6 ms·

You're not wrong, but the perspective feels like missing the forest for the trees. So what if stock-based compensation was uncommon in 1965? The average employe

• davvolun 5y ago
  Exactly, pensions were considerably more common in the 1960s also, but at the end of the day, I don't really care if my retirement is actually funded by a pension or a 401k or by stuffing dollar bills under my mattress, I want to know when I can retire and how comfortably I can live when I retire. Yes, getting into the weeds is valuable, but here we're talking about the money in your bank at the end of the day, and that CEO salaries haven't changed much doesn't say anything. Yes, a CEO should be making more money than the average employee. The debate is over how much -- why do CEOs get absolutely massive bonuses and golden parachutes and stock options and for employees it's expected that you put in the work in the hope of future recompense in terms of bonuses, promotions, etc.
  • WalterBright 5y ago
    > why Because their decisions can drive a company into bankruptcy or transform it into a trillion dollar company. Your average line employee has no such leverage from their actions.
    • FireBeyond 5y ago
      And when they drive it into bankruptcy, the company will still go to court to argue that these bonuses, compensation, parachutes should be paid, regardless. Win-win game. Except for the employees and shareholders.
      • WalterBright 5y ago
        Stock based compensation goes to zero in bankruptcy.
        • lanstin 5y ago
          Usually somehow the execs have sold out just before the bad news, while the regular employees haven't liquidated their 401s/stock plans.
          • WinstonSmith84 5y ago
            Usually? Please ... That's called insider trading and those who do that ends up in jail or at best have to hide in the sun for the rest of their life.
            • ivan888 5y ago
              Is "hide in the sun" an idiom I'm unfamiliar with? Genuinely curious about what this means
              • throwaway22211 5y ago
                Non-extradition countries are often tropical. "in the sun". https://worldpopulationreview.com/country-rankings/countries-without-extradition https://worldpopulationreview.com/country-rankings/countries... Latin countries, while not technically non-extradition, are still easy to hide in ... and also "in the sun"
              • centixel 5y ago
                Not OP, but I take it to mean that they flee to a tropical country with limited extradition laws.
            • paulmd 5y ago
              A recent example would be Intel's CEO Brian Krzanich dumping as much stock as he could after learning about Meltdown and before the news went public. https://arstechnica.com/information-technology/2018/01/intel-ceos-sale-of-stock-just-before-security-bug-reveal-raises-questions/ https://arstechnica.com/information-technology/2018/01/intel... The article also cites Equifax's CEO selling before the news of their data breach went public. And that's just the ones that are prominent enough that everybody knows about it.
    • refenestrator 5y ago
      That would make sense as a post-exceptional-transformation windfall. Not as standard comp for keeping the seat warm while saying "yeah do more of that thing that prints money".
      • WalterBright 5y ago
        Why would any company hire a CEO and pay him millions to warm a seat? Why would the stockholders put up with that?
        • bobthepanda 5y ago
          Stockholders are increasingly not putting up with it. Votes against are still kind of rare, but they do happen: https://www.restaurantbusinessonline.com/financing/starbucks-shareholders-deliver-rare-rebuke-compensation https://www.restaurantbusinessonline.com/financing/starbucks... But also, the board makes CEO decisions, and it's not totally uncommon for board members to also be CEOs of other companies, so they buy the kool-aid because they also benefit from it. Plus, CEOs and boards don't exist in a vacuum. You've got to keep up with the Joneses if you think you're letting a good candidate get away.
          • WalterBright 5y ago
            The stockholders can revolt. If they don't, and it's their money being handed to the CEO, is it reasonable for non-stockholders to gripe about it?
            • refenestrator 5y ago
              We're all stockholders, and anyone with a 401k is, by way of Vanguard and Blackrock.
              • WalterBright 5y ago
                So don't invest in corporations who you believe overpay their CEO.
    • deleted 5y ago
      [deleted]
  • lanstin 5y ago
    Didn't you just say the stock owners were being diluted by the CEO compensations? Doesn't that include the 401k and pension funds? Isn't this is a massive transfer of wealth the the managerial class, justified simply because they can do it, and leave the consequences to others to clean up.
    • idiotsecant 5y ago
      Bingo. The massive growth in the stock market in the past 40 years is directly a result of the massive inflow of capital from middle class 401k purchases. Overinflated CEO compensation packages are a way to siphon some of this into the pockets of the ruling class.
      • refurb 5y ago
        No it’s not due to that. How do I know? Look at PE ratios. Stock prices are backed by earnings.
        • bumby 5y ago
          I think the Cyclically Adjusted PE ratio is more useful in this regard. It does seem to point to overinflated prices compared to earnings. The current PE ratios are only surpassed by those during the dot-com boom when people found it difficult to create valuations grounded in reality. One theory is this is due to access to cheap capital in the last decade + https://www.multpl.com/shiller-pe https://www.multpl.com/shiller-pe
• WalterBright 5y ago
  You can't get a CEO without offering a golden parachute. This is because you're not hire a loser CEO, you're going to hire a winner, and you'll need to attract him away from his current lucrative position. It's the same thing as top athletes getting contracts paying them millions of dollars whether or not they continue to win games.
