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One reason would be to scrutinize and consider whether top executives deserve the mammoth compensation that they receive these days. Recall that executive compe

One reason would be to scrutinize and consider whether top executives deserve the mammoth compensation that they receive these days. Recall that executive compensation is at an extreme all time high these days relative to even just 2 decades ago.

adventured 14y ago
Executive compensation seems so out of whack because it has kept up with inflation, while real wages haven't even come close. Why? Allow me to explain. The S&P 500 now gets half of its profits and sales from the rest of the world. The boom in countries like Brazil, China, India etc has vastly expanded the rest of the world's share of the global economy relative to the US. CEO's are compensated for this performance, but labor is paid based on local / domestic factors, not the profit generated in foreign markets. The CEO wage numbers in the US demonstrate how horribly the US economy has fallen behind when it comes to labor keeping up with global growth. You can easily test this by scaling the corporate sales backwards, eg to the 1960s, and adjusting CEO compensation for inflation. Everybody likes to talk about worker to CEO pay ratios, but what they never want to talk about is the destruction at the root of the problem: the Fed destroying the US Dollar. CEO pay has kept up, worker pay has not, and the why is easy to understand: the US economy is being flushed down the toilet. By tapping into global growth, multi-nationals have been able to keep up with the horrific dollar devaluation that has occurred since the 1960s. CEOs are compensated on that basis. Meanwhile labor directly suffers the full intensity of the dollar's destruction. It is thus that the American standard of living has plunged over 50 years. Minimum wage has fallen from $45k to $50k per year ($1.25/hour in 1964, inflation adjusted), down to $14k or so today. Americans used to be able to more than get by on one income, while a spouse stayed home to raise a family of four. The savings rate was radically higher also. Fundamentally it's the same reason why wealth can survive inflation, but wages cannot. One can easily be shifted to defensive assets, the other drowns. Even running just 3% real inflation per year is massively destructive to the standard of living over the course of a single decade. You have to generate 34% wage increases just to tread water.

adventured 14y ago

Executive compensation seems so out of whack because it has kept up with inflation, while real wages haven't even come close. Why? Allow me to explain. The S&P 500 now gets half of its profits and sales from the rest of the world. The boom in countries like Brazil, China, India etc has vastly expanded the rest of the world's share of the global economy relative to the US. CEO's are compensated for this performance, but labor is paid based on local / domestic factors, not the profit generated in foreign markets. The CEO wage numbers in the US demonstrate how horribly the US economy has fallen behind when it comes to labor keeping up with global growth. You can easily test this by scaling the corporate sales backwards, eg to the 1960s, and adjusting CEO compensation for inflation. Everybody likes to talk about worker to CEO pay ratios, but what they never want to talk about is the destruction at the root of the problem: the Fed destroying the US Dollar. CEO pay has kept up, worker pay has not, and the why is easy to understand: the US economy is being flushed down the toilet. By tapping into global growth, multi-nationals have been able to keep up with the horrific dollar devaluation that has occurred since the 1960s. CEOs are compensated on that basis. Meanwhile labor directly suffers the full intensity of the dollar's destruction. It is thus that the American standard of living has plunged over 50 years. Minimum wage has fallen from $45k to $50k per year ($1.25/hour in 1964, inflation adjusted), down to $14k or so today. Americans used to be able to more than get by on one income, while a spouse stayed home to raise a family of four. The savings rate was radically higher also. Fundamentally it's the same reason why wealth can survive inflation, but wages cannot. One can easily be shifted to defensive assets, the other drowns. Even running just 3% real inflation per year is massively destructive to the standard of living over the course of a single decade. You have to generate 34% wage increases just to tread water.