5 ms·

Shareholders make the rules. They also lose their equity in bankruptcy. How is this unfair?

lovich 8y ago
To the employees, who had their bonuses/severance taken away for paying out the executives. If this was a one time thing I might agree with you, but it's a systemic issue where executives run their companies into the ground and then get paid out still while the employees are left with nothing. The argument has always been that they are paid so much due to the risk they take, but that risk has shown to be non existent. If you were going to follow that argument then the rank and file employees would be getting the high pay since they are left with nothing due to other people's choices
- edanm 8y ago
  > The argument has always been that they are paid so much due to the risk they take, but that risk has shown to be non existent. Not true. For some of them, earning 10mil might be far less than they would otherwise make. It's sad that some people are so much more (monetarily) valuable than other people, and is a function of a lot of things, most of them unfair, like different life circumstances, different IQ/talent, etc. But that's no one person's fault - I may as well be upset that I'm shorter than average. I mean, I am upset - but not at anyone, just at nature or something.
  - bambataa 8y ago
    Do you believe that the rise in executive pay we've been over the last few decades reflects a rise in executive competence?
    - edanm 8y ago
      I have no idea. It could be a rise in competence - it could be a rise in the size of businesses, bringing a commensurate rise in productivity (the average worker is also more productive, not sure if their salary reflects that though). It could be simply "fashion", or everyone making a mistake, or some kind of weird market condition that will fix itself. I don't think anyone truly knows, just like no one knows if stocks are overpriced right now. Or if compensation for e.g. programmers is also overpriced. It's really, really hard to second-guess the market and get the right answer, and I hesitate to trust people who a) don't know much about the specifics here (not saying that's you), and/or b) don't actually have skin in the game. If the people who are choosing how much to pay executives, and putting their money where their mouth is, are choosing this - well, they could definitely be choosing wrong, but its their money to lose for the most part.
      - Joakal 8y ago
        Someone told me that salary transparency of these executives are the reason for high pay. Make it private and execs have less power due to less information.
      - bambataa 8y ago
        - I have no idea. It could be a rise in competence - it could be a rise in the size of businesses, bringing a commensurate rise in productivity (the average worker is also more productive, not sure if their salary reflects that though). Actually median salaries have been relatively flat for the same time period (in the UK and US, at least) [0]. Where do you think the wealth created by the workers' increased productivity is going, since it's clearly not going to the workers? I'm not sure that people "with skin in the game" are really the best people to ask, since their justifications are likely to be local (as in, "our competitor is offering $X so we must beat that") without much insight into wider economic conditions. 0 - http://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ http://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-...
        edanm 8y ago
        The standard story is that salaries have remained flat. I've seen some people claim to the contrary (e.g. Russ Roberts) but I think that's too complicated for a non-economist like me to get at the truth, so I'll just stick to the general consensus here. There are some stories that make sense to me about where the increased productivity is going - into healthcare, into more leisure time, etc. But again, I'm not at all qualified to make any judgements here. > I'm not sure that people "with skin in the game" are really the best people to ask, since their justifications are likely to be local (as in, "our competitor is offering $X so we must beat that") without much insight into wider economic conditions. Well, kind of the basis for the whole idea of capitalism is that you can trust people to make local decisions that are totally selfish to them, without having to consider wider economic conditions, and that it will end up working out for everyone. The great value of capitalism, in my opinion, is that given appropriate conditions, this is usually true. It's not true in the case of some market failures, like monopolies, etc, but it's usually true. And in this specific case, again, it's totally in the interest of the people who have money, to give less of it to executives. Sure, there are lots of reasons why it's more complicated and people don't always behave in their best interest, but are you really so sure that this is the case here? Why? Why are people choosing to fork over extra money here, and what makes you think you can improve the economy by changing that?
