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JFC.... In the late 1970s, the US FTC was worried about rising executive pay. So they pioneered similar 'transparency' requirements, forcing publicly traded co
by 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 agoYou are right, it was the SEC rather than FTC, my bad. But no, it was the late 1970s, not the 1990s.
- dragonwriter 9y agoThere 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.
- oh_sigh 9y agoThe employees are hired out to do the job. If it really was the case that the average employees talents were so rare, then they would be making much more. See for example deep learning and self driving car company "average" employees
- otakucode 9y agoAre you under the impression that executives are not employees? Or that the "talents" of executives are rare? And no, the rarity nor value of the employees skills matter, and hasn't for quite awhile now (since at least the 1980s). The view you depict is the 'free market' one, where profit always rapidly decreases to zero based upon rational competition. Tell me, do you see many companies with profit margins rapidly approaching zero?
- oh_sigh 9y ago> Tell me, do you see many companies with profit margins rapidly approaching zero? Many of the companies that were in a field which Amazon entered
- ars 9y agoI can't find the citation right now, but I remember reading that a European country required all gas stations to report their price to a government database, so that consumers could easily price compare. It caused prices to go up, since now the gas station can easily see he doesn't really need to compete much, so they just barely went lower then their neighbor. After a few cycles of that prices ended up higher.
- bluthru 9y agoIt's always humbling to learn about economic policies that have backfired. Another one is capping wages in the US during WWII: companies compensated employees other ways which popularized employer-subsidized insurance.
- adventured 9y ago> Do you know what the result was? MASSIVE increases in executive pay. That's not what massively increased executive pay. The stock market boom - starting from the early 1980s and accelerating in the mid 1990s to now - is what generated the hyper spike in executive compensation. You can directly trace all big increases and drops in executive compensation, going back 50 years, with the S&P 500's movements. Jul 1964 to Apr 1982, the S&P 500 went from 84 to 109. Call it 30% over 17 years. Read that again and again until it sinks in. From Apr 1982 to Oct 1993 it went from 109 to 466. Call it near 300% in 11 years. From Oct 1993 to today, 24 years, it has gone from 466 to 2457. The only reason executive compensation has soared so dramatically, is because so much of it is tied to stock compensation. If we're talking base salary, the NBA's total league roster (~450 players) earns as much as all Fortune 500 CEOs combined.
- r00fus 9y agoThis is a much better factually supported hypothesis than it's parent post. I find it silly that transparency alone would cause pay raises or gas price increases.
- gremlinsinc 9y agoBetter ideas would be an Executive tax.. -- if you make more than 120 times the average American salary from a single company, anything above that is taxed at 100%.