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

[lpetrich]

The first trough of popular well-being and the corresponding first peak of elite overproduction both happened during the Gilded Age, as it is often called. Our current era is now often called Gilded Age II.

So grotesque CEO pay is part of an overall elite-overproduction trend.


Arthur Schlesingers I and II had identified cycles of liberalism and conservatism in American history, reform and stagnation, public purpose and private interest. These phases are typically around a generation in length, but the downhill parts of Peter Turchin's cycles contain unusually long conservative phases: the original Gilded Age and the present Gilded Age II.

In fact, our current era is overdue for lots of reforms, and we have already had some reform movements, though not very successful ones: the Wisconsin Revolt, Occupy Wall Street, Black Lives Matter, Bernie Sanders's campaign, the current gun-control push, even some of Donald Trump's campaign promises.

 

[DBT]

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).

Wow, a terrible mistake. The horror. What about the disparity of wealth distribution in our social and economic systems? Is that a problem?

 

[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.

You're not addressing my point at all.

I didn't see it as being relevant. What is relevant is that we have a huge disparity in both wealth and income between those at the top and the rest of us. That is the point. That is the problem, both socially and economically.

 

[DBT]

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.

How far do you question the stats? That they are way out?

 

[DBT]

Some Australian stats;

'In 2003-04, the wealthiest 20% of Australian households held 58.6% of total household wealth, and the poorest 20% of households held just 1.4% of total household wealth. In 2013-14, the wealthiest 20% of households held 61% of total household wealth, and the poorest 20% of households held just 1% of total household wealth.

These figures indicate that wealth inequality increased over the decade to 2013-14.''


Don’t listen to the rich: inequality is bad for everyone

''Our study of 21 OECD countries over more than a 100 years shows income inequality actually restricts people from earning more, educating themselves and becoming entrepreneurs. That flows on to businesses who in turn invest less in things like plant and equipment.

Inequality makes it harder for economies to benefit from innovation. However, if people have access to credit or the money to move up, it can offset this effect.

We measured the impact of this by looking at the number of patents for new inventions and then also looking at the Gini coefficient and the income share of the top 10%. The Gini coefficient is a measure of the distribution of income or wealth within a nation.
How inequality reduces innovation

From 1870 to 1977, inequality measured by the Gini coefficient fell by about 40%. During this time people actually got more innovative and productivity increased, incomes also increased.

But inequality has increased in recent decades and it’s having the opposite effect.''

 

[Canard DuJour]

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

Risk and Reward

Company boards, at least in principle, try to use compensation contracts to align executives' actions with company success. The idea is that CEO performance provides value to the organization. "Pay for performance" is the mantra most companies use when they try to explain their compensation plans.

..which is funny since there is negligible to negative correlation between CEO pay and performance.

Similarly in the wider economy, productivity growth was never faster than when CEO to median pay ratios were at their smallest.

Today's exorbitantly "rewarded" CEO is an expensive waste of money at best.

 

[Bomb#20]

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?

Source: National Bureau of Economic Research

Overall, it is not.

Overall, it is.

According to a 2013 Pew Research Center survey, a median of 80 percent of respondents in developed countries perceive income inequality to have worsened

100 people surveyed, top 4 answers on the board, survey says? Thank you for your input, Richard Dawson.

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.

I.e., a bunch of your religion's own activists said it, you believe it, that settles it. Have you considered the merits of applying critical thought to your own side's premises, instead of adopting an unquestioning attitude to their validity?

Similar figures are available from multiple sources

Did you even read what I wrote? The problem isn't their arithmetic; the problem is their empty-headed selection of which data to do arithmetic on, and their religious approach to interpreting what the numbers they get out of their calculations mean.

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

Excuse me? My claim is "deceptive" because you just now decided to change the subject?!? Get a grip. You made an implausible claim about income inequality. I contradicted you. Why the bejesus should I have wasted my time trying to track down data on wealth inequality when the claim you made was about income 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.”

Well, if you ever get around to explaining why income inequality is a large-scale problem and not just something you want to enrage people over, after we thrash that out we can move on to wealth inequality. Or if you'd rather, you can admit you were wrong about income inequality but claim you're right about wealth inequality and we can change the subject to wealth inequality now.

Be that as it may, I'm happy to defer to Mr. Lowe's expertise on the state of wealth inequality in Australia, but Australia wasn't really the focus of the claims you made that I challenged. You wrote "The largest contributor to increasing income inequality has been...". You didn't write "The largest contributor to Australia's increasing income inequality has been...".

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.

Why in god's name should we return to 1965 economic conditions?

(1987 dollars)

 

[Emily Lake]

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?

Well, if you'd read the article you would have seen that the suggestion was NOT to provide them with options, but to provide them with actual stock. That way they have a direct tie to company performance, as opposed to allowing them to cash in options when things are going well, and sit tight when things are going poorly.

 

[Emily Lake]

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).

Wow, a terrible mistake. The horror. What about the disparity of wealth distribution in our social and economic systems? Is that a problem?

