Really? The dichotomy is that stark and bright? All of those who have the requisite intelligence, pluck and determination end up building large companies and becoming wealthy?
Similarly, there are no decisions made about hiring, enrolling or distributing wealth based on personal acquaintances, shared academic institutions, or family relationships?
The world is really just and fair! Who knew?
Which explains why he is STARVING.
Yes I absolutely can create a coupon out of thin air. How do you think coupons get made? You call the print shop, order 5000 coupons for a free Big Mac, and start handing them out. You only have to create the Big Mac when someone presents you with a coupon and wants the Big Mac.
However, I can only do this if I’m McDonalds. I can’t print up Big Mac coupons myself, because I don’t have the ability to create Big Macs at my house. This is also the reason I can’t photocopy $20 bills. I also can’t create my own Starbucks coupons, or Walmart coupons, or IHOP coupons. In order for me to have a Big Mac coupon, I’d have to get one from McDonalds in some way. Or, get one from someone who got one from McDonalds. Like, if my neighbor has a Big Mac coupon, I could clean his toilets in exchange for that coupon. And he got the coupon because he traded his cow for the coupon. And that person got it because they traded it for some magic beans. In this instance the Big Mac coupon acts as money. But the Big Mac coupon had to come from McDonalds in the first place.
I could, however, create coupons redeemable for goods or services that I create myself. I could print up coupons “Good for one malware cleanup”, or “Good for one backrub” or “Good for one chocolate cheesecake”, and hand them out to people. I could create a “LemurBurger” coupon where I promise to make the holder a burger much better than a Big Mac. But I can only create coupons for goods and services I can provide personally.
So. You see how I can create a “free backrub” coupon and trade it for goods and services even though I haven’t actually performed a backrub yet? I promise to provide that backrub IN THE FUTURE. Same thing with a Big Mac coupon. McDonalds doesn’t have to make the Big Macs in advance and have them sitting in the warming tray before they can print up Big Mac coupons. The coupon is a promise to make a Big Mac in the future.
So if I trade my “free backrub performed by Lemur” coupon for some magic beans, and then the elf throws the coupon in the trash, I have the magic beans and the elf has nothing. I haven’t lost anything, I’ve gained the beans. Tom Thumb and all the other fairy tale characters haven’t lost anything. The elf has lost his magic beans. The only loser is the elf.
It’s a little more complicated. Suppose I scrub toilets at McDonalds, and the McDonald’s manager gives me a Big Mac coupon. I take the coupon and trade it to the elf for some magic beans. The elf throws the coupon away. Now who’s lost? The McDonald’s manager gained clean toilets, and lost nothing. I lost an hour scrubbing toilets and gained some magic beans. The fairy tale characters lose nothing and gain nothing. The elf lost some magic beans and gained nothing.
So in this case, throwing away the coupon doesn’t benefit me, it benefits the guy who issued the coupon. Now, who issues Federal Reserve Notes?
Again, if you think destroying money destroys value, then why can’t the government create value by creating more money?
I worked for a company where the founder, the richest guy I know personally, worked twice as hard as anyone else. On top of getting random chemotherapy. He was a driven, brilliant person. And when he died, the company folded. It’s true that other companies that he founded are still around in one form or another, because he was no longer involved in managing them.
Some rich people don’t have to work for their money, and don’t. Some rich people don’t have to work for their money, but do it anyway. I know plenty of lazy people, and none of them are rich. I know plenty of hard workers, and some are rich and some are poor and some are in between.
How many government workers make over $250,000 a year?
I’d say that executives should be rated on stockholder value, especially in terms of stock performance over time. That is a clearer metric, since you could compare performance of a company to similar ones and to the market as a whole. By that metric the situation is even worse than you say. Some CEOs get big bonuses when their stock price goes up 10% even though the stock price of the competition has gone up 20%.
Maybe Sam will like that one better.
Is the elf really the only loser? I think I gave a decent example a while ago of how there might be other implied losers. Specifically those people and businesses that were expecting the elf’s money. Maybe the elf has a mortgage on his cottage. The elf burnt his coupon, so now he can’t pay the bank. Yes, technically the bank can’t lose something it never had, but it was expecting that coupon, and that counts for something, doesn’t it?
