Why CEOs are paid too damn much

[ApostateAbe]

A letter written to Charles Murray from a CEO explains the theory of why CEOs are paid too much. It is the first good explanation I have seen for why executives are paid so much, even the bad ones.

"No board that isn't about to fire its CEO really wants to admit that their CEO is a less-than-average performer by paying him or her less than average. But if the lowest-paid CEO’s are always being brought up to the average, then the average increases every year. Then for the high performers to be paid well, their compensation needs to be increased, but that raises the average… and so on every year."
​

Murray closes on this thought:

"And yet there’s not the slightest chance that CEO compensation can be made a private matter."​

Though, presumably, that would be the perfect solution. If it is kept a secret how much executives are paid, then there is no runaway pay competition. So why not? Nobody except my boss gets to know how much money I make unless I brag about it, so why must the pay of executives be public information?

 

[barbos]

Yeah, good explanation.

 

[bilby]

So, hiding the problem will make it go away.

Or at least will make it possible to claim that it went away.

What could possibly go wrong

 

[barbos]

they don't suggest hiding the problem, they suggest hiding information about salaries as a solution of the problem.

 

[bilby]

they don't suggest hiding the problem, they suggest hiding information about salaries as a solution of the problem.

So hiding information about salaries will not hide the problem of excessive salaries?

How does that work?

 

[untermensche]

This doesn't explain anything.

Even the good CEO's are incredibly overpaid.

 

[barbos]

This doesn't explain anything.

It does explain CEO pay escalation. You can argue about solution but they described causes well.

Even the good CEO's are incredibly overpaid.

Who said they were not incredibly overpaid?

 

[RavenSky]

Raise the minimum wage and establish a maximum wage.

The same people who complain about government overreach wrt minimum wage can complain about the maximum wage, but the problem is solved. Moreover, those who complain that minimum wages cost the companies too much can't make that complaint about the maximum wages as that will save the companies money.

 

[TV and credit cards]

Raise the minimum wage and establish a maximum wage.

The same people who complain about government overreach wrt minimum wage can complain about the maximum wage, but the problem is solved. Moreover, those who complain that minimum wages cost the companies too much can't make that complaint about the maximum wages as that will save the companies money.

Works for me. They'll piss and moan about lack of incentive to excel to beat the competition but they'll get over it. In the end, highly paid people who are enamored with money will find other ways to maximize their perceived worth.

 

[dismal]

The part I don't get is why it's everyone's business what CEOs should be paid. It's a private transaction between the owners of the company and the CEO.

If you own a company and don't want to pay your CEO a lot feel free to go ahead and do that.

If you do not wish to buy the stock of a company because you feel the CEO makes too much feel free to go ahead and do that.

If you own shares of a company and don't like the CEO's raise feel free to sell your shares or vote your shares in favor of a new cheaper CEO.

Otherwise, this is really not your problem.

 

[ksen]

The part I don't get is why it's everyone's business what CEOs should be paid. It's a private transaction between the owners of the company and the CEO.

Corporations are creations of the government. Publically traded corporations use publically created and run exchanges.

Therefore it is other people's business and government is perfectly within its rights to require CEO pay packages to be public information.

Also disclosing executive pay is part of the audit process so you'd need FASB to change its disclosure requirements as well.

People voluntarily formed a public corporation subject to certain auditing/disclosure requirements which they knew full well about before making their decision. If they didn't want their pay to be public they didn't have to go public or go to work for a publically traded company.

 

[dismal]

The part I don't get is why it's everyone's business what CEOs should be paid. It's a private transaction between the owners of the company and the CEO.

Corporations are creations of the government.

Didn't bother to read anything after this complete non-sequitur.

"Marriage is a creation of the government therefore the government should tell everyone who they should marry".

 

[ksen]

Raise the minimum wage and establish a maximum wage.

The same people who complain about government overreach wrt minimum wage can complain about the maximum wage, but the problem is solved. Moreover, those who complain that minimum wages cost the companies too much can't make that complaint about the maximum wages as that will save the companies money.

