The question often arises, why are CEOs and executives paid more than workers?
CEOs/Founders of businesses (CEOs in many cases are just workers too)
-Risk: All businesses have a 95% chance of failure. People who start a company or business have a 95%+ chance of failure
-Education: What can you say about working hard in high school for 6 years, than another 4-6 years of hard university work?
-Stress: CEOs often bring work home to do, because their actions directly impact a company’s performance. Burger flippers don’t have to do that; they can sleep and forget about work until the morning.
-Ambition. Pure ambition. No laziness.
-HARD WORK: To start a business and run it sucessfully is harder work than holding a job. Did you know Bill Gates only slept 3 hours per night for an entire decade?
WORKERS
-No risk. Walk into a workplace, and get paid. You don’t live under the threat of the 95% business failure. Lost your job? Get another. If the founder of Microsoft lost his business, he would need a hell lot of money to start up a new company. A LOT.
-Lack of hard work: What is the difference between a burger flipper and the world’s richest man? Try 100,000 hours of hard work learning to negotiate, learning the aspects of business, bringing work home to examine today’s financial repot. CEOs have a tough life - thats why stress is a major killer of executives. How many burger flippers die of stress? How many bring their work home?
I haven’t even set up my business legally yet I have already spent:
-2 hours per day practicing sales and negotiation techniques (body language, voice tone, etc), examining real-life business strategies, and learning the basics behind legal and accounting aspects (100 hours total)
-Over 20 hours door-to-door cold calling just to gain my first 4 customers. At least 200 houses done.
-$3500 startup capital, borrowed from the bank at 11% interest
This is EXACTLY why I dislike workers who want to share in a firm’s profits. I don’t even legally earn money - yet I’m already putting in so much work while studying at college. What is the future factory worker doing? Sitting home, eating Doritos, and watching football. And to make things harder, I’ve got a chance of failing at the business and having to pay off the loan.
Lets hope we don’t get a commie revolution, otherwise we’ll end up a nation of lazy bums who can’t be bothered doing anything.
I’m afraid none of the reasons you ennumerated above have any bearing on why CEOs get paid more than the rank and file. Without trying to be glib, CEOs make more because someone is willing to pay them more. The market for a qualified candidate in that position allows them to command a higher salary.
Some folks are certain that is why this country is going to hell in the proverbial handbasket. Others have grasped the basic tenets of capitalism. What you are paid is only loosely correlated to how hard you work. Education is more important, but there are wide variations in education levels and income as well.
I know my answer amounts to ‘because that’s why’, but the market is the determinant factor here.
I have my own business which has been in operation for two years now. I have learned more in the last two years, than my entire life before that.
A couple stipulations:
I have yet to have a paycheck.
Despite all of my marketing and hard work, I went the first year without a paying customer.
I am supporting myself and my wife on a full-time job, while I do this on the side.
I have forgotten more about taxes and government licenses than my father had ever known.
The business is pretty much breaking even. The current customers are paying off my credit.
A couple suggestions:
Since you already haven’t chosen a legal entity, I have to suggest choosing an LLC (Limited Liability Company). It has all of the benefits of a Corporation, but very little of the liability of a Sole-Proprietorship.
Make sure you get all of the Unique Name and Tax EIN out of the way as early as possible. I waited before I did that stuff. It can take a while to process, so do it as early as possible.
Also, make sure you keep up with your business plan and have definite channels that the money flows through.
Everything I have experienced and learned has been from trial and error, so if my experience can help anyone else, I’m willing to gush on about it.
I feel the same way that you do, at least about the original Founders and CEOs of a company. But the people who take their place just have to make sure that they don’t crash the business, so I do not feel the same way about them.
Do you think it is at all out of line to receive benefits in excess to 500 million dollars, like some of these indicted CEOs recently have?
No offense fruitbat, and this may not be the case, but unless you actually have started up or run an entire business by yourself, I don’t feel you have any place to speak here. If that is not the case, please accept my apologies for flying off of the handle.
True, you are only worth what other people are willing to pay you, but as the CEO, you are the one who determines that. Unless you have issued stock, then you convince your shareholders how much you are worth.
