Companies forced to disclose CEO-workforce pay gap

[realibrad]

I have no problem with this rule for publicly traded companies.

As for CEO's pay being higher than it used to be, thats actually pretty to give justification for. Shareholders effectively own the company. They want to maximize their profits, so they push the company to hire a CEO that they feel will do that. If the company ends up over paying a CEO, the shareholders will push for a new CEO. You saw this happen with Home Depot.

So, if the question is what does a CEO do now that justifies higher earnings, its simple. CEOs now run companies that are worth far more. Companies feel that a CEO is worth more money and investment than positions below. If there were many people that could do the job, wages would be lower. The fact is that being a CEO for a major company is not easy.

Companies make more and thus having the best person for the position will make them more money too.

Also, check out this graph.

That net income is pretty damn flat. Not really important here, but I was very surprised.

 

[senseamp]

Basically boils down to Asia is slowly building a foundation for growth over the coming decades, while the U.S. is more trying to hang on to as much as it can. Investment money is what makes things happen and growth is where the investment money flows to.

China is growing much faster with much lower CEO pay.

 

[hal2kilo]

CEO's simply can't go home and forget about the job every night like Rank-and-file workers can at 5.

And if you could negotiate a salary for yourself and have a severance package of some sort, you wouldn't do it?

Jealous hypocrites need to worry about what's in their won paycheck..

I have a career and I barely make six figures, I think about my job after I go home all the time, to the detrement of my health. I 've got a little less than five years till i get my full social security. I'm not sure if I can handle much more stress. But, you go have your cry about how much harder CEOs are under appreciated.

 

[Genx87]

China is growing much faster with much lower CEO pay.

Eh Chinas economy is a house of cards waiting to crash. I wouldnt use that as an example of why CEO pay should be lower.

 

[Smoblikat]

I don't get this fixation on CEO pay. Yes, they make more than the average worker. They also provide more value than any single average worker.

The CEO of my old company (Dell) literally started it in his dorm room and has been building it up since the mid 80's. I think at this point he has put enough time, money, and effort into it to pay himself whatever he wants, and im fine with that.

 

[Retro Rob]

I have a career and I barely make six figures, I think about my job after I go home all the time, to the detrement of my health. I 've got a little less than five years till i get my full social security. I'm not sure if I can handle much more stress. But, you go have your cry about how much harder CEOs are under appreciated.

You've got it made, I make nowhere NEAR 6 figures!

However, my point was that they're DIRECTLY responsible for the financial stability and growth of the company -- rank-and-file people are not.

 

[lopri]

^ Exactly. CEOs have nothing to fear.

Edit: The arrow above refers to Smoblikat's post (#55)

 

[fskimospy]

I have no problem with this rule for publicly traded companies.

As for CEO's pay being higher than it used to be, thats actually pretty to give justification for. Shareholders effectively own the company. They want to maximize their profits, so they push the company to hire a CEO that they feel will do that. If the company ends up over paying a CEO, the shareholders will push for a new CEO. You saw this happen with Home Depot.

So, if the question is what does a CEO do now that justifies higher earnings, its simple. CEOs now run companies that are worth far more. Companies feel that a CEO is worth more money and investment than positions below. If there were many people that could do the job, wages would be lower. The fact is that being a CEO for a major company is not easy.

Companies make more and thus having the best person for the position will make them more money too.

In many (most?) companies the shareholders really don't own the company, and voting stakes vs. equity stakes are often totally different. CEO compensation is determined by a company's board, and the people who comprise those boards often sit on several boards, which if nothing else certainly leads to the perception of 'you scratch my back, I'll scratch yours'.

 

[fskimospy]

The CEO of my old company (Dell) literally started it in his dorm room and has been building it up since the mid 80's. I think at this point he has put enough time, money, and effort into it to pay himself whatever he wants, and im fine with that.

Dell is a private company.

 

[senseamp]

Eh Chinas economy is a house of cards waiting to crash. I wouldnt use that as an example of why CEO pay should be lower.

US bank CEO pay was high before the financial crisis crashed that house of cards too.

 

[realibrad]

In many (most?) companies the shareholders really don't own the company, and voting stakes vs. equity stakes are often totally different. CEO compensation is determined by a company's board, and the people who comprise those boards often sit on several boards, which if nothing else certainly leads to the perception of 'you scratch my back, I'll scratch yours'.

Shareholders get to vote on directors that get to have a lot of power. Its true that shareholders do not get to define the explicit income of the CEO, they do direct the company on what they want. Shareholders own equity in the company, so its probably more accurate to say they own part of the company. If you are a shareholder that has 51% of the equity, then you can outvote anyone typically.

But, the shareholders are supposed to want to make money and overpaying for a CEO would not do that.

