How much more should an CEO make than his employees?

[bryant69]

I've seen the figure that the current average CEO makes something like 255 times more than his employees. Like many people this strikes me as a little insane, particular when one considers the value a Kozlowski or a Lay brings to a company. Also particularly since the idea of a CEO taking personal risk is no longer really on the table (many if not most CEOS have golden parachutes laid in the moment they take the job.

On the other hand, a CEO or owner of a company should and often does invest more into his company than the average employer. So how much more do you think is just for a CEO. (Obviously this is an average, and we aren't factoring in how good the CEO is at what he does).

Anyway I'm curious how much you all think a CEO should make than his employees? (Oh and I"m not proposing any specific solution to deal with this situation--that's a question for another day.)

Bryant
Check it out --> http://politicalcomment.blogspot.com

[Pale_Rider]

1. CEOs, CFOs, COOs and CIOs that out-source ...

... should also be out-sourced.

[Tansy_Gold]

2. You might want to fix spelling in your header line

Employers should be employees, I think.

Just being a nit picker

[bryant69]

4. Well, that is kind of an important point

So thank you.

[onebigbadwulf]

3. 20 is a good number

Dont you think?

[greendog]

52. Yeah, no more than 20 times...

...the lowest paid employee.

[IrateCitizen]

5. Whatever allows them to look their employees in the eye...

... and be able to justify the compensation they receive. I doubt that many CEO's in the US would be able to do that today. But then again, workers are little more than a cost to be minimized, in their eyes. :shrug:

[Yupster]

68. Corporate Boards need to change

They are the people who are supposed to be protecting the stockholders from abuses like $ 55 million CEO salaries. Instead they are good ol' boy (and girl) networks where rich people help each other out and grant favors for future favors using other people's money.

The best example is Revlon which was near bankrupcy 7-9 years ago, and is still in trouble today. So what are their trustees doing to cut costs and protect the company's interests? Well Vernon Jordan's abusing his spot by getting his friend's bimbo a $ 90,000 job offer from the company even though she's never had any experience in anything. That's not what a Trustee is supposed to be doing, but I think it's more the rule than the exception to the rule.

It's up to stockholders to say no on their proxy statements to electing the same Trustees to multiple boards over and over again, especially if they're in politics, because there's no way a person who wants to run for office someday will say no to a CEO who will be needed to hold fundraisers for him some day.

[IrateCitizen]

73. Excellent point, Yupster!

You and I don't often agree on many economic issues, but this is one in which you are DEAD ON. Corruption and cronyism in the corporate boardrooms is the rule, not the exception -- no matter how the press wants to try and spin it otherwise.

Unfortunately, the "market" is what has gotten us to this point, so I wouldn't expect it to get us out of this mess. It seems that the only way this problem will be fixed is legislatively, by instituting things like putting workers' representatives on the boards or reps of small shareholders.

Any thoughts from your end on how to remedy this problem?

[Yupster]

77. It's stockholder neglect

that has gotten us to this point. Someone may own $ 50,000 of Colgate stock and yet they don't pay a bit of attention to what the company's doing.

Somehow we need stockholders' unions who will organize stockholders and keep them informed. Unfortunately the growth of the mutual fund industry separates stockholders from their companies even another step.

Perhaps a law saying you can only serve on one corporate board at a time would be a modest help. The point of getting small shareolder representatives on the boards is a good one, but how to do it without it turning into just another good old boy thing?

I am against workers controlling boards though, which I know is not what you are advocating. If the workers of Burger King had their say, they would sell the business, split the money, and go back to school. The interests of the workers and the company are not always the same.

I recognize this as a serious problem. I am a stockbroker BTW.

[IrateCitizen]

93. I'm not advocating workers controlling boards, Yupster...

I fail to see where you could infer that from my post. What I am advocating is allowing worker REPRESENTATION on corporate boards.

Since it is inevitably the labor of the workers that creates the profit for the companies, does that not seem in the least bit fair to include them in some way in the actual RUNNING of the company? Or am I drifting off into democratic socialism -- the democratization of the political AND economic aspects of society -- for your liking?

On second thought, I probably shouldn't use the "S"-word, since it's almost guaranteed to turn you off. ;-)

[Yupster]

99. Yo comprende

Here's from my above post

"I am against workers controlling boards though, which I know is not what you are advocating." ....

I know you aren't advocating workers controlling boards. That's why I put it in there to be clear.

It's fine to have workers' representatives in boardrooms, but the stockholders are the ones who own the company, and their decisions should be the ones that are actionable. The question is though how to make the stockholders express that opinion other than voting with their feet by buyng or selling the stock?

I think that's what we should be aiming for because the average Americans who own the stock would not agree to give a CEO $ 40 million a year which is an outrage.

[lcordero]

6. What value has Kozlowski or Lay ever brought to their

respective companies?
In both cases, all I have seen so far is looters and frauds lying in order to get the value of a stock to go up.

First of all, a CEO doesn't take any risks at all, their salary goes up regardless of any performance issues.

Their real value lies in putting over 10,000 workers out in the street and robbing investors and workers of their hard earned savings.

Yesterday's bank robber has been replaced by today's Board of Directors, CEOs, CFOs and COOs.

[bryant69]

10. That was my point

I mean there aer counter examples of CEOS who have brought value, who have turned their respective companies around---perhaps those CEOs are worth more--but in many cases it seems liek you pay a lot for a CEO and get nothing in return

[NashVegas]

7. Depends on the Company Size, Don't You Think?

A company that decides it's going to run lean ought to do just that.

OTOH, I do think that companies that are going to bring their CEO pay back down to 70s-80s levels needs to have a hefty expense account for entertainment, travel, clothing, etc., deal makers need to be seen as players.

[rman]

35. workers pay doesn't depend on company size,

why should a ceo's pay?

[GreenPartyVoter]

8. Check out what they say at

http://www.responsiblewealth.org/

[nhtfopo]

9. Whatever his/her company wants to pay them

This isn't for anyone but the company to decide.

[GreenPartyVoter]

12. But by company

do you mean employees or major shareholders?

