“Now we know why CEOs didn’t want this data released,”

[DBT]

1) That "income" is before deductions. There are a couple of possibly huge ones there--medical and casualty loss. It's quite possible those households are ones with high income who self-insured--and took a huge hit that year. (Setting the threshold lower you also get the people who are liquidating assets to pay for medical care at home in lieu of going to a nursing home. Pretty hard to reach $1m this way, though.)

It doesn't matter if it is income before deductions, the ratio of disparity of income is the issue....plus tax avoidance by the super rich is whole other issue, practically an art form in its own right.

 

[Bomb#20]

Obviously there are people who are outraged by the sheer disparity in wealth between those at the top and the rest of us, which includes the exorbitant salary packages of the CEO's in question, but my point is that the outrage does not relate to the scale of the problem.

The level of outrage does not appear to be strong enough to motivate action effective enough to bring about change for the better...

Well, what is the scale of the problem? Most CEOs get paid less than doctors. Just how many CEOs are we talking about.. ..

I gave an overview of the problem earlier;

This is the problem;
Quote;
''Across all companies, the average CEO pay was $13.8 million per year, the average median worker pay was about $77,800, and the average ratio of CEO pay to median worker pay was 204. In other words, on average, CEOs earn around 204 times what his or her median worker earns.Aug 25, 2015''

That's an out-of-context quote. No, across all companies, the average CEO pay was obviously not $13.8 million per year, a plainly ridiculous figure. Most companies don't even have $13.8 million in revenue. By "all companies", Glassdoor was referring only to the 441 companies they surveyed, all selected from the Fortune 500 list. Glassdoor elaborates: "Executives at many small and mid-sized firms are paid dramatically less. Looking only at America’s largest firms gives a misleading view of the ratio of CEO pay to worker pay throughout the economy."

Moreover, even among just those companies, on average, CEOs do not earn around 204 times what their median workers earn. Glassdoor elaborates: "To make a fair comparison, we compare total CEO pay to total worker pay. However, while CEO pay for bonuses, stock options and other pay beyond base salary is accurately reported in SEC filings, most workers underreport bonuses and stock options in surveys, such as Glassdoor’s salary survey. Most workers simply don’t know or don’t recall the details of non-salary compensation. As a result, total pay is likely underreported for workers, which could overstate CEO pay ratios.

We are not talking about CEO's who ''get paid less than doctors'' (not all doctors have the same income), we are discussing excessive incomes, and wealth, of a small percentage of the population....which, taken as a whole, exceeds the wealth of the rest of us

You're talking about 441 people. That's a lot less than 1% of Americans. According to you, the entire richest 1% own less wealth than the rest of us, so it is mathematically impossible for 441 rich people to own more wealth than the rest of us. What evidence do you have that CEO pay is a large scale problem?

Key Facts
The richest 1% of Americans own 35% of the nation's wealth. The bottom 80% own just 11% of the nation's wealth.

That's not a fact. That's a statement of religious faith. It transparently relies on the unfalsifiable metaphysical premise that when a rich American owns some item of wealth, that item is magically also simultaneously owned by the nation. I own my car. It may be 22 years old and have 380,000 miles on it, so it's not worth a whole lot, but it's still my car. It's not America's car. It isn't part of "the nation's wealth". It's part of my wealth. Owning my car does not make me own a 100 billionth of the nation' wealth. I own a 300 millionth of the nation's wealth, plus 100% of my wealth.

In the 1950s and 1960s, when the economy was booming, the wealthiest Americans paid a top income tax rate of 91%. Today, the top rate is 43.4%.

In the first place, that's nonsense. You clearly aren't counting state income tax. And in the second place, what's your point? Why are you offering that as though it were evidence of a problem? You are clearly relying on the unstated and unevidenced premise that tax rates on the rich should always ratchet upward -- that there can simply be no such thing in principle as rich people being overtaxed. Without that premise, tax rates dropping from 91% to 43% could just as easily mean there was a problem back in the 1950s and 1960s that has since been solved, as meaning there's a problem now.

The ratchet principle is a fixture of leftist thinking on taxation. It comes up over and over in this sort of discussion, usually unselfconsciously, without even a hint that the writer is aware he's introduced a premise he hasn't supported. So what justifies it? The theory that America owns all Americans' wealth? So any of our earnings we're graciously allowed to keep are a gift to us?