  • yardie 5y ago
    > top athletes getting contracts paying them millions of dollars whether or not they continue to win games. I know in the NFL, a lot of those contracts have clauses big enough to drive a dump truck through. Many of those million dollar football contracts are back loaded to only pay out if the athlete competes the full term [0]. Winning and losing games is definitely tied to whether they stay or are cut. Unlike a CEO, a poor performing athlete has no golden parachute to fall back to. [0] https://www.pff.com/news/nfl-salary-cap-terms-tricks-to-know-ahead-of-nfl-free-agency-2021 https://www.pff.com/news/nfl-salary-cap-terms-tricks-to-know...
    • WalterBright 5y ago
      You don't think that CEOs also have a lot of performance related clauses? Stock options are, for example.
      • bobthepanda 5y ago
        In practice compensation clawback can be quite difficult. https://hbr.org/2021/03/why-executive-compensation-clawbacks-dont-work https://hbr.org/2021/03/why-executive-compensation-clawbacks...
      • yardie 5y ago
        They get paid more for good performance but they don't get paid less for bad performance. Athlete contracts on the other hand are fixed. If the athlete does well the team organization gains the benefit. If the athlete does poorly the athlete may be fired or transferred. And there is no gold parachute when they are cut. So I don't recognize the similarities between CEO and pro athlete compensation at all.
• Alex3917 5y ago
  > Why didn't employee profit-sharing increase at the same rate as non-salary compensation did for CEOs? Because employees generally hated profit sharing and created unions to fight against it. Joseph Blasi talks about this in his book The Citizens Share. And it's not like he's some crank conservative, he's the economic advisor for Elizabeth Warren.
  • xur17 5y ago
    A good example of that [0]. Amazon is quoted as saying that hourly employees prefer the "predictability and immediacy of cash to RSUs", and I imagine Amazon would prefer to give RSUs, so this is probably accurate. [0] https://www.theverge.com/2018/10/3/17934194/amazon-minimum-wage-raise-stock-options-bonus-warehouse https://www.theverge.com/2018/10/3/17934194/amazon-minimum-w...
    • liveoneggs 5y ago
      an RSU is a massive tax problem, for one thing.
      • xur17 5y ago
        How so? Isn't it just taxed as normal income at vesting time? Most employers automatically sell enough to cover the tax withholding to solve any issues.
        • lazide 5y ago
          Wash sales, long term/short term gains and associated tax issues, RSU withholding which is a fixed amount and not based on the income tax withholding, and a typical broker account to sell/get money are massively more complicated than a direct deposit to your bank account and money back from the government at the end of the year unless you massively screw it up. By number, most of Amazon’s employees are working minimum wage and probably don’t have much of a balance. Many of them might get evicted if pay gets delayed even a couple weeks.
• samatman 5y ago
  > The average employee doesn't get to benefit from the very real contributions they've made to the company, while the CEO does benefit. Why didn't employee profit-sharing increase at the same rate as non-salary compensation did for CEOs? That's still relevant. This is correct, but the post you're replying to has the answer: CEOs successfully claimed more of the portion of surplus value which was going to stockholders, employees claimed less. It's key to analyze these things if the goal is to see employees better rewarded, as they should be, but it must start from the correct analysis. The details of how to do this are way over my head, and I won't embarrass myself by trying to make suggestions here.
  • asdffdsa 5y ago
    Give stock to employees. Easy
    • aerosmile 5y ago
      Instead of cash? Just like money, stocks don't grow on trees.
      • Kye 5y ago
        They find them for CEOs.
        • aerosmile 5y ago
          There are about 100 references on this page here alone stating that CEOs get relatively low cash comp in return for exceptionally high equity comp. Even CEOs have to treat equity as a form of compensation (duh!), and they have to trade off one against the other. Some people here also pointed out that Amazon would rather pay RSU, but people prefer cash. We all know that Amazon outperformed the market in the last couple of years and that the RSU would have been more valuable than cash, but even with the benefit of that hindsight, most warehouse workers would still pick cash because they don't have the privilege of making long-term investments. The sad reality of today's society is that it's not that hard to make profitable long-term investments (just look at pretty much anyone's 401k) - but for the majority of the population, they just don't have enough money to put it to work.
• bumby 5y ago
  To a certain extent, I think the worker is at least in part to blame. According to the BLS, union membership has declined from over 20% in the early 1980s to 6.3% today in the private workforce. I personally don't think it's by chance that this coincides with wage stagnation or even decline. Union membership is much higher in public institutions (I personally have some issues with that but it's a digression) which probably un-ironically are known to be relatively stable and well paid. And yet, workforces continually vote against unionization while these debates about pay abound. Maybe it's just the vocal minority, but I don't quite get it.
  • idiotsecant 5y ago
    Interesting that you phrase this as the worker being to blame and not anti-union lobbying and legislation, coupled with an intense psyops campaign from the landed gentry to convince the serfs that voting for their own interests is un-american.
    • bumby 5y ago
      Yes, because I give the individual's agency and try not to infantilize them. They have a right to collective bargaining protected by the right of association (within the US at least). They choose not to wield it.