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Britain Looks to Address Inequality with Executive Pay Measures

38 points by chollida1 9y ago

chollida1 9y ago
One test I have always applied when looking at joining a company is "do the majority of managers, including C level execs have an employee who makes more than them." In the well run tech companies I've worked at, the programmers tended to make more money than their managers, which I find to be a good sign. Ditto for almost all hedge funds I've seen, though to a much larger extreme, those who produce the value get the largest paycheck regardless of their pecking order. though to be fair the huge hedge funds buck this trend by making soooo much money and having a single person own the management company that the fund pays the management and performance fees into. It doesn't help with measuring the ratio of the lowest paycheck to the highest, but it does help ensure that people get paid based on what they produce rather than their title. But I find its a good question to ask when interviewing. Find the manager and ask how many of his/her reports make more than them. If you get squirming or push back about a top down approach with salaries that follow the same logic, then you've got a decent data point that you won't be all that valued at the company.
- anonymousDan 9y ago
  How exactly do you go about finding that out? Just during interviews?
- KGIII 9y ago
  Just an extension to your post... I sold and retired but I used to get shocked looks when I revealed that some of my employees earned a higher wage than I did. Basically, I paid myself a reasonable salary and paid other people to do things that I could not. On the whole, I think this fostered a good work environment. There was a physically demonstrable level of respect. Salaries weren't ever really hidden, so it was almost certainly a motivator/morale boost when crunch times came. I paid myself enough and, for the most part, just kept pushing funds back into growth and a nest egg. I also kept the business as a separate entity. To give an example, this was the early 1990s and quality programmers weren't easy to find. New hires started in the six figure range, unadjusted dollars. As an aside, it's notable that folks tell me that wages haven't really improved and, in sme cases, have declined. Anyhow, the gist of this post is that showing respect earns you respect. Granted, the company never expanded beyond 250 people and I haven't actually ever taken a business class. So, I guess this is largely anecdotal.
- albertgoeswoof 9y ago
  What's the incentive to go into management if you get paid less? By management I don't mean product/project management, I mean general & strategic leadership of a large organisation.
  - deleted 9y ago
    [deleted]
  - tim333 9y ago
    Maybe the person who is paid more has higher skills. The manager could be average and person the manage a star performer.
  - arebop 9y ago
    If you enjoy it, that's a good incentive. Organizations that overpay managers in order to entice ICs to take up less productive management work are shooting themselves in the foot.
  - gaius 9y ago
    What's the incentive to go into management if you get paid less? One organisation I worked for had a very elaborate grade system, I was a Grade 20, the highest non-management grade. At that level you had a choice: try to get promoted to Grade 21 at which you would officially be management, but you would lose your overtime pay, and it wasn't until Grade 25 at least that it would be financially worthwhile. Or you could divert your efforts into avoiding getting promoted... Guess what the majority of engineers did? The guy I reported to there however embraced the promotion. He loved "being a manager". He loved the attache case, he loved going over the minutes of meetings, he loved pre-meetings to plan the next meeting, he loved travelling to attend more meetings... It takes all sorts I guess. He was an unremarkable engineer before, and he wasn't any good at actually managing either tho'!
randyrand 9y ago
* Britain Looks to Address jealousy with Executive Pay Measures A few executives making large salaries is not an actual issue.
- ZenoArrow 9y ago
  It is an actual issue. Distribution of wealth affects the strength of the economy. The more wealth you spread out amongst the many, the faster your economy is likely to grow. It's the working class and middle class that are the major driving force in an economy (including job creation), not the rich.
  - randyrand 9y ago
    You've been lied to. Growth comes primarily from investment in science, technology, and other areas of innovation. The wealthy are much more likely to invest in these than the middle class because they have money to spare. The middle class is primarily a consumption class, not an investment class.
    - ZenoArrow 9y ago
      > "Growth comes primarily from investment in science, technology, and other areas of innovation." No, it doesn't. It's quite simple, none of those advances in science and technology mean a damn to the economy if there's no consumers buying new products. A working class person is much more likely to spend £1000 into the economy faster than a rich person, mainly because their needs are more immediate. Spreading wealth around leads to a broader base of consumers and a healthier economy. Also, it's quite clear that the opposite (trickle-down economics) has been a dismal failure.
