Yahoo: It’s Good to Be the King: CEO Pay Up Big 2010, Not So Much For the Average Worker

[Madison Redskin]

His vote is largely useless (especially for mid and large cap companies) because when you account for investment banks, large intitutional shareholders (i.e. Mutual Funds, etc.) and the top execs at the company you have well over 60% of the vote. Their interests are aligned most of the time and they control the vote. Take GE for instance, instituational shareholders have over 50% of their common stock and that doesn't even include company execs, etc.

I agree with most of the points you're making, but it's worth noting that activist shareholders are becoming much more vocal about executive compensation ... largely because executive compensation has skyrocketed over the past 20 years.

[Bootleg]

Well it's been a good diversion.

Closing statement: If you have an issue with the compensation of CEO's... Don't villify the CEO. Blame the people who compensate the CEO in such a way because they believe that'll in turn make themselves rich.

[Predicto]

Well it's been a good diversion.

Closing statement: If you have an issue with the compensation of CEO's... Don't villify the CEO. Blame the people who compensate the CEO in such a way because they believe that'll in turn make themselves rich.

You mean the other CEOs and consultants sitting on the compensation committee? Ok, I will.

[Bucaro]

You are missing the point. It's not an issue about how much power an individual shareholder holds, no one cares and no one is arguing that.

The point is that the CEO is elected by the board of directors who in turn is elected by the shareholders. Thus, the CEO and board of directors act in the interest of the shareholders NOT at the expense of them. If you want to argue that, go ahead, but don't go off on dumb tangents unrelated as you just did.

I feel like maybe I should explain this to you in a color by numbers......your point about the shareholders deciding and Predicto's disagreement with that, where he said the board essentially decides, is what my post is referring to. Predicto is essentially correct, the shareholders are controlled by large institutions and execs from the company and 99/100 times vote with the board recommendations. The regular guy common shareholder has no real control so the boards recommendations are passed and the board is elected by the institutional investors that play squash and golf with the CEO and the board. They act in the interest of the stock price but the point is, salaries are paid out of a specific bucket of money, if the CEO takes a large percentage of the that (in good times and bad) + the board and top execs, then the other employees earn less on a relative basis (CEO and board get 10% raises, everyone else gets 3%) it creates a further pay gap and increases inequity (gap between the top 1% and the rest of the US)

[DRSmith]

The CEO of my company is there because his family owns the majority of stock, now this does not bother me so much because if screws up bad it hurts his families finances.

But like many companies they offer stock options to employees which are non voting shares which means no voice but adds more power to the voice of the majority owners of common shares

[Bootleg]

Whelp, things went quicker than expected.

I feel like maybe I should explain this to you in a color by numbers......your point about the shareholders deciding and Predicto's disagreement with that, where he said the board essentially decides, is what my post is referring to. Predicto is essentially correct, the shareholders are controlled by large institutions and execs from the company and 99/100 times vote with the board recommendations. The regular guy common shareholder has no real control so the boards recommendations are passed and the board is elected by the institutional investors that play squash and golf with the CEO and the board. They act in the interest of the stock price but the point is, salaries are paid out of a specific bucket of money, if the CEO takes a large percentage of the that (in good times and bad) + the board and top execs, then the other employees earn less on a relative basis (CEO and board get 10% raises, everyone else gets 3%) it creates a further pay gap and increases inequity (gap between the top 1% and the rest of the US)

Let me break it down for you in a color by numbers type of way, because you obviously can't do it.

1) Nobody cares about common shareholder vs institutional investors. I never mentioned it as pertaining to my point, except in response to something Predicto said about how he doesn't personally elect anyone.

2) The institutional investors own a large portion of a company's equity. Why would they purposely and knowingly **** themselves over by voting in a way that is blatantly bad for their own bottom line? They don't. They vote based on what they think will make their own bottom line grow larger.

So let me reiterate the point. Board of directors are directly elected based on the interest of the shareholders, and the CEO is indirectly appointed in the same way.

[DRSmith]

Whelp, things went quicker than expected.

