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Are companies all optimizing for cost? Isn't there a temptation to optimize for executive compensation? What it manufacturing was sent to the place in the world
by mfer 7y ago
Are companies all optimizing for cost? Isn't there a temptation to optimize for executive compensation? What it manufacturing was sent to the place in the world with the lowest overall expense. The extra money made could be put into bonuses and raises for execs.
This is an honest temptation. It's not just about the company health. It prioritizes some employees over other employees.
It's more than optimizing expenses.
- seibelj 7y agoEvery company takes inputs (labor and physical goods) and produces outputs (products and services). GM is not the only producer of cars, this is a very competitive industry. If they sell a car for $25,000 they can't simply raise the price without consequence - there are competitors' cars for sale. So how will they cover the extra expense demanded by labor? It sounds like you believe executives are paid too much, so the extra money to pay labor should come out of executive compensation. However, the vast majority of executive compensation is in the form of equity, and labor's demand for more cash will punish the stock price. Plus there really isn't that many executives and you can't squeeze them enough to cover the extra spend on labor.