Every sentence the Sinful gave above is a reason CEOs deserve more. More risk, more liability, more work.
Sorry, at the SDMB we tend to be impressed by sound arguments, and unimpressed by claims to authority.
CEOs make money for exactly the reasons Fruitbat laid out. Entrepreneurs (whicn most CEOs are not) make money if the product or service they supply meets a demand at a market-freindly price. Econ 101.
If my business plan is to sell flavored drainwater, infinite amounts of risk-taking, education, stress, ambition and hard work will all be irrelvant. Or do you assume that if your business eventually fails, it will reflect badly on your work ethic?
As far as I know, CEO is the only job title where you can drive the company into the ground, leave with a overly generous “golden parachute”, then be hired to do the same thing at a different company on the grounds that you’ve now got the experience to know what not to do.
It’s related to how much you’re responsible for, not how much work you have to do. To an objective observer, CEO’s are responsible for everything that comes out of their company. They are accountable to shareholders, customers, corporate law, and even their own company’s employees. Ground level workers are only responsible for doing what they’re told and are only accountable to their boss.
fruitbat nailed it in one post: Because the market has determined that the knowledge, experience, and skills of an average CEO or executive are more valuable than the knowledge, experience, and skills of the average worker.
“The market” for corporate top managers consisting, essentially, of other corporate top managers, that is. They pay each other insane money because they can. That is less true as the company size is smaller, of course, but there is still a community that takes care of its own first.
Um, sinful, workers don’t have risk? They can “just get another job”? Not that easy, not in this economy, and meanwhile they don’t have the same financial cushion to see them through. It doesn’t help at all when the company’s failure, and their own unemployment, is traceable to an LBO gone bad, totally unrelated to anything the workers have done, or when the numbers have been propped up artificially by gutting the company’s primary assets - its people. When CEO’s are visibly passing on virtually all the risk to the people who can’t affect their ultimate results, and they’re getting bonuses for it as well, is it still fair to say they’re worth 500x+ as much?
Well, being a CEO, the difference between me and a ‘worker’ is the fact that they do a job, and they are pretty much told exactly what to do. Without getting into the HR of it, jobs and decisions CEO’s are responsible for can make or break a company, and the reward should match the risk. I’d pay someone $8 per hour to flip hamburgers, as there is no thinking and limited skills. Now, as a CEO, what do I do when I get a variance in a report for say supplies? The worker doesn’t care, where I have to see if it’s a price variance, efficiency variance, static vs flex budget amounts, etc. The average worker neither knows nor cares about that.
Really? When does that particular question ever arise?
I think almost all intelligent people realize that the Big Boss makes the most money. I think it would also be nice if he actually paid the biggest price if he screws things up.
A fair wage. That’s what most workers want. If they work hard, they deserve a fair wage.
My wife is one of those “indispensable” employees who helps keep her company’s ENT practice afloat. She was told over and over how great she was doing. The company’s making a lot of money. She’s “a miracle worker” when it comes to getting surgeries approved by the insurance companies, and getting surgeries scheduled at the hospital.
Raise time comes up. She’s rated “satisfactory,” and given the standard 4 percent raise.
Loyalty. Remember that when you start your business. Remain loyal to the workers who remain loyal to you. Expect a lot from your employees, and reward them, if at all possible, when it’s time.
My wife doesn’t want the same amount of pay that the controlling CEO does. I don’t know any worker who does. Just some fairness would be nice.
I certainly don’t begrudge honest, ethical CEOs, particularly the ones who founded a company.
What I do have a problem with is CEOs who use a company’s assets as their own personal playground, who make poor decisions and drag a company into the ground, or who are otherwise inept, but still get millions of dollars in compensation.
And exactly what is the personal risk for a CEO who didn’t plunk his own money into the company? At the startups I have worked at, the majority of the start-up money came from investors.
And finally, as to hours worked, I have yet to work at a company where any of the business people put in more hours that I do.
I would also say that there is a world of difference in asking, “Why do CEOs get paid more” and “Why do people who found their own companies get paid more”. If you start your own company there is no earthly reason you should have to justify paying yourself more than your workers. I would presume you don’t have a board of directors and the like to dictate terms to you.