The richest 1% pay an effective federal income tax rate of 24.7% in 2014; someone making an average of $75,000 is paying a 19.7% rate.

And that's a problem because...? Seems to me it ought to be feasible to run a government on the amount that would raise. (Sure, we'd probably have to cut military spending a bit. But then it seems to me we could get by with a smaller military if we started fewer wars.)

The average federal income tax rate of the richest 400 Americans was just 20 percent in 2009.

Well, not knowing the details of their individual situations, who knows if that's a problem? You can be incredibly rich but have low income, after all. But assuming their income is in proportion to their wealth, that sounds like a sign that there's a problem with the tax system, and that it would be fairer if they were paying 24.7% like the rest of the 1% -- or perhaps that the richest 1% should be paying just 20%. But 400 people paying 4.7% too little tax doesn't strike me as a very large scale problem. The government's trying to inflict a whole new drug war on us over manufactured opioid hysteria, and I'm supposed to get outraged over a few people with smart accountants who found a 4.7% tax loophole? Go hire a smarter accountant to figure out how to close the loophole, and move on.

Taxing investment income at a much lower rate than salaries and wages are taxed loses $1.3 trillion over 10 years.

That's not a fact. In the first place, we don't tax investment income at a much lower rate than salaries and wages. That's make-believe. A great deal of the "investment income" Americans are taxed on is fictitious income. It's an artifact of the government's choice to inflate the currency and then measure the purchase price and the sales price of an investment in different sized dollars. But the tax on the fictitious income is very real. Back when the nominal capital gains tax rate was 20%, an average investor getting average returns over a period with average inflation was paying enough real tax on fake income to roughly compensate for the difference in nominal rates, so her real investment income was effectively taxed at roughly the same rate as wages. With the addition of the Obamacare net investment income tax, capital gains are now taxed more heavily than wages.

And in the second place, even if the lower rate were real, claiming a lower rate "loses $1.3 trillion" is not a fact. It's another statement of religious faith. Not taking something is not the same thing as losing it. Suppose you bet on Justify in the Preakness and won $100. That means the bookie lost $100. You could have bet on him in the Kentucky Derby and won $250, back when the odds were longer. But you didn't. You waited til he looked more like a sure thing. Too bad for you, no guts, no glory. But the fact that you only got $100 and not the $250 you could have gotten does not mean you lost $150, or that the bookie gained $150. The bookie still lost $100. Sure, you could have gotten $250 but you didn't. Sure, you ended up with $150 less than you would have if you'd made the longer bet. Those are facts. But those facts do not magically make "You lost $150" into a fact. To decide it means you lost $150 takes religious faith.

Here's a quick fact-based way to tell who's losing money: check which direction the money is going. Even if we taxed after-inflation investment income at 20% and wages at 37%, that would mean the investors are losing money. Not as much as the wage-earners are losing, but losing all the same. It wouldn't mean the tax collector is losing money. This is not rocket science. It doesn't take a rocket scientist to figure out that shutting off the rocket engine does not cause the rocket's exhaust to flow back into the nozzle.

1,470 households reported income of more than $1 million in 2009 but paid zero federal income taxes on it.

Oh my god! You seriously wrote that.

And that fact is supposed to support your contention that CEOs being paid so much is a problem, how, exactly? What, John the CEO evaded his taxes and that means Jane the CEO ought to be required to have less money? If Saul, a Jewish man, figured out how to pay no taxes on $1 million in income, do you perhaps feel that the rest of us should compensate ourselves for his gaming the system, by imposing a special surtax on the Jews?

If you'd written what you just wrote, about anybody but rich people, you'd have been instantly recognized as a bigot by pretty much everyone. But you wrote it casually, without any hint you were aware how appalling the argument you were making is. You did it for exactly the same reason that casual antisemitism raised no eyebrows a hundred years ago: because bigotry against CEOs is socially acceptable in your subculture.

30 percent of income inequality is due to unfair taxes and budget cuts to services and benefits.

That's a "Key Fact", is it? "Unfair" is a moral judgment. So you are claiming the existence of moral facts. You're a believer in the objectivity of morality, it seems. Well, then, which is the correct moral theory? What is the criterion by which we can all objectively determine for ourselves which taxes and budget cuts are unfair?

The largest contributor to increasing income inequality has been changes in income from capital gains and dividends.

Income inequality is decreasing.

