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CEO pay and stock buybacks have soared at the largest low-wage corporations
- happyopossum 1y ago> 100 S&P 500 corporations with the lowest median worker pay So not necessarily “low-wage” corporations, just the lowest quintile from a very small group.
- hnlmorg 1y agoThere’s plenty of low wage corporations in the S&P 500 index. It’s certainly not enough of a cherrypicked group to warrant dismissing their findings.
- k_roy 1y ago[flagged]
- goyagoji 1y ago[flagged]
- 2OEH8eoCRo0 1y agoit goes it goes it goes
- m00x 1y agoAs a French, it's funny seeing references to the French revolution as some kind of rebellion against the rich. Most people don't realize that the revolution was led by the nouvelle bourgeoisie ( new nobles) who were tired of paying taxes to the royals. They sacrificed thousands of commoners to reach their goals akin to how Russia is sending in soldiers into the meat grinder, and France was a much worse place afterwards for everyone. The turning point was when Napoleon took over as a military dictator and ruled with an iron fist until the royalty took back the country yet again. Merci d'avoir écouté un peu d'histoire Française, mes amis.
- layman51 1y agoYes, but this is the nature of heroic figures in politics: “I’m from the elite and I’m here to save you from these other elites.” Who gets to determine whether it’s called a “revolution” versus a “civil war”? Is it based on whether there’s a concerted effort of manipulation? Even the popular figures who we think of as grassroots leaders are elite in some sense.
- _carbyau_ 1y agoMost people think of Napoleon as a military genius. But damn, he had a hand (not always positively supporting but often) in many elements of a modern developed nation. Things like standardised measures - metric system - science, education, nation level finances, military logistics and so much more. I'd argue that his greatest achievements was non-military administration. Throw in the military stuff too and historically he seems like the kind of person that FAANG founders look at and say "Damn, what am I doing with my life?"
- Aurornis 1y ago> As a French, it's funny seeing references to the French revolution as some kind of rebellion against the rich As an American with basic history knowledge I find it funny as well. The internet angry mob ideal of the French Revolution has become a meme in itself. It’s not actually about improving conditions or raising wages, it’s just an outlet for impotent internet rage.
- goyagoji 1y agoOr maybe you misunderstood.. It is a warning to people like those on this site (demographics wise) not to create the necessary powder keg by raising inequality. Whether an angry civil war works out in the end doesn't mean much to those killed at the beginning. For modern society the question of whether there are any regrets in living in a world entirely restructured by the French Revolution is maybe also interesting, but I think people should be a little selfish about having a reasonable present.
- greesil 1y agoLet them eat cake
- VirusNewbie 1y ago[flagged]
- k_roy 1y agoSeems like calling something low effort is even lower effort. But hey, let’s chat. Is this not the opposite of trickle down, with clearly the transfer of wealth upward?
- paulryanrogers 1y agoI like the snowball metaphor. Those who start with more get more regardless of the weather. Meanwhile smaller snowballs melt away in bad (warm) times and can't grow nearly as fast even in good (cold) times.
- VirusNewbie 1y ago>Is this not the opposite of trickle down, with clearly the transfer of wealth upward? How? How is it a transfer of wealth upward? It's a net zero transaction from the standpoint of valuations.
- tyleo 1y agoIt’s interesting to me this doesn’t self correct. I’d love to know if someone can explain why. E.g. presumably companies can pay people more if they capture less value themselves. Why can’t a company do that and just hire the best talent?
- nitwit005 1y agoIf you want a fun exercise, try to estimate how many more Chipotle stores they could open if they didn't have to pay their executive salaries.
- bluefirebrand 1y agoShareholders won't let them, basically
- FollowingTheDao 1y ago[flagged]
- JumpCrisscross 1y ago> self corrects with pitchforks. Does no one read history anymore? The elites after the French Revolution were not only mostly the same as before, they escaped with so much money and wealth that it’s actually debated if they increased their wealth share through the chaos [1]. Like, in the country today, which wealth constituency is most pushing for overthrowing our republic? [1] https://www.jstor.org/stable/650023 https://www.jstor.org/stable/650023
- JKCalhoun 1y agoAnd a few of them, of course, lost their heads.
- JumpCrisscross 1y ago> a few of them, of course, lost their heads A few of them were always losing their heads. That is the nature of violent elite competition.
- bruceb 1y agoThis from an advocacy group with a clear agenda. But if they wanted to raise wages they could just advocate for less immigration and robust enforcement. Restrict supply, wages will rise. But they don't.