Cause let's face it, John and Joan Q. worker aren't setting the wage rates for themselves or their bosses. And look at the result.

[SahaleArm]

23. Neither are shareholders n/t

[OneTwentyoNine]

13. Really? Even when that company is a public utility?

If anyone wants to take a little time look up David Wittig--Ex CEO of Westar energy and see how he raped and pillaged that company. That Repig FUCKER is looking at serious jail time.

But,all the debt and millions he blew on himself will come out of my pocket and everyone else in Kansas to pay it off.

David

[rogerashton]

11. As I recall the empirical evidence says that

above an 8:1 ratio, there is little incentive effect.

[On the Road]

16. Really, Hadn't Heard That

Do you have a link or source?

[Muddleoftheroad]

20. So if an entry-level clerk makes $25,000, the CEO only makes $200k?

And you think paying him more won't incentivize him?

Frankly, you will lucky to have most CEOs even take your call if that's all your firm offers the top boss.

[SahaleArm]

22. Depends on your company and options package.

Or at least something that holds the CEO accountable to shareholders.

[Muddleoftheroad]

30. Like I said

No CEO will work for a big company for that little amount of green. If they have to, they will simply go somewhere that they can earn what they are worth.

I don't see any moves afoot to limit A-Rod's salary. I guess baseball players aren't evil CEOs.

[KAZ]

41. What they are worth?

Well, the old boy network sits on each other's board and decides what "they are worth". "Hey, they're paying CEO Jack this at company X", then CEO Jack raises the same point on another board. Good gig if you can get it. Cheney gets a great gig because he's "worth" billions due to his connections. No prob, hey Mud?

[Muddleoftheroad]

43. It's imperfect, so is mandating salary as a function of the lowest earner

It is almost impossible to tangibly measure the work product of a CEO. Do you go by profit? What about a turn-around company? How do you account for attracting or retaining good employees? What about sudden competition or a gradual loss of market share due to changes at other firms?

[KAZ]

50. All valid points...

but I'm guessing the original poster was looking at a bigger picture. On average, what should the differential be? Here's a rather old link. http://www3.sympatico.ca/n.rieck/docs/ceo_pay.html

There's a graphical link out there, somewhere, that compares CEO compensation by country quite nicely, but I don't have it handy.

My real point is that the salaries have gotten out of control because of corporate board structures. They all sit around and give each other raises.

[Muddleoftheroad]

53. My real point

Is that big owners of stock -- like Calpers or other companies -- have to start voting out underperforming boards and CEOs. That is their right as stockholders and their obligation as well.

[IrateCitizen]

71. Strawman alert!

So if an entry-level clerk makes $25,000, the CEO only makes $200k?

That's not at all what the ratio is based upon. The ratio is based on AVERAGE EMPLOYEE PAY, not MINIMUM PAY.

A more realistic figure is an average employee salary of, say, $45,000 -- in which case the CEO's salary would be $360,000.

But, by no means is this a hard and fast rule. But the countries that seem to enjoy high workplace efficiency AND egalitarian standards of living -- namely, Japan and Western Europe -- all have ratios in the 25:1 - 40:1 range. Perhaps there's a lesson in all of that? :shrug:

[Murky Waters]

31. I don't believe that for a second

Average pay at the company I work for is probably $8.50 an hour or so. That would translate to $68 an hour for the CEO, or about $140,000/yr. salary. I know that sounds like a lot of dough, but in competitive terms it is not.

If the company I work for had to replace our CEO, I would expect that the board would spend as much as they needed to assure competent stewardship of the company. And in my opinion, competent stewardship of a 50 or 100+ million dollar company costs more than $140k a year.

[grannylib]

14. I voted 6-10; the real number on average is about 400 times the lowest

paid worker; in the '80s, it was about 45 times.

[IrateCitizen]

94. Wrong. It's 470 times the AVERAGE paid worker. (nt)

[comradebillyboy]

15. employees dont deserve to be paid

all good emanatets directly from the ceo and his inner circle, the workers are just window dressing

[Don Claybrook]

17. I’ve seen the “value” of a CEO up close…not real impressive

Back in the heyday of the dotcom boom, I was the 6th employee at a high speed networking company. The owner, the guy who started the company, was a great guy. He’d always come ask, “what do you need in order to do your job better?” And he meant it. He’d work long, hard hours like the rest of us. He’d fill in and go on installations if necessary.

Eventually, the company grew to a size of over 600 employees. VC financing was done by formula. It was pretty much dictated that if the company was to go public, we would need a CEO (and COO and CFO, CIO, etc) with the right “pedigree”. Meantime, the owner, the founder, had a net worth of about $200 million on paper. And he was still a regular guy. You could still walk to lunch with him, talk to him about your family, that sort of thing. Even I had options that, if I could’ve exercised them, would’ve made me very comfortable. That never came to pass, but that’s just another dot com bust story.

Anyway, we got a CEO with an Ivy League background. We got the rest of the positions filled. We got a nice new office space (actually 2 spaces) in highrises downtown. Being an IT guy, I happened to accidentally see a spreadsheet listing the CEO’s salary and his stock options. The numbers were insanely high. And the guy just didn’t do that much. Sure, he spent lots of time on the phone talking to potential customers and investors and whoever. But he didn’t build the place. Having had conversations with some of the early people, some of my co-workers, we all agreed we would’ve walked over hot coals for the original owner, because he would’ve done the same for us. The feeling about the new management was decidedly different. The company no longer resembled anything like a family. It looked much more like corporate America. And to an extent, I understand that this had to happen.

But in the end, the CEO was hired because of his pedigree. He was inserted into the slot and just took over from there. He didn’t build the place. He didn’t have to wear the many different hats we all wore in order to grow a company that rapidly. He didn’t have to design processes because they didn’t exist. He just walked in and took an obscene salary.

I’d say a CEO should make 5 to 10 times as much as the average employee.

[Vitruvius]

33. I've seen 4 heads of Fortune 100 companies up close, when they were being

shown thru my lab. None was particularly impressive; as far as I could see, their main skill was getting promoted. Two of them were at best barely brighter than George W. Bu$h.