 

[fskimospy]

Shareholders get to vote on directors that get to have a lot of power. Its true that shareholders do not get to define the explicit income of the CEO, they do direct the company on what they want. Shareholders own equity in the company, so its probably more accurate to say they own part of the company. If you are a shareholder that has 51% of the equity, then you can outvote anyone typically.

But, the shareholders are supposed to want to make money and overpaying for a CEO would not do that.

In a lot of cases that's not true. Shares of a public company are often divided into a number of different classes that have different attributes, like voting power (or lack thereof). For example, Mark Zuckerberg owns 28% of the shares of Facebook but has 56% of the voting power.

 

[Smoblikat]

Dell is a private company.

Now it is, it was public for most of the time I was working there. My point still stands though.

On a sidenote............boy was it an awful transition internally going from public to private..........

 

[Sonikku]

As others have said, that is highly debatable, plus:

Considering all wages have essentially stagnated for everyone else when adjusted for inflation for the past 20 years, what exactly made CEOs so much more useful? Per your argument, that is. My personal stance is that executive boards are mostly a bunch of good ole' boy clubs engaging in one giant circle jerk.

They were useful in off shoring middle class jobs. :hmm:

 

[cubby1223]

How is it that asking a question is misrepresenting? I wanted to know what you are trying to say when you invoked the needs(?) of foreign corporations because it seems foreign (forgive the pun) to the discussion at hand.

So let me rephrase the question, at the risk of misrepresenting, because it is still unclear to me what you wanted to convey;

Are you suggesting that there are some international norms and expectations that counsel against this disclosure rule and the foreign corporations will respond to this rule in a manner that will have adverse consequences on the U.S. economy?

Most of your posts in this thread are antagonistic with a misrepresentation of what was said. The pattern highly suggests your question for clarity was rather more for antagonizing.

U.S. law does not apply to all businesses everywhere. This new regulation doesn't even apply to all businesses within the U.S. It only applies to publicly traded businesses. And again, obviously it doesn't apply to businesses traded on foreign exchange markets that don't do business within the U.S.

So the next question is, does this law apply to companies listed on foreign exchanges who do business in the U.S.?

I never said anything about companies being able to ignore U.S. law. You made the assumption that all U.S. laws & regulations apply to all companies who do some business inside the U.S. or U.S. territories.

And keep in mind, a law is only as good as the government's willingness and ability to enforce the law. That's why the U.S. has laws that tax foreign income in some situations, yet foreign nations to not have the same.



The advantages of the U.S. of the past are slowly being torn down. And those people/companies who are mobile, these new regulations that have been piling up, have been altering how they live their lives, how they run their businesses. Many new companies starting up, take a manufacturing company, they may have their plants in China, an office in Taiwan that acts as the intermediary to a sales facility both in the U.S. and in Europe. It's a global world. And this new company gets to pick which country amongst a number it registers within to maximize their benefits.

No, no one is fleeing the country over pay gap disclosure, it's a slow drip that is already happening, and will catch up to us in the decades to come if we continue to operate how we are.

 

[realibrad]

In a lot of cases that's not true. Shares of a public company are often divided into a number of different classes that have different attributes, like voting power (or lack thereof). For example, Mark Zuckerberg owns 28% of the shares of Facebook but has 56% of the voting power.

Agreed, its not always true. Generally speaking though, shareholders have power to influence who the CEO is and how much they get paid.

 

[hal2kilo]

US bank CEO pay was high before the financial crisis crashed that house of cards too.

Hell in that business at least at the retail level your title is much higher than your pay. Bank president, bank vps really don't make that much.

 

[DrPizza]

I don't see how this new disclosure helps that. At such an aggregated level of "average worker pay" there's not enough context to tell whether the CEO pay is appropriate or not. A CEO for a fast food chain making $500K (a very modest CEO salary) would have a much higher multiple than a tech startup CEO making $2MM. One company has thousands of minimum wage workers, the other has a handful of highly skilled and paid developers. Both the numerator and denominator matter, and this measure doesn't really clarify that.

This measure is about as useful as requiring companies to show CEO pay as a multiple of the average sale price of their product mix. Sure, Congress can mandate that also but it's likewise just as pointless and irrelevant.

For the most part, agreed. This rule is just for show.

People who complain about the disparity between THEIR pay and their CEO's pay make it personal by making them out to be heartless crooks who care nothing about the rank-and-file.

It's always personal.

They seem to ignore the fact that a CEO's salary is negotiated by how much value he/she brings to the company, and if he/she increases its net worth.

If that person doesn't add value, they're replaced.

I'm not complaining about why CEO's salaries are made public, I'm contending the idea that this can be used as a tool to demonstrate "income inequality".

If you're a manager and I'm a line worker, you pay is SUPPOSED to be much more than my pay. That's not income inequality.

