3 ms·

I do see the value in paying high performing individuals but there has to be some moderation even in that. The CEO pay gap is now obscene. The CEO pay gap in t

I do see the value in paying high performing individuals but there has to be some moderation even in that. The CEO pay gap is now obscene. The CEO pay gap in the US was 399x that of the average worker! that is ludicrous! What that means is that if that company cut the pay for the CEO by half, it would leave enough money on the table to pay about 200 new hires at the average salary - which may bring down the number of hours each person currently works.. or if you decide to just pay employees a bit more, they may be able to meet their expenses a lot easier.

refurb 3y ago
Why is 399x ludicrous? What should the number be? And more importantly why? And getting 200 new jobs in a 100,000 employee company won’t even move the needle.
- pkphilip 3y ago
  Actually, it turns out that it is even worse than 399:1. It is as much as 604:1 in the US. https://www.newswise.com/politics/widening-wage-gap-between-ceos-and-workers-is-a-business-and-ethical-issue/?article_id=772511 https://www.newswise.com/politics/widening-wage-gap-between-... It is indicative that the boards and the CEOs are extremely self-serving. If you believe the company is doing well, reward the employees more than yourself. That is what ethical human beings do. To quote the article above: “Businesses are mostly rational actors that pay what they need to, to find the right talent. On the other hand, the US differential exceeds other sophisticated economies by far,” Professor Bailey says. “Why in Europe and other economically evolved economies, is this differential so much less? In Switzerland -- one of the richest countries in the world -- the difference is $150 to $1. Our salary gap between executives and workers isn't in sync with the rest of the world.”
  - refurb 3y ago
    That report is highly suspect. It's not measuring CEO pay to median employee, it's "The CEOs at America’s largest low-wage employers". So they basically looked at the largest companies that paid the lowest wages. CEO pay tends to align quite well with not just performance, but also company size. Would you expect a CEO of a low wage company that has revenues of $10B to be paid more than the CEO of a similar company with $100M in revenues? I would. Larger companies are more complex, the CEO is managing a lot more employees, the stakes are higher and you'd like hire a very different CEO for a $10B a year company versus a $100M a year company. Hence, you'd normally expect that larger companies would have a higher ratio of CEO to lowest paid employee. That is likely one factor in why the US stands out compared to Europe. The country USA was compared to was Switzerland! A country that is 41x smaller than the US. And look at the top Swiss companies by revenue [1]. They are commodity trading companies! They were likely entirely excluded from the analysis. But the point stands - what is the right ratio? 100x? 50x? Should it be exactly the same for every company? Why link pay solely to the lowest employee wage and ignore all the other factors - size of the company, revenues, profits, median employee wages, wage distribution, etc? [1] https://en.wikipedia.org/wiki/List_of_Swiss_companies_by_revenue https://en.wikipedia.org/wiki/List_of_Swiss_companies_by_rev...
    - pkphilip 3y ago
      I think this is a larger discussion and not limited to just a conversation about the pay a CEO gets. Well, of course, a CEO's pay is indicative of what board considers as the CEO's contribution towards the bottomline/topline vs the contribution of all employees and when a CEO's pay is so much higher than that of other employees, it is in a sense, a statement that devalues the contribution of other employees. Given that most boards are full of top-tier executives from other organizations, clearly it is in their narrow interests to favor high payouts to CEOs. But that is also indicative of a very high sense of entitlement and so the question is not - what should the ratio be? the question should really be - is the CEO really a team player? and does he/she value the team they have setup and if so how do they honour the team when the company does well and how will they as a team deal with a situation when there is a big downturn in the company? I am not at all arguing for a socialist/communist type of mindset - but there is a point at which the sense of entitlement that CEOs feel that does damage to their own teams in ways that they don't realise. And I say this as someone who is a CEO.
      - refurb 3y ago
        a statement that devalues the contribution of other employees. How is that? The board sets the CEO salary, not the other employees. is the CEO really a team player? I'm confused. So if the CEO is a "team player" then it's ok if their pay is super high?
        pkphilip 3y ago
        > How is that? The board sets the CEO salary, not the other employees. If you pay someone disproportionately higher than others in the same team, what message are you sending to others in the team? When a CEO goes with that decision, they are devaluing their own team
        refurb 3y ago
        I would say there are a ton of factors that influence how much a CEO gets paid. I worked for a large corporation and the CEO makes at least 100x what I do, but she is also running a company of 150,000 employees, so I don't feel devalued at all. I'm paid quite well.