And now you know why CEOs overwhelmingly support Bu$h. He's one of their own kind.

So -- ask yourself, how much more should George W. Bu$h be paid than the average American. IMHO Bu$h should be paid NOTHING -- because he's ruining the country. And 3 of those 4 execs lost market share for their companies, 4 out of 4 laid off employees en masse; and one of those companies (AT&T) was down to 1/20th of its' former stock price the last time I looked.

If CEOs were paid what they were worth, many would get nothing.

P.S: One of the 4 CEOs enjoyed the nickname "Norman Bates" thruout the company; a real personality kid.

[Muddleoftheroad]

56. Wow, you could tell all that on a tour?

You must be Kreskin.

CEOs have many skills and talents.

* Hiring top people;
* Making deals;
* Knowing markets;
* Finding creative ways to make projects happen -- financing, partnerships, etc.
* Bringing in money -- every CEO is a salesperson.

And a CEO nicknamed "Norman Bates" might either be bad or might have taken over an underperforming, failing company and be shedding the dead wood. Dead wood has a tendency to bad mouth the boss.

It's all in knowing the full story.

As for your thumbnail analysis of the CEO performance, most companies underperformed in the last few years. How did those three compare to others in their industry sector? Laying off employees is something firms do when they are trying to survive and continue surviving. And the company that "was down to 1/20th of its' former stock price" might have dropped even further under other leadership.

[Vitruvius]

66. If you didn't know about Dubya, and met him for half-an-hour,

you'd be able to size him up pretty well. The same for a CEO or anybody else.

And if Dubya had had one of his liquid lunches -- as one of these CEOs appeared to have done -- you'd pick that up immediately. Someone who cannot control his own appetites is unfit to control a company.

Also bear in mind the "observer bias"; everyone wants to believe that their company has good management, not some over-promoted incompetent in over his head who's slowly flushing the Company down the drain. We were all hoping for the best, we were all disappointed -- and scared -- by what we saw.

As for your question: "How did those three compare to others in their industry sector?": Those three were losing market share; the others were gaining market share.

And the ones gaining market share the fastest weren't even in the Fortune 500 -- yet. When the big guy can't compete with the little guy, there's something wrong with the big guy. Something wrong at the top.

Vitruvius

P.S: The people who were disappointed by these CEOs were hardly deadwood; a CEO does not make an extended visit to your lab unless your project is of substantial importance to the Company.

And what do you do when you find out your CEO is a dolt? You compare notes with others -- hoping for a more optimistic assessment, then you keep quiet, sell your stock, and very discreetly start looking for another job.

[Muddleoftheroad]

67. You might think so, you might also well be wrong

* is an extreme case. Most folks aren't that extreme.

Wow, one of the CEOs actually drank? Holy crud. They might be human? Or they might just have not really given a damn about the tour or what you might think.

Your response to the market share question is oversimplified. What was going on in those industries? Had there been new entrants? Were their companies in a cash crunch? Were there union problems? There are 1,000 or more reasons why a company might not be doing well. Depending on the tenure of the CEO, many may not be under his/her control.

Big companies often have problems competing with the little guy. Large, entrenched firms can turn on a dime like smaller firms can. That's why Microsoft buys so many small firms.

As for the last, I entirely agree. That is why a CEO is so incredibly important. They can attract OR repel top talent.

[Zomby Woof]

90. are you a CEO?

If not, you sure fancy yourself an expert on their skills and leadership abilities. You rationalize their worth at every turn. You apologize for their excesses at every turn. If you ARE a CEO, you sure are using company time wisely posting in here. I am sure the stockholders appreciate a hard-working go-getter like you!

Some are good, and some aren't, but the ratio of their income in general to that of the average employee in their company has gotten out of hand in the past 20 years. Let's just say that most CEO's now exceed their "value" to a company in terms of "attracting new business" and "hiring the best people" (when they are not laying off those people) more disproportionately than ever.

The core of your (and far too many others') philosophy that the accumulation of wealth gives one a "divine right" to as they please with the lives and livlihoods of others. Your endless rationalizations for CEO's makes me think you also equate wealth with character. "They work hard! They SHOULD make 100,000 times more than those peasants! They CHOOSE to be successful!" Yeah, and the rest of us choose to be "lazy" and "envious" too. :eyes: Oh! And we're waging "class warfare", and just don't have those unique talents endemic to salesmanship and networking!

I liked your term "union problems". I bet you wish they'd just outlaw them already! Greedy workers.

Yes, many people in top management DO make a company successful, and DO earn their high salaries. But some are just parasitic money-vampires who have rationalized their greed and Randian-objectivist world view to the point that their liabilities to the company have exceeded their assets. What "risk" is there when they can bail with a golden parachute? What risk is there when you can rip off millions and get away with it, Enron-style? But really, it just looks absurd to defend CEO's on every turn. Do you have a Ken Lay poster on your bedroom ceiling?

Please, no Horatio Alger-style 'bootstrap' arguments either.

The entire CEO/MBA culture is at the root of what is wrong with American business practices. The self-congratulatory world of circle-jerkin' suits cutting deals and a few lines of coke while ripping off both their employees and shareholders has no justification whatsoever.

None.

So if you ARE a CEO, please make better use of your company's time and assets, and get back to golf - I mean work. If you are NOT a CEO, why the hell are you so eager to apply the brown lipstick?

No one looks good in brown lipstick.

[IrateCitizen]

96. In my best "Michael Kelso" voice (from That 70's Show)...

BURN!

[Muddleoftheroad]

102. Not a CEO, but I have been an entrepreneur

So I understand the skills involved.

As for whether CEOs exceed their value, that really is up to the owners to determine. If they do feel that way, by all means, they should do something about it.

And, no, wealth has nothing at all to do with character -- either good or bad. But many people here know little of business and even less about what it takes to run a bodega, much less a Fortune 500 firm.

Your union problems comment is a classic of dininformation. All companies with unions periodically undergo problems. It is a natural power struggle.

Yes, obviously there are bad CEOs and bad middle management types and bad workers. There are bad people in all walks of life. Nothing new to that.