Oh yes they can.

After all, anything paid out to people below the executive level is charity and they didn't do anything to deserve it. People on the low end are motivated by the stick of looming deprivation while executives are motivated by the carrot of more cash.

It's simple really when you realize that for some the bottom 99% are moochers and takers that would be rightfully punished by The Market if it weren't for evil government interference while the 1% are wiser and better that The Market righteously smiles upon.

pbuh

 

[ksen]

Corporations are creations of the government.

Didn't bother to read anything after this complete non-sequitur.

"Marriage is a creation of the government therefore the government should tell everyone who they should marry".

Marriage licenses are a creation of the government therefore it is within their rights to put restrictions and requirements upon those wanting a marriage license. They do that right now by telling you that you can only marry someone of the opposite gender. That's telling you who you should marry.

I'm not sure what you're finding so hard to understand about this.

But I am aware of why you'd want to ignore the part about being publically traded and FASB requirements.

 

[dismal]

Didn't bother to read anything after this complete non-sequitur.

"Marriage is a creation of the government therefore the government should tell everyone who they should marry".

Marriage licenses are a creation of the government therefore it is within their rights to put restrictions and requirements upon those wanting a marriage license. They do that right now by telling you that you can only marry someone of the opposite gender. That's telling you who you should marry.

I'm not sure what you're finding so hard to understand about this.

But I am aware of why you'd want to ignore the part about being publically traded and FASB requirements.

The government has guns, so it can do things it should not do.

See all your threads about police abuse.

It can tell people who they can legally marry, it should not.

 

[barbos]

Limit on maximum wage is impossible.

 

[ksen]

Marriage licenses are a creation of the government therefore it is within their rights to put restrictions and requirements upon those wanting a marriage license. They do that right now by telling you that you can only marry someone of the opposite gender. That's telling you who you should marry.

I'm not sure what you're finding so hard to understand about this.

But I am aware of why you'd want to ignore the part about being publically traded and FASB requirements.

The government has guns, so it can do things it should not do.

See all your threads about police abuse.

It can tell people who they can legally marry, it should not.

I agree with you that the government does stuff it can do that it shouldn't do all the time. So does private business. So does everybody.

I just disagree with you that executive compensation disclosure of publically traded companies is one of those things government can do but shouldn't.

 

[dismal]

The government has guns, so it can do things it should not do.

See all your threads about police abuse.

It can tell people who they can legally marry, it should not.

I agree with you that the government does stuff it can do that it shouldn't do all the time. So does private business. So does everybody.

I just disagree with you that executive compensation disclosure of publically traded companies is one of those things government can do but shouldn't.

Right now the government does force disclosure of executive compensation of public companies. It does not force disclosure of executive compensation in private companies.

I'm somewhat ambivalent about forced disclosure. But then I consider myself capable of not investing in companies that won't tell me what they pay executives without the government's help.

I work making investments in private companies. We manage this issue of knowing what executives make in the companies in which we invest just fine without the government's help.

 

[ksen]

I work making investments in private companies. We manage this issue of knowing what executives make in the companies in which we invest just fine without the government's help.

You, being a much larger investor, have much more clout in getting that kind of information out of a private company. And if public companies were able not to disclose executive you would still have much more power than a small investor to find out that information if you want it.

I have no problem with all investors or potential investors in publically traded having access to that information.

 

[laughing dog]

The part I don't get is why it's everyone's business what CEOs should be paid. It's a private transaction between the owners of the company and the CEO.

If you own a company and don't want to pay your CEO a lot feel free to go ahead and do that.

If you do not wish to buy the stock of a company because you feel the CEO makes too much feel free to go ahead and do that.

If you own shares of a company and don't like the CEO's raise feel free to sell your shares or vote your shares in favor of a new cheaper CEO.

Otherwise, this is really not your problem.

Coming from someone who complains about a business owner raising the minimum salaries to his employees over 3 years to $70,000, that is hilarious.