- testing22321 1y ago[flagged]
- nielsbot 1y agoKey Points - While some policymakers have blamed immigration for slowing U.S. wage growth since the 1970s, most academic research finds little long run effect on Americans’ wages. - The available evidence suggests that immigration leads to more innovation, a better educated workforce, greater occupational specialization, better matching of skills with jobs, and higher overall economic productivity. - Immigration also has a net positive effect on combined federal, state, and local budgets. But not all taxpayers benefit equally. In regions with large populations of less educated, low-income immigrants, native-bor https://www.congress.gov/118/meeting/house/116727/documents/HHRG-118-JU01-20240111-SD013.pdf https://www.congress.gov/118/meeting/house/116727/documents/...
- m00x 1y agoThis account seems to be bot-posting.
- VirusNewbie 1y agowhat a weird way of rephrasing what the study actually says "most academic research finds little long run effect on Americans’ wages." Right, with this sentence being important right after: "studies suggest that these gains come at the cost of short-term losses from lower wages and higher unemployment."
- thrance 1y agoImmigration is an economic net positive on the country, you're just pushing your agenda. Don't pretend otherwise.
- nostrademons 1y agoIt’s entirely possible that this is causal ABs deliberate, ie the reason why boards of these companies have approved large CEO pay packages is so that the CEO will align themselves with the shareholders paying them rather than the workers working for them and cut wages so the money can be returned to shareholders as buybacks.
- flockonus 1y agoGoogle up "CEO fiduciary duty" - that's very much within the definition of a CEO role.
- simianwords 1y agoYeah pretty much.. but this is a good thing. Companies should focus on improving profits and not wages.
- TylerE 1y agoYes, crush the bottom 99.9% under the jackboots of the 0.1% even harder! That's what we need!
- whatisthiseven 1y agoAre there studies that show a causal relationship between higher CEO pay and profits? Do buybacks cause profits to increase? Maybe from what I can see? But long-term? If all we care about is short-term then that will lead to the continued financial cannibalization of the US economy. Where private equity firms buy companies and destroy them for short-term profit while loading them with the debt used to buy them. I think the obvious answer to both these questions is: no. CEO pay and buybacks don't focus on profits. At best short-term. Which isn't good. I think companies should focus on making good products that positively serve the countries they sell in, while secondly still aiming for a profit.
- johnecheck 1y agoIf you measure 'profit' as 'how much does the net worth of our owners go up', stock buybacks make a lot of sense. This seems like a particularly terrible measure of success for everyone but those owners.
- missedthecue 1y agoMeasuring median wage of Starbucks employees against the one time multi-year strictly performance based stock-option plan given to the new CEO is so blatantly dishonest I can barely read the rest of the article. Especially when Starbucks awards stock and healthcare plans to even part time baristas. Probably one of the better major employers of low skill labor in the world.
- Hikikomori 1y agoIs part of the performance keeping worker wages as low as possible?
- missedthecue 1y agoNo. If keeping worker wages as low as possible was the goal, they wouldn't award stock or healthcare benefits to part time workers in their kitchens. The point is that poaching a new CEO from another company (in this case, Chipotle), and awarding him a pile of stock options if he hits certain metrics is not pay, is not comparable to W2 income, does not hit his bank account, and does not make anyone else poorer, except theoretically the shareholders, who were so excited to hire this new guy that the stock literally popped 20% when the news broke.
- FredPret 1y agoThis is a point always missed in debates about CEO pay. The money doesn't rain from the sky onto his yacht. Shareholders have to shell it out, and they'd prefer the CEO works for free. That CEO has to add billions to their bottom line in order to get paid millions.
- JKCalhoun 1y agoNice if CEO was something like an election — with competing CEO's listing their qualifications, how much they expect in compensation. Shareholders could vote for the CEO + pay package they prefer.
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- nielsbot 1y agoStock buybacks used to be illegal. It's a loophole way of paying employees at a lower tax rate than salary. HBR discusses some downsides of buybacks: https://hbr.org/2020/01/why-stock-buybacks-are-dangerous-for-the-economy https://hbr.org/2020/01/why-stock-buybacks-are-dangerous-for...
- missedthecue 1y agoStock buybacks were never illegal. Stock buybacks were how Buffett took control of a small textile mill called Berkshire Hathaway in the 1960s. What was not allowed was at-the-market buybacks in the open market. Corporations had to do tender offers at a fixed price, usually well above market price, in order to attract sellers to mail in their certificates. I'm not sure why that is necessarily better or helps anyone, so I think allowing ATM buybacks is a net good.