 

[DBT]

I gave an overview of the problem earlier;

This is the problem;
Quote;
''Across all companies, the average CEO pay was $13.8 million per year, the average median worker pay was about $77,800, and the average ratio of CEO pay to median worker pay was 204. In other words, on average, CEOs earn around 204 times what his or her median worker earns.Aug 25, 2015''

That's an out-of-context quote. No, across all companies, the average CEO pay was obviously not $13.8 million per year, a plainly ridiculous figure. Most companies don't even have $13.8 million in revenue. By "all companies", Glassdoor was referring only to the 441 companies they surveyed, all selected from the Fortune 500 list. Glassdoor elaborates: "Executives at many small and mid-sized firms are paid dramatically less. Looking only at America’s largest firms gives a misleading view of the ratio of CEO pay to worker pay throughout the economy."

Moreover, even among just those companies, on average, CEOs do not earn around 204 times what their median workers earn. Glassdoor elaborates: "To make a fair comparison, we compare total CEO pay to total worker pay. However, while CEO pay for bonuses, stock options and other pay beyond base salary is accurately reported in SEC filings, most workers underreport bonuses and stock options in surveys, such as Glassdoor’s salary survey. Most workers simply don’t know or don’t recall the details of non-salary compensation. As a result, total pay is likely underreported for workers, which could overstate CEO pay ratios.

We are not talking about CEO's who ''get paid less than doctors'' (not all doctors have the same income), we are discussing excessive incomes, and wealth, of a small percentage of the population....which, taken as a whole, exceeds the wealth of the rest of us

You're talking about 441 people. That's a lot less than 1% of Americans. According to you, the entire richest 1% own less wealth than the rest of us, so it is mathematically impossible for 441 rich people to own more wealth than the rest of us. What evidence do you have that CEO pay is a large scale problem?

Key Facts
The richest 1% of Americans own 35% of the nation's wealth. The bottom 80% own just 11% of the nation's wealth.

That's not a fact. That's a statement of religious faith. It transparently relies on the unfalsifiable metaphysical premise that when a rich American owns some item of wealth, that item is magically also simultaneously owned by the nation. I own my car. It may be 22 years old and have 380,000 miles on it, so it's not worth a whole lot, but it's still my car. It's not America's car. It isn't part of "the nation's wealth". It's part of my wealth. Owning my car does not make me own a 100 billionth of the nation' wealth. I own a 300 millionth of the nation's wealth, plus 100% of my wealth.

In the 1950s and 1960s, when the economy was booming, the wealthiest Americans paid a top income tax rate of 91%. Today, the top rate is 43.4%.

In the first place, that's nonsense. You clearly aren't counting state income tax. And in the second place, what's your point? Why are you offering that as though it were evidence of a problem? You are clearly relying on the unstated and unevidenced premise that tax rates on the rich should always ratchet upward -- that there can simply be no such thing in principle as rich people being overtaxed. Without that premise, tax rates dropping from 91% to 43% could just as easily mean there was a problem back in the 1950s and 1960s that has since been solved, as meaning there's a problem now.

The ratchet principle is a fixture of leftist thinking on taxation. It comes up over and over in this sort of discussion, usually unselfconsciously, without even a hint that the writer is aware he's introduced a premise he hasn't supported. So what justifies it? The theory that America owns all Americans' wealth? So any of our earnings we're graciously allowed to keep are a gift to us?

The richest 1% pay an effective federal income tax rate of 24.7% in 2014; someone making an average of $75,000 is paying a 19.7% rate.

And that's a problem because...? Seems to me it ought to be feasible to run a government on the amount that would raise. (Sure, we'd probably have to cut military spending a bit. But then it seems to me we could get by with a smaller military if we started fewer wars.)

The average federal income tax rate of the richest 400 Americans was just 20 percent in 2009.

Well, not knowing the details of their individual situations, who knows if that's a problem? You can be incredibly rich but have low income, after all. But assuming their income is in proportion to their wealth, that sounds like a sign that there's a problem with the tax system, and that it would be fairer if they were paying 24.7% like the rest of the 1% -- or perhaps that the richest 1% should be paying just 20%. But 400 people paying 4.7% too little tax doesn't strike me as a very large scale problem. The government's trying to inflict a whole new drug war on us over manufactured opioid hysteria, and I'm supposed to get outraged over a few people with smart accountants who found a 4.7% tax loophole? Go hire a smarter accountant to figure out how to close the loophole, and move on.

