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Unpopular opinion: For big companies, if you take all of the exec pay (C suits) and give it out to rest of the employees, the average employee income only rise

Unpopular opinion: For big companies, if you take all of the exec pay (C suits) and give it out to rest of the employees, the average employee income only rises by 3-5%. While CXX packages are extra-ordinary, one has to understand that its often drop in the bucket for big balance sheets and even less relevant when you have couple of hundreds of thousand employees around. So the metric of disparity we should use is not max/min salary but rather avg % increase if CXX salaries were all given to employees.

kelnos 6y ago
I don't understand why you'd think that's a good metric. If the Cxx team each makes 100x what the average employee makes, it doesn't matter if there are 10 employees or 10,000. There's rampant income inequality either way.
- sytelus 6y ago
  The metric reflects the level of responsibilities. If you are managing and making decisions that directs activities of 100,000 people, then you do have that much more responsibility. So your comp as % of total comp of your report is good metric.
pembrook 6y ago
If I embezzle $10,000,000 from a giant company like GE, its also a drop in the bucket on their balance sheet. But that doesn’t make it right. American public company executives are grossly overpaid, and there’s been numerous studies proving this. Both historically in the US (exec pay has ballooned here since the 1980s) and currently in most other developed countries, companies with lower exec compensation don’t show lower ROE when sorted by industry. Exec compensation in many American companies is basically normalized theft from shareholders given the revolving door of incestuous boards and C-suites and the constant conflicts of interest. However, the money execs are looting from American companies doesn’t belong to employees. It belongs to shareholders. So a metric of giving that money to employees is irrelevant. Employee salaries are (and should be) set by broader market demand.
- sytelus 6y ago
  If you are responsible and accountable for $5B revenues and associated decisions, won’t you agree you deserve 0.5% of that revenue? This is generally accepted reasonable management fees for things like index funds. Your credit card company or your iOS platform or Uber takes much bigger cuts.
  - zxcmx 6y ago
    Maybe we should give the president a share of GDP?
    - maerF0x0 6y ago
      Recently I had been thinking what if we pay all elected officials this way, except as something like a multiplier on the median income in the country... GDP growth could be few getting a lot richer or many getting moderately richer. Their pay increases would be inflation indexed and tied to "rising tides lift all boats"
  - pembrook 6y ago
    Management fees on index funds are trending towards zero for a reason. Just because it’s generally accepted doesn’t make it correct. It was generally accepted 15 years ago that paying 2 and 20 in fees for a hedge fund was reasonable compensation. Then everybody realized that 98%+ of hedge funds aren’t providing alpha and were basically stealing money from the ignorant. A similar realization will eventually happen on exec compensation as we get more data.

kelnos 6y ago

I don't understand why you'd think that's a good metric. If the Cxx team each makes 100x what the average employee makes, it doesn't matter if there are 10 employees or 10,000. There's rampant income inequality either way.

sytelus 6y ago
The metric reflects the level of responsibilities. If you are managing and making decisions that directs activities of 100,000 people, then you do have that much more responsibility. So your comp as % of total comp of your report is good metric.

pembrook 6y ago

If I embezzle $10,000,000 from a giant company like GE, its also a drop in the bucket on their balance sheet. But that doesn’t make it right. American public company executives are grossly overpaid, and there’s been numerous studies proving this. Both historically in the US (exec pay has ballooned here since the 1980s) and currently in most other developed countries, companies with lower exec compensation don’t show lower ROE when sorted by industry. Exec compensation in many American companies is basically normalized theft from shareholders given the revolving door of incestuous boards and C-suites and the constant conflicts of interest. However, the money execs are looting from American companies doesn’t belong to employees. It belongs to shareholders. So a metric of giving that money to employees is irrelevant. Employee salaries are (and should be) set by broader market demand.

sytelus 6y ago
If you are responsible and accountable for $5B revenues and associated decisions, won’t you agree you deserve 0.5% of that revenue? This is generally accepted reasonable management fees for things like index funds. Your credit card company or your iOS platform or Uber takes much bigger cuts.
- zxcmx 6y ago
  Maybe we should give the president a share of GDP?
  - maerF0x0 6y ago
    Recently I had been thinking what if we pay all elected officials this way, except as something like a multiplier on the median income in the country... GDP growth could be few getting a lot richer or many getting moderately richer. Their pay increases would be inflation indexed and tied to "rising tides lift all boats"
- pembrook 6y ago
  Management fees on index funds are trending towards zero for a reason. Just because it’s generally accepted doesn’t make it correct. It was generally accepted 15 years ago that paying 2 and 20 in fees for a hedge fund was reasonable compensation. Then everybody realized that 98%+ of hedge funds aren’t providing alpha and were basically stealing money from the ignorant. A similar realization will eventually happen on exec compensation as we get more data.