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Should the US Copy Switzerland and Consider a 'Maximum Wage' Ratio?
Hugh Pickens DOT Com writes "John Sutter writes at CNN that as Swiss citizens vote on November 24 to consider capping executive pay at 12 times what the lowest-paid worker at a company makes in a referendum. Some say the idea of tethering top executive pay to some sort of concrete metric might stop American execs from floating further into the stratosphere. 'Here in America, the land of unequal opportunity, the CEOs of top-500 companies make in a single day about what it takes an average "rank-and-file" worker a year to earn, according to the AFL-CIO, the federation of unions,' writes Sutter. 'Democracy starts to unravel if a few people become wildly, ethereally successful, while the rest of a country struggles.' A $1 million salary worked for American CEOs from the 1930s to 1980s, says Lynn Stout. But CEO pay, including options realized that year, jumped about 875%, to $14.1 million, from 1978 to 2012, according to the Economic Policy Institute. 'What we've got is basically an arms race,' Stout says, 'where the CEOs are competing on pay because they each want to have higher status than the others.' Peter Drucker, the father of business management, famously said the CEO-to-worker salary ratio should not exceed 20:1, which is what existed in the United States in 1965. Beyond that, managers will see an increase in 'resentment and falling morale,' said Drucker. Stout has suggested that the IRS make CEO pay a non-deductible business expense when it's higher than 100 times the minimum wage. 'Limiting CEO pay to 100 times the minimum wage would still allow top execs to be millionaires,' concludes Sutter. 'And here's the best part: If the fat cats wanted a pay increase, maybe the best way for them to get it would be to throw political weight behind a campaign to boost the minimum wage.'"
But it will never happen. Because (looks up the current thing we're supposed to hate) because socialisim!
But it's not going to work in the US, where rapid growth is part of the ostensible "American Dream" -- which includes gobs of wealth.
---- Teach Peace. It's Cheaper Than War.
How many of them are actually useful to the companies that employ them, versus how many of them are an actual detriment to operations? What about the whole executive and management paradigm?
Can't we consider them a removable problem instead?
I'm the sort who prefers a more socialist state but I don't see how a wage disparity causes democracy to unravel. Bad education and information are what causes democracy to unravel. Not high pay.
The voters are the ones who keep voting for status quo. If they really are desperately unhappy they should vote for something else. But they aren't. So either they aren't that unhappy, or they are voting wrong. If they are voting wrong it isn't high CxO pay, it's bad education and/or information.
That's assuming of course the elections aren't completely Diebolded.
We should simply stop giving tax dollars to these companies enabling these huge differences due to inflation paired up with government contracts. Put actual supply and demand in place and the problem they're attempting to address goes away on its own.
The preceding post was not a Slashvertisement.
So the execs will layoff the lowest paid workers and hire other companies in to do the job of those workers.
Or they will split the company and have one company own the other. Low paid workers in the one company and high paid workers in the other.
So many ways around this they will never close all the loopholes.
Should we?
Yes.
Will we?
No.
Why?
Republicans.
I know Americans don't want to hear this... but a large gap between rich and poor is BAD for society.
How do the rich get rich? By selling things to the lower and middle classes. They then put that money into economic development... which creates jobs, money that gets spent on more shit ... which goes back to the rich.
In the last 30 years, the rich have openly grabbed everything to themselves... and held down wages for the lower classes. So how do you do that and still get richer... you LEND to the lower classes. Hence the debt apocalypse we've been having.
Like it or not... the solution to all this is to income redistribution. You FORCE the rich to pay tax and put it back in at the middle and bottom - which they then spend on shit. The rich are too greedy and short-sighted to realise that this doesn't jeopardise their position... they get the money back along with development for society, the economy and less societal unrest and crime due to the massive wealth gap.
As if they are not going to just find some other way to structure their compensation packages to make it appear to be under the cap.
I am sure there are at least a dozen ways they will be able to make as much as they possibly can and never have it run in to any restrictions like the proposed law in Switzerland. If worse comes to worse they can probably use off shore companies to have the executives get paid in a country that doesn't have these sorts of restrictions.