refurb 3y ago

Why is 399x ludicrous? What should the number be? And more importantly why? And getting 200 new jobs in a 100,000 employee company won’t even move the needle.

pkphilip 3y ago
Actually, it turns out that it is even worse than 399:1. It is as much as 604:1 in the US. https://www.newswise.com/politics/widening-wage-gap-between-ceos-and-workers-is-a-business-and-ethical-issue/?article_id=772511 https://www.newswise.com/politics/widening-wage-gap-between-... It is indicative that the boards and the CEOs are extremely self-serving. If you believe the company is doing well, reward the employees more than yourself. That is what ethical human beings do. To quote the article above: “Businesses are mostly rational actors that pay what they need to, to find the right talent. On the other hand, the US differential exceeds other sophisticated economies by far,” Professor Bailey says. “Why in Europe and other economically evolved economies, is this differential so much less? In Switzerland -- one of the richest countries in the world -- the difference is $150 to $1. Our salary gap between executives and workers isn't in sync with the rest of the world.”
- refurb 3y ago
  That report is highly suspect. It's not measuring CEO pay to median employee, it's "The CEOs at America’s largest low-wage employers". So they basically looked at the largest companies that paid the lowest wages. CEO pay tends to align quite well with not just performance, but also company size. Would you expect a CEO of a low wage company that has revenues of $10B to be paid more than the CEO of a similar company with $100M in revenues? I would. Larger companies are more complex, the CEO is managing a lot more employees, the stakes are higher and you'd like hire a very different CEO for a $10B a year company versus a $100M a year company. Hence, you'd normally expect that larger companies would have a higher ratio of CEO to lowest paid employee. That is likely one factor in why the US stands out compared to Europe. The country USA was compared to was Switzerland! A country that is 41x smaller than the US. And look at the top Swiss companies by revenue [1]. They are commodity trading companies! They were likely entirely excluded from the analysis. But the point stands - what is the right ratio? 100x? 50x? Should it be exactly the same for every company? Why link pay solely to the lowest employee wage and ignore all the other factors - size of the company, revenues, profits, median employee wages, wage distribution, etc? [1] https://en.wikipedia.org/wiki/List_of_Swiss_companies_by_revenue https://en.wikipedia.org/wiki/List_of_Swiss_companies_by_rev...
  - pkphilip 3y ago
    I think this is a larger discussion and not limited to just a conversation about the pay a CEO gets. Well, of course, a CEO's pay is indicative of what board considers as the CEO's contribution towards the bottomline/topline vs the contribution of all employees and when a CEO's pay is so much higher than that of other employees, it is in a sense, a statement that devalues the contribution of other employees. Given that most boards are full of top-tier executives from other organizations, clearly it is in their narrow interests to favor high payouts to CEOs. But that is also indicative of a very high sense of entitlement and so the question is not - what should the ratio be? the question should really be - is the CEO really a team player? and does he/she value the team they have setup and if so how do they honour the team when the company does well and how will they as a team deal with a situation when there is a big downturn in the company? I am not at all arguing for a socialist/communist type of mindset - but there is a point at which the sense of entitlement that CEOs feel that does damage to their own teams in ways that they don't realise. And I say this as someone who is a CEO.
    - refurb 3y ago
      a statement that devalues the contribution of other employees. How is that? The board sets the CEO salary, not the other employees. is the CEO really a team player? I'm confused. So if the CEO is a "team player" then it's ok if their pay is super high?
      - pkphilip 3y ago
        > How is that? The board sets the CEO salary, not the other employees. If you pay someone disproportionately higher than others in the same team, what message are you sending to others in the team? When a CEO goes with that decision, they are devaluing their own team
        refurb 3y ago
        I would say there are a ton of factors that influence how much a CEO gets paid. I worked for a large corporation and the CEO makes at least 100x what I do, but she is also running a company of 150,000 employees, so I don't feel devalued at all. I'm paid quite well.