As for your final, juvenile comment, I would say it is in keeping with the rest of your work.

[Name removed]

105. Deleted message

Message removed by moderator. Click here to review the message board rules.

[IrateCitizen]

109. Do you honestly think you're discussing the same kinds of people?

When you're talking about entrepreneurs vs. the Ivy League MBA CEO, you're talking about VASTLY different groups of people.

The very idea that you try and lump them all together is ludicrous.

People who are entrepreneurs and build a company up do it by working closely with their employees. They do it by knowing all of the jobs that all of their employees do. They do it by hard work -- and to be quite honest, they deserve what they get. But they also are usually much better about "spreading the wealth" with their employees and recognizing their worth.

The Ivy League educated MBA, OTOH, is taught that labor is a cost to be minimized. He doesn't know the jobs that all of the people working under him do, nor does he care. He doesn't work closely with his employees either -- he's too busy with his own kind. In his eyes, anyone who is a "working stiff" is less than him, and therefore doesn't deserve his top consideration.

Of course, these ARE stereotypes. But having been around both kinds of people -- entrepreneurs and Ivy League MBA's, I can tell you with all honesty that they aren't far from the truth.

[Muddleoftheroad]

117. Yes, I am

I am discussing people. People are the same whether they get that Ivy League education or grow up on the streets.

And when you start stereotyping them you make big mistakes. Stereotype me and when I walk or drive through your neighborhood, I get pulled over by cops for DWB (driving while black), when in reality you could leave your wallet in the street and I'd pull over, pick it up and drive it over to your place so you could get it back.

As an entrepreneur, I have indeed dealt with lots of CEOs and some are just the same. They will treat you ethically and morally and be downright smart about it.

Others are sleazy.

But I have found few who meet descriptions in this thread about being stupid or lazy.

In some cases, labor IS a cost to be minimized, in others, it is a cost to be maximized. Those decisions are what bosses do.

The problem is not that some CEOs earn too much. The problem is that the stockholders don't exercise their ability to do something about it.

[denverbill]

18. I have no objection to good pay if they really are good.

What really boils me is asshole idiots like Joe Nacchio, former head of Qwest. He made $10 million/year, gave himself an ENORMOUS bonus for buying Baby Bell US West, which was possibly one of the worst decisions ever made by a CEO, and damned near bankrupted both companies.

If a CEO comes into a shitty situation he left, he deserves 10 times for trying. Beyond that, everything should be performance based, and performance should be measured by profitability, but also good stewardship (not shipping jobs overseas, etc).

[Yupster]

72. Performance based

is the idea behind stock options.

If a company is selling for $ 20 per share, give the CEO a million stock options at $ 40 per share. If the stock goes up to $ 60 per share the CEO makes $ 20 million. If the stock never gets above $ 40 per share, the options expire worthless.

Of course then everyone will yell when the guy makes his $ 20 million, or everyone will yell when the guy has a million of stock options even if they will expire worthless as most do.

Personally, I think the salaries of many are obscene, but I blame the stockholders, and the boards for not taking control of their company. Everytime I get my proxy votes, I vote against any political or former political figure for any corporate board, be they Democratic or Republican. I don't like trdaing favors with other people's money.

[On the Road]

19. Robert Townsend, CEO of Avis in the 60's,

felt that a CEO should make as much as his Division Managers. Which was about $35,000 back then. He resisted efforts to raise his pay to the level of other CEOs.

If you've never looked at Up the Organization, check it out. The man was a corporate revolutionary.

On delegation of authority:

"Many give lip service, but few delegate authority in important matters. And that means all they delegate is dog-work. A real leader does as much dog-work for his people as he can he can do it, or see a way to do it, ten times as fast. And he delegates as many important matters as he can because that creates a climate in which people grow."

On leadership:

"True leadership must be for the benefit of the followers, not the enrichment of the leaders. In combat, officers eat last. Most people in big today are administered, not led. They are treated as personnel, not people."

On identifying leaders:

"How do you spot a leader? They come in all ages, shapes, sizes, and conditions. Some are poor administrators, some are not overly bright. One clue: since most people per se are mediocre, the true leader can be recognized because somehow or another, his people consistently turn in superior performances."

On ego:

"Before you commit to a new effort, it’s worth asking yourself a couple of questions – are we really trying to do something worthwhile here, or are we just "

http://www.referenceplace.com/Up_the_Organization_0449233685.html

[Silverhair]

21. How much more should a movie star make than the cameraman?

How about the amounts sports stars make? Was Jordan really worth all the money he was paid?

[Eric J in MN]

25. The way a movie star or athlete's pay is determined is different.

A movie star or athlete is paid as much as the movie studio or sports team wants to pay him.

The pay of CEOs is based on a corrupt system in which they sit on each others' Compensation Committees, and vote each other outrageous pay.

[Muddleoftheroad]

36. I don't know, the baseball union seems like it's got that beat

They won't even let a player cut his salary if he wants to.

Face it, ALL salaries are what the market will bear. If you have a skill or everybody thinks you do, then you are valuable. If those skills are easily replaced by untrained workers then you won't earn much.

[knight_of_the_star]

24. I voted for the flogging!

There are WAY too many that deserve it!

[Nikia]

26. I suppose it depends on the size of the company

I voted 6-10 times, although I think for a very large company, a CEO could be paid more, especially if headquartered in a high cost of living city. I suppose that benefits could come into play in that instant. Some companies have a housing allowance as a benefit, for example.
In smaller organizations, it is bad for morale to have an overpaid leader, especially if that leader is perceived to do very little.
CEOs usually can be fired easily though and should be if they don't deliver. A CEO and other high ranking employees are suppose to save the company several times their salaries. The ones that actually cost their company more money than they save are often fired. Strangely, they are often easily hired at another company for an equally impression salary. I don't know how that works.

[Northwind]

27. It should be illegal

For a CEO to make more than 5 times the pay of his lowest paid employee.

Period.

[Muddleoftheroad]

37. LOL, what industry do YOU work in

I guess I should have expected one over-the-top comment.