  - lovich 8y ago
    I don't find the argument that they are worth more to hold any water, not at these levels. Executive pay did not use to outstrip all other employees this much, and they are getting paid out whether or not they succeed. Part of it, I believe, is that all these companies are interconnected with executives sitting on boards of multiple other companies. Once you are in the in group it's a bunch of people oking each other's salaries as individuals companies rise and fall. It's a great system for that group. It's a shit system for everyone outside of it. It's also not a fact of nature so it's something we could prevent if we decided as a society to do so
    - edanm 8y ago
      > It's also not a fact of nature so it's something we could prevent if we decided as a society to do so If by that you mean "let's convince other people to use their money differently" (convince shareholders to pay executives differently with their own money), then I'm with you - go right ahead and try, though again, I think it's an uphill battle since shareholders already have more info than you, and care more since it's their money. If you mean let's use the power of government to make laws that change this behaviour, then I'm strongly opposed - it's the shareholder's money to lose if they decide to spend it unwisely, I don't think the government should be any more involved than in deciding programmer compensation. Btw, I personally think that executive compensation might well make sense in many cases - executives can change the future of a company, including causing it to exist or not exist in 10 years, in a way that just isn't true for the average employee. (As you yourself suggest when you complain of the executives causing the bankruptcy).
      - lovich 8y ago
        If the shareholders were the only ones with money at risk and society wasn't through having to help take care of the employees after the execs walk away with all the cash, I'd be fine leaving it entirely up to them. I'd want the law to not allow executives to get their massive payouts while at the same time they arent meeting their agreements with other employees such as in Sears case here where the employees aren't getting bonuses/severance while execs are. That's where they are privatising gains in the form of bonuses but making the losses public when society has to come in and help support the safety net for a bunch of employees who just got shafted. Letting shareholders and execs set up a "tails I win, heads you lose" situation in every single major corporation isn't good for having the economy actually put money towards useful ideas, and degrades the rule of law that binds society together. The biggest issue wasn't just that execs are getting paid more, it's that it was decided that agreements with regular employees can be ignored but we still have to do right by the execs I believe this situation shows a basic divide between conservative and liberal viewpoints where conservatives look at this situation and believe it's only involving the shareholders and execs making the agreement where liberals look at it and see it as agreement between two people that is affecting everyone around them and society. We probably won't get much further discussing it if we are looking at the same event and seeing entirely different situations

To the employees, who had their bonuses/severance taken away for paying out the executives. If this was a one time thing I might agree with you, but it's a systemic issue where executives run their companies into the ground and then get paid out still while the employees are left with nothing. The argument has always been that they are paid so much due to the risk they take, but that risk has shown to be non existent. If you were going to follow that argument then the rank and file employees would be getting the high pay since they are left with nothing due to other people's choices

edanm 8y ago
> The argument has always been that they are paid so much due to the risk they take, but that risk has shown to be non existent. Not true. For some of them, earning 10mil might be far less than they would otherwise make. It's sad that some people are so much more (monetarily) valuable than other people, and is a function of a lot of things, most of them unfair, like different life circumstances, different IQ/talent, etc. But that's no one person's fault - I may as well be upset that I'm shorter than average. I mean, I am upset - but not at anyone, just at nature or something.
- bambataa 8y ago
  Do you believe that the rise in executive pay we've been over the last few decades reflects a rise in executive competence?
  - edanm 8y ago
    I have no idea. It could be a rise in competence - it could be a rise in the size of businesses, bringing a commensurate rise in productivity (the average worker is also more productive, not sure if their salary reflects that though). It could be simply "fashion", or everyone making a mistake, or some kind of weird market condition that will fix itself. I don't think anyone truly knows, just like no one knows if stocks are overpriced right now. Or if compensation for e.g. programmers is also overpriced. It's really, really hard to second-guess the market and get the right answer, and I hesitate to trust people who a) don't know much about the specifics here (not saying that's you), and/or b) don't actually have skin in the game. If the people who are choosing how much to pay executives, and putting their money where their mouth is, are choosing this - well, they could definitely be choosing wrong, but its their money to lose for the most part.
    - Joakal 8y ago
      Someone told me that salary transparency of these executives are the reason for high pay. Make it private and execs have less power due to less information.
