Why do American CEOs get paid so much?

Lafayette · Aug 21, 2018

From here: Why do American CEOs get paid so much?

Excerpt:

A new report from the Economic Policy Institute calls attention to the hardy perennial of how much America’s corporate titans make: bosses of the top 350 firms made an average of $18.9m in 2017. That’s a ratio of 312-1 over the median worker in their industries. Big bucks to be sure. And a big change since 1965, when the ratio was just 20-1. But what does it mean? And if there’s a problem, what is it, exactly?

What it means, as the EPI economists carefully document, is that the top US corporate chiefs are paid overwhelmingly with stock options, and their income fluctuates with the market. About 80% of the pay packet is in stocks, and the rise of 17% in 2017 after two flat years surely suggests that the top CEOs (not unreasonably) sensed the market peaked last year. So they cashed in. On the other 20% of the pay packets, no gains occurred.

The US numbers have shock value. But bear in mind that they reflect not only the way companies are run, but also changes over decades in the structure of the US economy and tax law, specifically the rise of market valuations in technology and finance at the expense of the major industrial corporations, and a corresponding decline in unions, which held down the ratios in the sectors the industrial firms dominated a half century back. Plus, there is the radical decline in top marginal tax rates on income and capital gains, beginning in 1978, which gave executives strong reasons to restructure their pay away from inside-the-corporation perks (the penthouses and country clubs of yore) and toward cash and capital assets. The reliance of tech firms on venture capital and bubble psychology, rather than cash flow, deepened this trend.

That "beginning upper-income tax reduction" was first JFK/LBJ and then Reckless Ronnie's rule both of which actually devastated upper income taxation, as seen here:

What makes anyone think it is fair that ONLY the top-echelon of businesses merit the humongous amount of Wealth derived from stock-options. They did not achieve the results that merited such rewards all alone.

Upper income taxation must be revised and drastically upwards to reduce the Income Disparity that is the worst of any developed country in the world ...

Hawkeye10 · Aug 21, 2018

ANSWER: America is a very corrupt place.

We used to be better.

Kal'Stang · Aug 21, 2018

Lafayette said:
From here: Why do American CEOs get paid so much?

Excerpt:

That "beginning upper-income tax reduction" was first JFK/LBJ and then Reckless Ronnie's rule both of which actually devastated upper income taxation, as seen here:

What makes anyone think it is fair that ONLY the top-echelon of businesses merit the humongous amount of Wealth derived from stock-options. They did not achieve the results that merited such rewards all alone.

Upper income taxation must be revised and drastically upwards to reduce the Income Disparity that is the worst of any developed country in the world ...

Life isn't fair. Get over it.

Nap · Aug 21, 2018

The same reason CEOs around the world makes so much. Combine today's technological advancements with a global economy and you have companies fighting over the top talent that will bring them more success. When you select the top 350 CEOs, you are also talking about the top 1%, the top 1% of any profession makes drastically more than the average person of their position or that of a lower position.

The 312-1 ratio comparing the CEO to the worker would be like comparing Nick Saban salary to the waterboy. The waterboy is replaceable, there are few that can duplicate (if any) the success of a Nick Saban at Alabama hence the reason he gets paid millions of dollars.

Edit: Also, the average CEO salary is $750k which is at a 17-1 ratio to the average worker. So the entire point of the article is misrepresenting the stats to fuel a narrative.

holbritter · Aug 21, 2018

Lafayette said:
From here: Why do American CEOs get paid so much?

Excerpt:

That "beginning upper-income tax reduction" was first JFK/LBJ and then Reckless Ronnie's rule both of which actually devastated upper income taxation, as seen here:

What makes anyone think it is fair that ONLY the top-echelon of businesses merit the humongous amount of Wealth derived from stock-options. They did not achieve the results that merited such rewards all alone.

Upper income taxation must be revised and drastically upwards to reduce the Income Disparity that is the worst of any developed country in the world ...

Good question. Some of the salaries and perks are obscene.

Lafayette · Aug 22, 2018

Kal'Stang said:
Life isn't fair. Get over it.

Neither is sheer idiocy.