Out of curiosity, if the CEO of McDonalds took a 52 week vacation and did absolutely nothing, how do you think their business would be affected? How many earth shattering important, difficult decisions do you think some of these CEOs have to make?

Or, to put it in a better way, I would think that a dozen of the engineers in some companies, coming up with new innovations, new inventions, new patents, result in far greater future earnings for the company than a CEO is responsible for.

 

[lopri]

Most of your posts in this thread are antagonistic with a misrepresentation of what was said. The pattern highly suggests your question for clarity was rather more for antagonizing.

Of course it should be obvious that I prefer more corporate transparency by now, but it does not mean that I consider those with different views as enemy. I shall not directly respond to your insinuation on my person with the same kind, but I note that you seem rather eager to jump to a conclusion with your gut feeling.

U.S. law does not apply to all businesses everywhere. This new regulation doesn't even apply to all businesses within the U.S. It only applies to publicly traded businesses. And again, obviously it doesn't apply to businesses traded on foreign exchange markets that don't do business within the U.S.

So the next question is, does this law apply to companies listed on foreign exchanges who do business in the U.S.?

Didn't you already answer the question in the first paragraph?

I never said anything about companies being able to ignore U.S. law. You made the assumption that all U.S. laws & regulations apply to all companies who do some business inside the U.S. or U.S. territories.

And keep in mind, a law is only as good as the government's willingness and ability to enforce the law. That's why the U.S. has laws that tax foreign income in some situations, yet foreign nations to not have the same.

The advantages of the U.S. of the past are slowly being torn down. And those people/companies who are mobile, these new regulations that have been piling up, have been altering how they live their lives, how they run their businesses. Many new companies starting up, take a manufacturing company, they may have their plants in China, an office in Taiwan that acts as the intermediary to a sales facility both in the U.S. and in Europe. It's a global world. And this new company gets to pick which country amongst a number it registers within to maximize their benefits.

No, no one is fleeing the country over pay gap disclosure, it's a slow drip that is already happening, and will catch up to us in the decades to come if we continue to operate how we are.

So you are saying that this rule will make the U.S. less hospitable to foreign corporations, but the evidence of such causation will not appear until decades later?

Maybe I am misrepresenting (again) but I have to say that is quite an argument.

 

[cubby1223]

The sole reason the U.S. is able to both enact and enforce many of these laws and regulations against foreign companies as well as foreign individuals, is because we are the economic majority of the world. We have the luxury of being the bully against weak minority countries who do not have the power we do. If we don't play fair internationally, we better make sure we're also focused on protecting our majority and not let it slip away.

 

[nickqt]

Mammon worship involves much more than just worshiping Mammon. It also involves worshiping and praising those people whom Mammon has blessed.

 

[cubby1223]

I'm going to go back to the topic of why this regulation shouldn't apply to foreign companies again. I don't know if this regulation does or does not apply. I don't know.

But if it does apply, it's beyond stupid. Yes it's a trivial regulation because the information is already public knowledge.

China's government has demanded both Microsoft and Apple release their OS source code to them for analysis, under the demand that if you do business within our borders, you should follow our laws and regulations. This has happened. It would be colossally bad for Microsoft or Apple to comply with them.

When you create legislation in the U.S. that goes against the tops of foreign businesses it gives power to foreign governments to enact laws and regulations against U.S. businesses. And especially when it's a regulation so trivial as this one. Remember a decade ago when the E.U. kept levying fines against U.S. companies and most here believed it was primarily a money grab? Yea.

It's a two-fer. Businesses become more inclined to structure themselves away from the legislative reach of the United States, and foreign nations have more grounds to demand greater compliance from U.S. companies. And it's a self-feeding cycle, the more this happens, the less power the U.S. has to enforce the important laws.

 

[chucky2]

I'm not sure how it's going to matter, it's not like if you chop back the CEO salary magically the median worker is going to shoot way up in earnings. You'd have to have a pretty odd CEO:AverageWorker number as well as salary ratio for it to matter.

Sounds like election year fluff...

 

[Vic]

I don't get this fixation on CEO pay. Yes, they make more than the average worker. They also provide more value than any single average worker.

It's usually the shareholders who get screwed by executive compensation.
And who better to decide who provides more value than the company's owners?

 

[alcoholbob]

Are today's CEOs 10 times better than ones in the 70s and 80s ?

A lot more productive than the average worker. Late 80s early 90s was the beginning of 60,000 factories being offshored to Asia. When you ship your capital overseas your workers aren't as productive (regardless of how hard they work), and simply can't demand the same level of pay.

We've also seen a loss of purchasing power over time with the loss in productivity. This is why you have the same house that was $250,000 back in 1990 selling for over $1 million now even though the median wage of the neighborhood has hardly shifted.