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>Stock options make up a big part of CEO pay packages, and the conservative measure values the options when granted, versus when cashed in, or “realized.” The

by nv-vn 7y ago

>Stock options make up a big part of CEO pay packages, and the conservative measure values the options when granted, versus when cashed in, or “realized.” The "conservative" measure is the only correct way to measure here. Using realized gains makes no sense because that's not the value the company paid out. That's like saying you invested your salary and the gains are part of your compensation package.

turk73 7y ago
Not just CEOs. We had a terrible Superintendent of Schools in a nearby district and to fire her the contract required they pay her $500,000. So utter incompetence is actually rewarded handsomely.
pembrook 7y ago
This is true, but the overall reason CEO pay has ballooned is a dramatic cultural shift in Corporate America during 1980s towards stock options/grants for executives. Meanwhile corporate earnings have not grown 940% faster than they did in the 80s. Funny story, for a while, corporate America actually believed that equity pay was "free" and didn't realize that shareholders were paying for it. The reason worker pay hasn't kept up has a lot to do with simple stock market compounding. The stock market goes up 9.8% a year on average--regardless of executive skill. Even if worker salaries keep pace with inflation (which they don't), they would only go up 2-3% per year. Further reading, this article from II: https://www.institutionalinvestor.com/article/b1db3jy3201d38/The-MBA-Myth-and-the-Cult-of-the-CEO https://www.institutionalinvestor.com/article/b1db3jy3201d38... Also, highly recommend this newsletter: https://eomail1.com/preview?p=d9e18eae-6673-11e9-9307-06b4694bee2a&pt=campaign&t=1556101007&s=fad440ca5338bc1a92a229534c3562917c431f245224f98024e530365a4868e5 https://eomail1.com/preview?p=d9e18eae-6673-11e9-9307-06b469... This planet money episode: https://www.npr.org/sections/money/2018/06/22/622646316/episode-682-when-ceo-pay-exploded https://www.npr.org/sections/money/2018/06/22/622646316/epis...
- sokoloff 7y ago
  > Even if worker salaries keep pace with inflation (which they don't), they would only go up 2-3% per year. It seems to me that they do slightly better than keep pace: https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us... Or do better than that (albeit over a shorter timeframe): https://fred.stlouisfed.org/series/MEHOINUSA672N https://fred.stlouisfed.org/series/MEHOINUSA672N

by nv-vn 7y ago

turk73 7y ago

Not just CEOs. We had a terrible Superintendent of Schools in a nearby district and to fire her the contract required they pay her $500,000. So utter incompetence is actually rewarded handsomely.

pembrook 7y ago

This is true, but the overall reason CEO pay has ballooned is a dramatic cultural shift in Corporate America during 1980s towards stock options/grants for executives. Meanwhile corporate earnings have not grown 940% faster than they did in the 80s. Funny story, for a while, corporate America actually believed that equity pay was "free" and didn't realize that shareholders were paying for it. The reason worker pay hasn't kept up has a lot to do with simple stock market compounding. The stock market goes up 9.8% a year on average--regardless of executive skill. Even if worker salaries keep pace with inflation (which they don't), they would only go up 2-3% per year. Further reading, this article from II: https://www.institutionalinvestor.com/article/b1db3jy3201d38/The-MBA-Myth-and-the-Cult-of-the-CEO https://www.institutionalinvestor.com/article/b1db3jy3201d38... Also, highly recommend this newsletter: https://eomail1.com/preview?p=d9e18eae-6673-11e9-9307-06b4694bee2a&pt=campaign&t=1556101007&s=fad440ca5338bc1a92a229534c3562917c431f245224f98024e530365a4868e5 https://eomail1.com/preview?p=d9e18eae-6673-11e9-9307-06b469... This planet money episode: https://www.npr.org/sections/money/2018/06/22/622646316/episode-682-when-ceo-pay-exploded https://www.npr.org/sections/money/2018/06/22/622646316/epis...

sokoloff 7y ago
> Even if worker salaries keep pace with inflation (which they don't), they would only go up 2-3% per year. It seems to me that they do slightly better than keep pace: https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us... Or do better than that (albeit over a shorter timeframe): https://fred.stlouisfed.org/series/MEHOINUSA672N https://fred.stlouisfed.org/series/MEHOINUSA672N