The CEO’s salary is rarely a market reward for achievement, but usually more in the nature of a warm personal gesture by the individual to himself. -J.K. Galbraith
I would like to make one additional point that does not seem to have been brought up. The growth of corporate America has come at the expense of the little guy. Many independent businesses been forced out of business due to the inroads made by corporations. Obviously corporations are necessary to mine steel, build railroads and cars and the like, and it was in these and similar fields that the corporations first developed. But they have been increasingly encroaching in fields that have been traditionally the province of smaller business. This is bad news for anyone already running an independent business in that specific field, but the general trend in this direction also has the impact of limiting opportunities for people who would like to be self-employed.
Of course, alot of this is due to inherent efficiencies of running things as a corporation. (Govenment regulations cut both ways. Many regulations exempt smaller employers. But some discriminate against the self-employed. And of there’s always the lobbying power of the larger corporations.) But it’s a sad fact nonetheless.
To sum up: I am happy when I am able to buy stuff from Wal-Mart. I am not as happy when I consider the fact that I could not hope to compete against them (i.e. open a business to do that).
Yes, the proposed (not instituted) regulation would require up to (i.e., a maximum of) 100% of a person’s salary for no more than six months.
In other words, OSHA is proposing an inviolable ceiling (no compensatory benefits) for a limited amount of time.
I have problems with the proposal. The corporate responsibilities are rather broadly defined (which could lead to later regulatory abuse). On the other hand, the “massive investments” expected by the companies are the redundant costs of the ongoing investigation of ergonomics that each company would be required to provide individually. A procedure to work out a single valid study that could be applied to all companies (or all the companies in a specific industry) would reduce those costs significantly.
On the other hand, I am sure that it cost the mining companies a lot of money for dust suppression, but the number of cases of black lung and silicosis and related diseases that later become tax burdens has dropped significantly and we are still getting ore and stone out of the ground profitably.
The issue of the Feds interfering with state/local regulations concerning monetary awards is also a significant one. I believe the Feds shouldstep in when states have demonstrated that they refuse to do right by their citizens, but I do not agree to the Feds deciding the “right thing” by executive fiat (or even by committee) before the states have had a chance to work out practical solutions.
I am not a supporter of the current proposal, but alarmist hyperbole does nothing to win my support for “evil corporations.”
Of course, flights of Fanatsy and Horror are not limited to the corporate side of this discussion:
oldscratch, I feel that most corporate officers are currently overpaid, but spreading their wealth among the workers would really not go very far. It would never come close to paying for the issues OSHA’s plan raises.
As for reducing profits, that is simply a way of telling investors to go elsewhere with their money, leaving less capital for the company to actually invest in the improvements. It would be a major display of the Law of Unintended Consequences in which the results would be more harmful than the problem it allegedly addressed.
Tom, First of all, I did not claim to be exhaustively describing the new OSHA ERGO standard. Actually, the benefit would be eithger 90% or 100%. Current com[ rates are around 66% with a maximum weekly cap. OSHA has none. I would get $400 per week on comp. I would get $1038 to $1200 or so under the Ergo deal. THat is a pretty big change.
Secondly, I have seen nothing stating that it would have a time limit(which does not mean that it doesn’t. It is entirely possible that I read over that).
Third I din’t even mention some of the real scary parts of it such as the fact that the work related injury needs only be a contributing factor not the sole cause. ut I still dont think I was being hyperbolic.
Fourth, I seem to recall that you are an atty, which is fine. But I handle our comp (and GL and other) dollars all year long. I know that this will cost us a lot. It is not hyperbole to say that we will have to make cuts if this goes into place. As it stands, we are rprobably facing a layoff or restructuring in the coming months.
I calculate that the cost will be roughly 15% of our net. Probably more considering that our workers could get a raise for filing a claim and not working. If you add in lost profit due to a lack of workers, administarative costs and prevention costs, it is much higher.
I think that OSHA will prove, should they act on the Ergo standards, is that a) the govenrnment is not the puppet of corporations and b) government can and does bleed corporations for the benefit of individuals from time to time.
