7 ms·

CEO pay is up 78% over the past decade

84 points by blopeur 4y ago

nickff 4y ago
It looks like market capitalization of the S&P 500 has been rapidly increasing (relative to GDP) since 2010; this seems like a potential cause. https://endlessmetrics.substack.com/p/s-and-p-500-gross-domestic-product?s=r https://endlessmetrics.substack.com/p/s-and-p-500-gross-dome...
lynguist 4y ago
I want to share Bob Cringely’s (yes, that Bob Cringely) article on this topic. It explains everything very concisely in very simple terms. https://www.cringely.com/2018/02/26/win-lose-wall-street-screwed-middle-class/ https://www.cringely.com/2018/02/26/win-lose-wall-street-scr...
- isaacimagine 4y ago
  This is a great read. What could someone starting a company today do to address the problems brought up in this article?
  - yes_i_can 4y ago
    Given this is about shareholder value and the supposed evils that come from maximizing shareholder value, if you believe everything you read here, then you could just never take the company public. From there, you're not beholden to shareholders to maximize their value by paying employees poorly, etc. You can pay them whatever you want, although you are still beholden to math and accounting to pay wages that keep your company profitable, at least.
  - kqr 4y ago
    Start a co-op. Make your employees and customers owners.
- kqr 4y ago
  > Their theory, in a nutshell, was that there was an inherent conflict in business between owners (shareholders) and managers, and that this conflict had to be resolved in favor of the owners, who after all owned the business; and the best way to do that was to find a way to align those interests by linking managerial compensation to owner success. And all along the real solution is so obvious: make the employees and customers owners. The co-op ownership model aligns all interests in ways that actually make sense.
  - 3qz 4y ago
    Being an employee and an owner doesn’t align incentives since I have no meaningful influence over the stock price. I don’t care at all about the success of the projects I work on as long as I keep getting paid
    - kqr 4y ago
      The world does not, contrary to popular opinion, revolve around stock prices. Ownership is about having equal influence in strategic decisions. "I don't care about the success as long as I get paid" is typically something you hear from people who have never tried a truly democratic workplace before. It's a transformative experience.
      - 3qz 4y ago
        Does it matter? Jobs worth caring about are extremely rare so I don’t actually care about what the company does. I would vote to sell the company and cash out if I worked somewhere democratic.
        antifa 4y ago
        > Jobs worth caring about are extremely rare Yes, co-ops are rare.
        3qz 4y ago
        There is no ownership structure in the world that could ever make me care about boring software
- IdiocyInAction 4y ago
  Well, not everyone agrees with the conclusions made by the article. For example, here it is argued that the graph used by the article is suspect: https://economicsfromthetopdown.com/2020/01/17/debunking-the-productivity-pay-gap/ https://economicsfromthetopdown.com/2020/01/17/debunking-the... > This wasn’t a matter of productivity, either: workers were more productive every year, we just stopped being rewarded for it. In particular, this point is being disputed. Besides, I object to the use of the word "worker" here; some workers are surely more productive, but I can think of many classes of work that are fundamentally the same as they have been in the 70s; indeed, this kind of thing has been talked about under the heading of "cost disease" already: https://en.wikipedia.org/wiki/Baumol%27s_cost_disease https://en.wikipedia.org/wiki/Baumol%27s_cost_disease Note that the article still points out inequality as a problem.
V__ 4y ago
Is pay up or compensation? Since stock-based compensation is the norm and the stock market had "some" growth, this wouldn't be surprising.
jeffreyrogers 4y ago
Average firm size has increased as well (both in terms of employees and market cap) so that explains some of it.
missedthecue 4y ago
Probably a result of the stock market flying high for so long. Share based comp will do that. I wonder what the average pay for top developers has done in the last 10 years.
daenz 4y ago
I'd be curious to hear what workers think their CEOs compensation should be. I hear a lot of "a CEO doesn't do 100x the work of their workers." Well, what multiple do you think is more appropriate? What is the mechanism for determining that multiple? Direct democratic voting by the employees? Why stop at the CEO? Maybe everybody should vote on everybody else's comp. I'd love to see how that plays out for a company. Anyone know if it has been tried?
- cosmotic 4y ago
  Just watching undercover boss, the CEOs always do a terrible job at the 'no-to-low-skill work'. I'd guess employees, given a chance to evaluate the CEO using their own job as a metric, would probably chose quite a low figure for the CEO's salary.
- vmception 4y ago
  Also curious about this Similar to calls for paying “fair share” of taxes
- didibus 4y ago
  I feel a 1.25x to 3x multiple from the next highest paid employee sounds reasonable to me. I think with CEO I don't understand how the demand and offer works. Wouldn't there be tons of people willing to do the job for way less? So why is it so high? Is it true that there are very few qualified individuals that can do a good job at CEO?
  - Gigachad 4y ago
    Programmers are paid so much because their work multiplies out to have huge impacts. CEOs are that on a much larger scale. There are plenty of CEOs who are ok or acceptable, but one that is 1% better means millions or billions extra in profit. Companies with top tier management like Apple have had a non stop run of success for a while now and it’s not just luck. They pay Tim a $99 million package, and he certainly earns the company all that and more back.
    - 4y ago

