So, by your reasoning, tax laws are pointless and we should just get rid of them because smart accountants just find ways around them. I’d rather have the laws and force people to expend the effort to circumvent them.
No, not at all. Re- read the thread, the information given and the reasons why several of us have explained that your proposal won’t work that way you intend.
If I hire you to work for me, by what right does the government come along to limit how much I can pay you?
But shouldn’t some of that depend on how much of the credit he can claim for having acheived that result? There should be some measure like value above replacement that would measure an executive against the industry, his peers and the probably performance of a typical CEO. That would be a better metric than just looking at what happened given that what happens with a corporation is often a result of extrinsic forces.
For example, ConocoPhillips made $12.4B in 2011. Sounds great, but most huge oil companies made a killing because oil prices went up. Chevron made $26.9B in 2011. Exxon/Mobil made even more. Is the CEO of ConocoPhillips really so integral to their success? I am sure he works very hard, and probably deserves a large salary, but attributing their success to his stewardship seems foolish given the fact that much of the profits come from things beyond his control. If some recent MBA grad became CEO of ConocoPhillips tomorrow, do you really think the company would fall apart?
Part of the problem is that boards are often not acting to secure the best deal for shareholders since they are not really independent or impartial. Not that I agree with the OPs plan, but when you see guys like Steve Ballmer, who has basically destroyed wealth as a supersonic pace for over a decade still working, you have to ask yourself why the systems of accountability are functional or equitable.
While I agree with the general thrust of your argument, I don’t think there is any reason to assume the above is true. I think we can all recognize that Steve Jobs was a talented, smart, hard working guy, and a somewhat unique person, but why are you so sure his leadership led to the best outcome for Apple? There doesn’t seem to be very much comprehensive, comparative data tracking executive value and performance. How do you know Bill Gates would not have done an even better job? Or whether Tim Cook, the current CEO, would have done better? How do you know that Woz couldn’t have done the same thing for far less money? There doesn’t really seem to be any reason being a good CEO should be such a rare skill given the number of people who have the general to succeed in the job. It’s not like sports where an individual’s incompetence is exposed via careful, measured, head to head competition.
Also, isn’t it strange that one guy can suck one minute and be great the next? Steve Jobs in 1981 was a great visionary. Steve Jobs in 85 was a huge fuck up who got fired. Obviously, he because “great” again in more recent years. Did Jobs stop trying for a few years? Did he just happen to make a few bad choices? Did outside events conspire against him? I am sure there are a multitude of reasons; which is why we should not act as though success or failure is fundamentally tied to executive management.
FYI, Ben and Jerry’s tried. From Wiki: Ben & Jerry’s used to have a policy that no employee’s rate of pay shall exceed seven times that of entry-level employees. In 1995, entry-level employees were paid $8 hourly, and the highest paid employee was President and Chief Operating Officer Chuck Lacey, who earned $150,000 annually. When Ben Cohen resigned as Chief Executive Officer and Ben & Jerry’s announced the search for a new CEO in 1995, the company ended the seven-to-one-ratio policy.
How about we, as a society, quit whining because some people earn more than others?
This.
However, the cleaning staff’s contribution is still necessary for the optimal functioning of the business, since a clean environment is obviously essential. The janitors don’t necessarily have to be employed by the company whose offices they’re cleaning, so that obviates the the problem of the million dollar janitor.
It goes without saying that there are any number of other occupations which entail showing up and performing some sort of maintenance task, some of which require far more education and qualifications than being a janitor, yet which do not readily allow one to claim that they increased profits or revenue by so many percent. If the reward for a company’s success is given overwhelmingly to the decision makers, we arrive at a point where only executives and owners can expect decent pay, and an impoverished population that is resigned to it.
The world oversupply of workers is a huge problem, and one that makes it almost imperative that we address income inequality, unless we want the American worker to be merged into the global labor pool. I’m sure most Americans do not want this to happen. I’m not sure how it can be prevented other than by some coercive strategy, although I’m not sure a law directly aimed at limiting the highest/lowest salary ratio would be feasible with regard to its operation.