Let me break it down for you in a color by numbers type of way, because you obviously can't do it.

1) Nobody cares about common shareholder vs institutional investors. I never mentioned it as pertaining to my point, except in response to something Predicto said about how he doesn't personally elect anyone.

2) The institutional investors own a large portion of a company's equity. Why would they purposely and knowingly **** themselves over by voting in a way that is blatantly bad for their own bottom line? They don't. They vote based on what they think will make their own bottom line grow larger.

So let me reiterate the point. Board of directors are directly elected based on the interest of the shareholders, and the CEO is indirectly appointed in the same way.

Often these bad Ceos cover their mistakes by taking it out on the working folks

[Bucaro]

Whelp, things went quicker than expected.

Let me break it down for you in a color by numbers type of way, because you obviously can't do it.

1) Nobody cares about common shareholder vs institutional investors. I never mentioned it as pertaining to my point, except in response to something Predicto said about how he doesn't personally elect anyone.

2) The institutional investors own a large portion of a company's equity. Why would they purposely and knowingly **** themselves over by voting in a way that is blatantly bad for their own bottom line? They don't. They vote based on what they think will make their own bottom line grow larger.

So let me reiterate the point. Board of directors are directly elected based on the interest of the shareholders, and the CEO is indirectly appointed in the same way.

Wow, my junior in high school cousin understands corporate finance better than you! The bottom line generally doesn't change, the CEO's high pay is taking money away from the other workers in the company and furthering the gap. The more he gets paid, the less everyone else gets paid without any significant change to the bottom line. If you would have actually read my last post you would see that.The point about institutional shareholders that you don't seem to get is that the people who run those institions are other CEO's and board memebers. They all work, golf and serve on each others boards.....therefore it is essentially CEO's (and other execs) deciding pay for other CEO's just like Predicto said. You honestly have no idea what you are talking about, it is a beyond simplistic understanding

[greenspandan]

We've got all sorts of stupid hyperbole about 999,999 out of 1,000,000 Americans living in poverty,

i apologize for your lack of comprehension. i did not say 999,999 out of every million americans live in poverty. i said that 999,999 out of every million *poor people* in america could work hard and still not end up rich. my point was that the idea that "if you are poor, hard work will eventually make you a rich CEO" is a one-in-a-million proposition. i'm explaining this so that others reading this thread will not mistakenly think you have a legitimate talking point -- not because i think you'll come around on anything.

[mcsluggo]

I appreciate. Your post in its honesty and tone.

A couple of thingss on my mind after reading it.

I don't think that any solution that doesn't address the whole upper 1 percent could work on what many here feel is the root problem of income disparity. I also would need to see whatever rules are created having to beequal for every individual. Otherwise. It could become just a political move.

you are right... there are alot of different "issues" entangled in the same debate.... with "fairness" trumping most others in many discussions. Fairness matters, but it is a dangerous area.

On the one hand, there are problems from an economic efficiency standpoint when income/wealth diparities get too large --- or too small, for that matter. There needs to be both ENOUGH disparity so that people have the incentive to strive and achieve... but there also cannot be too much disparity, for the exact same reason. The US has become more and more disprate over the last 30-40 years (so no,,,, it is not something to be dumped on W's lap-- although the structure of his tax cuts ABSOLUTELY made the situation worse), AND people have become much less mobile across wealth/income stratas as well. America traditionally had very high mobility relative to our "rich world" peers... this has reversed, and the USA is now amongst the worst in terms of the ability to claw your way to the top of the heap (also for useless schleps born rich to fall OFF of the top of the heap) this is problematic to me.. and implies reduced efficiency.

However... these "fairness" issues are CLEARLY a loaded gun, and a slippery slope. It would suck something awful if this sort of thing gave rise to a TRUE radical left, a-la hugo, manuel and evo (chavez/ortega/morales) in America. Right leaning pundits like to posture that we have radical left wing politicians here in the US ... but they are full of feces. The "left" in the US is pretty damned centrist... and this is good. but the truth of the matter is that "fairness" griping is not exogenous... there is always some level of envy/griping about the rich, but it doesn't acually build traction and momentum in the mainstream unless the perceptions of "unfairness" rise enough to reach some sort of a tipping point.