- arthurcolle 1y agoI think they are actually bad because it enables messing with stock price in a way that is "explainable" when really it is just a bookkeeping exercise
- JumpCrisscross 1y ago> when really it is just a bookkeeping exercise …that’s what a share of stock is.
- missedthecue 1y agoMessing in what way? They are buying from willing sellers at the market price, using funds that are announced well before hand in public government filings (Form 10-Q and 8K) are to be used to buyback shares Sure, bids hitting the orderbook theoretically keeps a stock price higher than the counterfactual where the bids did not exist, but it's simply urban myth that failing companies can keep their stock price high over the long term with buybacks. The math doesn't pencil out.
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- VirusNewbie 1y agoThis in particular seems silly to post to the hackernews crowd, as this seems to imply the majority of stock goes to senior execs, when large tech companies are literally paying out tens of billions of dollars to the average tech worker.
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- missedthecue 1y agoThis is a great point. Companies like Microsoft have spent billions on buybacks over the last couple years, yet their sharecount has not decreased. It's literally just to eat up the dilution from paying out RSUs to rank and file.
- johnecheck 1y agoNo, large tech companies are not paying out tens of billions of dollars to the average worker. Did you mean that tens of billions of dollars are going to ALL the tech workers combined? True, but a single absolute number means little when the conversation is about relative distribution of resources and how those numbers change over time.
- VirusNewbie 1y agowhat is the claim here? That the majority of the tens of billions are given to what, L7 and above? L10?
- johnecheck 1y agoI don't know, you didn't provide any stats. Without that context, the total compensation of all employees isn't a terribly meaningful number when discussing disparity. My claim was that your argument isn't well supported, not that you're wrong.
- csours 1y agoI'm not sure how to phrase this, so please be patient and try to understand what I intend to say. CEO pay relative to median employee pay has soared since the 1970s. That is, a CEO may be paid $10,000,000 vs the median employee at $70,000 (arbitrary numbers), where before 1970 the numbers may have been $150,000 and $20,000 Using only one set of numbers can be deceiving though. For instance, through mergers and acquisitions, there may be One CEO where there were previously 10. So you might be able to see this by comparing Total Executive Pay - ie the whole C-suite to Total Non-Executive Pay. Also, many companies have become more efficient as measured in revenue per employee over time, so another good set of numbers might be Total Executive Pay vs Gross Revenue. How does Executive Pay look in these contexts? I'm sure someone has done the work, but I have not had luck googling it, and I definitely don't trust a LLM to get this one right.
- CGMthrowaway 1y agoAs a thought experiment, consider what it would take to make CEO pay gap even BIGGER, in addition to stock-based comp* and buybacks, which are mentioned in headline. Here's what one might do: - Reduce unions - Outsource and automate labor - Slow minimum wage increases - Consolidate power via M&A (you mentioned this) - Cut back on benefits like healthcare, pensions and paid leave - Promote "guru culture": indispensable, iconic leaders like Jack Welch, Steve Jobs etc - Shift economy towards high-margin industries (tech, finance, pharma) and away from lower-margin ones (retail, manufacturing) Turns out all of these have been happening since the 70s. So this result should not be surprising. *Important note that the 1993 Clinton tax bill made it so corporations could no longer deduct the full amount of top executive salaries as a business expense. Only up to $1 million. UNLESS the amount beyond $1 million was performance-based (leading to stock option comp boom).
- NoahZuniga 1y agoNone of these issues are specific to CEO wages. This is essentially just a list of reasons why you don't like capitalism. ie if a CEO doesn't do these on their own accord, the shareholders might contact the CEO and tell them to take some of these measures. This mechanism isn't dependent on CEO pay, because the CEO is always beholden to the shareholders, and shareholders always want more money. The solution to this isn't to get mad (or even do something about) CEO wages, but to make sure there are other good reasons why companies might not use these approaches to maximize shareholder returns (ie stronger government regulation, making these approaches illegal).
- LordDragonfang 1y agoSo perhaps someone can explain something to me. One of the main problems I see with modern Corporatism is that "shareholders" have too much influence over companies, driving them to make choices that erode long-term customer trust and brand value in return for short-term gains. (This is rational from the investor POV, because they can sell their stake at any point and still have made a profit on the dead husk of a company they left behind). Put more briefly, being beholden to shareholders drives enshittification. Stock buybacks should, in principal, allow a company to dilute shareholder power and re-control its own destiny. It should allow a company that is successful enough to not need external investment anymore to re-prioritize what's good for the company, rather than the shareholders, especially once they've reached the point of having enough free cash to not need investors. Why, then, is it so universally reviled?