84 points by blopeur 4y ago

It looks like market capitalization of the S&P 500 has been rapidly increasing (relative to GDP) since 2010; this seems like a potential cause. https://endlessmetrics.substack.com/p/s-and-p-500-gross-domestic-product?s=r https://endlessmetrics.substack.com/p/s-and-p-500-gross-dome...

lynguist 4y ago

I want to share Bob Cringely’s (yes, that Bob Cringely) article on this topic. It explains everything very concisely in very simple terms. https://www.cringely.com/2018/02/26/win-lose-wall-street-screwed-middle-class/ https://www.cringely.com/2018/02/26/win-lose-wall-street-scr...

isaacimagine 4y ago
This is a great read. What could someone starting a company today do to address the problems brought up in this article?
- yes_i_can 4y ago
  Given this is about shareholder value and the supposed evils that come from maximizing shareholder value, if you believe everything you read here, then you could just never take the company public. From there, you're not beholden to shareholders to maximize their value by paying employees poorly, etc. You can pay them whatever you want, although you are still beholden to math and accounting to pay wages that keep your company profitable, at least.
- kqr 4y ago
  Start a co-op. Make your employees and customers owners.
kqr 4y ago
> Their theory, in a nutshell, was that there was an inherent conflict in business between owners (shareholders) and managers, and that this conflict had to be resolved in favor of the owners, who after all owned the business; and the best way to do that was to find a way to align those interests by linking managerial compensation to owner success. And all along the real solution is so obvious: make the employees and customers owners. The co-op ownership model aligns all interests in ways that actually make sense.
- 3qz 4y ago
  Being an employee and an owner doesn’t align incentives since I have no meaningful influence over the stock price. I don’t care at all about the success of the projects I work on as long as I keep getting paid
  - kqr 4y ago
    The world does not, contrary to popular opinion, revolve around stock prices. Ownership is about having equal influence in strategic decisions. "I don't care about the success as long as I get paid" is typically something you hear from people who have never tried a truly democratic workplace before. It's a transformative experience.
    - 3qz 4y ago
      Does it matter? Jobs worth caring about are extremely rare so I don’t actually care about what the company does. I would vote to sell the company and cash out if I worked somewhere democratic.
      - antifa 4y ago
        > Jobs worth caring about are extremely rare Yes, co-ops are rare.
        3qz 4y ago
        There is no ownership structure in the world that could ever make me care about boring software
IdiocyInAction 4y ago
Well, not everyone agrees with the conclusions made by the article. For example, here it is argued that the graph used by the article is suspect: https://economicsfromthetopdown.com/2020/01/17/debunking-the-productivity-pay-gap/ https://economicsfromthetopdown.com/2020/01/17/debunking-the... > This wasn’t a matter of productivity, either: workers were more productive every year, we just stopped being rewarded for it. In particular, this point is being disputed. Besides, I object to the use of the word "worker" here; some workers are surely more productive, but I can think of many classes of work that are fundamentally the same as they have been in the 70s; indeed, this kind of thing has been talked about under the heading of "cost disease" already: https://en.wikipedia.org/wiki/Baumol%27s_cost_disease https://en.wikipedia.org/wiki/Baumol%27s_cost_disease Note that the article still points out inequality as a problem.

V__ 4y ago

Is pay up or compensation? Since stock-based compensation is the norm and the stock market had "some" growth, this wouldn't be surprising.

jeffreyrogers 4y ago

Average firm size has increased as well (both in terms of employees and market cap) so that explains some of it.

missedthecue 4y ago

Probably a result of the stock market flying high for so long. Share based comp will do that. I wonder what the average pay for top developers has done in the last 10 years.

daenz 4y ago

I'd be curious to hear what workers think their CEOs compensation should be. I hear a lot of "a CEO doesn't do 100x the work of their workers." Well, what multiple do you think is more appropriate? What is the mechanism for determining that multiple? Direct democratic voting by the employees? Why stop at the CEO? Maybe everybody should vote on everybody else's comp. I'd love to see how that plays out for a company. Anyone know if it has been tried?

cosmotic 4y ago
Just watching undercover boss, the CEOs always do a terrible job at the 'no-to-low-skill work'. I'd guess employees, given a chance to evaluate the CEO using their own job as a metric, would probably chose quite a low figure for the CEO's salary.
vmception 4y ago
Also curious about this Similar to calls for paying “fair share” of taxes
didibus 4y ago
I feel a 1.25x to 3x multiple from the next highest paid employee sounds reasonable to me. I think with CEO I don't understand how the demand and offer works. Wouldn't there be tons of people willing to do the job for way less? So why is it so high? Is it true that there are very few qualified individuals that can do a good job at CEO?
- Gigachad 4y ago
  Programmers are paid so much because their work multiplies out to have huge impacts. CEOs are that on a much larger scale. There are plenty of CEOs who are ok or acceptable, but one that is 1% better means millions or billions extra in profit. Companies with top tier management like Apple have had a non stop run of success for a while now and it’s not just luck. They pay Tim a $99 million package, and he certainly earns the company all that and more back.
  - 4y ago