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Are some people being over compensated? "the average American CEO now earns 319 times as much as the average American worker" http://abcnews.go.com/Business/w

Are some people being over compensated? "the average American CEO now earns 319 times as much as the average American worker" http://abcnews.go.com/Business/walmart-ceo-pay-hour-workers-year/story?id=11067470#.UV8jX6s4WGg http://abcnews.go.com/Business/walmart-ceo-pay-hour-workers-... Japanese Business leaders are making way less then American CEOs around 16 times as much as an average worker. http://thinkprogress.org/politics/2010/07/08/106536/japanese-ceo-american-sixth/ http://thinkprogress.org/politics/2010/07/08/106536/japanese... If the average worker makes, say, 30K. I can see someone making 10x, maybe 50x that. But really 300x ?? Making decisions at the top is no doubt difficult and requires experience and expertise etc. But can you really say a CEOs time is worth 300x? Like everything else, the pay at the top affects the pay scale at the entire management tier.

habosa 14y ago
Japanese culture has a much smaller 'power distance' than US culture, we pay our CEOs so much because our individualistic culture rewards the superstar unlike almost any other nation in the world. You can debate over whether this is good or bad (it's probably bad when taken to this extreme), but it is an essential part of The American Dream. See http://en.wikipedia.org/wiki/Hofstede%27s_cultural_dimensions_theory http://en.wikipedia.org/wiki/Hofstede%27s_cultural_dimension... for more info on Power Distance and other variables that can broadly define a society.
- Evbn 14y ago
  The American Dream is owning a house, not a small island nation.
adventured 14y ago
That's completely bogus. The average CEO is running a business that won't exist in ten years, and doesn't earn more than six figures. You're talking about an extreme minority business group, a few hundred individuals are used to skew that stat to the moon. It'd be like comparing Single A baseball players to the top 100 paid players in the MLB; or NBA vs the development league. And even that doesn't get you close to the real exaggeration in the CEO stat. There are over 20 million businesses in the US, none of which are Fortune 500 companies that always are used to abuse that CEO stat. The average CEO is not earning $15 million per year (median income is $50k+, mean is over $55k (was $60k in 2004)). Indeed, how can the average CEO earn that much, when only a few dozen in the entire country earn that much?
- enraged_camel 14y ago
  Yeah. It seems more useful to talk about "median CEO salary" rather than average.
  - Evbn 14y ago
    No, the average and the count are multiplied together to determine he taxable base. The median is irrelevant and is used as a human shield by the 1%.
- jiggy2011 14y ago
  I'm not sure that actually makes it any better. This further re-enforces the idea that a huge amount of wealth is horded by a small number of people. This means that there are a small number of CEOs earning well in excess of 300x salary. Of course there are also going to be many small business "CEOs" making less than many salaries.
jeffdavis 14y ago
There are places you can buy a $100 hamburger. Is it worth it? I doubt it. But it's not my money, so I don't lose sleep if someone else buys one. If you own stock in such a company, consider selling.
sliverstorm 14y ago
Making decisions at the top is no doubt difficult and requires experience and expertise etc. But can you really say a CEOs time is worth 300x? My theory; It isn't about difficulty or experience. It is about impact. Apple's revenue last year was $36B, and net was $8B. A CEO who increases their revenues by just 5% would thus immediately justify his or her salary, up to $400M, as he or she increased profits by $400M. Bottom-rung employees don't have that kind of scope of impact. Of course, this isn't always what happens- not every CEO can boost revenues, let alone stop them from falling- but it is why you see such high salaries, why they are even on the table.
- nostrademons 14y ago
  My theory: it's about risk. The CEO of Apple or Google has an inordinate effect on the net worth of a number of wealthy individuals. It is impossible to predict whether that effect will be positive or negative, yet people have a strong incentive to ensure it will be positive. Thus, a number of people who would do perfectly fine at running these companies are disqualified immediately, simply because they've never had experience at running a large company before. Nobody will take a chance at a random unknown when billions of dollars are on the line. And this artificially restricts the supply of CEO candidates, while the amount of money available to pay them remains high, artificially driving up wages.
- jonknee 14y ago
  All too often pay is not tied to performance. Few people begrudge a CEO who takes all pay in the increases of his/her stock, but nearly everyone sees a problem with golden parachutes.
  - sliverstorm 14y ago
    Of course, I'm not saying it is an effective system. Just trying to theorize why it is so. We like to think people are exploiting the system at-will, but don't forget about Hanlon's Razor.
    - Evbn 14y ago