Sometimes I wish I could make everyone handle work comp, ADA, and discrimination claims for a year. What sounds great in the abstract is often ghastly in reality.
This doesn’t prove that corporations are not evil, but it is a good demonstaration of the lack of power of corporations. Were they running the country, this never would have been proposed.
scratch I know you don’t like market forces as an explanation of the cost of things, but good CEO’s are hard to come by. They may or may not make back their salary, but they may or may not evr be employed again if they screw up. It is diamonds and water.
As a “little guy” I dont’ feel put upon at all. I make a fair wage or I leave. My employer can raise my salary, or find someone who works cheaper. It is up to me to make myself more valuable. Not the government, nor my employer.
It is true that big companies (not nesecarily corporations) put other businesses out of business. But then, I certainly will go to circuit city over the local store to save $150 on a computer. Sorry, but that is the beauty of the market.
I promised I’d get to Kimstu’s post: kimstu said
I disagree here. It is more profitable for an employer to have people desiring to work for it. Better employees apply and stay for a longer time. This saves money. There is a distinct disincentive for any company to engage in practices that will land it on the news for injuring its customers, employees or the environment. Remember what happened to Jack in the Box when its customers got e-coli? But some basic regulation I will agree on.
I ment ot say: if corporations are to be regulated, it will probably be by the government. We must be careful not to give the governmetn too much control or corporate america could begin to resemble the US government in its inefficiency.
I disagree. In a competetive environment, a corporation has to constantly work at staying alive. If it is inefficient, or its product is not purchased, it will die like a cave man that can’t catch food. Downsizing is often a large part of the equation. Overhead directly impacts corporate health.
to me, this issue is the most important issue in the upcoming election. my ability to support my family, IMHO, dependes gratly on the success of American business. I am worried that more and more of the US is willing to stick it to “big business” for their own benefit. I really, really, can’t understand the sentiment.
Maybe I missed it in the thread, but most large corporations started out very small…just a few folks with a good idea, hard work, maybe a little luck, and an improved or new product/service. In other words the large corporation got there because they did it better than the other guy…they utilized resources more efficiently. In the thinking of the biologists/evolutionists, this process in the animal kingdom is called “natural selection”. The best will win out.
The yardstick used to rate companies is profits/ROI [Return on Investment]. It is the primary goal of every good executive to insure the stockholders have the greatest possible return on their money, and yes sometimes other things such as the environment, employee working conditions, etc. tend to take a back seat. There is a natural balance struck if the company steps too far over the “line” however. The EPA is there, OSHA, anti-monopoly suites, and the like can each effect the bottom line to a large degree. Remember the tape of the executive boardroom where the disparaging remarks regarding minorities was made public. Although it may take longer than desired, companies who in one way or another abuse their position do find thenselves whittled down. But to arbitrarily paint all corps as evil is crazy IMHO.
YES!! I do believe in “market forces” 
and would be most happy to be the best gopher you ever saw for the small stipend of 5% of what some of these guys make, ROFLMAO!!!
This may not be as common as Moore (I’m assuming that’s who you meant) would like you to believe, but it does happen. If you’re interested, look at Scott paper products or Sunbeam for examples. Both companies hired hotshot new CEOs who instituted large-scale layoffs. Both saw short-term (1-2 years) stock surges, whereupon the CEOs cashed out muti-million dollar option packages and resigned. Both companies then pretty much collapsed. Scott got bought out by its main rival, Kimberly-Clark. Sunbeam has been on the decline for over three years. Their stock is now worth about 10% of what it was before the layoffs.
I read recently (in Business Week, I think) that while Japanese and German CEOs make 10 to 20 times the average worker salary, American CEO’s make over 400 times as much as the average laborer. That means you could give say a 20% pay increase to 2000 employees and still be paying your CEO on par with other successful industrialized nations. That’s reasonably far, isn’t it?
tomndebb
Dumbguy
My comment was actually referring to the excessive costs of the OSHA proposal, but let’s look at your “400 times” figure: If we eliminate the CEO position, at 400 times the “average” wage, how much increase can we give to each employee in a company with 400,000 employees (as, for example, the Big Three auto companies have)? When you figure that the “400” figure often includes stock, not cash, the amount of cash that could be given to each employee or spent on improving working conditions drops further.
