Why would you need to do it like that? I would expect it to be something more conventional, with a guaranteed base that was a normal level of compensation and the profit sharing as bonuses above that. In that case, if the company experience a period of losses, they would cut staff, like normal
My previous post has my reply mistagged from John Mace. Sorry. Missed the edit window.
Why would you expect that? Why should someone who invested none of his own money in a company deserve a piece of the profit, but not be subject to a loss if the company loses money? You are creating an asymmetrical pay structure which rewards success but does not punish failure. And not all companies cut staff when the experience a loss. There is no “normal”.
You are defining it as a problem without any discussion about why it is a problem. Why does every job created have to be able to support someone? Why must an employer, rather than society as a whole, have a responsibility to meet people’s basic needs? Why do I, as an employer, suddenly taken on the burden of meeting a person’s basic needs simply by hiring him?
Like I said earlier, I can see that we, as a society, might not want people to starve. In that case we, through our taxes, should fund programs to make sure people don’t starve. Why do we shift that burden to employers?
No I’m not creating an asymmetrical pay structure, I’m attempting to rectify the extreme asymmetry of some existing pay structures. That is what started this whole thread, remember?
As for the taxes, as mentioned earlier, another problem that has developed is extreme tax avoidance by the corporate sector. Again, that’s another reason why this thread was started.
And why would a company share profits with those who have not invested in the company? Well, maybe for reasons like Lincoln Electric in Cleveland, Ohio does. Everyone there is included in the company profit sharing program and they get Christmas bonuses that sometimes exceed their normal paychecks–which are not minimum wage. They have extraordinarily high employee retention and productivity. Maybe for reasons like that.
Yes, you are. When someone shares the upside, but not the downside, that’s asymmetrical. And just because you found a way to fix the alleged problem doesn’t mean that is a good fix-- that it doesn’t create new problems.
I think it’s more practical to close loopholes than to mandate pay ratios. Don’t you? Has any western country successfully mandated pay ratios?
All you are arguing is that one company has done things a certain way. If it’s a good business model, then you have a great opportunity to copy it and put companies that don’t use it out of business. You, and a million or so other entrepreneurs out there. You will have to do a lot to convince me that the government can tell all of corporate American how better to run their companies.
I LOVE Lincoln Electric. They paid piece rate before it was cool - making each person work for their money instead of get a flat salary (Lincoln’s book is a great read, and you get a free copy with one of their welders). Yes, they also pay out a profit share every year.
Their CEO also made over $6 million last year. You OK with that, or is that evil too?
But only to the extent that they are being required to pay a janitor 1 million a year, or outsource the job. Which might benefit the guy who wants to start a janitor service, because you have legislated that economic niche into existence, but it doesn’t benefit the janitor who works for that guy.
If it’ll cost them 1 million a year to empty the CEO’s wastebasket, then of course it’s cheaper to outsource it. Your proposed law made it so. How does your proposal improve any janitor’s life. Anyone at all. Show us how, because I’m not seeing any benefit. None at all. Show me how your proposal benefits anyone at the low end. I can see how it benefits people who want to start janitorial companies. It makes them vitally necessary. How does it benefit the janitors he employs?
Yeah, this was me when I worked as a janitor, for a subcontractor (i.e. outsourcing) back when minimum wage was 3something an hour. No matter how good I was, I was only going to be getting 3something. Period.
My extra effort only kept the supervisor away, so I could work for 3 hours (and sometimes only 2, or rarely 1), and fuck off for the last hour. That’s all being good as a minimum wage janitor is worth. You get to fuck off for an hour and get paid for it. And outsourcing it ain’t going to change that dynamic. I used that extra time to hack the corporate data center via the computer terminals in the offices I was cleaning. Fun, fun, fun. Seriously, that was fun. And it was all made possible by me being a better minimum wage mop-swirler than the next guy. Because the supervisor would never come around to check up on me. Because I was better than the other mop-swirlers. At minimum wage… and that’s all it was worth to my outsourced janitorial employer. Or the company who outsourced it. Back in the early '80’s. And they would have fired me for the hacking, or even the fucking off for the last hour.
So a company that chooses to pay a large amount for a CEO would have to outsource lower paying job. As was said like Janatorial staff. If the company wanted to pay 40k and have a great benifit plan but that was still too low and they were told that to meet regulations they had to pay at least 100k.
So they choose to outsource. then the janitor makes 20k and gets the absolute minimum of benifits. And that is assuming the company they hire chooses to employ full time employees.
Yes, clearly the OP has not thought through the unintended consequences of his attempt to control the economy. That is, sadly, not that unusual.
Sure. But with half of the government pledging allegiance to Grover Norquist instead of the USA, this seems unlikely. That’s why I’m look for other methods.
You, like others on the conservative/Republican side of things keep trying to invent this non-existent hatred for wealthy people. I’ve never said people who make a lot of money are evil. Please stop it.
Why would I have a problem with the CEO of Lincoln Electric making $6 million after I’ve held them up as an example for how a company could be run successfully while sharing the wealth with the workers–all of them.
According to figures from 2011 the average total compensation for emlpoyees was about $80,000. That gives a ratio for his salary of 75:1. Well within the range I was suggesting as reasonable. Why would I have a problem with that?