Taxing investment income at a much lower rate than salaries and wages are taxed loses $1.3 trillion over 10 years.

That's not a fact. In the first place, we don't tax investment income at a much lower rate than salaries and wages. That's make-believe. A great deal of the "investment income" Americans are taxed on is fictitious income. It's an artifact of the government's choice to inflate the currency and then measure the purchase price and the sales price of an investment in different sized dollars. But the tax on the fictitious income is very real. Back when the nominal capital gains tax rate was 20%, an average investor getting average returns over a period with average inflation was paying enough real tax on fake income to roughly compensate for the difference in nominal rates, so her real investment income was effectively taxed at roughly the same rate as wages. With the addition of the Obamacare net investment income tax, capital gains are now taxed more heavily than wages.

And in the second place, even if the lower rate were real, claiming a lower rate "loses $1.3 trillion" is not a fact. It's another statement of religious faith. Not taking something is not the same thing as losing it. Suppose you bet on Justify in the Preakness and won $100. That means the bookie lost $100. You could have bet on him in the Kentucky Derby and won $250, back when the odds were longer. But you didn't. You waited til he looked more like a sure thing. Too bad for you, no guts, no glory. But the fact that you only got $100 and not the $250 you could have gotten does not mean you lost $150, or that the bookie gained $150. The bookie still lost $100. Sure, you could have gotten $250 but you didn't. Sure, you ended up with $150 less than you would have if you'd made the longer bet. Those are facts. But those facts do not magically make "You lost $150" into a fact. To decide it means you lost $150 takes religious faith.

Here's a quick fact-based way to tell who's losing money: check which direction the money is going. Even if we taxed after-inflation investment income at 20% and wages at 37%, that would mean the investors are losing money. Not as much as the wage-earners are losing, but losing all the same. It wouldn't mean the tax collector is losing money. This is not rocket science. It doesn't take a rocket scientist to figure out that shutting off the rocket engine does not cause the rocket's exhaust to flow back into the nozzle.

1,470 households reported income of more than $1 million in 2009 but paid zero federal income taxes on it.

Oh my god! You seriously wrote that.

And that fact is supposed to support your contention that CEOs being paid so much is a problem, how, exactly? What, John the CEO evaded his taxes and that means Jane the CEO ought to be required to have less money? If Saul, a Jewish man, figured out how to pay no taxes on $1 million in income, do you perhaps feel that the rest of us should compensate ourselves for his gaming the system, by imposing a special surtax on the Jews?

If you'd written what you just wrote, about anybody but rich people, you'd have been instantly recognized as a bigot by pretty much everyone. But you wrote it casually, without any hint you were aware how appalling the argument you were making is. You did it for exactly the same reason that casual antisemitism raised no eyebrows a hundred years ago: because bigotry against CEOs is socially acceptable in your subculture.

30 percent of income inequality is due to unfair taxes and budget cuts to services and benefits.

That's a "Key Fact", is it? "Unfair" is a moral judgment. So you are claiming the existence of moral facts. You're a believer in the objectivity of morality, it seems. Well, then, which is the correct moral theory? What is the criterion by which we can all objectively determine for ourselves which taxes and budget cuts are unfair?

The largest contributor to increasing income inequality has been changes in income from capital gains and dividends.

Income inequality is decreasing.

Income inequality is decreasing? Do you have evidence for this?

Overall, it is not. Of course, some countries have remained stable, a few have improved while other have experienced increased disparity in wealth and income;

''While there is evidence of rising inequality, not all countries are experiencing this trend in the same way. According to a 2013 Pew Research Center survey, a median of 80 percent of respondents in developed countries perceive income inequality to have worsened, compared to medians of 70 percent in developing economies and 59 percent in emerging markets. Inequality has indeed increased in some countries, for example in the United States over the past 40 years and China over the past 20. However, inequality has remained stable in countries such as Japan, Switzerland, and Germany, and even fallen significantly in countries such as Brazil.''

As for the rest of your objections, the article gives a run down on methodology used and source material. I see no reason to question its validity.

Similar figures are available from multiple sources

''Australia is among countries with the highest growth in income inequality in the world over the past 30 years, according to the International Monetary Fund.
Vitor Gaspar, the IMF’s director of fiscal affairs, has told an audience at the launch of the IMF’s latest Fiscal Monitor that Australia’s income inequality growth has been similar to the US, South Africa, India, China, Spain and the UK since the 1980s.''