---------- Post added April-14th-2011 at 03:02 PM ----------

Overall...fairness is NOT the factor that drives my thinking... it is economic efficiency (i am an economist nerd, after all)

but mounting disparaties in wealth and income DO have economic concequences: first directly in affecting incentives (people not at the top AND already at the top both strive less if there is little chance of you making or losing a position at the top)... but also disparities EVENTUALLY will lead to less elegant methods of income redistribution than simple "death taxes" or raising the top marginal rate by 2-3%.... we really don't want to set up a scenario that encourages radicalization... Just ask Henry Kissinger ...

"Any economic system, but especially a market economy, produces winners and losers. If the gap between them becomes too great, the losers will organise themselves politically and seek to recast the existing system—within nations and between them."

http://www.economist.com/node/12574180 paragraph 3

[SnyderShrugged]

you are right... there are alot of different "issues" entangled in the same debate.... with "fairness" trumping most others in many discussions. Fairness matters, but it is a dangerous area.

On the one hand, there are problems from an economic efficiency standpoint when income/wealth diparities get too large --- or too small, for that matter. There needs to be both ENOUGH disparity so that people have the incentive to strive and achieve... but there also cannot be too much disparity, for the exact same reason. The US has become more and more disprate over the last 30-40 years (so no,,,, it is not something to be dumped on W's lap-- although the structure of his tax cuts ABSOLUTELY made the situation worse), AND people have become much less mobile across wealth/income stratas as well. America traditionally had very high mobility relative to our "rich world" peers... this has reversed, and the USA is now amongst the worst in terms of the ability to claw your way to the top of the heap (also for useless schleps born rich to fall OFF of the top of the heap) this is problematic to me.. and implies reduced efficiency.

However... these "fairness" issues are CLEARLY a loaded gun, and a slippery slope. It would suck something awful if this sort of thing gave rise to a TRUE radical left, a-la hugo, manuel and evo (chavez/ortega/morales) in America. Right leaning pundits like to posture that we have radical left wing politicians here in the US ... but they are full of feces. The "left" in the US is pretty damned centrist... and this is good. but the truth of the matter is that "fairness" griping is not exogenous... there is always some level of envy/griping about the rich, but it doesn't acually build traction and momentum in the mainstream unless the perceptions of "unfairness" rise enough to reach some sort of a tipping point.

Yeah, Id agree that both our right and left are pretty moderate overall. I think that the divide between them is more contrived for fun political theater and that they intersect very often (which sucks for me because I can t stand either! LOL)

[mcsluggo]

the "right" in this country is fairly centrist economically.... unfortunately, economics seems to be a diminishing pillar in the overall standard GOP platform

bring back the rockefeller republicans! (otherwise known as RINOs ... i suppose)

[SnyderShrugged]

the "right" in this country is fairly centrist economically.... unfortunately, economics seems to be a diminishing pillar in the overall standard GOP platform

bring back the rockefeller republicans! (otherwise known as RINOs ... i suppose)

You wont like this. But I want the Robert Taft Republicans instead.

[mcsluggo]

i might not ever VOTE for Taft republicans... but i would still like the anchor that they brought to discussions, and the effect that anchor had on overall policy.

The current GOP doesn't do much anchoring in areas I care about.. and does far too much anchoring in irritating trogladite areas

---------- Post added April-14th-2011 at 03:52 PM ----------

i'd be happy enough to just bring back the Bush Senior republicans.

in retropect... at THAT time the irritating willie horton-like distractions seemed like calculated sleights of hand to muddy the waters and allow the GOP to affact the balance of power, and cause the eventual GOP-DNC compromise to lean slightly further in the GOP direction. The stupid distractions seem like THE platform now, and the idea of consensus-finding compromise a dirty word.

I want Henry Clay.