I agree that the top officers are overpaid for their actual performance, but I doubt that dividing up their salaries will have a material benefit on their employees.
My actual complaint against the top officers is in contradiction to Mr.Zambezi’s comment:
I cannot think of any CEO who, having fouled up a company, was put in the position of never again being employed. The ones I have watched, good and bad, are on a rotating circuit where they always find more work–and always at inflated salaries so that, if they did make themselves unemployable, their retirement would quite luxurious.
It is true that good CEOs are hard to come by, but the good ones, the mediocre ones, and the truly terrible ones get hired by boards of directors all over the country at the same scale, regardless of past performance, and are compensated at the same scale regardless of the results of their decisions. From what I have seen, there is less accountability imposed on a CEO or other corporate officer than there is on the average mail clerk.
In over 30 years of watching business from the inside, I have known exactly two corporate officers (neither at the level of CEO) who have actually suffered for misdeeds. The first was caught stealing (and was dismissed, although no charges were filed). My understanding is that he had to leave the metropolitan area to find work–although I did not hear that he could not find work. The second was an abusive SOB who spent as much time backstabbing his superiors as he did stomping on his subordinates and who cooked the books on many occasions to inflate his apparent performance. It took the company 15 years to actually decide to get rid of him (when he was caught lying directly to the new CEO), and he then lost his next job when he began his abuse and backstabbing before he had built up a power base in his next company.
However, the CEOs, CIOs, COOs, presidents, and VPs that I have watched screw up companies have, when finally dumped, simply moved on to new companies where their arrival has been heralded with encomiums describing their brilliance at the places from which they were just tossed.
(BTW, MrZ, I’m just a garden variety programmer, not a lawyer, but I generally work on financial systems, so I try to keep abreast of the business as well as doing the technical stuff.)
Sure, if you choose to use a company that big as an example, the difference becomes irrelevant, but there are very few that size. I assume the 400x figure was a mean income disparity, so for comparison we should probably portion that out over the mean corporation size. I don’t know what that is, but I’m sure it’s considerably less than 400,000 employees.
**
I don’t see why that same stock wouldn’t be as valuable to the employees as it is to the boss.
Sorry, Dumbguy, my experience got in the way of reading your post and I mentally inserted a “some” into your statement regarding CEO’s making 400 times the salaries of their employees.
I’m afraid that the average U.S. CEO does not make 400 times the prevailing wage in his company. Not the mean, not the median, certainly not the mode. In order to find the CEOs that are making that kind of money, you pretty much have to go to the really large corporations. I have been employed by or provided services to a number of Fortune 500 companies, including one in which the CEO was identified by the local paper as having the greatest salary in the region. (He was making about 14 times his lowest paid employee and most employees were quite a bit better paid.) While I find U.S. officers overpaid and not sufficiently accountable, (and their median salary probably is generally more than 14 times their workers’ median salaries), the 400X factor really is the exception, even in the U.S.
Your point that the employees could do well with the CEO’s stock is well taken, but it does not address the earlier issue of using that “money” to improve working conditions. You cannot use stock options (which have no value until they are exercised) to hire ergonomic researchers or buy ergonomic furniture and work stations.
One has to look at CEO, CCO, CFO, etc., compensation in the greater context of the business. IF the company has low productivity and a high turnover rate, then perhaps it is a good idea to drop the higher benefits down to lower level employees. If productivity is high and turnover is normal or lower than normal, what would be the incentive to increase pay?
It would be nice if everyone got paid less and products cost less for the consumer, at least from the consumers’ perspective. But if they are still buying the product, it would seem that the cost is acceptable.
Sure, it is frustrating to look at what the CEO makes and then compare it to the salary of the average worker. Hell, I am one of the workers and the CEO’s salary looks like a king’s ransom to me. But looking at someone making $2 million a year and saying “nobody should make that much money” is a little bit like wanting to tax the rich down to what the middle class considers reasonable.
This type of …well, I can’t think of a better word than envy…can be applied to any profession where people make a huge amount of money. When it occurs in the private sector, it is only going to get changed in one of two ways: market forces or government intervention.