    - bambataa 8y ago
      - I have no idea. It could be a rise in competence - it could be a rise in the size of businesses, bringing a commensurate rise in productivity (the average worker is also more productive, not sure if their salary reflects that though). Actually median salaries have been relatively flat for the same time period (in the UK and US, at least) [0]. Where do you think the wealth created by the workers' increased productivity is going, since it's clearly not going to the workers? I'm not sure that people "with skin in the game" are really the best people to ask, since their justifications are likely to be local (as in, "our competitor is offering $X so we must beat that") without much insight into wider economic conditions. 0 - http://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ http://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-...
      - edanm 8y ago
        The standard story is that salaries have remained flat. I've seen some people claim to the contrary (e.g. Russ Roberts) but I think that's too complicated for a non-economist like me to get at the truth, so I'll just stick to the general consensus here. There are some stories that make sense to me about where the increased productivity is going - into healthcare, into more leisure time, etc. But again, I'm not at all qualified to make any judgements here. > I'm not sure that people "with skin in the game" are really the best people to ask, since their justifications are likely to be local (as in, "our competitor is offering $X so we must beat that") without much insight into wider economic conditions. Well, kind of the basis for the whole idea of capitalism is that you can trust people to make local decisions that are totally selfish to them, without having to consider wider economic conditions, and that it will end up working out for everyone. The great value of capitalism, in my opinion, is that given appropriate conditions, this is usually true. It's not true in the case of some market failures, like monopolies, etc, but it's usually true. And in this specific case, again, it's totally in the interest of the people who have money, to give less of it to executives. Sure, there are lots of reasons why it's more complicated and people don't always behave in their best interest, but are you really so sure that this is the case here? Why? Why are people choosing to fork over extra money here, and what makes you think you can improve the economy by changing that?
- lovich 8y ago
  I don't find the argument that they are worth more to hold any water, not at these levels. Executive pay did not use to outstrip all other employees this much, and they are getting paid out whether or not they succeed. Part of it, I believe, is that all these companies are interconnected with executives sitting on boards of multiple other companies. Once you are in the in group it's a bunch of people oking each other's salaries as individuals companies rise and fall. It's a great system for that group. It's a shit system for everyone outside of it. It's also not a fact of nature so it's something we could prevent if we decided as a society to do so
  - edanm 8y ago
    > It's also not a fact of nature so it's something we could prevent if we decided as a society to do so If by that you mean "let's convince other people to use their money differently" (convince shareholders to pay executives differently with their own money), then I'm with you - go right ahead and try, though again, I think it's an uphill battle since shareholders already have more info than you, and care more since it's their money. If you mean let's use the power of government to make laws that change this behaviour, then I'm strongly opposed - it's the shareholder's money to lose if they decide to spend it unwisely, I don't think the government should be any more involved than in deciding programmer compensation. Btw, I personally think that executive compensation might well make sense in many cases - executives can change the future of a company, including causing it to exist or not exist in 10 years, in a way that just isn't true for the average employee. (As you yourself suggest when you complain of the executives causing the bankruptcy).
    - lovich 8y ago
      If the shareholders were the only ones with money at risk and society wasn't through having to help take care of the employees after the execs walk away with all the cash, I'd be fine leaving it entirely up to them. I'd want the law to not allow executives to get their massive payouts while at the same time they arent meeting their agreements with other employees such as in Sears case here where the employees aren't getting bonuses/severance while execs are. That's where they are privatising gains in the form of bonuses but making the losses public when society has to come in and help support the safety net for a bunch of employees who just got shafted. Letting shareholders and execs set up a "tails I win, heads you lose" situation in every single major corporation isn't good for having the economy actually put money towards useful ideas, and degrades the rule of law that binds society together. The biggest issue wasn't just that execs are getting paid more, it's that it was decided that agreements with regular employees can be ignored but we still have to do right by the execs I believe this situation shows a basic divide between conservative and liberal viewpoints where conservatives look at this situation and believe it's only involving the shareholders and execs making the agreement where liberals look at it and see it as agreement between two people that is affecting everyone around them and society. We probably won't get much further discussing it if we are looking at the same event and seeing entirely different situations