Most businesses have clerks, receptionists, etc. who all make in the $20,000s or a bit more depending. So you are basically saying that no CEO should earn over $100,000 or so.

Frankly, LOTS of people in businesses earn more than that.

You need to get out more.

[rbnyc]

40. That sounds reasonable to me.

I live pretty damn well on 33K. Why do you need to earn more that 100K? People who spend beyond their means even when they're earning 300-500K is what I call over-the-top.

[Muddleoftheroad]

45. What CEO will work for that?

Certainly not top or even medium talent. Why? Because they can earn a lot more on the open market.

I don't know where you live, but in and around D.C., $33,000 ain't much. Starter homes are $400,000+. Not too many CEOs want a starter home.

[rbnyc]

49. I live in New York City.

I once made it work for a year on 15K, but that wasn't easy.

I also think that things should cost less, especially housing. I know there's no CEO who would work for 100K, except maybe in the non-profit sector where people have principles.

Anyway, I’m talking about the culture that I would work toward if I had a choice. I do believe this poll was asking for our personal opinion about the way things should be.

EDIT: typo

[Muddleoftheroad]

54. Yes, it is asking how things should be

But we still have to contend with reality. In reality, we compete in a worldwide marketplace. If we underpay our top people, other nations will be quite happy to take them off our hands.

[rbnyc]

61. Right.

We have a lot to work toward, and we have to move on many fronts. You and I probably have very different skills to add to the same struggle.

[IrateCitizen]

70. And THERE is where your argument falls apart like wet cardboard

You seem to think that there's this international market willing to pay CEO's insanely large salaries, regardless of their performance. The reality is that this is strictly an American phenomenon.

CEO pay in Japan is still only about 25:1 when compared with the average employee salary. I believe that Germany is in the neighborhood of 40:1. The UK is just about the highest among other industrialized nations, and they are still well below a 100:1 ratio.

What is the ratio in the United States? Rapidly approaching 500:1. That's not 500 times the lowest salary in the company. That's 500 times the average salary.

Such an outrageous salary gap is not indicative of the "market value" of CEO's. It's indicative of a system gone seriously awry. These CEO's make this kind of money not because they are inherently valuable -- many run their companies into the ground while hemmoraging jobs at the same time, just look at the airlines. They get this kind of pay because directors' boards are an exclusive club, with CEO's of companies serving on the boards of others. They get that lavish pay because they are simply taking care of their own -- at the expense of the workers.

"Muddle" indeed....

[Muddleoftheroad]

76. "Insanely large"

There is certainly a market that will pay them more than $100,000 a year, which some here are advocating. And if American salaries simply went away, some nations would indeed fill the void -- whether in Western Europe or in the third world, eager to compete with the West.

Besides, ALL of the numbers you quote are vastly more than most in this thread support. So, instead of disproving my point, you are making it. Especially since you fail to take into account the massive number of major world corporations that are headquartered in the U.S.

As for whether some firms are getting market value, clearly not all CEOs are worth what they are paid. Neither are all entertainers, politicians and baseball players.

[rbnyc]

91. About that 100K

That was a figure you came up with based on the lowest paid employees making around 20K. I didn't make a point about that particular number before because it didn't seem that important, but let me just clear up that when I say it sounds reasonable that a CEO make no more than 5 times more than the person who cleans the toilets, I'm not saying that the person who cleans the toilets should have a 20K salary cap. These hard numbers in this thread are kind of silly.

I think the main point that almost all of us can agree upon is the lowest paid people need to be paid more, and some of the hightest paid people really aught to be earning less.

We need to be talking about how to get there. (And I do see you have some good ideas about that.) But picking on these numbers isn't really helpful, IMO.

[Muddleoftheroad]

103. The problem is how much more? How much less?

How much is a person who cleans toilets worth to a company?

Honestly? Not much. It is a job anyone with even a borderline intellect can master.

Is it fun or easy work? No, but it is honest. Unfortunately, it's also easily replaced.

The skills at the other end are not so easily replaced and to claim that such a person should only make five times what a cleaner makes is ludicrous.

[IrateCitizen]

92. You're the one saying "the market" would move in...

... and maintain the "insanely high" salaries. In that sense, I am not making your point. In fact, I am countering it by saying that, subject to the "market forces" exhibited by the rest of the world, US CEO salaries would come down tenfold or more -- rather than continue to spiral out of sight, as you seem to be contending.

What other people in this thread are advocating is their business. But I still say that my advocation of something in the neighborhood of 25-40:1 is much closer to them than your justification of a continued 500:1.

Frankly, I don't think that there is a CEO alive who is worth 500 times more than the average company salary. Nobody brings that much to their company -- NOBODY. It's more of a sign of the Horatio Alger myth than anything else -- that people who make obscenely large amounts of money do so simply because they DESERVE to, and any attempt to criticize it is somehow violating the "natural order".

[rbnyc]

97. I'm so glad you're here.

What you're saying makes a lot of sense to me. Thanks.

[Muddleoftheroad]

104. Some here, right above here in fact

Are advocating salaries only five times the minimum in the firm.

So clearly, not everyone is on the same page here. Once you are in the territory of 100 times the minimum salary, it is no longer a function of multiples and more a function of the board ensuring that it is getting value for its buck.

Now, let me ask you, why should a CEO earn so much less than a baseball player? Or Britany Spears?

[IrateCitizen]

107. On the flip side...

Why should a teacher earn 1/500th of what a CEO makes? Or a nurse? After all, they both contribute valuable skills to the social economy -- which, in my estimates, is at least as important as the fiscal/monetary economy.

I never said that anyone here is on the same page. What I did say is that I was advocating something much closer to a realistic gap in salaries than you were. Your tactic has been more or less apologism for CEO's making 500 times more than the average salary in their companies -- even as they shed jobs like a snake sheds its skin.

Personally, I don't think that baseball players or Britney Spears should make such outrageous salaries. I never said they should. But thanks for interjecting the strawman into the debate, it is duly noted.