Your income inequality claim is deceptive because there is a distinction to be made between income and wealth inequality;

''In July the Reserve Bank governor, Philip Lowe, when asked about his views on inequality at a charity lunch in Sydney, said it had grown “quite a lot” in the 1980s and 1990s and had risen “a little bit” recently, but it was important to make a distinction between income and wealth inequality.

“Wealth inequality has become more pronounced particularly in the last five or six years because there’s been big gains in asset prices,” Lowe said. “So the people who own assets, which are usually wealthy people, have seen their wealth go up.”

He said income inequality had increased slightly in recent years, but wealth inequality was more pronounced because of rising asset prices.''



Income inequality

Rank of U.S.: Fourth highest inequality in the world.

The authors argue that the most severe inequality can be found in Chile, Mexico, Turkey — and the US. Citing the Gini coefficient, a common inequality metric, and data from Wall Street Journal/Mercer Human Resource Consulting, they say this inequality slows economic growth, impedes youths’ opportunities, and ultimately threatens the nation’s future (an OECD video explains). Worsening income inequality is also evident in the ratio of average CEO earnings to average workers’ pay. That ratio went from 24:1 in 1965 to 262:1 in 2005.

 

[Emily Lake]

I think we should compare the top 225 athletes in all the major sports and see who wins with the CEOs. it would be close I bet.

Sport star renumeration (amongst a range of things) falls into the same category; excessive. It's just that the subject of this thread happens to be CEO salary and bonus rates.

Quibble: It's remuneration, not renumeration. You're paying them (the root involved in the muner portion of the word, meaning to give or reward), not counting them (the root involved in the numer portion of your spelling).

 

[Emily Lake]

But in general the value of the stock is approximately the net present value of the expected future dividends the company pays out. When you pay out money to CEOs it's not available to pay dividends. Thus it does come out of shareholder pockets.

Setting aside that many shares don't pay dividends, when a substantial portion of CEO compensation is in the form of shares or options... they ARE shareholders. So it doesn't come out of shareholder pockets. For the most part, the board (which is comprised of the major shareholders who control voting blocks) approve the method of CEO compensation to include shares or options.

 

[coloradoatheist]

But in general the value of the stock is approximately the net present value of the expected future dividends the company pays out. When you pay out money to CEOs it's not available to pay dividends. Thus it does come out of shareholder pockets.

Setting aside that many shares don't pay dividends, when a substantial portion of CEO compensation is in the form of shares or options... they ARE shareholders. So it doesn't come out of shareholder pockets. For the most part, the board (which is comprised of the major shareholders who control voting blocks) approve the method of CEO compensation to include shares or options.

Except it dilutes their earnings per share for those options so their shares become less valuable.

 

[Emily Lake]

Obviously there are people who are outraged by the sheer disparity in wealth between those at the top and the rest of us, which includes the exorbitant salary packages of the CEO's in question, but my point is that the outrage does not relate to the scale of the problem.

The level of outrage does not appear to be strong enough to motivate action effective enough to bring about change for the better...

Well, what is the scale of the problem? Most CEOs get paid less than doctors. Just how many CEOs are we talking about.. ..

I gave an overview of the problem earlier;

This is the problem;
Quote;
''Across all companies, the average CEO pay was $13.8 million per year, the average median worker pay was about $77,800, and the average ratio of CEO pay to median worker pay was 204. In other words, on average, CEOs earn around 204 times what his or her median worker earns.Aug 25, 2015''

We are not talking about CEO's who ''get paid less than doctors'' (not all doctors have the same income), we are discussing excessive incomes, and wealth, of a small percentage of the population....which, taken as a whole, exceeds the wealth of the rest of us

It might be worth noting that the quote here is referring to CEOs of the S&P 500 - literally the 500 companies in the US with the strongest stocks. In 2016, there were 3,800 publicly traded companies in the US. In 2013, there were 240,000 CEOs in the US, including non-publicly traded companies.

Your statistic is referencing the 0.2% highest paid CEOs.

Yes, they're paid an exorbitant amount. But it's worthwhile to note that they are not representative of CEOs overall, and that if you take the top 0.2% of almost any non-uniform distribution, they're going to look extreme compared to the mean. Anything that many standard deviations from the mean look extreme.