habosa 14y ago

Japanese culture has a much smaller 'power distance' than US culture, we pay our CEOs so much because our individualistic culture rewards the superstar unlike almost any other nation in the world. You can debate over whether this is good or bad (it's probably bad when taken to this extreme), but it is an essential part of The American Dream. See http://en.wikipedia.org/wiki/Hofstede%27s_cultural_dimensions_theory http://en.wikipedia.org/wiki/Hofstede%27s_cultural_dimension... for more info on Power Distance and other variables that can broadly define a society.

Evbn 14y ago
The American Dream is owning a house, not a small island nation.

adventured 14y ago

That's completely bogus. The average CEO is running a business that won't exist in ten years, and doesn't earn more than six figures. You're talking about an extreme minority business group, a few hundred individuals are used to skew that stat to the moon. It'd be like comparing Single A baseball players to the top 100 paid players in the MLB; or NBA vs the development league. And even that doesn't get you close to the real exaggeration in the CEO stat. There are over 20 million businesses in the US, none of which are Fortune 500 companies that always are used to abuse that CEO stat. The average CEO is not earning $15 million per year (median income is $50k+, mean is over $55k (was $60k in 2004)). Indeed, how can the average CEO earn that much, when only a few dozen in the entire country earn that much?

enraged_camel 14y ago
Yeah. It seems more useful to talk about "median CEO salary" rather than average.
- Evbn 14y ago
  No, the average and the count are multiplied together to determine he taxable base. The median is irrelevant and is used as a human shield by the 1%.
jiggy2011 14y ago
I'm not sure that actually makes it any better. This further re-enforces the idea that a huge amount of wealth is horded by a small number of people. This means that there are a small number of CEOs earning well in excess of 300x salary. Of course there are also going to be many small business "CEOs" making less than many salaries.

jeffdavis 14y ago

There are places you can buy a $100 hamburger. Is it worth it? I doubt it. But it's not my money, so I don't lose sleep if someone else buys one. If you own stock in such a company, consider selling.

sliverstorm 14y ago

Making decisions at the top is no doubt difficult and requires experience and expertise etc. But can you really say a CEOs time is worth 300x? My theory; It isn't about difficulty or experience. It is about impact. Apple's revenue last year was $36B, and net was $8B. A CEO who increases their revenues by just 5% would thus immediately justify his or her salary, up to $400M, as he or she increased profits by $400M. Bottom-rung employees don't have that kind of scope of impact. Of course, this isn't always what happens- not every CEO can boost revenues, let alone stop them from falling- but it is why you see such high salaries, why they are even on the table.

nostrademons 14y ago
My theory: it's about risk. The CEO of Apple or Google has an inordinate effect on the net worth of a number of wealthy individuals. It is impossible to predict whether that effect will be positive or negative, yet people have a strong incentive to ensure it will be positive. Thus, a number of people who would do perfectly fine at running these companies are disqualified immediately, simply because they've never had experience at running a large company before. Nobody will take a chance at a random unknown when billions of dollars are on the line. And this artificially restricts the supply of CEO candidates, while the amount of money available to pay them remains high, artificially driving up wages.
jonknee 14y ago
All too often pay is not tied to performance. Few people begrudge a CEO who takes all pay in the increases of his/her stock, but nearly everyone sees a problem with golden parachutes.
- sliverstorm 14y ago
  Of course, I'm not saying it is an effective system. Just trying to theorize why it is so. We like to think people are exploiting the system at-will, but don't forget about Hanlon's Razor.
  - Evbn 14y ago