I will take the former. If the board of directors want a long term investment and continued profits, then it is within their control to alter the benefit package in a manner that would encourage this. Time released options for example. However, I have seen companies with this structure go under as well (Boston Market.)
On a side note: Corporations get started by people for two (among other) very good reasons: a)to avoid losing personal assets should the company flounder or get sued into oblivion and b) to raise capital through stocks. As a side benefit stocks allow little guys like me, who don’t have enough moolah to start my own business, to invest.
I’m not sure what you’re basing these claims on, other than your anectodtal experience. Business Week does a profile of CEO pay every year, and it was their claim that the average US CEO salary was over 400 times the average worker salary. I tried to find the magazine to see exactly what type and size cororations they were talking about, but I seem to have thrown it away. I searched their online archives and couldn’t find it either, but I did find this:
which claims that Michael Eisner makes 25,000 times more than the average worker. So, if there’s one of those guys for every 50 guys making 14 times the average worker, you’d end up with a mean of around 400x.
Dumb, I tried yourt figures out. In a corp of 12,000 with avg pay at $18k per year. If the CEO had his salary halved, the Benefit to each employee would be $3,000. This is not going to affect the standard of living of anyone. It would be a nice little bonus though.
But I don’t see that CEO pay should matter to anyone other than the CEO and teh sharholders. Just because the CEO gets less does not necesarily mean that the employees will get more.
That is an extra $250 a month. That would definetly affect peoples standards of living.
exactly, oldscratch. I remember being in a public meeting listening to one of those CEO folks, pulling down 100 Gs annually plus car etc. saying “No one will relocate for a 12 $ an hour job”.
lots of folks would, it’s just an example of how out of touch with the rest of the country some folks at the top are. I’m also reminded of a scene where George Bush, when he was prez went into a store and paid cash for something and was amazed by the scanner.
Well, assuming they pay no taxes, $250 is significant. But it wont allow a big change in a person’s lifestyle. Private school, a new car, a new home, college… what it may mean is a little nicer apartment, or a few dinners out.
For me it would be $157 per month. Not even what a week’s groceries cost.
But it still does not matter if the sum is $15,000. If the employees are sticking around and working hard and being paid fair market wage, there is no reason to increase wages unless it will increase profit.
i’m a former Customer Engineer for IBM
been working in electronics since '72 when i dropped out of engineering school majoring in Electrical Engineering.
the corporations manufacture trash that is designed to become obsolete. they hide information about the trash they design. they bombard us with stupid commercials full of psychological manipulation to get us to buy the trash. BUT of course that is freedom of speech. WHAT BULL! how many individual citizens can afford TV air time?
i don’t have a problem with Adam Smith, but dumb capitalist sycophants pi$$ me off. Adam Smith objected to joint-stock companies. what we now call corporations. the corporations don’t tell you that, do they. FREEDOM TO HIDE INFORMATION.
Dal Timgar
Let me ask you this. Why do you feel it’s reasonable to judge the impact of an increase in the workers’ salaries, but CEO salaries aren’t anyone’s business?
Well, I can’t really speak for speak for others, and I guess I shouldn’t have. But my position is that what anyone makes is that person’s business. They need to decide whether or not it is enough. IF not, they have many, many choices as to what action they can take. They can learn more skills, work more hours, find a different profession…
…or they can complain and simply demand that they get paid more. It may work, it may not, but surely it is the worst way to actually make more money.
Let me turn the question around: how can you state what is fair for someone to make in a corporation? How do you know that the employees that would receive the $250/mo. actually deserve it? How can you judge that the CEO does not?
Sure, the numbers for the CEO are big to shmucks like you and me, but that alone is not justification to lower that number. Hell, If my employees found out what I make they would kill me, and I am paid about 60% under market.
I never did, actually. Mostly I just quoted some numbers from Business Week. For the record, they have argued that CEO pay is excessive. So has Alan Greenspan, among others. I just offered some information that you’re free to interpret as you see fit. Perhaps when you read that Michael Eisner makes 25,000 times as much as the average worker, you inferred a value judgement. Might want to consider why. Or you might not.