Get a brain ...

ludin · Aug 22, 2018

Lafayette said:
What makes anyone think it is fair that ONLY the top-echelon of businesses merit the humongous amount of Wealth derived from stock-options.
Upper income taxation must be revised and drastically upwards to reduce the Income Disparity that is the worst of any developed country in the world ...

They have the ability to run major corporations?
not everyone has the skill to be a CEO.

most companies have a board of directors that work out CEO contracts.
Most people are mentored into positions.

some people graduate from big name schools and spend a lot of time in upper management before attempting the CEO route.
again i go back to not everyone has the skill to do it and if the company chooses to offer them those packages then that is what they offer.

at the same time they expect results from the CEO and profits returned to the company.

Lafayette · Aug 22, 2018

ludin said:
They have the ability to run major corporations? not everyone has the skill to be a CEO.
.

Look, you are simply repeating what exists in a market-economy. Anybody can get to the top and become a "CEO". Staying in that job for a significantly long period of time is, however, a very different matter.

And I am saying that what exists isn't good enough, because the return on the time/work involved is unfair to those who participate. Upper-management is taking market-value and returning more for itself than for the people under them who actually do the hard-work of servicing that market!

I have worked at the top echelons of companies and know well how they function. Most often, it is a matter of luck that a company succeeds. What is most needed is a booming economy in which people really want to spend money. (Ie., the Demand side.)

But markets change and businesses change with them. (I started a career in Data Processing with IBM a long time ago. Where is IBM today in computing? In history books thanks to the Internet!)

Companies simply meet Consumer Demand by means of Product/Service Supply. There is no business-miracle involved that is not based upon that basic formula. Iow, Bezos had a good idea that made him a multi-billionaire at a key-point in time that also brought about the Internet and the ability to indirectly connect Supply with Demand more efficiently. Without the Internet Bezos would still be peddling books out of a shop in his garage!

Meaning that products were brought to customers rather than customers being brought physically to places selling products. Which changed fundamentally the Supply/Demand equation.

In fact, the Internet is just an advanced method of Catalog Shopping that is replacing physical stores ...

RetiredUSN · Aug 22, 2018

Lafayette said:
Look, you are simply repeating what exists in a market-economy. Anybody can get to the top and become a "CEO". Staying in that job for a significantly long period of time is, however, a very different matter.

And I am saying that what exists isn't good enough, because the return on the time/work involved is unfair to those who participate. Upper-management is taking market-value and returning more for itself than for the people under them who actually do the hard-work of servicing that market!

I have worked at the top echelons of companies and know well how they function. Most often, it is a matter of luck that a company succeeds. What is most needed is a booming economy in which people really want to spend money. (Ie., the Demand side.)

But markets change and businesses change with them. (I started a career in Data Processing with IBM a long time ago. Where is IBM today in computing? In history books thanks to the Internet!)

Companies simply meet Consumer Demand by means of Product/Service Supply. There is no business-miracle involved that is not based upon that basic formula. Iow, Bezos had a good idea that made him a multi-billionaire at a key-point in time that also brought about the Internet and the ability to indirectly connect Supply with Demand more efficiently. Without the Internet Bezos would still be peddling books out of a shop in his garage!

Meaning that products were brought to customers rather than customers being brought physically to places selling products. Which changed fundamentally the Supply/Demand equation.

In fact, the Internet is just an advanced method of Catalog Shopping that is replacing physical stores ...

How much money should a CEO earn per year in Lafayette's world?

ludin · Aug 22, 2018

Lafayette said:
Look, you are simply repeating what exists in a market-economy. Anybody can get to the top and become a "CEO". Staying in that job for a significantly long period of time is, however, a very different matter.

No they can't because unless you have executive experience they won't even look at you. So no not anyone can get to the top and become a CEO.

And I am saying that what exists isn't good enough, because the return on the time/work involved is unfair to those who participate. Upper-management is taking market-value and returning more for itself than for the people under them who actually do the hard-work of servicing that market!

Your opinion of what is fair or not good enough is irrelevant. Since there are very few people that are CEO's the ones that can be are able to leverage their salaries better.

I have worked at the top echelons of companies and know well how they function. Most often, it is a matter of luck that a company succeeds. What is most needed is a booming economy in which people really want to spend money. (Ie., the Demand side.)

