Would a maximum wage ratio work?

[Elixir]

Secondly, many states already have a "wealth tax" on real estate to fund local schools.

I like that one Harry. It keeps the likes of Donald Trump the hell out of your State.

 

[Sajara]

Automation in many forms has reduced the need for skilled labor that used to provide living wages.

The fact a CEO makes a lot more than the lowest worker really does not have an effect on overall wages. It mostly looks bad. Some may be overpaid. What you do not see is the level of responsibility and time demand of a CEO. Lee Aokoka saved Chrysler People at that level eat, drink, and breath work 24/7 with no letup.

The other side is the expectation of continuous growth in wages and earning power. The economy does not need a lot of labor as it once did to produce necessities. The economy is based on consumption of unnecessary goods. In the 60s a middle class house might be 1000ft^2. Much more is expected today.

Automation should create higher waged jobs as you need people to maintain, program, and build the robotics. If you are smart, you won't replace a loyal worker with a machine...you'll find another job for them to do.

As for your comment on the CEO's, yes...they work alot, but so do my operations staff (and so do I). 60 hour weeks are the normal. I've done 90, but choose not to because it isn't healthy or sustainable. It isn't for a CEO either, which is why they don't do well after 5 years and jump ship.

Your point on continuous growth is noted and I would agree. The issue is that we've had fairly continuous growth (really good in the companies I've ever worked in), and yet my pay never increased with the cost of living unless I moved to a new company (getting head-hunted is a good feeling).

 

[Testy Calibrate]

Automation in many forms has reduced the need for skilled labor that used to provide living wages.

The fact a CEO makes a lot more than the lowest worker really does not have an effect on overall wages. It mostly looks bad. Some may be overpaid. What you do not see is the level of responsibility and time demand of a CEO. Lee Aokoka saved Chrysler People at that level eat, drink, and breath work 24/7 with no letup.

The other side is the expectation of continuous growth in wages and earning power. The economy does not need a lot of labor as it once did to produce necessities. The economy is based on consumption of unnecessary goods. In the 60s a middle class house might be 1000ft^2. Much more is expected today.

Automation should create higher waged jobs as you need people to maintain, program, and build the robotics. If you are smart, you won't replace a loyal worker with a machine...you'll find another job for them to do.

As for your comment on the CEO's, yes...they work alot, but so do my operations staff (and so do I). 60 hour weeks are the normal. I've done 90, but choose not to because it isn't healthy or sustainable. It isn't for a CEO either, which is why they don't do well after 5 years and jump ship.

Your point on continuous growth is noted and I would agree. The issue is that we've had fairly continuous growth (really good in the companies I've ever worked in), and yet my pay never increased with the cost of living unless I moved to a new company (getting head-hunted is a good feeling).

I didn't write that post.

 

[Testy Calibrate]

I started a company with a couple partners a couple years ago. It started well. However, we got tired of working 90 hours a week and found a CEO. He started well. But then he made a few terrible decisions. Drove several key employees to leave. Pissed off a major customer. Company dipped dramatically. We fired him, and took over again. Back to working major hours a week again. The trade war is hurting us. The cost of raw materials has risen dramatically (thanks Trump). But it has not risen for our foreign competitors. So we really can't raise our prices too much without losing market share.

Anyway, we are seeking a CEO. We'll pay top dollar for a great one. It will include great pay and substantial equity. We've been looking for a couple months. It's not easy to find the right CEO. We pay the highest wages and benefits in our space. Why should we be limited to how much we can offer the right person?? First off, as the majority shareholder now, why would I pay a CEO more than what I need to unless it was due to great need? High level CEOs who can perform are not easy to find...

Harry, hear me out here for a second...why do you need a top paid CEO? Sounds like you might be better off hiring about 8 people instead and break up all the different functions of what you and your partners are doing so that you aren't working 90 hours a week.

There is a difference between high level CEOs and someone who can perform. Most CEOs I've met are not able to perform and the ones who can are typically very humble and realize their value comes directly from their employees (who actually do most of the work).