I’m repeating myself a little bit, but let’s say that a certain McDonald’s gets 100 customers a day, that each spend $1. That McDonald’s is earning roughly $3000/month. Based on a consistent income of $3000/month, McDonald’s decides that next month they’re going to buy a new ice machine for $2000. McDonald’s lets Ice Machine’s, Inc know that they’re going to be buying an ice machine, so Ice Machine’s, Inc packs one up and then plans to use $1000 of that expected money to buy some new mops from the Ye Olde Mop Company to clean up the mess from all the melted ice. But inexplicably, 40 of McDonald’s customers burn all their money and next month, they only earn $1800. They can’t buy the ice machine they had planned to buy, and Ice Machine’s, Inc can’t buy those mops. Sure, McDonald’s, the ice machine company, and the mop company haven’t actually lost anything. But there are shortfalls, right? Maybe the mop company, which budgets for this order of mops every month, has to lay some people off. Maybe the warehouse of the ice machine company suffers serious water damage because they have no mops, and they have to close down. A month later, the ice machine at McDonald’s breaks down and they lose even more customers because nobody wants soda without ice. And it’s all because a couple of people burned their money.
I mean, isn’t that what we’re experiencing right now? People are spending less of their money, so businesses are laying people off and closing down. Isn’t that why we all got that stimulus check a few years ago that they insisted we should spend to get the economy moving again? Clearly, burning a dollar affects more than just the person who burned it.
At least that plan recognized that demand is where help is needed.
American demand was a huge engine in the world. Countries catered to American tastes and needs. We are diminishing that power with layoffs and salary cuts. Eventually, the offshore manufacturers will start to ignore us. We are becoming a third world economy. Bad for people but great for international corporations.
This is why in the def14a (Proxy) there is a 5 year chart showing the companies total returns vs peer groups and an index or two.
CEOs don’t get a bonus if stock price goes up, they instead have either options or restricted shares whose value goes up when the stock price rises. The downside of this measurement is rewarding a CEO for simple market movements (or punishing them - how many CEOs were responsible for yesterday’s 500 point drop?). There are ways of building a plan around this where your shares vest only if you beat your peer index, or similar measures. Back when I did this for a living (executive compensation), we built a lot of plans this way.
Regardless, I have met CEOs and I have met drones and I have met up and comers. Some people will NOT rise above a certain level. They are not capable of it. Some people will rise too high (Peter Principle). In general, however, those at the top go there through a combination of skill, intelligence, drive, and some luck. Luck, though, usually just determines WHERE they are at the top. I had a very smart, driven friend in high school. He owns a construction firm now, and a couple of mini-malls. His name will never be in Forbes, and he won’t be the subject of a Harvard Case Study. He has, however, risen to the top of his pond. Another friend, just as smart, just as driven, ended up in technology and has founded a few firms. He has also risen towards the top, and has done quite well for himself. He has a better chance of making that Forbes list.
Both make more than $250k. Both employ many people. Neither is indispensable, but neither could be replaced by most of the other yahoos we went to high school with. If they left, their firms MIGHT succeed IF there is someone up and coming with the same drive, skill and intelligence who lucks out at the disappearance of the top percentage. However, if you just draw a name from a hat the company probably won’t make it.
I think companies should decide how they want to compensate their execs. It’s their money.
But philosophy aside, the value of a CEO can be measured in many ways, not all of which hit the bottom line. For example, sometimes a CEO will be hired because he has a talent for engineering design and the company’s offerings are lackluster and out of date. In that case, the company’s profits could actually fall as the new CEO revamps the product line, and then they might only return to previous levels. So on paper, it would look like the CEO is a bust, but in fact what he did was prevent the company from fading into irrelevance and having its stock price begin to plummet over the years.
Other times a new CEO may be brought in to restructure the company internally and break down internal divisions and bureaucracies that are making the company less efficient. Or perhaps the company has serious HR problems and the new CEO has a gift for labor negotiations.
The bottom line for me is that this is a choice the owners of a company have to make, and that includes the shareholders of public companies. It’s really no one else’s business. If the company pays its CEOs too much, it will lose competitiveness and market share to leaner companies. If you are morally opposed to the salary a CEO draws, don’t buy that company’s products.
No, we need the human capital too. Probably more than usually, since we have lost the wealth that the top 2% created.
