4 ms·

You're missing one of the single greatest factors which is that shortly after that time, executive compensation became wholly disconnected from worker compensat

by tw04 2y ago

You're missing one of the single greatest factors which is that shortly after that time, executive compensation became wholly disconnected from worker compensation. If executive compensation were tied to average employee compensation, I think you'd find a course correction in short order. https://en.wikipedia.org/wiki/Executive_compensation_in_the_United_States https://en.wikipedia.org/wiki/Executive_compensation_in_the_...

lotsofpulp 2y ago
How would that work practically if executives are getting paid in equity at various points in time? All the employees get options and RSUs too when the executives get them?
- jimbokun 2y ago
  Sounds good to me.
  - egypturnash 2y ago
    Sounds fucking awesome to me.
- tw04 2y ago
  Yes? Employees should have a vested interest in the financial success of their company, and an ownership stake. That's how it used to be "in the good old days" when folks had both pensions and stock tying them to the long-term success of the business. That worked quite well prior to robber barons looting and pillaging, declaring bankruptcy, and screwing the workers out of their pensions.
  - NoMoreNicksLeft 2y ago
    >Employees should have a vested interest in the financial success of their company, and an ownership stake. How do you engineer this, do you think? If every burgerflipper at Wendy's owned stock, the performance of that stock isn't connected to performance of their job at all. They can fuck off completely, and the stock either rises or falls. Even if we tie it not to traded stock, but some sort of profit-sharing of that one franchise, there are 40 or 50 workers, minimum, all of whom have been trained to coast along and hope someone else has to do the real work. One could hope they (and the other workers) would learn that their contribution is essential before it goes out of business, but that's absurdly unrealistic. >That's how it used to be "in the good old days" when folks had both pensions and stock tying them to the long-term success of the business. It was never that way for any significant fraction of the workforce. Sure, if you worked for one of the Fortune 100 companies, already wildly successful. But anyone struggling at their city's papermill or textile mill or whatever, there wasn't stock and pensions. And at the biggest companies, unions managed to wedge their foot in the door to the point that you had UAW workers and the like quitting the week after lunch on Tuesday because they'd made quota. It was good for them, personally, of course, but to the long term detriment of the very businesses that employed them. They too, despite their stock and pensions and vested interest int he financial success of their companies and ownership stakes, just sort of coasted along and let it all fall apart. The grunts, it turns out, are rarely all that interested in their own vesting.
    - tw04 2y ago
      >How do you engineer this, do you think? If every burgerflipper at Wendy's owned stock, the performance of that stock isn't connected to performance of their job at all. They can fuck off completely, and the stock either rises or falls. Even if we tie it not to traded stock, but some sort of profit-sharing of that one franchise, there are 40 or 50 workers, minimum, all of whom have been trained to coast along and hope someone else has to do the real work. One could hope they (and the other workers) would learn that their contribution is essential before it goes out of business, but that's absurdly unrealistic. That's not really true at all. If they fuck off completely, they're either getting fired, or if everyone at the store takes the same stance, the store closes entirely. If enough stores close, the stock dips. I'd counter with: what's stopping them from fucking off right now when they don't have stock? Why would stock inherently make them more likely to fuck off? Just like executives, the stock would vest over a period of time. And clearly nobody is talking about giving $500k in stock to a person making $5/hr. It is commensurate to their salary. >It was never that way for any significant fraction of the workforce. Sure, if you worked for one of the Fortune 100 companies, already wildly successful. But anyone struggling at their city's paperkill or textile mill or whatever, there wasn't stock and pensions. And at the biggest companies, unions managed to wedge their foot in the door to the point that you had UAW workers and the like quitting the week after lunch on Tuesday because they'd made quota. It was good for them, personally, of course, but to the long term detriment of the very businesses that employed them. They too, despite their stock and pensions and vested interest int he financial success of their companies and ownership stakes, just sort of coasted along and let it all fall apart. This literally didn't happen, and I find it laughable you're portraying unions as a horrible blight on the working man. You might want to go a bit further back into history and look at what the factory conditions were like prior to unionization. If you think that would've just naturally occurred without unions, you're delusional, and need to look at all the non-unionized places we've outsourced manufacturing to, and what their work life looks like. Hint: exactly like it was in the US prior to unionization. Then take a look at unionized manufacturing economies in Europe. Hint: they didn't get that standard of living because businesses just thought it was the right thing to do. But in summary, your argument appears to be: people are lazy, and if you give them more they'll just stop trying. Which might be one of the most absurd takes I've ever heard on the subject.