As for why you shouldn't offer whatever you want to offer to get the best of the best, you should, as long as you continue to pay your workers within a range that makes sense. If your workers find out you just hired a CEO for 10 million when they make $20,000...how do you think that would sit with them? Do you think morale would raise or lower?

Because the qualities of successful leadership are extremely uncommon. We have worked very hard to make systems which allow leadership level decisions to be distributed according to a bunch of criteria but there are probably ten times a year where one person just needs to sit down and perform as an informed genius for a straight 30 hrs on top of their regular workload. Most people, I would argue even most ceo's, simply can't do it. It takes a very unusual person.

 

[Testy Calibrate]

I started a company with a couple partners a couple years ago. It started well. However, we got tired of working 90 hours a week and found a CEO. He started well. But then he made a few terrible decisions. Drove several key employees to leave. Pissed off a major customer. Company dipped dramatically. We fired him, and took over again. Back to working major hours a week again. The trade war is hurting us. The cost of raw materials has risen dramatically (thanks Trump). But it has not risen for our foreign competitors. So we really can't raise our prices too much without losing market share.

Anyway, we are seeking a CEO. We'll pay top dollar for a great one. It will include great pay and substantial equity. We've been looking for a couple months. It's not easy to find the right CEO. We pay the highest wages and benefits in our space. Why should we be limited to how much we can offer the right person?? First off, as the majority shareholder now, why would I pay a CEO more than what I need to unless it was due to great need? High level CEOs who can perform are not easy to find...

This has been our experience too. Incentives matter. That's one reason why a massively progressive wealth tax would need to start at an absurdly high number. Say, $100m. At that point, incentives in wages/compensation are not involved. If you need more than that, our society has failed.

I do favor a progressive income tax. But I hate wealth taxes. Wealth is an arbitrary value that changes every day often based on opinions (home values, and etc.). Even wealth values in stock change dramatically every day. If Trump says something wacky and the market crashes 5% - wealth changes dramatically. Secondly, wealth doesn't equal cash. Volatility would increase substantially if people were required to liquidate each quarter to make tax payments. I favor a progressive tax on income as it is realized for most federal taxes. Secondly, many states already have a "wealth tax" on real estate to fund local schools.

And that wealth tax falls on seniors on fixed incomes as well as young urban professionals. I'm not sure if I was clear about this, but my point was that when you accrue some ridiculously over the top with no possible justification for needing more amount of money, I set it at $100m but it could easy be a quarter of that, you are no longer being rewarded for your incentive, you are being rewarded for your status. The point isn't even to raise money. It's to minimize power imbalance. We could burn the money and society would still be better off.

 

[ZiprHead]

Funny, where I worked, the executive parking lot where I worked was almost always empty by noon on Fridays, definitely empty by five every other day. The weekly board/management meetings were held at the local exclusive social club (membership paid for by the company) even though there are numerous very nice conference rooms adjacent to cafeterias that have some actually pretty good quality food. (I know this because I helped accounts payable on check days weekly stuffing envelopes.)

It's nice to hear about small business people working hard to get their business growing but that's just not the way it works for the much larger businesses that many people work for.

 

[Sajara]

Did I mess up the tag BWE? Sorry!!!

 

[Sajara]

I started a company with a couple partners a couple years ago. It started well. However, we got tired of working 90 hours a week and found a CEO. He started well. But then he made a few terrible decisions. Drove several key employees to leave. Pissed off a major customer. Company dipped dramatically. We fired him, and took over again. Back to working major hours a week again. The trade war is hurting us. The cost of raw materials has risen dramatically (thanks Trump). But it has not risen for our foreign competitors. So we really can't raise our prices too much without losing market share.

Anyway, we are seeking a CEO. We'll pay top dollar for a great one. It will include great pay and substantial equity. We've been looking for a couple months. It's not easy to find the right CEO. We pay the highest wages and benefits in our space. Why should we be limited to how much we can offer the right person?? First off, as the majority shareholder now, why would I pay a CEO more than what I need to unless it was due to great need? High level CEOs who can perform are not easy to find...

Harry, hear me out here for a second...why do you need a top paid CEO? Sounds like you might be better off hiring about 8 people instead and break up all the different functions of what you and your partners are doing so that you aren't working 90 hours a week.