This tells me you have never worked at the top echelons of companies.

But markets change and businesses change with them. (I started a career in Data Processing with IBM a long time ago. Where is IBM today in computing? In history books thanks to the Internet!)

IBM is still one of the top computer companies in america. They have a pretty healthy economy in servers our company uses exclusive IBM servers for everything we do.
again you have proven you don't know what you are talking about.

Companies simply meet Consumer Demand by means of Product/Service Supply. There is no business-miracle involved that is not based upon that basic formula. Iow, Bezos had a good idea that made him a multi-billionaire at a key-point in time that also brought about the Internet and the ability to indirectly connect Supply with Demand more efficiently. Without the Internet Bezos would still be peddling books out of a shop in his garage!

Yet he isn't. He took an idea came to market with it and is one of the top companies in america. He has grown that business to one of the largest consumer shopping stores online.
not everyone can do that and many that have tried have failed to do so.

Meaning that products were brought to customers rather than customers being brought physically to places selling products. Which changed fundamentally the Supply/Demand equation.
In fact, the Internet is just an advanced method of Catalog Shopping that is replacing physical stores ...

which as usual has nothing to do with your claim.

ludin · Aug 22, 2018

RetiredUSN said:
How much money should a CEO earn per year in Lafayette's world?

not more than his mega buck whatever that is. something he has yet to define.
it is right up there with companies should pay a living wage.

well define living wage.

ttwtt78640 · Aug 22, 2018

RetiredUSN said:
How much money should a CEO earn per year in Lafayette's world?

That is a very good question which will likely never be answered. The idea seems to be to that the government should take ever more of the income of those that earn "too much" in order to share it with those that earn "too Little". Obviously, the setting of a maximum wage would either reduce total income tax revenue or cause tax rates to rise on those now making less than "too much".

Rickeroo · Aug 22, 2018

I work as a network manager, handling 12 buildings and about 7000 users. I'm worth only 3 teenage burger flippers.

Hawkeye10 · Aug 22, 2018

Rickeroo said:
I work as a network manager, handling 12 buildings and about 7000 users. I'm worth only 3 teenage burger flippers.

In a $15 min wage zone one hopes....

Rickeroo · Aug 22, 2018

Hawkeye10 said:
In a $15 min wage zone one hopes....

I based it on California's minimum of $11 an hour, though I am about 40 miles outside Boston. People don't make that much when you measure against CA burger flippers. Then again, $11 goes a lot further where I am than in CA. It's relative.

Lafayette · Aug 22, 2018

ludin said:
No they can't because unless you have executive experience they won't even look at you. So no not anyone can get to the top and become a CEO.

Yeah, right. They all walk on water.

Moving right along ...

Lafayette · Aug 22, 2018

RetiredUSN said:
How much money should a CEO earn per year in Lafayette's world?

A lot less "net" than they do today, and that will happen when Upper-income Taxation is put back up to the 92% level where it was before JFK foolishly brought it down.

Also, with highly restricted tax write-offs and other "freebies" that the government has provided over the years. And Inheritance Taxes that are confiscatory on all sums above 10 megabucks.

Then, and only, then, along with a National Healthcare System for all along with free post-secondary education, the US will have smartened up to a point where it is a fair and decent place to live.

But not till then ...

Lafayette · Aug 22, 2018

Rickeroo said:
I based it on California's minimum of $11 an hour, though I am about 40 miles outside Boston. People don't make that much when you measure against CA burger flippers. Then again, $11 goes a lot further where I am than in CA. It's relative.

Any market-economy is sufficiently variable over time to change circumstances virtually overnight, as it did when the Great Recession occurred.

And anyone who thinks that Great Recession One cannot lead to Great Recession Two over the next 10 years is economically blind ...

ludin · Aug 22, 2018

Lafayette said:
Yeah, right. They all walk on water.

Moving right along ...

as usual you can't address the argument.
this is a debate board remember you should try it.
instead when you can no longer support your argument
you just throw out platitidues as if they mean anything.

also you can either quote me fully and address everything or you can continue your dishonest posting.
which know which one you will do. YOu do it in every thread your post in.

Sorry you could not be a CEO. in fact 70% or more of the population couldn't be CEO's.
not everyone is able to.