- micromacrofoot 2y ago
  So simple you solved it before you finished writing
HPsquared 2y ago
All sorts of inputs and outputs were disconnected from each other around that time. Executive compensation is just yet another thing to put on the list.
uoaei 2y ago
This was a direct consequence of asset-backed currency being converted to fiat currency unleashing the stock market and the creation of new money at will.
- blased 2y ago
  And of course the reason is that when fiat currency is institutionalized, interest rates drop because money is plentiful since it's being freely printed to fund anything and everything. Interest rates reflect the scarcity of money. Now money is funneled into the stock market by people seeking yields. So the beneficiaries of the money printer and big government are corporations who are now able to spend everyone's savings that have been converted into equities.
  - carlosjobim 2y ago
    Well, most benefit by an enormous margin goes to real estate owners, since the money gets created with home purchase loans. The stock market is peanuts in comparison.
ajross 2y ago
But that's a "be careful what you wish for" observation. I mean, obviously it prompts the question of why executive compensation grew so fast. Well, executives are paid a ton because they need to compete in an environment where other executives of successful companies are already filthy rich. And why is that? Well, it's actually not because of compensation policy at all. Those other executives are rich because they were founders who hit an exit. That is, it's all HN's fault (and the fault of the VC-based startup money engine more generally). We created an environment where to staff a successful C suite you need to hire away senior people from FAANGs. And you can't do that unless you pay them crazy numbers. And that means the rest of your executive staff, and your board, need to see the same numbers. And so on, across the rest of the economy. You can't have an economy producing huge numbers in the stock market without handing those dollars out, in proportion, to the senior staff, basically. The same analysis does not hold to the regular employees, who don't compete against people getting that exit money.
- malvim 2y ago
  You’re saying when executives compete, their average salary goes higher, but when workers like us compete, our average salary gets smaller?
  - ajross 2y ago
    I... said nothing like that at all? Not sure how you interpret that from what I wrote. (Also btw: average salaries for works are NOT GETTING SMALLER and I remain absolutely dumbfounded that people continue to believe this lie). Rephrasing: I said salaries in competition trend to market price points, and market price points for executives are set by externalities like "IPO windfalls" that don't exist for workers.
  - MarkusQ 2y ago
    When companies compete to hire top executives, the cost of hiring those executives goes up. Just like with athletes or musicians.
  - s1artibartfast 2y ago
potato3732842 2y ago
Sorry, but the numbers for that simply don't work out. Pick any public company and divide CEO pay by headcount and it'll come out to a dollar figure way, way, way too small to account for the reduced share that workers are getting. There's something (likely multiple things) else sucking up all the money that was formerly shared with workers.
- TheCoelacanth 2y ago
  It obviously can't explain where the actual money is going, but it potentially can change the way CEOs behave in a way that changes where money goes. Before the rise in CEO comp, CEOs were upper-middle class or borderline upper class. After the rise, CEOs are solidly upper class. That aligns CEOs' interests much more firmly with the interests of capital and less with the interests of labor.
- carlosjobim 2y ago
  A dollar is worth about 30 cents. That's what has happened.
JumpCrisscross 2y ago
> executive compensation became wholly disconnected from worker compensation The "Celler–Kefauver Act is a United States federal law passed in 1950 that reformed and strengthened the Clayton Antitrust Act of 1914" [1]. It kicked off the conglomerate boom in the 1960s by incentivising buying "companies in unrelated fields" [2]. (Conglomerates were nudged along "thanks to low-interest rates and a market that fluctuated between bullish and bearish, providing good buyout opportunities for acquiring companies.") That ended with Volcker's early 80s recession [3], which co-incided with (a) computers in finance enabling new entrants to (i) create new financial instruments, e.g. high-yield bonds [4], and (ii) circumvent banks to distribute them [4]; and (b) a multi-decade decline in rates [5]. Herego, my pet theory: since the 1960s we've been in a series of corporate regime changes, each which created demand for a new type of leader (about once a decade), said leader being scarce and thus valuable at the beginning of each shift. (The internet also gives executives unprecedented direct access to investors, customers and employees, current and potential.) [1] https://en.wikipedia.org/wiki/Celler%E2%80%93Kefauver_Act https://en.wikipedia.org/wiki/Celler%E2%80%93Kefauver_Act [2] https://www.investopedia.com/terms/c/conglomerate-boom.asp https://www.investopedia.com/terms/c/conglomerate-boom.asp [3] https://en.wikipedia.org/wiki/Early_1980s_recession https://en.wikipedia.org/wiki/Early_1980s_recession [4] https://www.thegentlemansjournal.com/article/story-michael-milken-junk-bond-king/ https://www.thegentlemansjournal.com/article/story-michael-m... [5] https://fred.stlouisfed.org/series/FEDFUNDS https://fred.stlouisfed.org/series/FEDFUNDS

by tw04 2y ago

lotsofpulp 2y ago

How would that work practically if executives are getting paid in equity at various points in time? All the employees get options and RSUs too when the executives get them?

