Forum Post: Return CEO pay to historic norms (10-24x average salaries)
Posted 13 years ago on Oct. 19, 2011, 12:59 a.m. EST by mdimport
(10)
This content is user submitted and not an official statement
Back in the 1960's CEO pay was about 24x the national average, today it's hundreds of times the national average. That excess is public money, essentially swiped from our capital markets. That money belongs to you and I and comes out of our pension funds (current workers and retirees) and local governments (through increased costs).
Returning executive compensation to sustainable levels (Henry Ford model was 10x average pay) and getting rid of golden parachutes (pay on leaving for poor performance) would provide extra money for companies to invest in productive assets and create jobs.
The average wage today is around $45k, so someone making 10-24x that won't be impoverished, even with a return to sustainable levels.
Solving outrageous compensation practices isn't the whole solution, but it's part of the problem.
One other thing: If you have a 401(k), pension etc. contact that company and pressure them to vote for reduced executive compensation at the next shareholder meeting. Protests work in many fora.
Thank you for reading.
at first the public were angry that CEO's were hiding compensation levels. so they said "DISCLOSE YOUR PAY" and ceo's said "NO WAY"
so it was passed into legislation that they ought to.
then CEO's started looking over each others shoulders and they started telling their board of directors "WTF I'm better than him I deserve more than this"
and thus began the ceo payflation.
So maybe now is the time either through government regulation or through private sector voting to change salary links.
If people force their funds (pension, mutual ETF etc.) to vote for a link between the highest and lowest compensated within a firm (Salary Spread Vote) at Annual General Meetings (AGMs), then Wall Street can show it's in touch with public outrage (and what's going on now at the top of firms is outrageous).
Reminder: It's our main street pension money that funds the existence of fund managers. Let them do the job they're paid to do (drive efficiency and produce better returns). That is both in the corporate boardroom as well as within the fund (a different topic).
Moving2China: Not entirely true:
Really care less what the CEO is paid long as the company well ran, , but on ensuring longer term taken into consideration. Profitably matter for all companies. CEO salary very small cost compared to other costs in a company. CEOs are not 8 to 5 workers like most of us. They work 50 to 80 hours weeks. If investments in productivity are lacking in the company shareholders can fire and do from time to time can CEO, CFO, Vice Presidents etc. Want to help the workers out get the employer out of healthcare business and have the government provide taxes breaks to people to purchase their own coverage, or raise medicare levy to support single payer on all workers. You will not build stronger safety net just off the rich people because you need the sufficient funds that provided by the lower, middle, upper classes to fund it. Wealthy people salaries fluctuate widely year to year unlike some working on a hourly or salary.
The intention isn't to build a stronger safety net off of rich people, it's not even to stop having rich people. The point is to reduce input costs and high salaries at the executive level are a high cost and can easily be reduced.
Many people work over 50 hours a week and aren't paid 300+x average salaries. That's a false argument.
On the point of firing CEO's the golden parachute rewards failure. If you like I'll debate that with you too.
I'll debate healthcare costs elsewhere. If you're looking for specific things, my specific is reduce executive compensation to reasonable levels through a Salary Spread Vote.
Since CEO + few top execs' pay has reached 10% of corporate profits, it has become a serious drag on the profitability. If half that were even paid in dividends, which would help middle class 401ks, that would be more constructive. Of course, using it to hire people here would be even better.
It is no longer a very small cost compared to other costs in a company. CEO pay has doubled, as a percentage of profits, in the recent past. Companies are not run better. Furthermore, research has found that high CEO pay does not predict or produce better company performance.
Every industry is different in terms of profit margins, input and output costs,. a retail business probably not gonna pay CEO hunderds of millions like Apple or Technology would. Some CEO are good in one industry and poor in another like any other job out there a person works. Futile to regulate salaries at the top end as shareholders can vote for CEO pay packages at most companies anyways. If you want to regulate CEO salaries have to do it thru legislation as the marketplace votes by stock share price. Still, government intervention in terms of wages dangerous. CEO that failed companies if they want to pay them millions shareholders can stop it.
Voting on CEO salaries is a very new right which shareholders just got recently. It's non-binding, but it still appears to have executive knickers in a twist.
Shareholders have very few rights that actually work to change CEO behavior. When voting on members of the board, they cannot vote against, only for or abstain. So if the person running has one share and votes for himself, he has won. There are other strange legal obstacles as well.
If shareholders had more power, responsible groups like pension systems would be glad to work to clean up some of these problems.
There are two separate issues:
Both can be combined. If a CEO is bound to say 10x average salary, then s/he has an inventive to make his/her company earn more money so his/her workers are better paid and finally his/her own salary increases. That would be sustainable. Paying someone 3/400x average salary isn't sustainable. In fact, even if that person is fired after one year, they'd never have to work again, so why should they care about taking undue risk with company (your pension fund) money?
If employees would just negotiate better with their employers, CEO pay wouldn't be so high. People have less leverage to negotiate today though because they have so much debt & they have to pay their bills. It isn't off-shoring, I am not buying the off-shoring stuff. In the US the cost of living is so much higher than elsewhere that if you can make enough to survive here then your job would have already been off-shored if it could have been. People just don't have enough leverage to negotiate higher compensation with their employers because they are too in debt. That's what get's their CEOs the big bonuses.
Those increased taxes will eventually happen -- and I don't know if it will be 91% or not. Excess pay means less money for companies to invest in their productive employees (managers aren't productive and CEO's are just highly compensated employees).
In a company, if you don't have money, you can't invest in infrastructure and assets and finally jobs. For those reasons I'd prefer lower salaries (carrot to invest) and not higher taxes (stick after taking too much out).
I still think higher taxes will eventually be part of the overall solution.
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