      - oh_sigh 9y ago
        Ok, so now we have a bunch of companies selling soda to end consumers, instead of risky startup in unproven fields which may lead to large changes in our world.
itaris 9y ago
Isn't this capitalism working exactly as intended?
- randyrand 9y ago
  That depends. Do you mean free market capitalism or crony capitalism? To decide whether this is what free market capitalism intends, we'd have to determine if their wages are large due to free market forces (e.g supply and demand, etc) or if there is some government collusion going on inflating their wages.
  - bluntfang 9y ago
    there's not a difference.
    - randyrand 9y ago
      There is actually a pretty clear distinction. Here is one persons explanation if you want to inform yourself. http://www.thedailybell.com/editorials/richard-ebeling-free-market-capitalism-vs-crony-capitalism/ http://www.thedailybell.com/editorials/richard-ebeling-free-...
  - itaris 9y ago
    What sort of collusion would increase their wages?
    - randyrand 9y ago
      lobbying/bribing for laws intended to limit competition is the most common weapon of choice.
      - itaris 9y ago
        But that wouldn't affect the ratio of employee wage to executive wage. Lobbying/bribing would increase the company's total profit.
KaiserPro 9y ago
The chances of this acutally becoming law are fairly small. Firstly, most of the ruling party (Tories) are rabidly "pro buisness" which translates to sounding tough on anything that could be twisted into "red tape". Secondly, this is an attempt to steal thunder from the current opposition party, who are currently in disarray. Thirdly, and most importantly, there is simply not enough time for this to be implemented fully.
otakucode 9y ago
JFC.... In the late 1970s, the US FTC was worried about rising executive pay. So they pioneered similar 'transparency' requirements, forcing publicly traded companies to reveal the compensation of their executives. Do you know what the result was? MASSIVE increases in executive pay. Rather than shaming companies by making them admit to paying their executives hundreds or thousands of times more than they pay their average employees who are actually creating all of the companies value, they turned executive compensation into a signal to investors of corporate health. 'Would that company be able to pay their CEO $650 million a year if it was failing? Of course not!' This move in Britain appears to be nothing more than an attempt to radically amplify economic inequality, not reduce it. And it will succeed at that as well as it succeeded in the US.
- dragonwriter 9y ago
  > In the late 1970s, the US FTC was worried about rising executive pay. So they pioneered similar 'transparency' requirements, forcing publicly traded companies to reveal the compensation of their executives. I think you mean “early 1990s” and “SEC”, not “late 1970s” and “FTC”.
  - otakucode 9y ago
    You are right, it was the SEC rather than FTC, my bad. But no, it was the late 1970s, not the 1990s.
    - dragonwriter 9y ago
      There was clearly an SEC change for transparency of executive compensation that was driven by concerns of rising inequality in the early 1990s; I can't find anything about one in the late 1970s with that as a motivation, and it seems improbable, because through the 1970s the slow compression of wages following the 1940s “Great Compression” was still continuing, and significant rising inequality took into the 1980s to take off, and wasn't generally a concern of policymakers or in the political sphere in any significant way until the 1990-1991 recession.
- 9y ago
tim333 9y ago
They should figure a way for a shareholder vote to determine pay levels. I've got shares and wouldn't vote for the managers to get stupid high pay. At the moment the managers effectively choose their own salaries hence the excesses. It is, theoretically at any rate, us shareholder's money.
- guy_c 9y ago
  Remuneration of executive is up for approval at AGM in many countries. So you probably can vote. You can also check the vote results, the majority of shareholders vote to approve the remuneration packages.
addicted 9y ago
While I do believe that inequality is one of the biggest, if not the biggest, issue in modern developed nations, isn't the rise of the inequality largely due to accumulation of wealth, and not income amongst the richest? I see a lot of ire being targeted towards people making close to a million, and while the 1% makes for a good slogan, I believe the real problem is actually the 0.1 - 0.01% whose wealth has skyrocketed. And you don't reach the 0.1% with executive pay, but rather due to making money on existing capital. Wasn't Picketty's research evidence that the problem isn't income, but rather accumulated wealth?
- antisthenes 9y ago
  It is, but any measure to reverse-tax and redistribute wealth is a non-starter anywhere in the US, even the most left-learning states and municipalities. So yes, that's the cause, but it's unlikely anything will ever be done about it.
- deleted 9y ago
  [deleted]
- r00fus 9y ago
  This is really prescient. It's not the "pay" but the capital gains. And something like a very minimal transaction tax would probably do far more to address inequality. By focusing on people rather than the financial instruments, the politicians can be seen to do something (which is guaranteed to not fix the problem fundamentally).