Willingness to learn from other countries might be helpful, but as a people that is not one of our strong suits. Germany’s economy continues to speed along like a steam locomotive; I listen to the news from there, and it seems that every month unemployment goes down and average wages rise another tick. Young people come out the universities full of optimism for the future, and the Arbeitskräfetmangel, or worker shortage, seems to be affecting most sectors. Meanwhile, government (federal) coffers are overflowing with tax revenues as every quarter the government has to revise its estimates upward. The social health insurance program also has surpluses. Correlation is not causation, but it does so happen that the ratio of CEO pay to worker’s pay is considerably lower than in the US. It does seem like they’ve got everything over there, from robust social programs to a surging job market to trade surpluses. Of course they have rich people in Germany, but not every effort in the business world is devoted to making them still richer.
Those are all good questions. However, they are questions to be asked by Apple shareholders, and not a matter of government policy. If they wanted to pay Jobs a ton of money, then why should you and I get to say they can’t?
What you are talking about is not a MW but a Living Wage. Firstly, you need to consider what impact that will have on inflation and employment. And since many people who make MW don’t need to support themselves (they are either dependents or part of a 2-wage earning family), you are to a large degree solving a problem that doesn’t exist.
We should not be encouraging people to make a career out of a MW. Those are entry level jobs and account for only a few percent of the jobs in this country.
Didn’t Ben and Jerry’s have a similar rule for their employees? Apparently they struggled to find a competent CEO.
See post #46.
Of what value is forcing a company with a $100 million CEO to outsource janitorial and other low wage jobs? The CEO’s office is still being cleaned by a $20k janitor, it’s just that the janitor works for someone else, instead of the CEO. How is that any kind of improvement?
I’d like to respond to several comments at once. Some of these points have been raised in multiple posts. The ones I quote below just serve as examples.
I haven’t suggested limiting how much someone can be paid. The suggestion is to have a mechanism for equitable distribution of compensation throughout an organization. The limit proposed is a ratio, not an amount.
Again, the complaint is not that some people earn more than others, it that the range of income is too large to be healthy to society as a whole.
As I stated earlier, the optimum ratio is open to discussion. I looked into the current compensation at Ben & Jerry’s. They did remove the original 7:1 ratio when searching for a new CEO. According to a recent article on the company:
Between 65%-80% of its staff are “satisfied” or “engaged” at work, and the highest paid individual earns between 16 and 20 times more than the lowest paid full time worker
So, a 20:1 ratio is still reasonable, and way less than 1700:1. Seems they got a competent CEO and kept employees happy at the same time.
No, they got bought out. Ben and Jerry’s is now a subsidiary of another corporation.
First, I don’t think there is anything inherently wrong with outsourcing. Like any other business decision, it can end up being a good or bad decision.
That said, something like this could occur:
Company A decides it doesn’t want to pay X dollars for janitorial services. XYZ Janitorial services provides the services at lower cost. Janitor A, an employee of XYZ Janitorial services now contributes directly to the success of that company and is in a better position to negotiate higher wages.
Because of the compensation ratio law, as XYZ Janitorial becomes more successful, Janitor A’s wages may increase.
If the rising cost of outsourced janitorial services one day exceeds what Company A thinks is reasonable, they can again provide in-house janitorial services. Either way the janitor’s wages might improve.
What are you saying “No” to? Ben and Jerry is still a corporate entity with a CEO. How does them being a subsidiary of Unilever affect this discussion, and the compensation structure referenced in my previous post?
What does it matter if someone is paid 100 or 1000 times the median? Companies are privately held institutions. Its their business if they think someone is worth that much. Sure, everyone contributes, but compare the responsibilities of some low level drone to a ceo responsible for a multibillion dollar company of tens of thousands of employees.
Legislating compensation has historically done nothing but inhibit economic growth. Our economic problems were not created because some people make more than others.
If you don’t like your compensation, go see if someone else values your skills more.
I am not arguing they should. In fact I think the government has better things to do, and easier ways to achieve a similar result. That said, government must often step in when the private sector fails in a way that affects larger society. I am not sure it’s warranted int his case, but I think there is precedent.
WSJ just ran a piece highlighting how the quality of life has risen despite all the alleged pay inequities.