I told you it was a quibble up front.

I also provided several commentaries on the topic itself... but you seem to be pretending to ignore them.

 

[Emily Lake]

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

Risk and Reward

Company boards, at least in principle, try to use compensation contracts to align executives' actions with company success. The idea is that CEO performance provides value to the organization. "Pay for performance" is the mantra most companies use when they try to explain their compensation plans.

..which is funny since there is negligible to negative correlation between CEO pay and performance.

I can't read the first link, it's behind a paywall. The second shows a correlation between negative performance and overconfidence of the CEO. It might also be worth pointing out, again, that they're only looking at S&P 1500 (which is better than S&P 500, admittedly), but is still only looking at a very, very small portion of CEOs at the very highest end of the compensation scale.

Similarly in the wider economy, productivity growth was never faster than when CEO to median pay ratios were at their smallest.

Today's exorbitantly "rewarded" CEO is an expensive waste of money at best.

Okay, but I think it's a specious correlation. Productivity growth and CEO compensation are probably both correlated with a different underlying cause... perhaps corporate consolidation and lack of competition, perhaps tax regulations, perhaps something altogether different. Realistically, if you reduce CEO compensation to be more reasonable, and spread that "excess" compensation among all the other employees... it turns out to be something like $2.75 per year difference in income for everyone else or something equally ridiculous. I can't recall exactly, it's been a long time since I did that calculation.

 

[Loren Pechtel]

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.

I was responding to a specific claim about having $1 million and paying no income tax.

 

[Loren Pechtel]

You're not addressing my point at all.

I didn't see it as being relevant. What is relevant is that we have a huge disparity in both wealth and income between those at the top and the rest of us. That is the point. That is the problem, both socially and economically.

It's not relevant what the numbers actually mean so long as they appear to support your position?

 

[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.

How far do you question the stats? That they are way out?

I'm saying we don't know if inequality is actually rising or not.

Tax policy has changed so as to make people structure things to have personal income rather than corporate income. We simply do not know how much of the increase is due to reporting rather than reality.

 

[Loren Pechtel]

Well, if you'd read the article you would have seen that the suggestion was NOT to provide them with options, but to provide them with actual stock. That way they have a direct tie to company performance, as opposed to allowing them to cash in options when things are going well, and sit tight when things are going poorly.

I'd go even farther:

Publicly traded corporations should have a salary + benefits cap of say $1 million/year.

Compensation beyond this is permitted but it must be paid in the form of stock. The stock received in any given year becomes available at the rate of $1 million (or whatever the cap is) per year. While you have earned stock that is not yet allowed to be traded you are not allowed to engage in any transaction where you would benefit from the fall of the stock price and if you do so outside your control any such profits are taxed at 100%. (Thus you aren't a criminal if you invest in a mutual fund that shorts your company.)

This makes the top people care about the long term prospects of the company rather than temporarily driving the share price as high as possible to redeem options.

 

[jonatha]

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?

Well, if you'd read the article you would have seen that the suggestion was NOT to provide them with options, but to provide them with actual stock. That way they have a direct tie to company performance, as opposed to allowing them to cash in options when things are going well, and sit tight when things are going poorly.

1. Options and stock move in tandem.

2. Replace "options" in my original post with "stock". Same question...

 

[DBT]

Well, if you ever get around to explaining why income inequality is a large-scale problem and not just something you want to enrage people over, after we thrash that out we can move on to wealth inequality. Or if you'd rather, you can admit you were wrong about income inequality but claim you're right about wealth inequality and we can change the subject to wealth inequality now.

As I pointed out, this income disparity is a part the larger problem of wealth distribution, namely, that the bulk of the worlds wealth is either owned or controlled by a small percentage of the worlds population.

Wealth accumulation at the top being the central problem, the excessive incomes of CEO's who fall into that bracket is a 'visible' symptom of this situation.

As there is ample evidence to show that wealth is indeed accumulating at the top, and that this is indeed a problem, both social and economical...what is your point?

Are you defending the situation of excessive wealth accumulation for a small percentage of the population?

Are you defending the high salaries and bonuses of some executives?


And yes, poverty rates have fallen in nations such as China, India, etc, but this does not change the fact that wages for ordinary workers in Australia have been stagnant for decades, going backwards in buying power, while management salaries have been increasing, so improvement for some, while others languish.

But that is not the full story.

''Australia’s union movement is in a period of soul-searching. After three decades of labour market “reforms”, the workforce has fractured and wage inequality has deepened.

Part-time and casual jobs have increased as a proportion of the economy, along with the number of people who say they want to work more hours. Household income is lower in real terms than it was in 2011.

Wages stagnation: a 30-year story

To understand what is going on with incomes in Australia, we have to look closely at what is going on in the labour market. John Buchanan, a professor and the chair of business analytics at Sydney University, has long warned about Australia’s rising income inequality.

He notes that wages are determined by market and institutional forces, and changes to Australia’s institutional wage-setting arrangements since the 1980s have negatively affected wages.