[Muddleoftheroad]

115. OK, so how do you limit their salaries as well?

Sorry, I don't like the idea of a maximum wage which many clearly support. If the people who are your boss determine you are worth a certain pay level, it is up to them to determine whether they are getting their money's worth.

[Northwind]

69. If none of them were allowed to earn more than that

They would not have much choice, would they?

[Muddleoftheroad]

82. You can't make laws for the whole world

So they will always have options.

[stopthegop]

108. So...

when you set the rules, will you also take the risks?

[IrateCitizen]

110. The modern-day corporate CEO has no risks...

Someone starting up a business certainly takes risks. But the modern-day CEO invariably has a golden parachute. Whether the company succeeds or fails, he gets paid.

That is a HUGE problem today. It's endemic throughout the entire corporate world. Enron, WorldCom, Global Crossing, Tyco, etc. -- these weren't a few "bad apples". They were an indication of business practices that have become all too familiar throughout Corporate America.

[stopthegop]

111. CEO can also be sole owner...

and even if he's not...your salary is between you and whoever pays you..none of my business...

[Touchdown]

51. It's been rumored that JFK was assasinated...

in part because of his rumored intention of implimenting a "Maximum wage".

However, as with all things JFK, the truth is stil elusive.

If a CEO builds his own company from scratch...with none but his OWN money, invents, designs, tests, manufactures, sells, distrubutes, advertises, and handles all complaints...ALL BY HIMSELF, without help from anybody else...then not only is he entitled to the ridiculous pay he gets now, but Ayn Rand is an absolute goddess!

CEOs are a figurehead of a company. Nothing more.

[FDRrocks]

59. The JFK thing kinda ties into the FDR assassination plot..

Well outlines by Gen. Smedley Butler in "War is a Racket".

edit: Message: Oppose the corporate state, and work towards democracy, you die.

[Muddleoftheroad]

84. Clearly, you don't know what CEOs do

As for why JFK was killed, it has been rumored that he was killed for just about every reason under the sun. This one is new to me and I will place it in the pile it deserves along with aliens and the dwarf hitmen on the grassy knoll.

CEOs are vastly more than figureheads. Every decision they make -- from hiring and firing top executives, to choosing product lines -- can make or break a company.

Figurehead, sure...

[Yupster]

100. I've got the JFK thing figured out

I've looked for a person who had a motive to kill JFK, an opportunity, and most importantly, a person who others would gladly lie to protect for generations.

I've now figured it out.

Joe DiMaggio killed JFK.

[FDRrocks]

57. Why do they need that much?

To buy off politicians? Or a house that 30 other people could live in. I bet many CEO's are christian. Hah, funny shit.

[Ksec]

28. Theyre overrated.

Or maybe we can be revolutionary like Jack Welch and fire the workers to get a spike in profits. Duh.

[NewJeffCT]

29. Big pay is ok sometimes...

I don't mind a CEO that gets a big check for good results, but I think if a company has a bad performance, they should not first be laying off the rank & file workers that are just doing their jobs... the CEO should be the one that is laid off first, if he or she doesn't resign first out of shame for the bad results.

And, no bonuses for laying off workers and/or cutting benefits to improve the bottom line...

[NoMoreRedInk]

32. I'm still kind of fond of supply and demand setting the price, but....

I think a CEO should have to personally pay a truly independent CPA firm to audit his/her salary and benefits and perks and disclose them to the company's shareholders.

If the CEO creates enough value for the shareholders to justify (in the shareholders minds; they are the only ones that count because its their money) the salary, then so be it.

[ComerPerro]

34. I don't really like setting a specific range

But consider company performance, instead. Say the company is doing well, all employees are paid a wage that they can actually survive on and all of them have good benifits. Then, hell, pay the CEO whatever the hell he thinks he deserves.
But if the company is losing money, laying off people by the thousands, sometimes entire shifts, then why the fuck is the CEO still making 200 times the wage of his average employee?

[liberalcapitalist]

38. as much as a FAIR market determines

Wage restrictions should be opposed by all.

[sandnsea]

39. In 1945, a note from my Dad

He and my brother both do auto body work. Shops pay on commission. In 1945, my dad got 60%, the shop got 40%. Today, my brother gets 40%, the shop gets 60%. That's how much things have changed, even between small business owner and laborer.

[Muddleoftheroad]

48. Times have also changed

Overhead costs are much higher. Computers and computer upgrades are essential. Marketing is much more sophisticated. Legal expenses and insurance costs have skyrocketed.

[sandnsea]

63. Income used to be closer

There's always been new technologies that businesses had to purchase in order to compete. This is the same argument large corporations use to justify their lower wages. While CEO's and upper management make more and more. Small business owners expect to be upper class today in a way they didn't when labor and business were more on an equal footing.

And save the stories of labor earning more than the boss. I've heard them. But I've never seen the boss living in a tiny apartment using food stamps to get by.

[Muddleoftheroad]

65. In very few instances does labor earn more per person

Forgetting the silliness of the entertainment field -- sports, movies, TV -- only top sales people typically earn more than the bosses.

But why is that wrong? The bosses are the ones who ensure that everything fits together.

[sandnsea]

81. Income used to be closer

I never said bosses shouldn't make more, only that laborer and employer income used to be closer. Somebody quoted Lincoln in here, we used to value labor as the real creator of capital. Since Reagan's 80's, we suddenly have the idea that the boss is king again. An idea that we thought was eliminated with Henry Ford.

[FDRrocks]

42. To me, it depends on how much work he does.

To me, the idea of a desk jockey beaurocrat making even half as much as someone who puts thier back into the work is dispicable.

[Muddleoftheroad]

46. Perhaps you need to learn what they really do

They make decisions that can either earn or lose a company millions of dollars. Not too many workers have the training or knowledge for that kind of work.

Hell, some of it is just having the right contacts. But contacts mean business.

Remember that line about walking in another man's shoes.

[FDRrocks]

47. That wasn't a blanket statement.

At least that is not how I meant it.

[Muddleoftheroad]

55. Sorry, seemed like it

Thanks for the clarification.