There is a difference between high level CEOs and someone who can perform. Most CEOs I've met are not able to perform and the ones who can are typically very humble and realize their value comes directly from their employees (who actually do most of the work).

As for why you shouldn't offer whatever you want to offer to get the best of the best, you should, as long as you continue to pay your workers within a range that makes sense. If your workers find out you just hired a CEO for 10 million when they make $20,000...how do you think that would sit with them? Do you think morale would raise or lower?

Because the qualities of successful leadership are extremely uncommon. We have worked very hard to make systems which allow leadership level decisions to be distributed according to a bunch of criteria but there are probably ten times a year where one person just needs to sit down and perform as an informed genius for a straight 30 hrs on top of their regular workload. Most people, I would argue even most ceo's, simply can't do it. It takes a very unusual person.

Again, if we are talking about 30 minutes once a month...we're not talking about a lot of work here. You aren't looking for a CEO, you're looking for someone who you can delegate your tasks to in order to clear up 30 minutes once a month....but hey, that's just my train of thought. No one will know your business as well as you do.

 

[Canard DuJour]

The fact a CEO makes a lot more than the lowest worker really does not have an effect on overall wages.

It probably does.

 

[Canard DuJour]

Harry, hear me out here for a second...why do you need a top paid CEO? Sounds like you might be better off hiring about 8 people instead and break up all the different functions of what you and your partners are doing so that you aren't working 90 hours a week.

There is a difference between high level CEOs and someone who can perform. Most CEOs I've met are not able to perform and the ones who can are typically very humble and realize their value comes directly from their employees (who actually do most of the work).

As for why you shouldn't offer whatever you want to offer to get the best of the best, you should, as long as you continue to pay your workers within a range that makes sense. If your workers find out you just hired a CEO for 10 million when they make $20,000...how do you think that would sit with them? Do you think morale would raise or lower?

Because the qualities of successful leadership are extremely uncommon. We have worked very hard to make systems which allow leadership level decisions to be distributed according to a bunch of criteria but there are probably ten times a year where one person just needs to sit down and perform as an informed genius for a straight 30 hrs on top of their regular workload. Most people, I would argue even most ceo's, simply can't do it. It takes a very unusual person.

But even if that's true, paying them more doesn't cause more of them to exist. And the evidence suggests that they were no less willing or able back when they "earned" far smaller multiples of median wages.

 

[Harry Bosch]

I started a company with a couple partners a couple years ago. It started well. However, we got tired of working 90 hours a week and found a CEO. He started well. But then he made a few terrible decisions. Drove several key employees to leave. Pissed off a major customer. Company dipped dramatically. We fired him, and took over again. Back to working major hours a week again. The trade war is hurting us. The cost of raw materials has risen dramatically (thanks Trump). But it has not risen for our foreign competitors. So we really can't raise our prices too much without losing market share.

Anyway, we are seeking a CEO. We'll pay top dollar for a great one. It will include great pay and substantial equity. We've been looking for a couple months. It's not easy to find the right CEO. We pay the highest wages and benefits in our space. Why should we be limited to how much we can offer the right person?? First off, as the majority shareholder now, why would I pay a CEO more than what I need to unless it was due to great need? High level CEOs who can perform are not easy to find...

Harry, hear me out here for a second...why do you need a top paid CEO? Sounds like you might be better off hiring about 8 people instead and break up all the different functions of what you and your partners are doing so that you aren't working 90 hours a week.

There is a difference between high level CEOs and someone who can perform. Most CEOs I've met are not able to perform and the ones who can are typically very humble and realize their value comes directly from their employees (who actually do most of the work).

As for why you shouldn't offer whatever you want to offer to get the best of the best, you should, as long as you continue to pay your workers within a range that makes sense. If your workers find out you just hired a CEO for 10 million when they make $20,000...how do you think that would sit with them? Do you think morale would raise or lower?

A CEO's primary job is to make all final corporate decisions, manage the overall operations and resources of a company, calm the nerves of the owners and partners, motivate and hire the key personnel and managers that make the company profitable. All those jobs can't really be delegated.

