don't live in a free market. There ought to be some way to cap pay. A progressive income tax that caps out at 90% of income above $3M a year? So if you make $3,000,001, you pay 90 cents in taxes on the last dollar you earned sounds fair to me.
- tossaway1 9y ago
  > income tax that caps out at 90% Kind of like it was in the 50s back when America was "great again"?
  - rsync 9y ago
    I am obligated, any time these very high historical tax rates are mentioned, to point out that these were very special, very specific actions taken to discourage war profiteering during world war two. The extremely high marginal rates that did indeed exist were not implemented as part of a tax regime nor were they enacted to redistribute wealth - they were a patriotic wartime measure enacted to ensure nobody got rich on war contracts. They have almost no relation to our current discussion of tax rates and taxation.
    - tossaway1 9y ago
      Maybe so, I'm not an expert on such matters, but the highest tax rate was 50% or higher from 1932-1986. I would say that is relevant to our current discussion.
  - valuearb 9y ago
    You realize that almost no one ever paid 90% or anything close to that, don't you? The tax code that had a 90% rate also had massive deductions.
- jdmichal 9y ago
  I think you would need to start taxing equity grants for that to have the effect you want. Otherwise, executives just won't sell more equity than $3m a year. And when they found new companies and non-profits, they'll just grant the equity directly and never have paid any personal taxes on it.
- edanm 9y ago
  "However, my point is that unchecked executive pay is not good for anyone. We don't live in a free market. There ought to be some way to cap pay." Why? To all those questions. I mean, in some specific cases you might be right, but in the case of shareholders, who own a company, deciding how much to pay to the executive that they choose to run that company, why would someone else need to be involved in that decision? Who is supposedly losing out here? The shareholders themselves? They (vicariously) own the money in the company, and choose how much of it to pay to the executive, because they believe that's the best way to make more money in the long run. Why do you think you know better than them, when they're actually betting money on it? Or is someone else being hurt here? Also, as far as I understand it, you're mixing two different things by proposing to "fix" this with an income tax. You said in the paragraph above that executive pay is not good for anyone, which I presumed to be about (or at least to include) the shareholders of the company. But by introducing taxing, you are quite literally talking about taking money from the shareholders and giving it to the government. So at least in this way of doing it, you're quite literally not protecting the shareholders but rather "harming" them. (This doesn't make income taxes bad or anything, I'm just pointing out that one thing they're not good for is to protect shareholdres, IMO).
  - ebbv 9y ago
    The idea that shareholders own the company and are therefore good, objective arbiters of CEO pay sounds good on paper but even the simplest of examinations of how this functions in reality should tell you what the problems are. First, the board who decides the CEO pay are not objective. They are friends with the CEO. They are not objective. The social circles of boards of large companies and the CEOs they hire is not that big, and they do not think objectively about each other. Second, there's no real motive for them to be strict with the CEO; there's every motive to be overly generous. If they give the CEO ultra generous pay and bonuses, they then expect (and receive) to be treated in the same way when the shoe is on the other foot. When the CEO is on a board for a company they are an executive at. Executve pay has been on an insane runaway explosion for years. You can say "That's because the companies are so successful!" But Yahoo is evidence success has nothing to do with it. And I would argue even if it were due to success; the workers should be benefit at least as much as executives, and they don't.
- analog31 9y ago
  A progressive income tax that caps out at 90% of income above $3M a year? So if you make $3,000,001, you pay 90 cents in taxes on the last dollar you earned sounds fair to me. Sounds fair to me too. My attitude is that the CEO of a business is homo economicus. Their job is to grab as much value from the company as possible for themselves, just like every other shareholder, employee, supplier, customer, etc. It's none of my business how many billions they take home, but they should be taxed up the wazoo.
- dsacco 9y ago
  > However, my point is that unchecked executive pay is not good for anyone. We don't live in a free market. There ought to be some way to cap pay. Why? This is not an axiom, it's a conclusion. Defend the premise.
  - pooper 9y ago
    > Why? This is not an axiom, it's a conclusion. Defend the premise. My basic premise is that shareholders do not have the tools to protect themselves from (to use inciting language) predatory management. Sometimes it looks like it works perfectly. Google seems to be doing just fine with a dual class arrangement and not all shares having the same voice. We have certain restrictions on freedom all the time. You may not consent to die* for example. I am not very good at explaining but the idea is that freedom of speech and freedom to carry arms have restrictions imposed on them. Even freedom to privacy is not absolute. I don't know what the legal words mean in practice but from what I've read even habeas corpus has the limitation of "unless when in cases of rebellion or invasion the public safety may require it". The point is that if all these rights are in some way capped, why can't the right to earn money and spend be capped as well? OK, I haven't answered your question so far. I don't have a good answer with formal proof. I just think an effective income cap is possible within our ethical/moral framework. * well this one is changing but I guess you could argue that the wording can be you cannot consent to die without adequate safeguards to make sure you know what you are consenting to.
barrkel 9y ago
It's funny, but when people talk about CEO compensation, they refer to the value created by the company, yet when they talk about e.g. office cleaner compensation, they talk about the market price of labour. The salary of a CEO could do with more reference to the cost of the next available substitute, rather than how much the CEO changes the stock price. That would require changes in how CEOs are compensated, but it could also change short-term perspectives. Options would seem to motivate CEOs to think with a longer term, but in fact they align with shareholder interests, which are more often short term with investment decisions reviewed quarterly. And shareholder interests are not the most important reasons why we, as a society, have companies.
- rsync 9y ago
  "It's funny, but when people talk about CEO compensation, they refer to the value created by the company, yet when they talk about e.g. office cleaner compensation, they talk about the market price of labour." Inasmuch as we are talking about either of them, the discussion of CEO involves fairly high level abstractions about jobs and tasks that most people have never done at a scale they have never done it at. So I think it makes sense that you have a deeper, more abstract discussion of value. On the other hand, all of us have cleaned an office/room/building. We've all cleaned toilets and vacuumed floors and washed a kitchen. There's no reason for abstraction or analogy or depth - we all know how it works so we can just cut to the chase.
- edanm 9y ago
  "The salary of a CEO could do with more reference to the cost of the next available substitute, rather than how much the CEO changes the stock price. That would require changes in how CEOs are compensated [...]" Would it? I assume that just like in every market, the pay of the CEO is based on exactly this. Supply & demand tend to be the cause of prices. When we talk about the value that CEOs bring, and quite specifically talk about how no one else could've done the job that Marissa Mayer did, we're implicitly talking about supply & demand - the supply of people who can do the job she did is very small, the amount of companies who would love to have a high-functioning CEO that can raise their stock price is very high, and therefore CEO pay is what it is. I assume that if Yahoo could've gotten some other succesfull figure at a fracftion of the price, they would've done so - it's in the shareholder's interests and they more-or-less make the decisions. Of course, I'm not naive enough to think that this is a purely technical matter - I assume a lot of human psychology, precedent and culture goes into this, e.g. the amount that exectuvies make is well-known, which causes other executives to raise their price to "compete", etc. This effectively makes wages higher than they "should have been". But I do assume that none of us are smart or knoweldgeable enough to say what CEO pay really "should" be, even assuming that's a well-defined concept. I think that most people just hear a big number, say "that's way too much" and have this as the bottom-line of their thinking, then come up with all sorts of arguments for why their bottom line is right, rather than questioning the core assumption and realising that maybe, CEOs are worth their price.