Law Limiting Highest to Lowest Compensation Ratio

If I understand your question, this would apply more to the team owners and studio owners. Actually, that’s the basis of recent sports team strikes. The players felt the owners were taking too big of a share of profits.

But now you are pitting OWNERS against employees. You started with income from the top to the bottom. The person who owns the company is not necessarily the top employee, and might not even be carried on the employee roster.

Fair point. This needs to be ironed out.

This sounds good in principle but I’m not to sure that it would work out in practice. I’d be more inclined to give shareholders greater say over executive compensation.

Of course, whatever you do, as others have pointed out, accountants can always find ways around these things.

I do seem to recall hearing about laws like this in other countries, but Google is failing me, probably because I can’t figure out appropriate search terms.

Base compensation should be market based and then total compensation should be relative to the individual’s actual contribution to profits of the company.

Legislating compensation levels is the worst way it could be done.

This notion of redistribution or equitable compensation makes no sense. People should earn based upon their contribution.

Yeah, I can’t even get past the basic idea. This is an entirely artificial, meaningless way to determine compensation, regardless of what percentage you use. The idea itself makes no sense.

Okay, what does the CEO of United Health Care contribute to the company that makes him worth 1700 times more than the average employee?

How should I know? Ask the the Board.

Well, let’s check the Def 14A statement from April, 2012 and see.

Happily pay the CEO for a 42% return on my investment.

http://google.brand.edgar-online.com/EFX_dll/EDGARpro.dll?FetchFilingHTML1?ID=8562120&SessionID=ys4LFeDu1W-GCu7#D285409DDEF14A_HTM_TOC285409_15

His entire incentive plan is public knowledge. Take a look at what he is measured on - that is what he is getting paid to do.

He somehow achieved all of these things strictly through personal effort? No help from staff or other employees?

Actually it’s because we do understand this that we vote Democratic, to the extent one can accept the premise that the Democratic Party is still a left-leaning party. (A questionable assertion, to be sure, but we’re obviously far to the left of Tea Party Republicans if nothing else).

Of course the janitor shouldn’t be paid a million bucks a year, but possibly he does deserve a large enough paycheck to provide the necessities of life for himself and his family. At least, one would think so, but the market clearly dictates otherwise. As both Democrats and Republicans continue to exalt the small businessperson as the savior of the American economy, they all seem to be overlooking, or willfully disregarding, the fact that the market is dictating lower wages for a hell of a lot more workers in today’s economy besides janitors. Even Obama’s ideal of “a fair start” for everybody isn’t adequate, for the simple reason that we can’t all be “rock stars” in the workplace; a system that rewards most of the income to the rock stars and leaves only crumbs for everyone else is iniquitous. The only protection for all the non-rock stars is in the form of labor regulations and collective bargaining, which makes voting Democratic a no-brainer.

Or maybe I just don’t get it. Explain to me how moving further towards an ideal of laissez-faire capitalism will result in better working conditions and compensation for the average person, and not just entrepreneurial rock stars. Fifty years ago it wasn’t a problem because the employment base–and often the customer base as well–came from their own communities. By contrast, now that we import nearly all the essential consumer products of daily life, how is that going to work now? If we give a rich person a tax cut amounting to millions and millions of dollars, by what logic do we expect that person to create good jobs for Americans?

Keep reading, you will see that the other top execs are on a similar plan. The CEO, in his role as head of the company, did this. He guided the strategic decisions that led to this nice paycheck for the shareholders. The shareholders (i.e. owners), through their representatives on the Board, were happy to pay him for this success.

The janitor, however, had zero measurable impact on the company’s 42% return.

I’m only assuming here, as I don’t know the person at United Health Care…but normally a CEO is responsible for:

  • Setting the vision of the company
  • Ensuring the company is in compliance with necessary laws and regulations
  • Hiring, mentoring and supervising the leaders of the company
  • Delegation of authorities down into the business
  • Setting the strategic direction for the business
  • Determining the appropriate risk tolerance for the company
  • Key decision maker for allocation of capital (where should capital be spent in the business)
  • What new company’s to acquire. Which existing businesses/assets should be sold.
  • Interface with the board of directors and key shareholders.

Quite a bit more responsibility than your average employee.

I’m not saying he doesn’t deserve to be well-paid. But 1700 times more? Really?

I’m sure there are other execs on a similar plan. That’s why I started this thread. This type of plan is contributing to the USA taking on the characteristics of a third-world nation. I’d like to explore alternatives to modify that trajectory.

Sure - his percent of the take is less than I pay my sales reps for bringing in a deal. I have no issue with the CEO of a company making a lot when they help others make a lot.

I DO hate it when Board foregoes its fiduciary duties and keeps a lackluster CEO on the payroll, however.

If your issue is the pay levels of those at the bottom - that is a different issue than how much a CEO can make. You need to look at the factors that impact unskilled labor pay rates and try to impact those.

Hint - it isn’t the CEO keeping their wages down - it is the availability of a lot of other unskilled laborers in the market willing to work for a little bit less.

It’s not that they’re willing to work for less. It’s because they don’t have a choice. Nobody willingly works for shit wages that they can barely live on. You can argue about what their labor is worth if you want, but to use a word like “willingly” is just factually incorrect.

Everybody works for whatever wages they can get. If you want to fix the wages at the bottom, you will need to deal with outsourcing, offshoring and illegal immigration effects on unskilled labor wages. Skilled labor does better, as long as there is enough work and competition for those workers.

The minimum wage helps keep a bottom - and I welcome putting the minimum wage on a constantly adjusted to inflation basis. In addition, I support the Earned Income Tax Credit as well.

None of that has a thing to do with CEO pay, however. If you cut CEO pay - that will just put more money in the hands of the shareholders. It is not going to trickle down to the workers.

I agree. Nothing ever does trickle down. That’s why I’m proposing a law to force it down, since we can’t depend on the law of economic gravity.

Your law won’t force it down though - read my earlier posts - you will just give more work to people like me to find ways around it. You won’t limit the top pay, and you won’t see the CEO giving a raise to everyone at the bottom.