 

[Testy Calibrate]

Harry, hear me out here for a second...why do you need a top paid CEO? Sounds like you might be better off hiring about 8 people instead and break up all the different functions of what you and your partners are doing so that you aren't working 90 hours a week.

There is a difference between high level CEOs and someone who can perform. Most CEOs I've met are not able to perform and the ones who can are typically very humble and realize their value comes directly from their employees (who actually do most of the work).

As for why you shouldn't offer whatever you want to offer to get the best of the best, you should, as long as you continue to pay your workers within a range that makes sense. If your workers find out you just hired a CEO for 10 million when they make $20,000...how do you think that would sit with them? Do you think morale would raise or lower?

Because the qualities of successful leadership are extremely uncommon. We have worked very hard to make systems which allow leadership level decisions to be distributed according to a bunch of criteria but there are probably ten times a year where one person just needs to sit down and perform as an informed genius for a straight 30 hrs on top of their regular workload. Most people, I would argue even most ceo's, simply can't do it. It takes a very unusual person.

But even if that's true, paying them more doesn't cause more of them to exist. And the evidence suggests that they were no less willing or able back when they "earned" far smaller multiples of median wages.

Competition for qualified leadership is pretty high so compensation does need to be enough to make it worth coming and worth staying. That said, I do think that a legislative fix would be a good idea as long as it preserves incentive. That is kind of my point regarding the wealth tax. After a certain point, we've got a broken system rather than increased incentive to perform well within society.

 

[Testy Calibrate]

What kind of boggles my mind is that leadership is less an innate skill and more an issue of training. If I sat on the board of a big company, I'd be focused on training internal assets.

 

[Sajara]

What kind of boggles my mind is that leadership is less an innate skill and more an issue of training. If I sat on the board of a big company, I'd be focused on training internal assets.

I struggle with making my CEO understand this every single day...

 

[Sajara]

A CEO's primary job is to make all final corporate decisions, manage the overall operations and resources of a company, calm the nerves of the owners and partners, motivate and hire the key personnel and managers that make the company profitable. All those jobs can't really be delegated.

Final corporate decisions - I give you that one, but only when there are competing priorities (2 hours a day if done well/right).
Manage overall operations - Delegated to a Director of Operations
Manage resources of a company - Delegated to Director of Operations, Director of Finances, and Director of HR (depending on what resources you are talking about).
Calm nerves & motivate - Primary function of any leader, but does not have to rely on just CEO. Can be delegated (see above).
Higher key personnel - Director of HR. CEO can be in on final interview (see 2 hours a day if done well/right). From there you rely on the people you've hired to do their jobs and don't micro-manage.

Looks to me like you still need people to delegate to, not an overly expensive CEO.

 

[Testy Calibrate]

A CEO's primary job is to make all final corporate decisions, manage the overall operations and resources of a company, calm the nerves of the owners and partners, motivate and hire the key personnel and managers that make the company profitable. All those jobs can't really be delegated.

Final corporate decisions - I give you that one, but only when there are competing priorities (2 hours a day if done well/right).
Manage overall operations - Delegated to a Director of Operations
Manage resources of a company - Delegated to Director of Operations, Director of Finances, and Director of HR (depending on what resources you are talking about).
Calm nerves & motivate - Primary function of any leader, but does not have to rely on just CEO. Can be delegated (see above).
Higher key personnel - Director of HR. CEO can be in on final interview (see 2 hours a day if done well/right). From there you rely on the people you've hired to do their jobs and don't micro-manage.

Looks to me like you still need people to delegate to, not an overly expensive CEO.

It's actually a difficult job which requires a lot more than a few hours a day. The key there, though, is the "overly expensive" part. Competition raises the stakes to the point where I can see a legislative fix being necessary.

 

[Harry Bosch]

A CEO's primary job is to make all final corporate decisions, manage the overall operations and resources of a company, calm the nerves of the owners and partners, motivate and hire the key personnel and managers that make the company profitable. All those jobs can't really be delegated.