Key Facts
The richest 1% of Americans own 35% of the nation's wealth. The bottom 80% own just 11% of the nation's wealth.
In the 1950s and 1960s, when the economy was booming, the wealthiest Americans paid a top income tax rate of 91%. Today, the top rate is 43.4%.
The richest 1% pay an effective federal income tax rate of 24.7% in 2014; someone making an average of $75,000 is paying a 19.7% rate.
The average federal income tax rate of the richest 400 Americans was just 20 percent in 2009.
Taxing investment income at a much lower rate than salaries and wages are taxed loses $1.3 trillion over 10 years.
1,470 households reported income of more than $1 million in 2009 but paid zero federal income taxes on it.
CEOs of major corporations earn nearly 300 times more than an average worker.
30 percent of income inequality is due to unfair taxes and budget cuts to services and benefits.
The largest contributor to increasing income inequality has been changes in income from capital gains and dividends.

It may also be worth noting that the richest 1% pay only 24.7% of their income as taxes, but that it accounts for mpore actual dollars of income taxes than the lower 90% all combined.

https://taxfoundation.org/official-statistics-inequality-top-1-and-redistribution/

Recently released IRS data for 2011 shows that the Top 1% of taxpayers earned 18.7 percent of the nation’s adjusted gross income (AGI) and paid 35.1 percent of all income taxes.

Yes, there are some truly astonishingly wealthy people in the US. And their level of wealth seems offensive most of the time. But they're also bearing a considerable portion of the tax burden in the US. I'm sure there's some reasonable in-between that could be found... but I worry a bit about putting all our eggs in one basket. If we continue to increase the burden on an incredibly small segment of people... having the majority of tax revenue coming from a very small minority of the population... what happens when that minority decides they're not going to play anymore?

As of 2015... IRS Individual Income Statistical Tables:

The top 1% pay 38.3% of the income taxes; that top 1% starts at AGI of $500,000
The top 25% pay 87.9% of the income taxes; that top 25% starts at AGI of $75,000

So let's look at millionaires, exclusively. People with AGIs of $1M and above account for 0.3% of the returns... and are shouldering 27.7% of the income taxes paid. People with AGIs of $5M and above are 0.03% of the returns, and 13.5% of the income taxes collected.

I'm all for a progressive tax system. I'm just not so sure that I'm all for it causing such concentration. That's kind of the indecision point for me - wealth is concentrated... but so is our government income. And when SOOOOOO much of the taxes are coming from so very few... It's going to be incredibly difficult to shift that relationship. Increasing the top tiers of the progressive system aren't necessarily going to reduce the concentration of wealth... but it will make the government even more dependent and beholden to an incredibly small segment of people in the US.

- - - Updated - - -

Yes because the workers have no legal control of anything.

They are hired servants.

CEOs are hired servants too. They are workers. Hirable, firable.

There is a big difference between an employee that controls the company and a servant that controls nothing.

Control is power.

Where do managers and directors fall in your spectrum of evil capitalist pigs? I'd kind of like to know how evil you think I am...

 

[Emily Lake]

But in general the value of the stock is approximately the net present value of the expected future dividends the company pays out. When you pay out money to CEOs it's not available to pay dividends. Thus it does come out of shareholder pockets.

Setting aside that many shares don't pay dividends, when a substantial portion of CEO compensation is in the form of shares or options... they ARE shareholders. So it doesn't come out of shareholder pockets. For the most part, the board (which is comprised of the major shareholders who control voting blocks) approve the method of CEO compensation to include shares or options.

Except it dilutes their earnings per share for those options so their shares become less valuable.

Unless I'm really missing something, I don't think this is the case. Giving shares to someone doesn't dilute earnings per share. Earnings per share is literally earnings per share, and includes all the shares. IANAEconomist, so I could be misremembering... but it seems like the only way that CEO comp being in the form of shares or options would reduce EPS would be if the CEO were being granted shares as a result of a stock split.

 

[coloradoatheist]

Except it dilutes their earnings per share for those options so their shares become less valuable.

Unless I'm really missing something, I don't think this is the case. Giving shares to someone doesn't dilute earnings per share. Earnings per share is literally earnings per share, and includes all the shares. IANAEconomist, so I could be misremembering... but it seems like the only way that CEO comp being in the form of shares or options would reduce EPS would be if the CEO were being granted shares as a result of a stock split.