Regards,
Shodan
I agree with all of this, but want to add one factor you omitted - local and personal knowledge. One of the things executives need is broad knowledge of the company’s internals. The best ones are uncanny at this - I’ve had senior managers from other divisions talk to me about a project I’ve been working on, and it becomes clear that they have a better ‘big picture’ view of the project than many of the people on the actual project team, and that project will be just one of many they oversee.
In addition, people are unique. Take Bob Lutz, the guy who helped revitalize GM. Lutz was a jet fighter pilot, speaks four different languages, Has four degrees including two honorary doctorates, and worked as an executive at all of the big three auto makers plus BMW. As an exec at GM, how valuable do you think his intimate knowledge of the business and production practices of his major competitors was? And by the time he went to GM, he had personally initiated the development of numerous competitor’s cars, including the class of the ‘driver’s car’ field, the BMW 3-series.
This is a guy with a unique vision, a set of skills and experience that are nearly impossible to replace. That’s one reason why people like him are paid the big money - they have unique skills and a unique perspective.
GM hired Lutz precisely for those skills. Their product lines had become stodgy, the average age of GM buyers was going up, and their attempts at ‘performance’ cars had failed. Lutz came in, and initiated the development of some of the best cars GM has ever made. The Pontiac Solstice and Saturn Sky were beautiful, the new Camaro has given GM a lot of cachet, and the Cadillac CTS is a legitimate competitor to the BMW 3-series. Given that Lutz was involved in the development of the 3-series, how much value do you think he brought to that particular car?
Now, looking at GM’s stock performance, you’d think Lutz was a flop. Hell, GM needed a bailout to avoid bankruptcy. But you have to dig under the surface to see that the stuff that sank GM was not Lutz’s fault, and all the things that made GM worth saving had Lutz’s fingerprints on them. He made a bad company somewhat less bad.
So what’s that worth? What should he be paid? Should it be a simple metric like measuring the stock against its peers? Or is it, like most things, much more complex than that? And who is to judge? Had Lutz not been at GM, most of their ‘bright spot’ vehicles would not exist. There’d be no new Camaro, no CTS. Or if there was a CTS, without Lutz’s unique vision and ability to manage a performance car development program, it might have been another typical numb-feeling, overweight GM car that isn’t competitive and would have half the market share it’s got. How much is that worth?
For me, the answer is that we have to let the market decide. Let the people running these companies decide what they need, and what they’re willing to pay to get what they need. Ultimately, they have to answer to the market. If they pay an exec too much, it will drive up the unit cost of products and they’ll lose market share. If they pay too little, they’ll get a second-rate performer and the quality of their products will suffer. It’s not an easy choice, and it’s not amenable to simple formulas or government edict.
If all the rich people evaporated today, they would be replaced tomorrow. In a week, we would not notice.
Yeah, we get it. You keep repeating that. You think wealth is a complete accident, and the rich are just lucky or corrupt or have otherwise managed to steal ‘society’s’ wealth. Of course, you never back it up with any examples or facts, so really you’re not offering a thing to this thread. We already know where you stand.
Whose fault were they, and how much did that person make?
$145,126, so you would still be stuck with him.
Regards,
Shodan
You think the president of the United Auto Workers was in charge of GM before Bob Lutz?
How fascinating.
Only in the same way that all Parasites, Looters and Moochers have control over the Job Creators! We’ll all rue the day that they decide to go Galt!
Some of us have become quite well off mostly due to luck. I’m one of them, as I’ve noted many times. There are a metric shitload of people who are smarter than me, have more drive than me, and work harder than me, yet make far far less than I do. I happen to be very good in a niche that is currently undersupplied. Basically, right place, right time. The stupid, but obvious, counter to that is that these smart, driven, hard workers could simply shift into my niche. The problem with that is that once they do, that niche won’t offer them the same benefits, as the supply problem will have then resolved itself. Luck, while not the only factor, is definitely a HUGE factor in the income level of a large number of people.
I’m not morally opposed to the salary a CEO draws. I’m just smart enough to know that it isn’t as purely a market-driven methodology as many are making it out to be. Again, if my peers were a primary factor in determining my salary, and if I were in determining theirs, I (and they) would be making a shitload more money than now. You scratch my back and I’ll scratch yours is the method of determining their compensation. My compensation is determined in a market driven manner.