Final corporate decisions - I give you that one, but only when there are competing priorities (2 hours a day if done well/right).
Manage overall operations - Delegated to a Director of Operations
Manage resources of a company - Delegated to Director of Operations, Director of Finances, and Director of HR (depending on what resources you are talking about).
Calm nerves & motivate - Primary function of any leader, but does not have to rely on just CEO. Can be delegated (see above).
Higher key personnel - Director of HR. CEO can be in on final interview (see 2 hours a day if done well/right). From there you rely on the people you've hired to do their jobs and don't micro-manage.

Looks to me like you still need people to delegate to, not an overly expensive CEO.

Holy cow! There aren't many companies who can hire a full or parttime DOO, COO, CFO and HR manager! The vast majority of US companies combine all those positions into one.

 

[Worldtraveller]

A CEO's primary job is to make all final corporate decisions, manage the overall operations and resources of a company, calm the nerves of the owners and partners, motivate and hire the key personnel and managers that make the company profitable. All those jobs can't really be delegated.

Final corporate decisions - I give you that one, but only when there are competing priorities (2 hours a day if done well/right).
Manage overall operations - Delegated to a Director of Operations
Manage resources of a company - Delegated to Director of Operations, Director of Finances, and Director of HR (depending on what resources you are talking about).
Calm nerves & motivate - Primary function of any leader, but does not have to rely on just CEO. Can be delegated (see above).
Higher key personnel - Director of HR. CEO can be in on final interview (see 2 hours a day if done well/right). From there you rely on the people you've hired to do their jobs and don't micro-manage.

Looks to me like you still need people to delegate to, not an overly expensive CEO.

Holy cow! There aren't many companies who can hire a full or parttime DOO, COO, CFO and HR manager! The vast majority of US companies combine all those positions into one.

Vast majority? I think you're conflating two completely different worlds here. In the world where the CEO is making 500x the lowest paid employee, which is what we're talking about, those companies have all that, and entire departments dedicated to each of those roles.

In my company, I was pretty much: VP of Engineering (my title), head of HR, Director of Operations, and in charge of new business development, but we were a really small engineering firm. When I worked for a small company (<1000 employees), that company had all of the roles you describe separated out into departments, each with its own director or VP.

So while the vast majority of companies (i.e. small businesses) might have all those things combined, those companies aren't what we're talking about here.

 

[Sajara]

Holy cow! There aren't many companies who can hire a full or parttime DOO, COO, CFO and HR manager! The vast majority of US companies combine all those positions into one.

Vast majority? I think you're conflating two completely different worlds here. In the world where the CEO is making 500x the lowest paid employee, which is what we're talking about, those companies have all that, and entire departments dedicated to each of those roles.

In my company, I was pretty much: VP of Engineering (my title), head of HR, Director of Operations, and in charge of new business development, but we were a really small engineering firm. When I worked for a small company (<1000 employees), that company had all of the roles you describe separated out into departments, each with its own director or VP.

So while the vast majority of companies (i.e. small businesses) might have all those things combined, those companies aren't what we're talking about here.

If we're talking about a smaller company here, are you really looking to bring someone in who is making 2 million a year for a CEO - to keep with the 100x limit...which I was only offering as an easy example. It might have to be closer to 200x to make sense.

What is a 'ratio' that would make sense for your company? As world traveler mentioned, the bigger issue is not the smaller companies making even 10 million in a year, but those making 100+ million that still pay their employees minimum wage only to pay their CEO 10 million. I could (and do regularly) argue that this inequality leads to other issues within the company (high turnover and poor employee morale as an example).

 

[Worldtraveller]

If we're talking about a smaller company here, are you really looking to bring someone in who is making 2 million a year for a CEO - to keep with the 100x limit...which I was only offering as an easy example. It might have to be closer to 200x to make sense.

What is a 'ratio' that would make sense for your company? As world traveler mentioned, the bigger issue is not the smaller companies making even 10 million in a year, but those making 100+ million that still pay their employees minimum wage only to pay their CEO 10 million. I could (and do regularly) argue that this inequality leads to other issues within the company (high turnover and poor employee morale as an example).

The effects on the company are minuscule compared to the effect on society at large. There are way too many to link to, but if you google Robert Reich, he has dozens of informative, well researched (aka left leaning. ) videos on the effects of income inequality.