Yes it's called the diluted earnings per share, and it's the number of outstanding shares out there plus all of the options that could be converted to shares divided by earnings (actually reverse numerator and denominator). But yes, if a employee gets 10 share options then there are an extra possible ten shares out there.

 

[untermensche]

Where do managers and directors fall in your spectrum of evil capitalist pigs? I'd kind of like to know how evil you think I am...

I think the institutions are evil and the people behave in an institutional manner not a personal evil manner.

Put these people into democratic institutions and they will be just fine.

But there are many people who understand it is much better to fly in a private jet and give orders than to take them.

 

[ZiprHead]

But in general the value of the stock is approximately the net present value of the expected future dividends the company pays out. When you pay out money to CEOs it's not available to pay dividends. Thus it does come out of shareholder pockets.

Setting aside that many shares don't pay dividends, when a substantial portion of CEO compensation is in the form of shares or options... they ARE shareholders. So it doesn't come out of shareholder pockets. For the most part, the board (which is comprised of the major shareholders who control voting blocks) approve the method of CEO compensation to include shares or options.

Corporate boards share members. A CEO of one company sits on the boards of other companies, and so one, and so one. They're all members of the same club, granting themselves huge pay rates across the board, payed for by the lowly scum that actually did the work to create that money.

https://hbr.org/2016/04/how-corporate-boards-connect-in-charts

 

[Emily Lake]

I found this an interesting read:
https://www.investopedia.com/managing-wealth/guide-ceo-compensation/

 

[Loren Pechtel]

1) That "income" is before deductions. There are a couple of possibly huge ones there--medical and casualty loss. It's quite possible those households are ones with high income who self-insured--and took a huge hit that year. (Setting the threshold lower you also get the people who are liquidating assets to pay for medical care at home in lieu of going to a nursing home. Pretty hard to reach $1m this way, though.)

It doesn't matter if it is income before deductions, the ratio of disparity of income is the issue....plus tax avoidance by the super rich is whole other issue, practically an art form in its own right.

You're not addressing my point at all.

 

[Loren Pechtel]

Overall, it is not. Of course, some countries have remained stable, a few have improved while other have experienced increased disparity in wealth and income;

''While there is evidence of rising inequality, not all countries are experiencing this trend in the same way. According to a 2013 Pew Research Center survey, a median of 80 percent of respondents in developed countries perceive income inequality to have worsened, compared to medians of 70 percent in developing economies and 59 percent in emerging markets. Inequality has indeed increased in some countries, for example in the United States over the past 40 years and China over the past 20. However, inequality has remained stable in countries such as Japan, Switzerland, and Germany, and even fallen significantly in countries such as Brazil.''

Objection: Perceived inequality is only a useful yardstick for measuring how people feel.

And I'm not even sure about the actual data for the United States because it's based on the assumption the numbers are accurate. Changing tax policy has changed how the rich handle money which changes reported income even without any actual change.

 

[laughing dog]

1) That "income" is before deductions. There are a couple of possibly huge ones there--medical and casualty loss. It's quite possible those households are ones with high income who self-insured--and took a huge hit that year. (Setting the threshold lower you also get the people who are liquidating assets to pay for medical care at home in lieu of going to a nursing home. Pretty hard to reach $1m this way, though.)

It doesn't matter if it is income before deductions, the ratio of disparity of income is the issue....plus tax avoidance by the super rich is whole other issue, practically an art form in its own right.

You're not addressing my point at all.

Your "point" was to evade the issue by concocting rationales for a minor point. The issue is income disparity, not how one can have $1 million + and pay no US federal income tax on it.

 

[ZiprHead]

I found this an interesting read:
https://www.investopedia.com/managing-wealth/guide-ceo-compensation/

I found it to be fairly shallow and of little use to this conversation.

 

[Emily Lake]

I found this an interesting read:
https://www.investopedia.com/managing-wealth/guide-ceo-compensation/

I found it to be fairly shallow and of little use to this conversation.

I wasn't looking for a dissertation I thought it gave a pretty decent (and objective) overview of how CEOs are compensated, as well as some of the things to consider in determining whether a CEO is being compensated well with respect to her performance, or if they're getting a package that includes no incentive for them to perform in the best interest of the company (or shareholders, I suppose). It was simple background info that I thought was interesting.

 

[jonatha]

I found this an interesting read:
https://www.investopedia.com/managing-wealth/guide-ceo-compensation/

I found it to be fairly shallow and of little use to this conversation.