If you are a CEO of GE for example, you do not set your own salary. You are a commodity in a marketplace. Fortunately for the potential CEO the number of people who have proven they can run huge multi-national concerns are severly limited. Thus the board and the company owners are forced to pay for your expertise.
Sinful, I also think you’re leaving out employees who fall somewhere between CEO and “future factory worker.” Coming out of college, I went to work for a startup company manufacturing construction materials. I was the first full time employee there, making me part design engineer, field service rep, marketing director, salesman, accountant, receptionist, lawyer, welder, mechanic, etc. While I wasn’t exactly a CEO, my work made the company succesful, and my decisions (to an extent) determined the future directions that the company would take.
I passed up a higher paying job with a solid, well-established company to do that. You’re damn right I want a share of the profits.
The reason CEOs get more money is because people are willing to voluntarily pay them. I’m sure the people who make these decisions (usually stockholders) have their reasons for this decision, and it’s likely based on what they think will net the company the most money, but the fact remains: it’s their decision to make utterlly regardless of whether the rationale even makes sense at all.
God, one of the most ill-informed OPs i’ve seen in GD for a while.
Let’s take these points one at a time, and see if any of these criteria really serve to distinguish CEO’s/Business Founders (not the same thing, but i’ll get to that later) and workers.
Risk: as ElvisL1ves has already pointed out, this distinction is completely spurious. Every worker runs the risk of job loss, and there is no guarantee of finding new employment quickly, or indeed at all.
Also, there are many cases in which CEOs actually assume less risk than regular workers. I’m thinking of CEOs who have stock options and bonuses written into their contract that are not conditional on their own or the company’s performance. Anyone who’s kept even half an eye on the financial press over the past few years will have seen stories about CEOs who leave with huge severance pay after overseeing a decline in their company’s fortunes.
Education: you’ve already conceded yourself that CEOs are essentially workers in many cases. And there are also millions of regular workers in modern post-industrial society who have undertaken “4-6 years of hard university work.” A very short list includes lawyers, accountants, professors, teachers, marketing consultants, doctors, social workers, engineers, lab scientists (sorry, chemists, biologists, etc. for the general term), journalists, pharmacists, etc., etc. A good percentage of “workers” in the NBA and NFL have also spent four (or more) years at university. Many of these workers are employees of large corporations or companies. What makes the CEO so unique in terms of education? In fact, some CEOs, even nowdays, don’t have college degrees.
Stress: Firstly, many workers do indeed have to think about their work after they leave for the day. Your ridiculously simplistic dichotomy of “CEOs” on the one hand, and “burger flippers” on the other misses a huge proportion of the modern workforce.
And even people in minimum wage, manual labor jobs often have stress as a result of their work, even if this stress does not involve the content of the work, but other problems such as “How can i make ends meet on $320 a week” or “I hope the bus to take me to my night job isn’t late, or i might get fired.” Read Eric Schlosser’s Fast Food Nation and ask yourself whether you would find it stressful to work in some of the meat-packing places that he discusses.
Ambition: You treat “ambition” as synonymous with “no laziness,” but the two are not the same thing. I could be incredibly ambitious, but also lazy. This might mean that my ambitions are not realized. Also, the way in which you equate these things implies that workers who are not CEOs are lazy and have no ambition. Tell a single mother working two jobs for a total of 70 hours a week, before coming home to look after her kids, that she’s lazy. Tell a cop who pulls three overtime shifts in a week to bump his pay that he’s lazy. Or a woman who works nights as a waitress and days at a supermarket just to get by. Or a lawyer who adds ten hours of pro bono work onto a sixty hour work week.
My own ambition is to be a college professor. Even if i do incredibly well, and become very successful and renowned in my field, i will still never be a CEO, or earn as much as one. Does this mean that i have no ambition, or that i’m lazy? Just because a person’s ambition is not simply to make as much money as possible, or to head a major corporation, does not mean that the person in unambitious or lazy.
Hard work: This idiotic argument was addressed in my previous paragraphs. Again, you ridiculously assume that anyone who is not a CEO or the owner of their own business is lazy.
