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Employee to CEO pay ratio is such a meaningless and distracting measure. Imagine there is a hedge fund that has only a handful of very highly paid employees. Co

Employee to CEO pay ratio is such a meaningless and distracting measure. Imagine there is a hedge fund that has only a handful of very highly paid employees. Compare that to a very large multi-national corporation that employs hundreds of thousands of low skilled laborers (something like Walmart). Let’s also imagine the CEOs of both companies have identical pay packages. All else being equal, the hedge fund that only employs a few people is much better for society than the company employing many many more people. I don’t think anyone here would agree with that. One thing we absolutely don’t want to do is disincentivize companies hiring people at the lowest end of the socioeconomic ladder. If employing those people lowers how much executives are allowed to get paid, what do you think is going to happen?

WorkerBee28474 1y ago
Yes. If companies are told to minimize CEO-to-employee pay they will just externalize the lowest paid employees. This won't meaningfully improve those employees lives or wages, but will reduce the target ratio, and may make promotions more difficult as the employee would need to move between legal entities.
whatshisface 1y ago
The statistic in the article compares average CEO pay to the median income, which is not driven by company-to-company differences in category of labor.
- SideQuark 1y ago
  > The statistic in the article compares average CEO pay to the median income No, it compares the top 500 CEO pay out of 250k+ CEOs to all workers, which is as ludicrous and misleading as comparing the top 500 worker pay to all 250k CEOs and thinking this is the useful metric to rage about.
fwip 1y ago
Isn't this just an argument about Goodhart's law? (Yes, if this measure becomes a target, it will no longer be a useful measure.)
qualeed 1y ago
In a complete vacuum, sure, it's not a great measurement. But it can provide some information when you look at it in context and with other information. Practically any comparison between a 10-person hedge fund and walmart is going to be silly.

WorkerBee28474 1y ago

Yes. If companies are told to minimize CEO-to-employee pay they will just externalize the lowest paid employees. This won't meaningfully improve those employees lives or wages, but will reduce the target ratio, and may make promotions more difficult as the employee would need to move between legal entities.

whatshisface 1y ago

The statistic in the article compares average CEO pay to the median income, which is not driven by company-to-company differences in category of labor.

SideQuark 1y ago
> The statistic in the article compares average CEO pay to the median income No, it compares the top 500 CEO pay out of 250k+ CEOs to all workers, which is as ludicrous and misleading as comparing the top 500 worker pay to all 250k CEOs and thinking this is the useful metric to rage about.

fwip 1y ago

Isn't this just an argument about Goodhart's law? (Yes, if this measure becomes a target, it will no longer be a useful measure.)

qualeed 1y ago

In a complete vacuum, sure, it's not a great measurement. But it can provide some information when you look at it in context and with other information. Practically any comparison between a 10-person hedge fund and walmart is going to be silly.