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> Redistributing 100% of these 5 executives' salary to all 2.2m workers would be a raise of... $32/year. But that's besides the point. What on earth do they ne

> Redistributing 100% of these 5 executives' salary to all 2.2m workers would be a raise of... $32/year. But that's besides the point. What on earth do they need to get paid that much for? Even if you assume they're contributing 100x what line workers are doing, they'll do just fine earning under $1M/year. Plus, you then pinpoint the bigger issue. Yeah, the investor class exists because, you know, someone shaved $32 off of everyone's salary so 5 people could get paid a total of ~$70M/year.

ekianjo 7y ago
> But that's besides the point. What on earth do they need to get paid that much for? Companies decide. It is their prerogative. If you dont like it nothing prevents you from having your own billion dollar company where everyone earns the same.
- pytester 7y ago
  There have been a number of shareholder fights over executive pay (it is their money, after all, so it's only natural they should try to claim it). They often end up losing thanks to the trend of passive investors and fund managers (principal/agent problem) with unhealthily close relationships with executives.
- FabHK 7y ago
  > Companies decide. It is their prerogative. Yet it is also a legitimate target for outside regulation, if there are indicators of market failure (monopoly, externalities, asymmetric information, etc.).
  - ekianjo 7y ago
    Asymmetric information is in the nature of business. This is where value emerges.
austhrow743 7y ago
Its not beside the point. It directly refutes the other commenters point. You don't get to jump in to a discussion between others and retroactively decide what the point was. How rude.
manigandham 7y ago
This is what the job is worth, if you want someone competent and responsible for thousands of employees and billions in revenue. Nobody is doing that for $1m/year when one wrong decision could end up costing 1000x more than their salary and hurting livelihoods of the workers. Focusing on a single number is irrelevant, you must account for everything in the organization and the results. Also nobody is stopping anyone from creating corporations with different compensation, but clearly there's a certain price required when you get to these levels.
- nkrisc 7y ago
  > Nobody is doing that for $1m/year when one wrong decision could end up costing 1000x more than their salary and hurting livelihoods of the workers. You make it sound like they'll somehow lose out personally by losing the company 1000x their salary and hurting the livelihoods of workers, like they're somehow being compensated for personal risk. What you cited represents no personal risk to the CEO. They already made their millions. Now maybe if CEOs were actually liable for the damage they could do to the company and economy, would it be more justified.
  - manigandham 7y ago
    There is personal risk. If the CEO does a poor job they might not be hired again or have other career impacts. There are numerous Fortune 500 CEOs that have a negative reputation that impacts their future earnings. Also corporations partly exist to shield liability so CEOs are not going to be personally held responsible outside of gross negligence or criminal acts, the same way you wouldn't be held responsible if you caused a major outage in your company that lost customers. There is an general move towards more performance-based compensation though, which I think you would agree is a good thing.
    - reroute1 7y ago
      > There is personal risk. If the CEO does a poor job they might not be hired again or have other career impacts. There are numerous Fortune 500 CEOs that have a negative reputation that impacts their future earnings. This is true for all jobs...
barry-cotter 7y ago
> What on earth do they need to get paid that much for? Even if you assume they're contributing 100x what line workers are doing, they'll do just fine earning under $1M/year. No one needs to get paid anything. Calvin Coolidge's[1] son died of an infected blister he got playing tennis. Do we need antibiotics? No. People lived without them and if we're unlucky we will too as antibiotic resistance spreads. It's not about what people need. Americans don't need such huge houses or so many cars. Swedes don't need their winter holiday to the sun. Chinese peasants don't need to go from eating meat once a year to every day of the week. It's about what people are worth paying, whether they produce more than it costs to employ them. The news that Steve Ballmer was retiring as CEO caused MSFT stock to rise $1 billion. Ballmer was worth -$1,000,000 as CEO. Since Satya Nadella became CEO its market capitalisation has quintupled. He is very easily worth paying $100 million a year. On your final point, the investor class is the reason we can have nice things. People who have money and invest it instead of consuming it are where investment comes from. Without investment our private stock of capital will rapidly run down due to depreciation and there will be no economic growth, no research and development. We've seen the alternative to capitalism. It failed to promote economic growth, freedom or human flourishing. For countries starting from almost everyone being peasants it has its plus points[2], see Branko Milanovic's new book. For [1] A US President [2] Communism probably led to faster investments in education and healthcare than would otherwise have occurred in countries like Romania and Bulgaria. In countries that were already developed before the Soviet conquest like East Germany or Czechoslovakia it had basically no redeeming features
- simiones 7y ago
  > Communism probably led to faster investments in education and healthcare than would otherwise have occurred in countries like Romania and Bulgaria. I think much more than healthcare and education, investment in infrastructure, industry and research were somewhat "redeeming" features of the brutal totalitarian regimes in Romania at least. More to the point, most ground-breaking research, especially computing and rocketry, has actually come from the state in the capitalist USA, with private capital only serving with mass-marketing of those technologies once proven out and gifted from the public to the private space. Also, a non-capitalist society would not be investor-less. It would instead spread investment opportunities to vastly more people, and would encourage them to band together and pool their investment in worker-owned enterprises. This is in stark contrast to the totalitarian state capitalism of the so-called "communist countries".
roenxi 7y ago
The problem is actually a bit more subtle than that. Practically speaking they don't add that much value over the next candidate. My estimate is any large company has 10s of people who could be an effective CEO. The competition at that level is absurd. With that sort of supply it doesn't make sense to pay them so much; especially considering how many of them turn out to be not particularly good at the job and just buffeted by luck and coincidence. So with that in mind, the inequality between CEOs and general management suggest that the process of picking the CEOs is corrupted. It is possible (imho, likely) that the most competent people aren't being appointed to the role. That is bad for investors, workers and the public. The company law around appointing CEOs probably needs to be changed.
- rjtavares 7y ago
  Michael Lewis has a great episode about this in his podcast "Against the Rules". He actually gets a consultant to try to explain why CEOs are paid so much. The answers are pretty telling.
  - Infinitesimus 7y ago
    I'd love to check it out. Do you remember the episode title/consultant's name? edit: I think it's "The Magic Shoebox" episode
    - rjtavares 7y ago
      I don't think it's that one, I think it's "The Hand of Leonardo". It convincingly links what happens in the art world with what happen with CEO compensation.
- bluGill 7y ago
  There have been many examples of a CEO retiring and the replacement running the company into the ground. Thus if you find a good CEO they are well worth a much larger salary (if that is what it takes to get them) to ensure they stay on the job working for you. A good CEO is well worth the price because of how well the company does. Luck is a factor in how much a company grows, but bad management is the largest factor in how fast the company fails. Of course why you would pay such high salaries to a CEO who is untried and might turn out to destroy the company is a valid question.
davinic 7y ago
You're cherry picking. What is the number if you redistribute all CEO pay over 100x the average employee for the Fortune 1000?
rhino369 7y ago
Who gets harmed by it though? If Walmart execs suddenly got 300k a year, that money would just go back to the richer owners. >someone shaved $32 off of everyone's salary so 5 people could get paid a total of ~$70M/year. But that's not it works. It's like Walmart has a "wages" budget that gets divided up. Leadership compensation comes out of profitability.
notSupplied 7y ago
My question to you is why do you choose to prioritize that problem? Yes, $70 million to the execs while many earn minimum wage sure does sound awful. But like OP says, even if you achieved resounding success in eliminating this inequality, it translates to a $32/yr raise. That rounds down to zero in terms of improvement in prosperity. Isn't prosperity of the rest what we really ought to care about? It seems an awfully lot like focusing on the cosmetically ugliest problem that doesn't really move the needle.