Well, there’s really no need to address these shibboleths again, save to reiterate how asinine your taxonomy of employment is, and how offensive your constant use of the term “burger flippers” is, both to those who actually do this job for a living and to those who are workers in other fields of endeavour. Again, in case you hadn’t noticed, there are workers who are neither CEOs nor burger flippers.
And in response to your questions, i don’t know. How many burger flippers do die of stress? Do you have any idea? Or are you just pulling shit out of your ass again? And how many CEOs die of asbestosis, or from septicemia caused by cutting themselves with a dirty butcher’s knife, or from lung cancer caused by coal dust, or from gunshot wounds in the line of duty? Did you know that, in terms of catastrophic injuries and deaths, the most dangerous occupation in the United States is (or at least was last time i looked at the figures) the meat packing industry? How many workers die early deaths because they can’t afford health care to treat chronic illnesses? How many workers’ kids suffer from lead poisoning because they can’t afford to live in a newly-painted house, or because they were never told that their house has lead paint?
And, as i suggested earlier, and as you yourself acknowledge at one point, CEOs and business owners are not necessarily the same thing. Lumping them in together, and contrasting them as a group with “burger flippers” the way you do, just reflects your own ignorance. As furt clearly pointed out, many (perhaps most) CEOs are not entrepreneurs.
And a quick note to chicago faucet: your attempts to tell people when they do and do not have a right to speak might work with your employees, but will not help you much around here.
2 hours a day? Suck it up, crybaby. After all, if your own prognosis is right, this will all be rewarded further down the line.
So you’re not just annoying here; you also pester people for a living.
Cry me a fucking river. Your reductionist, ignorant stereotyping of workers leaves me with no sympathy.Who knows–maybe if your business fails and you end up having to work for a living, you might develop some empathy one of these days.
And you just know who’d be first against the wall…
Note that none of my post is intended to argue that workers should get paid the same as CEOs. It’s not necessary for me to make that argument in order to demolish the naivety or wishful thinking or pig-ignorance displayed by the OP. Fruitbat and minty green explained the pay differential clearly, concisely, and without resorting to the sort of offensive generalizations made in the OP.
Thank you for saying exactly what I wish I had said. Reading more closely I am not at all sure what kind of business the OP is talking about here. I tend to doubt we are talking about a franchise or a factory. Going door to door with an initial investment of $3500 doesn’t sound like the type of venture with employees to me. MLM perhaps? I am probably wrong in that assumption, but if so my esteem sinks further.
Except in your case, Sinful; the likely of your business failing is 100%. You utter disdain for your employees (which you don’t even have yet!) is what differenciates you from your successful competitors. A successful business owner sees his employees as a resource which is expensive to train, and difficult to replace. Your pompous attitude will drive you employees away from you, and believe it or not, you need them more than they need you. You don’t make the product; you only manage the people who make the product. If you treat them like replaceable chattel, they will bail on you at the first better offer, and from the sounds of you, that would be just about anywhere else.
So this “business” you are working so hard to build; I’m betting it is a multi-level marketing scam like Herbalife. No wait, what are they calling it them these days? “Matrix” marketing, ooh, that’s different.
Here’s a list, I’ll bet your first year’s profits you “business” is among them:
The attitude towards sharing your profits is strange as well. Here in America at least you damn well better share your profits. There are four ways an employer is expected to do this:
Salary - Pay me
Benefits - Offer me some protection from the vagaries of life
Bonuses - Give me a bit extra if I help your business grow
401k - I expect a contribution towards my retirement
If you choose not to offer most of these incentives you will not find a very willing and/or skilled workforce waiting for you.
I would ask how many large corporations anyone knows of were STARTED by the CEOs they now have? How many CEOs were imported from a totally unrelated company solely on the basis of them knowing how to screw employees?
How many of today’s CEOs have EVER done ANY of the jobs within the company they “run”.
I would also ask: In the era of huge corporate meltdowns, how many CEOs assume any real risk to their personal net worth, REGARDLESS of how badly the company tanks? Sure, they don’t make as much money, but the last twenty times I checked, corporate performance is no longered tied to CEO “bonuses”… ? How many, like the above post, retain tens or hundreds of millions while the shareholders get screwed?