jimbokun 2y ago
Sounds good to me.
- egypturnash 2y ago
  Sounds fucking awesome to me.
tw04 2y ago
Yes? Employees should have a vested interest in the financial success of their company, and an ownership stake. That's how it used to be "in the good old days" when folks had both pensions and stock tying them to the long-term success of the business. That worked quite well prior to robber barons looting and pillaging, declaring bankruptcy, and screwing the workers out of their pensions.
- NoMoreNicksLeft 2y ago
  >Employees should have a vested interest in the financial success of their company, and an ownership stake. How do you engineer this, do you think? If every burgerflipper at Wendy's owned stock, the performance of that stock isn't connected to performance of their job at all. They can fuck off completely, and the stock either rises or falls. Even if we tie it not to traded stock, but some sort of profit-sharing of that one franchise, there are 40 or 50 workers, minimum, all of whom have been trained to coast along and hope someone else has to do the real work. One could hope they (and the other workers) would learn that their contribution is essential before it goes out of business, but that's absurdly unrealistic. >That's how it used to be "in the good old days" when folks had both pensions and stock tying them to the long-term success of the business. It was never that way for any significant fraction of the workforce. Sure, if you worked for one of the Fortune 100 companies, already wildly successful. But anyone struggling at their city's papermill or textile mill or whatever, there wasn't stock and pensions. And at the biggest companies, unions managed to wedge their foot in the door to the point that you had UAW workers and the like quitting the week after lunch on Tuesday because they'd made quota. It was good for them, personally, of course, but to the long term detriment of the very businesses that employed them. They too, despite their stock and pensions and vested interest int he financial success of their companies and ownership stakes, just sort of coasted along and let it all fall apart. The grunts, it turns out, are rarely all that interested in their own vesting.
  - tw04 2y ago
    >How do you engineer this, do you think? If every burgerflipper at Wendy's owned stock, the performance of that stock isn't connected to performance of their job at all. They can fuck off completely, and the stock either rises or falls. Even if we tie it not to traded stock, but some sort of profit-sharing of that one franchise, there are 40 or 50 workers, minimum, all of whom have been trained to coast along and hope someone else has to do the real work. One could hope they (and the other workers) would learn that their contribution is essential before it goes out of business, but that's absurdly unrealistic. That's not really true at all. If they fuck off completely, they're either getting fired, or if everyone at the store takes the same stance, the store closes entirely. If enough stores close, the stock dips. I'd counter with: what's stopping them from fucking off right now when they don't have stock? Why would stock inherently make them more likely to fuck off? Just like executives, the stock would vest over a period of time. And clearly nobody is talking about giving $500k in stock to a person making $5/hr. It is commensurate to their salary. >It was never that way for any significant fraction of the workforce. Sure, if you worked for one of the Fortune 100 companies, already wildly successful. But anyone struggling at their city's paperkill or textile mill or whatever, there wasn't stock and pensions. And at the biggest companies, unions managed to wedge their foot in the door to the point that you had UAW workers and the like quitting the week after lunch on Tuesday because they'd made quota. It was good for them, personally, of course, but to the long term detriment of the very businesses that employed them. They too, despite their stock and pensions and vested interest int he financial success of their companies and ownership stakes, just sort of coasted along and let it all fall apart. This literally didn't happen, and I find it laughable you're portraying unions as a horrible blight on the working man. You might want to go a bit further back into history and look at what the factory conditions were like prior to unionization. If you think that would've just naturally occurred without unions, you're delusional, and need to look at all the non-unionized places we've outsourced manufacturing to, and what their work life looks like. Hint: exactly like it was in the US prior to unionization. Then take a look at unionized manufacturing economies in Europe. Hint: they didn't get that standard of living because businesses just thought it was the right thing to do. But in summary, your argument appears to be: people are lazy, and if you give them more they'll just stop trying. Which might be one of the most absurd takes I've ever heard on the subject.
micromacrofoot 2y ago
So simple you solved it before you finished writing

HPsquared 2y ago

All sorts of inputs and outputs were disconnected from each other around that time. Executive compensation is just yet another thing to put on the list.