ekianjo 7y ago

> But that's besides the point. What on earth do they need to get paid that much for? Companies decide. It is their prerogative. If you dont like it nothing prevents you from having your own billion dollar company where everyone earns the same.

pytester 7y ago
There have been a number of shareholder fights over executive pay (it is their money, after all, so it's only natural they should try to claim it). They often end up losing thanks to the trend of passive investors and fund managers (principal/agent problem) with unhealthily close relationships with executives.
FabHK 7y ago
> Companies decide. It is their prerogative. Yet it is also a legitimate target for outside regulation, if there are indicators of market failure (monopoly, externalities, asymmetric information, etc.).
- ekianjo 7y ago
  Asymmetric information is in the nature of business. This is where value emerges.

austhrow743 7y ago

Its not beside the point. It directly refutes the other commenters point. You don't get to jump in to a discussion between others and retroactively decide what the point was. How rude.

manigandham 7y ago

This is what the job is worth, if you want someone competent and responsible for thousands of employees and billions in revenue. Nobody is doing that for $1m/year when one wrong decision could end up costing 1000x more than their salary and hurting livelihoods of the workers. Focusing on a single number is irrelevant, you must account for everything in the organization and the results. Also nobody is stopping anyone from creating corporations with different compensation, but clearly there's a certain price required when you get to these levels.

nkrisc 7y ago
> Nobody is doing that for $1m/year when one wrong decision could end up costing 1000x more than their salary and hurting livelihoods of the workers. You make it sound like they'll somehow lose out personally by losing the company 1000x their salary and hurting the livelihoods of workers, like they're somehow being compensated for personal risk. What you cited represents no personal risk to the CEO. They already made their millions. Now maybe if CEOs were actually liable for the damage they could do to the company and economy, would it be more justified.
- manigandham 7y ago
  There is personal risk. If the CEO does a poor job they might not be hired again or have other career impacts. There are numerous Fortune 500 CEOs that have a negative reputation that impacts their future earnings. Also corporations partly exist to shield liability so CEOs are not going to be personally held responsible outside of gross negligence or criminal acts, the same way you wouldn't be held responsible if you caused a major outage in your company that lost customers. There is an general move towards more performance-based compensation though, which I think you would agree is a good thing.
  - reroute1 7y ago
    > There is personal risk. If the CEO does a poor job they might not be hired again or have other career impacts. There are numerous Fortune 500 CEOs that have a negative reputation that impacts their future earnings. This is true for all jobs...