[dobak]

44. Wesley Clark's take on this issue:

I cannot find the link, but I recall hearing Clark saying that CEO pay should somewhat resemble the ratio used in US Army.

Clark made only $60,000 as a 4 star General in 1999.

http://www.boston.com/news/politics/president/clark/articles/2003/12/14/clarks_income_soared_after_army_career/

[interceptor]

60. Nope, quite a bit more

He made around $120,000 a year just in base pay.

http://www.dfas.mil/money/milpay/priorpay/1999.pdf

Add to that a housing allowance, which for an O-10 could range from a thousand to several thousand a month dependent on area, tax free. He also got a Basic Allowance for Subsistence (about $100 a month at the time), plus free medical, dental, whatever. Then you figure in additional tax breaks (zero tax except for SSI and Medicare) when he was in the Balkans area and getting Combat Zone Tax Exclusion, etc.

That's still not a bad pay scale for most moderate companies' CEO's.

[FDRrocks]

58. Abe Lincoln (first repub President) quote.

"Labor is prior to, and independent of, capital; that, in fact, capital is the fruit of labor, and could never have existed if labor had not first existed, - that labor can exist without capital, but that capital could never have existed without labor. Hence... labor is the superior - greatly superior - of capital."

[slaveplanet]

62. It's 400+ times according to Moyers

and the rapid distancing is in direct correlation to the SEC rules of corporate disclosure that were changed around 1996 when Clinton's veto was overridden.Check the Now website

[0rganism]

64. We're all good little capitalists, right? So, whatever the market allows

If a CEO can expect to make $1 million a year or more, whether the corporation's median employees earn $40000 (1/25th) or $100000 (1/10th) or $10000 (1/100th), that's for the CEO market to decide. Naturally, actual salary is going to depend on many things -- size of company, stock price and options package, and so on. Any corporate board will want the best CEO it can afford, who will deign to take the job.

The day corporations start outsourcing their top officers like they farm out the peonships, will be a day of great rolling mirth for me. Consider, if a CEO gets 400 times what his average employees earn, sending his job overseas to someone who'll do it for 5% of an American CEO is the same as outsourcing 380 jobs! What a savings!

[1songbird]

74. No more than 10 times the average workers pay. n/t

[Buns_of_Fire]

75. I'd been wrestling with this question

for a while, since I'm currently setting up a corporation. I finally decided on a formula -- which has been written in the bylaws -- that absolutely forbids the annualized pay rate of any employee from being more than fifteen times the rate of the lowest-paid employee (since I'm setting it up, I can do these things :-) ). There are no options allowed to be underwritten or awarded by the company or the BoD, and any potential cuts in salary are mandated to be performed -- across the board -- from the top to the bottom.

The likes of Jack Welch and Wall Street wouldn't like it, of course, but one of the first precepts of this company is that it doesn't give a flying f**k what Jack Welch and Wall Street thinks.

[Muddleoftheroad]

78. Good theory, but

I hope your firm doesn't rely on high-end salespeople.

[Yupster]

80. Exactly first thing I thought of Muddle

You better not have commissin salespeople, which is what I am. It's a killer when they jump to a competitor because they'll take your customers with them.

[Lydia Leftcoast]

83. On the other hand

executives can also lose customers for themselves by changing the rules in midstream.

One of my brothers is a salesman for a wholesaler, and his bosses have recently made his life much harder by changing the payment terms in order to make a few dollars more in interest off each customer. Not surprisingly, the customers, who have set up their accounting systems to handle usual business practices, are not pleased and are threatening to go to other suppliers.

Now the "problem" of high-end sales people can be solved by taking the average compensation, not the lowest, as the basis of executive pay.

[Yupster]

86. I'm like your brother

I am in the process of switching companes right now after 13 years and moving to a competitor. It will cost my old company greatly, but it's because they keep changing the rules to my detriment as a slaesperson dealing with customers.

[Buns_of_Fire]

89. No, no high-end-salespeople

Admittedly, my model probably wouldn't work with a staff highly-dependent on commission-based salaries. FWIW, my model is highly-dependent on dividend and unit-oriented profit sharing -- similar (but not identical) to the Mondragon and sweatX concepts. Since the company is highly service- and retail-oriented, and no heavy-duty manufacturing (with the concomitant heavy-duty sales) is required, I'll happily leave that segment to the super-performers who thrive in such environments.

Time will tell if my model is workable in the real world. Either way, I doubt that Bill Gates or George Soros will be lining up at my door anytime soon. If nothing else, I know my limits. ;-)

[Yupster]

112. Soros runs a hedge fund

He'll find a company trying your idea, sell it short, and then hope it goes out of business so he make millions off of other people's misery.

[Lydia Leftcoast]

79. Incentives for CEOs

I spent 3 years working as a temp in every conceivable type of business in the Twin Cities, and CEOs are vastly overrated. Most of the real work is done by their administrative assistants, who gather the data, even analyze it sometimes, write the letters, keep the records, set the schedules, and write the reports. I found one situation where the administrative assistant was essentially handling all property acquisitions, because the boss was too "busy" (or more likely, having seen that guy in action, too dense) to deal with the complexities.

There may be exceptions, but from the perspective of a visiting corporate drone, all the CEOs seemed to do was schmooze with other bigwigs. If they made decisions, it was on the basis of paperwork that others had spent weeks or months producing.

Any one of them would have been helpless without an army of assistants.

The market for CEOs is artificially inflated. If all CEOs were making $200,000 a year, they would all be content with that. Instead, we have these silly status wars where units of $1 million become points in a game rather than real money. A few years ago, Disney hit a rough spot, and Michael Eisner "graciously" offered to accept only a one million dollar bonus instead of ten million. My God, the man probably already has enough money to buy several Third World countries, and he gets a $1 million bonus when the company is laying people off?

Here's an international perspective. When I first went to Japan, 26 years ago, it was one of the most economically egalitarian countries on earth. The only homeless people you saw were obvious late-stage alcoholics. The crime rate was so low that it was barely noticeable.