I wasn't looking for a dissertation I thought it gave a pretty decent (and objective) overview of how CEOs are compensated, as well as some of the things to consider in determining whether a CEO is being compensated well with respect to her performance, or if they're getting a package that includes no incentive for them to perform in the best interest of the company (or shareholders, I suppose). It was simple background info that I thought was interesting.

So to align the CEO's interests with the shareholders', the board gives the CEO a yachtful of stock options.

Very good. Now the CEO's interests are aligned with the shareholders'.

Next year, to align the CEO's interests with the shareholders', the board gives the CEO another yachtful of stock options.

At what point did the CEO's interests get out alignment with the shareholders', so that a new bunch of stock options was necessary? Are the roads CEOs travel full of potholes or something?

 

[lpetrich]

I think that the problem here is that business leaders are often perceived as living off of the labors of their employees, especially employees who are not paid very much for their labors. Especially when one considers that some business leaders and their sycophants seem to think that everybody is grossly overpaid except those on top. Look at what they think about labor unions and the minimum wage. Like grumbling that the minimum wage is grotesquely high rather than trying to insure that people can earn more than it.

Athletes and entertainers don't get attacked as much for their wealth because they are not perceived as living off of others' labors. But they sometimes get criticized for that, especially if they go on strike.

 

[lpetrich]

Peter Turchin Ages of Discord - Peter Turchin

Seventy percent of Americans (and counting) think so. The inflation-adjusted wage of a US worker today is less than 40 years ago—but there are four times as many multimillionaires. As inequality grows, the infrastructure frays and the politics become more poisonous. Every year, more and more Americans go on shooting sprees, killing strangers and passers-by—and now, increasingly, the representatives of the state.

...
Historical analysis shows that long spells of equitable prosperity and internal peace are succeeded by protracted periods of inequity, increasing misery, and political instability. These crisis periods—“Ages of Discord”—tend to share characteristic features, identifiable in many societies throughout history.

Biologist and historian Peter Turchin has proposed that many agrarian societies have experienced a "structural demographic cycle", and he proposes the United States as a good example of an industrialized society with such cycles.

Peter Turchin Age of Discord II - Peter Turchin

Something happened in the United States during the 1970s. According to a number of indicators, well-being of the majority of Americans, which had been growing for many decades, entered a regime of stagnation and, eventually, decline. The trend towards greater equality in incomes and wealth was reversed. Social cooperation within the political and business elites, and between elites and the rest of the population began unraveling. As intraelite fragmentation and conflict increased, the American political system became increasingly more dysfunctional.

He and others have proposed that many preindustrial societies go through an alternation of integrative and disintegrative phases. In an integrative phase, elites are not very big and everybody is well-off. But elites grow, and as they grow, they support themselves by forcing down the standard of living of ordinary people. Society enters a disintegrative phase, and elites start fighting each other for leadership positions. They fight until they get pruned enough so that they are not much of a burden on the ordinary people. Pruning can happen by demotion to commoner status, going into exile, and getting killed.

Fighting is not necessary continuous. It often follows a two-generation "fathers and sons" cycle, where a generation that revolts is followed by one that is unwilling to revolt, and that one, in turn, is followed by one that is willing to revolt.

Peter Turchin has discovered that this has also happened to the United States over most of its history as an independent nation, though it has had only a few cycles. The US had spikes of political violence -- riots, lynchings, and terrorism -- around 1870, 1920, and 1970, though not 1820. It also has a long-term cycle with relatively little violence in its early decades, a peak around 1895, a trough in 1955, and increasing violence.

For ordinary-people well-being, he used

• Employment prospects: fraction of workers who are foreign-born. ---
• Relative wages: median wage divided by the GDP per capita. +++
• Health: life expectancy and physical height. +++
• Family: age of first marriage. ----

I've added the sign of the direction of correlation.

For elite overproduction, he used

• Top Wealth: largest private fortune divided by the median wage.
• Education Cost: price of going to Yale, an elite university, divided by the median wage.
• Elite Fragmentation: amount of party polarization in Congress.

Popular well-being had a peak in 1825, a trough in 1905, and a peak in 1960.
Elite overproduction had a trough in 1820, a peak in 1895, and a trough in 1955.

There is a nearly-perfect negative correlation, and political violence is also well-correlated, but in the direction of elite overproduction.

So Peter Turchin's theory predicts another peak of political violence around 2020.