- 01HNNWZ0MV43FF 1y agoI think what I've heard is: The buyback is part of a larger scheme where execs / board members can pump the price of the stock, and then make themselves money either through bonuses tied to rising stock prices, or through dumping their own shares once the market price goes up. https://en.wikipedia.org/wiki/Share_repurchase#Criticism https://en.wikipedia.org/wiki/Share_repurchase#Criticism The vibe is that there's a vicious cycle of "Customers are not brand-loyal, let's make our products shitty, hollow out the brand, and then liquidate everything to enrich ourselves" and "Why should I be loyal to any brand when brands that were institutions in my parents' time, like Sears and Craftsman, are hollowing out their brands and making everything shitty for a quick buck?" Feels like everything has become a market for lemons, and the hand of Moloch has realized that if something isn't a market for lemons, it would be more profitable if it was. In my head there's a piece of red string connecting this to the Internet Whalefall phenomenon - The Internet used to feel like (again, vibes are all I have for this) a place where the savvy early-adopter techie could be rewarded for their skill at installing any web browser but IE, with secret information shared by other elite techies, about which brands were good and how to get things done cheaper. But now that Eternal September post-2007 has Pokemon-mega-evolved into Eternal 2007, everyone just buys reviews and nothing online is trustworthy. All the whale meat is eaten and those picking at the bones are left starving. This led to my personal heuristic of just taking recommendations from people or orgs I meet in person. "Do you like that brand of clothing? How is that USB hub treating you? Where did you buy this?" It's a natural hedge against "I could have _told_ you not to buy that piece of crap" and it's also mathematically similar to best-of-two-random-choices load balancing. Just pick any service or product that one real human halfway-likes.
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- therobots927 1y agoBrought to you by trickle down economics!!
- xyst 1y agoReagan economic policy of legalizing stock manipulation via "stock buybucks" has been one of the worst mistakes for American class and sustainable living.
- tracker1 1y agoI kind of wish stock buybacks had to include an equivalent portion of executive and board shares (bought back) and options (reduced). It may raise the value of remaining shares, but at least it would reduce the use of the decision to drain value from the public and the company itself.
- slashdave 1y agoInequity is a real thing, but I am confused about why the CEO of a company that consists primarily of low wage earners deserves a lower compensation for that reason alone. If you follow this logic to extremes, the compensation of a CEO of a company of a dozen people earning 100,000 should be higher than one with with tens of thousands of employees earning 30,000. Not all businesses are the same.
- cammikebrown 1y agoEven $30,000 is below minimum wage full time on the west coast. You’re not gonna be doing well at all making that.
- yieldcrv 1y agowhich neither bolsters or negates the point.
- tw04 1y agoWhat’s the motivation of the CEO to increase employee wages if his compensation isn’t tied to theirs? There’s this perverse belief that companies should exist to enrich the wealthy shareholders at the expense of the workers and it’s put us dangerously close to a complete collapse of the social contract.
- slashdave 1y agoThe motivation? A healthy and productive workforce. The greater good. Not sure why you would tie pure compensation (a greedy concept) with goals that align exactly to the opposite.
- danny_codes 1y agoPeople who become CEOs tend not to care about other people. Sort of a prerequisite to the job in a lot of cases. See that UHC guy as a prime example.
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- Aunche 1y agoI'd likely be progressive if American progressivism wasn't so economically illiterate (as opposed to say Piketty). The vindictive themes make me think that it's motivated more by envy than a genuine desire to improve society. The CEO to worker compensation ratio is a useless metric. There is absolutely no reason why Starbucks should be punished for hiring more workers over a company like Nvidia that hires relatively few very well paid workers. If you want raise taxes, just increase taxes across the board. If you really think that stock buybacks are meant to "pump up short term share prices", you should test your theory in the market and you'll be a billionaire in no time.
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- danny_codes 1y agoIt’s a metric capturing income inequality. Very relevant to those of us who care about income inequality. There are plenty of reasons to want to limit income inequality.
- Aunche 1y agoMy point is that it is a useless metric about income inequality. Starbucks can restructure to a franchise model and immediately reduce worker-CEO pay. Like I said, any other form of taxation would be a less economically distortionary way to reduce income inequality.