38 points by chollida1 9y ago

One test I have always applied when looking at joining a company is "do the majority of managers, including C level execs have an employee who makes more than them." In the well run tech companies I've worked at, the programmers tended to make more money than their managers, which I find to be a good sign. Ditto for almost all hedge funds I've seen, though to a much larger extreme, those who produce the value get the largest paycheck regardless of their pecking order. though to be fair the huge hedge funds buck this trend by making soooo much money and having a single person own the management company that the fund pays the management and performance fees into. It doesn't help with measuring the ratio of the lowest paycheck to the highest, but it does help ensure that people get paid based on what they produce rather than their title. But I find its a good question to ask when interviewing. Find the manager and ask how many of his/her reports make more than them. If you get squirming or push back about a top down approach with salaries that follow the same logic, then you've got a decent data point that you won't be all that valued at the company.

anonymousDan 9y ago
How exactly do you go about finding that out? Just during interviews?
KGIII 9y ago
Just an extension to your post... I sold and retired but I used to get shocked looks when I revealed that some of my employees earned a higher wage than I did. Basically, I paid myself a reasonable salary and paid other people to do things that I could not. On the whole, I think this fostered a good work environment. There was a physically demonstrable level of respect. Salaries weren't ever really hidden, so it was almost certainly a motivator/morale boost when crunch times came. I paid myself enough and, for the most part, just kept pushing funds back into growth and a nest egg. I also kept the business as a separate entity. To give an example, this was the early 1990s and quality programmers weren't easy to find. New hires started in the six figure range, unadjusted dollars. As an aside, it's notable that folks tell me that wages haven't really improved and, in sme cases, have declined. Anyhow, the gist of this post is that showing respect earns you respect. Granted, the company never expanded beyond 250 people and I haven't actually ever taken a business class. So, I guess this is largely anecdotal.
albertgoeswoof 9y ago
What's the incentive to go into management if you get paid less? By management I don't mean product/project management, I mean general & strategic leadership of a large organisation.
- deleted 9y ago
  [deleted]
- tim333 9y ago
  Maybe the person who is paid more has higher skills. The manager could be average and person the manage a star performer.
- arebop 9y ago
  If you enjoy it, that's a good incentive. Organizations that overpay managers in order to entice ICs to take up less productive management work are shooting themselves in the foot.
- gaius 9y ago
  What's the incentive to go into management if you get paid less? One organisation I worked for had a very elaborate grade system, I was a Grade 20, the highest non-management grade. At that level you had a choice: try to get promoted to Grade 21 at which you would officially be management, but you would lose your overtime pay, and it wasn't until Grade 25 at least that it would be financially worthwhile. Or you could divert your efforts into avoiding getting promoted... Guess what the majority of engineers did? The guy I reported to there however embraced the promotion. He loved "being a manager". He loved the attache case, he loved going over the minutes of meetings, he loved pre-meetings to plan the next meeting, he loved travelling to attend more meetings... It takes all sorts I guess. He was an unremarkable engineer before, and he wasn't any good at actually managing either tho'!

randyrand 9y ago

* Britain Looks to Address jealousy with Executive Pay Measures A few executives making large salaries is not an actual issue.

ZenoArrow 9y ago
It is an actual issue. Distribution of wealth affects the strength of the economy. The more wealth you spread out amongst the many, the faster your economy is likely to grow. It's the working class and middle class that are the major driving force in an economy (including job creation), not the rich.
- randyrand 9y ago
  You've been lied to. Growth comes primarily from investment in science, technology, and other areas of innovation. The wealthy are much more likely to invest in these than the middle class because they have money to spare. The middle class is primarily a consumption class, not an investment class.
  - ZenoArrow 9y ago
    > "Growth comes primarily from investment in science, technology, and other areas of innovation." No, it doesn't. It's quite simple, none of those advances in science and technology mean a damn to the economy if there's no consumers buying new products. A working class person is much more likely to spend £1000 into the economy faster than a rich person, mainly because their needs are more immediate. Spreading wealth around leads to a broader base of consumers and a healthier economy. Also, it's quite clear that the opposite (trickle-down economics) has been a dismal failure.
    - oh_sigh 9y ago
      Ok, so now we have a bunch of companies selling soda to end consumers, instead of risky startup in unproven fields which may lead to large changes in our world.