barry-cotter 7y ago

> What on earth do they need to get paid that much for? Even if you assume they're contributing 100x what line workers are doing, they'll do just fine earning under $1M/year. No one needs to get paid anything. Calvin Coolidge's[1] son died of an infected blister he got playing tennis. Do we need antibiotics? No. People lived without them and if we're unlucky we will too as antibiotic resistance spreads. It's not about what people need. Americans don't need such huge houses or so many cars. Swedes don't need their winter holiday to the sun. Chinese peasants don't need to go from eating meat once a year to every day of the week. It's about what people are worth paying, whether they produce more than it costs to employ them. The news that Steve Ballmer was retiring as CEO caused MSFT stock to rise $1 billion. Ballmer was worth -$1,000,000 as CEO. Since Satya Nadella became CEO its market capitalisation has quintupled. He is very easily worth paying $100 million a year. On your final point, the investor class is the reason we can have nice things. People who have money and invest it instead of consuming it are where investment comes from. Without investment our private stock of capital will rapidly run down due to depreciation and there will be no economic growth, no research and development. We've seen the alternative to capitalism. It failed to promote economic growth, freedom or human flourishing. For countries starting from almost everyone being peasants it has its plus points[2], see Branko Milanovic's new book. For [1] A US President [2] Communism probably led to faster investments in education and healthcare than would otherwise have occurred in countries like Romania and Bulgaria. In countries that were already developed before the Soviet conquest like East Germany or Czechoslovakia it had basically no redeeming features

simiones 7y ago
> Communism probably led to faster investments in education and healthcare than would otherwise have occurred in countries like Romania and Bulgaria. I think much more than healthcare and education, investment in infrastructure, industry and research were somewhat "redeeming" features of the brutal totalitarian regimes in Romania at least. More to the point, most ground-breaking research, especially computing and rocketry, has actually come from the state in the capitalist USA, with private capital only serving with mass-marketing of those technologies once proven out and gifted from the public to the private space. Also, a non-capitalist society would not be investor-less. It would instead spread investment opportunities to vastly more people, and would encourage them to band together and pool their investment in worker-owned enterprises. This is in stark contrast to the totalitarian state capitalism of the so-called "communist countries".

roenxi 7y ago

The problem is actually a bit more subtle than that. Practically speaking they don't add that much value over the next candidate. My estimate is any large company has 10s of people who could be an effective CEO. The competition at that level is absurd. With that sort of supply it doesn't make sense to pay them so much; especially considering how many of them turn out to be not particularly good at the job and just buffeted by luck and coincidence. So with that in mind, the inequality between CEOs and general management suggest that the process of picking the CEOs is corrupted. It is possible (imho, likely) that the most competent people aren't being appointed to the role. That is bad for investors, workers and the public. The company law around appointing CEOs probably needs to be changed.

rjtavares 7y ago
Michael Lewis has a great episode about this in his podcast "Against the Rules". He actually gets a consultant to try to explain why CEOs are paid so much. The answers are pretty telling.
- Infinitesimus 7y ago
  I'd love to check it out. Do you remember the episode title/consultant's name? edit: I think it's "The Magic Shoebox" episode
  - rjtavares 7y ago
    I don't think it's that one, I think it's "The Hand of Leonardo". It convincingly links what happens in the art world with what happen with CEO compensation.
bluGill 7y ago
There have been many examples of a CEO retiring and the replacement running the company into the ground. Thus if you find a good CEO they are well worth a much larger salary (if that is what it takes to get them) to ensure they stay on the job working for you. A good CEO is well worth the price because of how well the company does. Luck is a factor in how much a company grows, but bad management is the largest factor in how fast the company fails. Of course why you would pay such high salaries to a CEO who is untried and might turn out to destroy the company is a valid question.

davinic 7y ago

You're cherry picking. What is the number if you redistribute all CEO pay over 100x the average employee for the Fortune 1000?

rhino369 7y ago

Who gets harmed by it though? If Walmart execs suddenly got 300k a year, that money would just go back to the richer owners. >someone shaved $32 off of everyone's salary so 5 people could get paid a total of ~$70M/year. But that's not it works. It's like Walmart has a "wages" budget that gets divided up. Leadership compensation comes out of profitability.

notSupplied 7y ago

My question to you is why do you choose to prioritize that problem? Yes, $70 million to the execs while many earn minimum wage sure does sound awful. But like OP says, even if you achieved resounding success in eliminating this inequality, it translates to a $32/yr raise. That rounds down to zero in terms of improvement in prosperity. Isn't prosperity of the rest what we really ought to care about? It seems an awfully lot like focusing on the cosmetically ugliest problem that doesn't really move the needle.