- rchaud 1y agoYou're conflating managerial economics with macroeconomics. CEOs at publicly traded companies aren't hired to enhance the long-term productive capacity of the firm ("growing the economy"); they're there to calm investor nerves and make the stock sexy. Those only have a very slight correlation to the overall health of the economy. Microsoft grew revenue and profits under Steve Ballmer, but the stock stayed flat, so he had to go. It'd be great if public companies could grow market share by beating competitors by with better prices or service, but that takes long-term strategic planning and no surprises from government, activist investors, suppliers and employees. CEOs don't have that kind of time, so they reach for familiar tools: restructuring (mass firings), selling off parts, and yes, share buybacks, because these tools move the needle that matters. During their quarterly earnings calls, they answer to Wall Street analysts, who represent the interests of shareholders, not employees or economic policymakers. As for "economic illiteracy", the very concept is nonsensical. Every economy is structured differently and what's "sensible" changes over time. If you asked a US economist whether they thought zero interest rate policy (2008-2022) was a good idea, they'd think you were talking about a communist society with a desperate government trying to manufacture growth. But this is how every western economy largely operated after the Great Recession. They'd probably take a dim view of venture capital as well, considering its portfolio strategy ignores operational profit targets in favor of IPO windfalls. That's how you end up with abominations like SPACs, where companies can go public with a fraction of the financial transparency that would otherwise be required.
- simianwords 1y agoI did an exercise here: the average CEO salary of S&P 500 is around $20M. That's around $10B totally. Assume there are three executives - so thats around $30B annually. Lets go much further, lets multiply this by 10 to account for top 5000 companies (in practice it would be more like top 20,000 because the lower companies have much lower CEO salaries). There are around 300 million people in USA. By redistributing the 100% CEO salary you can give around $900 per year to every single person. All this for $900? Which does not even account for income tax paid by CEO's. Edit: after accounting for income tax it is more like $600 So all you have achieved by completely eradicating C suite salary for top 20,000 companies in the USA is around ~$900~ $600 for each individual per year. I'm increasingly convinced that CEO pay is the wrong place to look at for any impact at all. Edit: there's more to this if you account for spending patterns. Even if you give $500 to every citizen, that does not mean affordability will increase because inflation can increase proportionally. This is because even with increased money, each citizen is buying goods amongst the same quantity of goods as before. For example we can take potatoes: do you think citizens can afford potatoes even more now? No, because the number of potatoes have remained the same. Taking away CEO salary does not mean potato stock would increase because CEO's are not hoarding up potatoes.
- drunner 1y agoAs shown by the covid payments. $900 a year is a lot of money to a lot of folks. Heck annual social security average is 24k a year, so you are talking about nearly 4% more money for just those people alone.
- simianwords 1y agoFair, lets then count income tax which makes it more like $500 assuming net taxes around 40%. I'm ignoring salary increase due to stock valuation going up because it complicates things and there is equal force from both sides of the argument. So you decide: 20,000 companies running with a CEO being paid like an average person. And every citizen gets $500 in their account per year. Edit: its not just a CEO but the C suite. 20,000 running without a C suite.
- BobbyTables2 1y agoI suspect the low tax rate of long term capital gains combined with companies being allowed to do buy-backs drives all of this. Seems like today they are paid mostly in stock. Their vision becomes very short term. If they can’t organically grow the company, stock buybacks will prop up their shares. Otherwise a CEO paid mainly from salary might be more motivated to stay a tiny bit longer.
- jimmytucson 1y agoThe company with the lowest median pay, Aptiv, I had to look up, and what a darling of a company this is: - guilty of systemic accounting fraud from 1999-2004 - manufactured a (allegedly known-to-be) faulty ignition switch that led to the deaths of 124 people and injured 275 others - currently forcing 20,000 former employees to fight a decades-long legal battle for their earned pension benefits - gleefully dumps massive quantities of carcinogens and poisons into the environment, including: lead compounds, chromium compounds, sulfuric and hydrochloride acid (lol), and glycol ethers Simply a masterclass in corporate irresponsibility, exactly why their CEO is so well comped. Citations here: https://en.m.wikipedia.org/wiki/Aptiv https://en.m.wikipedia.org/wiki/Aptiv
- selinkocalar 1y agoThis is exactly why I believe in building companies that actually create value, not just extract it. We could easily charge enterprise prices and hire armies of consultants to inflate our costs. Instead, we focus on making compliance genuinely affordable for the companies that need it most. The best businesses solve real problems efficiently. When you're spending millions on CEO compensation while your workers can't afford basic necessities, you're not solving problems - you're creating them.