NO one mentioned walking on water but that is your excuse for not being able to defend your own argument.

ludin · Aug 22, 2018

Lafayette said:
A lot less "net" than they do today, and that will happen when Upper-income Taxation is put back up to the 92% level where it was before JFK foolishly brought it down.

Also, with highly restricted tax write-offs and other "freebies" that the government has provided over the years. And Inheritance Taxes that are confiscatory on all sums above 10 megabucks.

Then, and only, then, along with a National Healthcare System for all along with free post-secondary education, the US will have smartened up to a point where it is a fair and decent place to live.

But not till then ...

he asked you a specific question.

How much do you think a CEO should make?
give details instead of ambiguous answers.

myth of the 90% tax bracket.
https://mises.org/library/good-ol-days-when-tax-rates-were-90-percent

Lafayette · Aug 22, 2018

ttwtt78640 said:
Obviously, the setting of a maximum wage would either reduce total income tax revenue or cause tax rates to rise on those now making less than "too much".

A great many countries have far higher taxation than the US, and yet perfectly comfortable and fair economies with decent lifestyles (and higher lifespans*).

They are mostly in Europe, btw ...

*Four years more on average than the US

Lafayette · Aug 22, 2018

ludin said:
well define living wage.

Since apparently you cannot afford a dictionary: a wage that is high enough to maintain a normal standard of living.

And before you ask "what's normal?", the answer is that "normal" depends upon each nation's economy ...

Lafayette · Aug 22, 2018

ludin said:
he asked you a specific question.

How much do you think a CEO should make?
give details instead of ambiguous answers.

myth of the 90% tax bracket.
https://mises.org/library/good-ol-days-when-tax-rates-were-90-percent

And you learn how to debate in an economics forum.

Your answer is "that depends upon the character of each market-economy" and the manner in which it functions.

I will say this: Since America refuses to provide Tertiary Education free, gratis and for nothing, it is going to take a good long while for those who have no post-secondary education to make a decent living. Say family income of $60K per working parent.

Why? Because unbeknownst to people like you, the Industrial Age is being left behind as we enter globally the Information Age. Which implies that aptitudes and work-abilities to earn even "average incomes" must be enhanced by means of a free Tertiary Level Education.

Which in my book can come about by reducing the DoD budget by 20% and shifting it to the Dept. of Education that will guaranty those in need with the means to enter a post-secondary schooling (vocational, associate-, bachelor-, masters, doctorate) in a state-school that is funded by the Federal Government (DoE).

And I am no brainy wonder. That's how I put two kids through university here in Europe ... (Total cost each: $950 for schooling and 6500 for living expenses per school-year.)

What if...? · Aug 22, 2018

Lafayette said:
From here: Why do American CEOs get paid so much?

Excerpt:

That "beginning upper-income tax reduction" was first JFK/LBJ and then Reckless Ronnie's rule both of which actually devastated upper income taxation, as seen here:

What makes anyone think it is fair that ONLY the top-echelon of businesses merit the humongous amount of Wealth derived from stock-options. They did not achieve the results that merited such rewards all alone.

Upper income taxation must be revised and drastically upwards to reduce the Income Disparity that is the worst of any developed country in the world ...

Because they sit on each others' boards.

ludin · Aug 22, 2018

Lafayette said:
Since apparently you cannot afford a dictionary: a wage that is high enough to maintain a normal standard of living.

And before you ask "what's normal?", the answer is that "normal" depends upon each nation's economy ...

OK so you can't define living wage.
that is what i thought.

you are doing nothing more than using ambigious platitudes to push your ideology.

If you go to almost any job application they will ask what you want to make.
if you put living wage you will probably be declined.

why? a company can't put living wage on a pay check and it mean anything.

Why do American CEOs get paid so much?

Lafayette

Hawkeye10

Buttermilk Man

Kal'Stang

Nap

holbritter

Lafayette

ludin

Lafayette

RetiredUSN

ludin

ludin

ttwtt78640

Sometimes wrong

Rickeroo

Hawkeye10

Buttermilk Man

Rickeroo

Lafayette

Lafayette

Lafayette

ludin

ludin

Lafayette

Lafayette

Lafayette

What if...?

ludin