Under U.S. pressure and a temporary overvaluation of their currency, Japan began adopting American economic models, such as outsourcing to cheap labor countries and hiring MBA executives fresh out of U.S. business schools instead of generalists who had paid their dues and proven their worth by working in various departments in the company. Foreign CEOs came in to "turn around" ailing companies.

What have approximately 15 years of this wrought? Greater economic inequality, reflected in huge numbers of homeless middle-aged people, young people who despair of ever finding more than McJobs, and a rising crime rate.

Today's major U.S. corporations are run exclusively for the shareholders and the executives, not for the public or the welfare of the community at large. Yes, I know that business school textbooks teach that the only purpose of a corporation is to enrich the shareholders, but following that principle to its logical conclusion leads to monstrous organizations that will hurt anybody and anything in pursuit of the Great God Money for a privileged few.

[Muddleoftheroad]

85. No offense

But temps seldom see the inner workings of a company. They see what a company seems like, not the way it really is. Why? Because they are not in on the important meetings. They see how the CEO handles top clients or top sales calls. They don't see the CEO massaging the bank or the major stockholders. They don't see him or her drawing major talent to the organization or keeping top talent in the fold.

In fact, few people do because the major actions happen behind closed doors or out on the golf course.

A top CEO can make or break a company. So can a bottom one.

As for the army of assistants, of course they need them. Every leader does because you can't be everywhere at every second of the day.

You concept of human nature is unique. All the baseball players earn six figure salaries. Are they content?

No? Why are you surprised?

You are right that U.S. corporations are run for the shareholders. After all, they do own the company. Employees who don't like this can always go work elsewhere or start their own firm.

[Lydia Leftcoast]

87. What CEOs do

"But temps seldom see the inner workings of a company. They see what a company seems like, not the way it really is. Why? Because they are not in on the important meetings. They see how the CEO handles top clients or top sales calls. They don't see the CEO massaging the bank or the major stockholders. They don't see him or her drawing major talent to the organization or keeping top talent in the fold."

Otherwise known as "schmoozing with people just like themselves."

[Muddleoftheroad]

88. A lot more than schmoozing

But people skills are essential. That alone eliminates many workers.

[rbnyc]

95. There's a HUGE culture gap between us.

And I seriously have to admit my prejudice against “corporate types” when I read your posts and acknowledge that that prejudice taints the way I understand you. I’m both too quick to want to shoot you down, and too quick to want to accept what you say to compensate for my bias. I really don’t have enough cultural understanding to be confident in my judgment of things corporate.

However, when you say, if employees don’t like it, they can find another job or start their own firm, I am pretty confident that that is a destructive attitude.

We need people to be security guards and receptionists and dishwashers and porters. Why isn’t it in our interest to pay dignified wages to these people? Why would we want to support an environment where these jobs can only go to people who have no options if they don’t like it. And why do we want to contribute to a culture that is making that pool of people with few choices wider and wider?

BTW: I do development work and direct service for non-profits and work directly with board members, trustees, and directors.

[Muddleoftheroad]

106. Very honest of you

We all have prejudices and biases based on our own perspective and experiences.

Let me ask you, "What is a dignified wage?" To me, a dignified wage is what you and your employer agree to. If you don't like it, then don't agree to it. Either quit or strike or something.

The reason many people earn so little is that it takes little skill or experience to replace them.

[rbnyc]

116. Replaceable People.

See, this is why I prefer the non-profit to the for-profit environment. Thinking of people as replaceable is just an alien concept to us.

Whether the lower paying jobs we’re talking about are difficult or not, it is very important that someone is there to do them. I think there’re probably some advantages to creating a wok environment that someone wants to be in as well. I also think that in the long run, it’s probably bad for society to create a class of replaceable people.

Sure, workers have some responsibility to stand up for their own rights, but they have many things working against them and I don’t see why it’s wrong for people who are better off to care.

As for dignified wages, no one with a full time job should earn less than 3 times the average cost for housing in the area.

[kodi]

98. that is a private issue, not one the government needs to get into

once the government dicatates how much a person can earn (and i am not referring either to minimum wges or to after taxe income here) the government has moved into dicating the way companies spend their money on employees.

i dont see anything wrong with a ceo making as much as the company wants to give the ceo.

however, as either an employee, or stockholder, i would be mighty pissed if i was told, "sorry buckeroo, no raise or dividend for you" if the ceo was making $10 Million.

if the goverment wants to intrude in the market like that, i want to restrict the salaries of sports athletes and rock stars.

[ctex]

101. Speaking as a CEO, about million times as much.

Unfortunately, I never been able to achieve that. I can't fault my board of directors -- they normally do all I ask of them no matter how stupid my request. The problem boils down to simple mathematics -- I have to hire a second employee so I will no longer be the lowest paid at my company.

Seriously, some academic research I read years ago suggested that 10-20 times as much total compensation for the COO/CEO was sufficient to get really good performance out of top management in large firms.

[arendt]

113. The stock option scam - how its a no lose proposition

Each year, the board votes the CEO a "bonus" if
company performance improves by some percentage,
for example 5%.

Suppose in year X, the CEO decides to dump a lot
of bad investments, and take charges. That year,
the company does really badly.

But, in year X+1, with all the bad news written
off, the company usually takes a big jump. It is
year X+1 when the CEO gets his options and cashes
them.

The whole thing is a crooked scam. He doesn't get
hurt for doing badly, and he gets to benefit from
recovering from his own bad job.

What a racket! And these kind of paper entreprenuers
(god I hate how MISUSED that word is - anyone opens
a hamburger stand, he is an entre....) are lionized
while real risk-takers get screwed.



arendt

[Cleita]

114. Having worked for a couple of CEO's in the capacity of

secretary/assistant, it's not an all consuming job. It's really a matter of the CEO motivating those under them to get the work done and keep the company humming along. He needs a keen intelligence and knowledge of his company and the products they sell. So this does count for something but definitely not what these guys are getting today in renumeration.

Back in the 1960's, higher executive office management positions weren't coveted because of huge salaries, but for the contacts and prestige the job brought to them. Most of them made money from investments because they were able to set up a network of contacts, especially access to venture capital, that enabled them to get rich outside of the company.