Buchanan says Australia’s architecture of industrial tribunals and awards – with its roots in the 1890s – reduced wage inequality in the 20th century but, after 30 years of “modernisation”, the industrial relations framework is now entrenching it.

“Within the political class there is low-level moral panic about low wages growth,” he wrote. “The irony is that those lamenting this situation are simply witnessing the ultimate outcomes of policies they have long advocated.”

The problem is, your selective objections tend to miss a lot of these factors.

 

[DBT]

How far do you question the stats? That they are way out?

I'm saying we don't know if inequality is actually rising or not.

Tax policy has changed so as to make people structure things to have personal income rather than corporate income. We simply do not know how much of the increase is due to reporting rather than reality.

Whether inequality is rising or not seems to be a moot point. The level is too high now. If conditions in places, China, India, etc, are improving, as it appears, it still does not address the problem, the rich in China, India, get very, very rich while workers eke out a marginal existence.

Wages for ordinary in western countries like Australia languish for decades while management salaries increase.

CEO pay trends in Australia are unjustifiable on any reasonable grounds
''The latest report from the Australian Council of Superannuation Investors released on Thursday (August 24, 2017) – CEO Pay in ASX200 Companies: 2016 – shows how unfair and unsustainable the income distribution is in Australia. While there has been moderation in the growth of CEO pay after the ‘greed is good’ binge leading up to the GFC, the managerial class in Australia has still enjoyed real growth in pay at a time when the average worker is enduring either flat to negative growth in pay. Further, overall economic growth in Australia is being driven by increased non-government indebtedness as real wages growth (what there is of it) lags well behind productivity growth. And, at the same time, the Federal Government is intent on pursuing an austerity policy stance. All these trends are similar to the dynamics we experienced in the lead-up to the GFC. They are unsustainable. A major shift in income distribution away from capital towards workers has to occur before a sustainable future is achieved. The indicators are that there is no pressure for that to occur.''

 

[bleubird]

https://www.cbsnews.com/news/harley-davidson-cut-jobs-repurchased-shares-after-tax-cut/
All American corporation?

 

[Canard DuJour]

..which is funny since there is negligible to negative correlation between CEO pay and performance.

I can't read the first link, it's behind a paywall.

It shows that compensation packages of FTSE 350 chief executives have risen 82% in 13 years, while return on money invested has been less than 1%.

The second shows a correlation between negative performance and overconfidence of the CEO.

It shows a negative correlation of performance with CEO pay, which the authors attribute to overconfidence.

It might also be worth pointing out, again, that they're only looking at S&P 1500 (which is better than S&P 500, admittedly), but is still only looking at a very, very small portion of CEOs at the very highest end of the compensation scale.

Why? The subject is exorbitant CEO pay. Talking about CEOs who aren't paid exorbitantly would be changing the subject.

Similarly in the wider economy, productivity growth was never faster than when CEO to median pay ratios were at their smallest.

Today's exorbitantly "rewarded" CEO is an expensive waste of money at best.

Okay, but I think it's a specious correlation. Productivity growth and CEO compensation are probably both correlated with a different underlying cause...

Certainly, and I doubt anyone's saying otherwise. The underlying cause is the disparate bargaining power and median wage stagnation that came with neoliberalism. If wages don't grow apace with productivity, aggregate demand retards growth while firms have less incentive to invest in subsequent increases in output per man-hour.

perhaps corporate consolidation and lack of competition, perhaps tax regulations, perhaps something altogether different. Realistically, if you reduce CEO compensation to be more reasonable, and spread that "excess" compensation among all the other employees... it turns out to be something like $2.75 per year difference in income for everyone else or something equally ridiculous. I can't recall exactly, it's been a long time since I did that calculation.

..which is a total red herring. The money supply isn't fixed, but grows with the economy, and its value is a function of the available quantity of goods and services. Exorbitant CEO pay is a symptom of the inequality which tends to retard growth. The proper comparison would be with the purchasing power of workers (i.e. the mass of consumers) had their wages kept pace with productivity.

 

[Emily Lake]

Why? The subject is exorbitant CEO pay. Talking about CEOs who aren't paid exorbitantly would be changing the subject.

I'm having difficulty viewing this as something other than cherry picking. Especially since you're taking the very highest paid CEOs and then broad-brushing the conclusion gleaned from an outlier sample and presenting it as if it's representative of the mean.Can you explain why you think it's appropriate in this case?

If wages don't grow apace with productivity

Why would you expect wages to grow at the same rate as productivity? We're becoming increasingly automated, with increasingly sophisticated machinery. There are many jobs that can now be done with fewer workers, or where lower-skilled workers can leverage computer programs and automation to do the work that previously required a skilled technician or someone with years of experience. Employers still invest a large amount of money in production... but that production isn't all being done by people. And the people who are still engaged in that production are neither skilled or limited in supply. There seems no reason to expect that wages would keep apace of productivity.