itaris 9y ago

Isn't this capitalism working exactly as intended?

randyrand 9y ago
That depends. Do you mean free market capitalism or crony capitalism? To decide whether this is what free market capitalism intends, we'd have to determine if their wages are large due to free market forces (e.g supply and demand, etc) or if there is some government collusion going on inflating their wages.
- bluntfang 9y ago
  there's not a difference.
  - randyrand 9y ago
    There is actually a pretty clear distinction. Here is one persons explanation if you want to inform yourself. http://www.thedailybell.com/editorials/richard-ebeling-free-market-capitalism-vs-crony-capitalism/ http://www.thedailybell.com/editorials/richard-ebeling-free-...
- itaris 9y ago
  What sort of collusion would increase their wages?
  - randyrand 9y ago
    lobbying/bribing for laws intended to limit competition is the most common weapon of choice.
    - itaris 9y ago
      But that wouldn't affect the ratio of employee wage to executive wage. Lobbying/bribing would increase the company's total profit.

KaiserPro 9y ago

The chances of this acutally becoming law are fairly small. Firstly, most of the ruling party (Tories) are rabidly "pro buisness" which translates to sounding tough on anything that could be twisted into "red tape". Secondly, this is an attempt to steal thunder from the current opposition party, who are currently in disarray. Thirdly, and most importantly, there is simply not enough time for this to be implemented fully.

otakucode 9y ago

JFC.... In the late 1970s, the US FTC was worried about rising executive pay. So they pioneered similar 'transparency' requirements, forcing publicly traded companies to reveal the compensation of their executives. Do you know what the result was? MASSIVE increases in executive pay. Rather than shaming companies by making them admit to paying their executives hundreds or thousands of times more than they pay their average employees who are actually creating all of the companies value, they turned executive compensation into a signal to investors of corporate health. 'Would that company be able to pay their CEO $650 million a year if it was failing? Of course not!' This move in Britain appears to be nothing more than an attempt to radically amplify economic inequality, not reduce it. And it will succeed at that as well as it succeeded in the US.

dragonwriter 9y ago
> In the late 1970s, the US FTC was worried about rising executive pay. So they pioneered similar 'transparency' requirements, forcing publicly traded companies to reveal the compensation of their executives. I think you mean “early 1990s” and “SEC”, not “late 1970s” and “FTC”.
- otakucode 9y ago
  You are right, it was the SEC rather than FTC, my bad. But no, it was the late 1970s, not the 1990s.
  - dragonwriter 9y ago
    There was clearly an SEC change for transparency of executive compensation that was driven by concerns of rising inequality in the early 1990s; I can't find anything about one in the late 1970s with that as a motivation, and it seems improbable, because through the 1970s the slow compression of wages following the 1940s “Great Compression” was still continuing, and significant rising inequality took into the 1980s to take off, and wasn't generally a concern of policymakers or in the political sphere in any significant way until the 1990-1991 recession.
9y ago

tim333 9y ago

They should figure a way for a shareholder vote to determine pay levels. I've got shares and wouldn't vote for the managers to get stupid high pay. At the moment the managers effectively choose their own salaries hence the excesses. It is, theoretically at any rate, us shareholder's money.

guy_c 9y ago
Remuneration of executive is up for approval at AGM in many countries. So you probably can vote. You can also check the vote results, the majority of shareholders vote to approve the remuneration packages.

addicted 9y ago

While I do believe that inequality is one of the biggest, if not the biggest, issue in modern developed nations, isn't the rise of the inequality largely due to accumulation of wealth, and not income amongst the richest? I see a lot of ire being targeted towards people making close to a million, and while the 1% makes for a good slogan, I believe the real problem is actually the 0.1 - 0.01% whose wealth has skyrocketed. And you don't reach the 0.1% with executive pay, but rather due to making money on existing capital. Wasn't Picketty's research evidence that the problem isn't income, but rather accumulated wealth?

antisthenes 9y ago
It is, but any measure to reverse-tax and redistribute wealth is a non-starter anywhere in the US, even the most left-learning states and municipalities. So yes, that's the cause, but it's unlikely anything will ever be done about it.
deleted 9y ago
[deleted]
r00fus 9y ago
This is really prescient. It's not the "pay" but the capital gains. And something like a very minimal transaction tax would probably do far more to address inequality. By focusing on people rather than the financial instruments, the politicians can be seen to do something (which is guaranteed to not fix the problem fundamentally).