Of course I haven’t thought through all of the unintended consequences. That’s why I started this discussion–to explore the idea.
However, the only unintended consequence that seem to matter are the ones that impact the profitability of businesses. The decisions with unintended consequences that affect other members of society don’t seem to be of much concern. Like, for example, the repeal of Glass-Steagall, whose unintended consequences precipitated global economic collapse. But since those consequences also resulted in enormous profits for some members of the financial community, I guess that’s okay.
Let’s be clear. I’m not anti-business anti-wealth, anti-success, or anything like that. I’m trying to find a recipe for a healthy society overall. I think business and corporations are an important component of American society, but I don’t think the primary focus of government should be catering to their wants to the exclusion of the needs of society in general.
Average is not lowest however. Your argument continues to lack backing with a basic understanding of economics ( supply and demand), finance ( the difference between salary,bonus, ISOs, NQSOs, performance shares, restricted stock, pensions, and perqs as a start), and math (average vs median vs lowest paid).
The lowest total compensation, for some kind of intern, would be about $40,000, judging from actual salaries reported here and the details of their compensation plan. That still comes out to a ratio of 150:1. Still in the ballpark of what I proposed as reasonable.
But you’re just picking nits here, and retreating further into the business bubble while ignoring any discussion of the effects on society at large, which is really the purpose of this whole discussion.
A collection of nits is a market.
How about Lincoln’s India operations - are they part of your deeply thought out proposal?
Your desire for equity is admirable, but you really need to think through the consequences of your proposal. That is what several of us have pointed out. Some of us have lived through similar actions here and abroad - so we have a feel for what can happen with poorly thought out propositions.
First, I stated outright in an earlier post that there is nothing “deeply thought out” about this. It’s an idea. I’m inviting discussion. Stop acting like it’s some formal proposal that I’ve submitted.
Second, Lincoln Electric is a general example of how a successful company can be organized in a way to share profits across the company. Stop acting like I propose it as a perfect solution for all businesses.
All of the posts here have been considered, and some of them raise good points, which I have acknowledged. You seem to expect me to admit some kind of defeat when I am not waging a battle here. I’m just looking to share ideas.
dataguy - I think what you are failing to realize is that wealth disparity is not about interns or entry level engineers and analytsts at Apple or Goldman Sachs making $40,000 or less while the CEO makes tens of millions. Those people are at least on the career track to making decent incomes in their lifetime. It’s about the millions of uneducated, barely skilled people who work in dead end minimum wage jobs who don’t work for large successful companies and have no means to improve their station in life.
I understand your assertion, and accept it as one of the opinions expressed. Others who have approached this problem have different points of view. Really, I appreciate what you and others have expressed, but, again, you seem to expect some sort of capitulation on the subject. Like I said, I’m just gathering ideas and opinions.
Dataguy, I think all that would actually be accomplished by such a law would be the segregating of different “pay levels” of jobs into different companies. So there may be some umbrella corps where employees get $50 million - $500,00 per year, large corps with $5 million - $50,000 per year, and smaller companies with say a $2 million - $20,000 spread (using 100:1 ratio of highest paid:lowest paid). The large corps are just going to contract everything menial out to the lower paying corps.
In your example with the theoretical janitorial company, you think that if company XYZ starts to become more profitable, its janitors will get paid more. That only makes sense if there isn’t any competition in the field. If company XYZ’s pays its janitors $100,000, it is almost certain that there will be some guy who will be willing to start a competing company UVW that pays its janitors $80,000, then RST who pays its janitors $60,000, etc. until there are companies that pay its janitors “market value”. The CEO of said company will be limited to 100 times (or whatever value) of the janitor’s compensation, which may or may not limit how good of a candidate you can get for that company, but it will not result in any improved income for janitors.
As for why profit sharing isn’t more common among employees - well, it really has to do with negotiating power. A CEO can say “I want a big bonus if the company does well” and if the owners of the company want to keep this particular candidate, they are willing to compensate him as he requests, otherwise the CEO will go elsewhere. A janitor could as for the same thing - but how often do the owners really want to keep this particular janitor? More likely, the owners will say “Thanks, but we’d rather hire this other janitor who isn’t asking for profit sharing” - because there probably are other people out there willing to work as janitors without profit sharing. How many people do you think are willing to work as CEOs without what they deem as adequate compensation? How many of them do you think are the top qualified candidates?
If profit sharing were made a LEGAL REQUIREMENT, so that companies would have to distribute profits to all employees by law - well again that would probably result in a lot of companies greatly reducing the number of employees they have and increase the amount of contractors. The owners of companies already have the option of offering profit sharing to people who work for them - and in cases like Lincoln Electric they do so. I think the fact that more companies don’t do this currently indicate that owners would rather keep profits to themselves, if they can help it 
Thus they will structure their company organizations to keep it so. If that means that they have to contract everything out, that’s what they’ll do.
Now, I personally think that there’s probably a lot of cronyism going on in CEO circles (since most boards of directors are made up of CEOs of other companies, it’s almost inevitable that there is some “you pat my back, I’ll pat yours” going on), but fundamentally, I don’t think there’s something inherently wrong with uncapped CEO compensation.