uoaei 2y ago

This was a direct consequence of asset-backed currency being converted to fiat currency unleashing the stock market and the creation of new money at will.

blased 2y ago
And of course the reason is that when fiat currency is institutionalized, interest rates drop because money is plentiful since it's being freely printed to fund anything and everything. Interest rates reflect the scarcity of money. Now money is funneled into the stock market by people seeking yields. So the beneficiaries of the money printer and big government are corporations who are now able to spend everyone's savings that have been converted into equities.
- carlosjobim 2y ago
  Well, most benefit by an enormous margin goes to real estate owners, since the money gets created with home purchase loans. The stock market is peanuts in comparison.

ajross 2y ago

But that's a "be careful what you wish for" observation. I mean, obviously it prompts the question of why executive compensation grew so fast. Well, executives are paid a ton because they need to compete in an environment where other executives of successful companies are already filthy rich. And why is that? Well, it's actually not because of compensation policy at all. Those other executives are rich because they were founders who hit an exit. That is, it's all HN's fault (and the fault of the VC-based startup money engine more generally). We created an environment where to staff a successful C suite you need to hire away senior people from FAANGs. And you can't do that unless you pay them crazy numbers. And that means the rest of your executive staff, and your board, need to see the same numbers. And so on, across the rest of the economy. You can't have an economy producing huge numbers in the stock market without handing those dollars out, in proportion, to the senior staff, basically. The same analysis does not hold to the regular employees, who don't compete against people getting that exit money.

malvim 2y ago
You’re saying when executives compete, their average salary goes higher, but when workers like us compete, our average salary gets smaller?
- ajross 2y ago
  I... said nothing like that at all? Not sure how you interpret that from what I wrote. (Also btw: average salaries for works are NOT GETTING SMALLER and I remain absolutely dumbfounded that people continue to believe this lie). Rephrasing: I said salaries in competition trend to market price points, and market price points for executives are set by externalities like "IPO windfalls" that don't exist for workers.
- MarkusQ 2y ago
  When companies compete to hire top executives, the cost of hiring those executives goes up. Just like with athletes or musicians.
- s1artibartfast 2y ago

potato3732842 2y ago

Sorry, but the numbers for that simply don't work out. Pick any public company and divide CEO pay by headcount and it'll come out to a dollar figure way, way, way too small to account for the reduced share that workers are getting. There's something (likely multiple things) else sucking up all the money that was formerly shared with workers.

TheCoelacanth 2y ago
It obviously can't explain where the actual money is going, but it potentially can change the way CEOs behave in a way that changes where money goes. Before the rise in CEO comp, CEOs were upper-middle class or borderline upper class. After the rise, CEOs are solidly upper class. That aligns CEOs' interests much more firmly with the interests of capital and less with the interests of labor.
carlosjobim 2y ago
A dollar is worth about 30 cents. That's what has happened.

JumpCrisscross 2y ago

> executive compensation became wholly disconnected from worker compensation The "Celler–Kefauver Act is a United States federal law passed in 1950 that reformed and strengthened the Clayton Antitrust Act of 1914" [1]. It kicked off the conglomerate boom in the 1960s by incentivising buying "companies in unrelated fields" [2]. (Conglomerates were nudged along "thanks to low-interest rates and a market that fluctuated between bullish and bearish, providing good buyout opportunities for acquiring companies.") That ended with Volcker's early 80s recession [3], which co-incided with (a) computers in finance enabling new entrants to (i) create new financial instruments, e.g. high-yield bonds [4], and (ii) circumvent banks to distribute them [4]; and (b) a multi-decade decline in rates [5]. Herego, my pet theory: since the 1960s we've been in a series of corporate regime changes, each which created demand for a new type of leader (about once a decade), said leader being scarce and thus valuable at the beginning of each shift. (The internet also gives executives unprecedented direct access to investors, customers and employees, current and potential.) [1] https://en.wikipedia.org/wiki/Celler%E2%80%93Kefauver_Act https://en.wikipedia.org/wiki/Celler%E2%80%93Kefauver_Act [2] https://www.investopedia.com/terms/c/conglomerate-boom.asp https://www.investopedia.com/terms/c/conglomerate-boom.asp [3] https://en.wikipedia.org/wiki/Early_1980s_recession https://en.wikipedia.org/wiki/Early_1980s_recession [4] https://www.thegentlemansjournal.com/article/story-michael-milken-junk-bond-king/ https://www.thegentlemansjournal.com/article/story-michael-m... [5] https://fred.stlouisfed.org/series/FEDFUNDS https://fred.stlouisfed.org/series/FEDFUNDS