It is nice to put the executives on notice that it would be good for everyone if pay rates were not so disparate, but really the law will make zero difference.
Wax on, wax off baby!
Yes, we should make them answerable, and their wages approvable, by the people who own the company and who profit or lose by its success! Oh wait, they already do that.
How someone that cares about the product they're making instead of how much they can line their own pockets in 2-5 years regardless of the the long term consequences? I see no downside here.
Seeing that investing is just like gambling: tax the gains like lottery winnings.
...
Seems to me that a cap on CEO to average pay take company size into account, the ratio should be smaller for a company with 100 employees than it would be for a company with 100,000 employees.
A Shadeless room is a brighter room.
American CEOs usually make more money by wrecking the company for short-term gain rather than steering it towards long-term success.
The people who suffer are the people at the bottom who lose their jobs when the inevitable "downsize" comes.
This vote is a vote to break that destructive cycle not just a vote to hate on rich people.
No sig today...
Using the Physical Resources Department (Janitorial Department) of a company as an example: All a given business would have to do is contract out the work of the lowest paid employees. Since those lowest paid employees would no longer work for the original company, the CEO's pay could increase accordingly to fall in line with 12 times the next highest employee.
Repeat until every different cast of employee has formed its respective company for contract based work. There will be the association of: Janitors, Nurses, Doctors, Engineers, Car Wash Attendants, McDonalds staff, Retail Clerks, etc. At this point society will still be classed based, and very much like "A Brave New World".
If the government adds a regulation, somebody will find a way around it.
All my liberal friends think I'm a conservative, all my conservative friends think I'm a liberal.
"Make your society egalitarian with this 1 weird trick!"
If we postulate that this measure will leave company profits unchanged, then the cap will send extra money somewhere else. Its backers seem to assume that it would go to the rank and file workers, but I think it likelier that the owners of the firm would begin experiencing a better return on their money. That cohort, too, is wealthier than average, though not by so much as CEOs since a lot of it is comprised of pension funds and mutual funds. In any case, the loopholes around this kind of measure are so numerous that it would be silly to pursue.
What we really need is to bring back serious inheritance taxes, even if some people want to call them "death taxes". In the long run, huge wealth is not a societal problem so long as it doesn't become dynastic. Rather than playing havoc with the incentives of the living via convoluted tax laws and weird rules, let's concentrate on fighting the growth of entrenched classes.
The US will go the way of China if this ever becomes popular enough to happen. The US business community, the far right, and the southern states will not tolerate such a change, and a "second business plot" will happen and be successful. The rest of the industrialized world has decent laws in place to protect its employees, but not the US and China. Where else will the fat cats go to if a maximum wage is adopted in the US? China? I would think that would not want to go to China unless they are assured they will have complete control there as well. With no place to flee to with thier capital, they will fight to the bitter end here in the US.
How about a law that says movie stars can only make 100 times what the lowest wage guy on the movie set makes? Perhaps recording artists should only make some multiple of what some guy in the studio does? Maybe authors can only make some multiple of what the editors at their publishing houses make?
Does anyone really believe laws like that that would lead to net improvements in those areas, or for society in general? Paging Harrison Bergeron. This way lies madness, folks. As P.J. O'Rourke put it:
Q: What does the "B." in Benoit B. Mandelbrot stand for? A: Benoit B. Mandelbrot
It would never work because there are many alternative means, besides salaries, to transfer wealth and it is impossible to control all of them. If a corporation thinks it is worth it to pay millions to a person it will find a way to do so.
Do you mean the paycheck received on a weekly basis? Do we count stock options or awards? Dividends from preferred stock not available to the average worker? Annual bonuses? Perks (such as the use of a company paid private plane)? Corporate "gifts" of all sorts?
Steve Jobs famously worked at Apple for a one dollar annual salary. However, does anyone here really think that he only made a dollar per year?
The idea has merit, but it is a foregone conclusion that people in power will figure out how to work around the "ratio".
The NSA: The only part of the US government that actually listens.
How about making them answerable to the workers?
This is just typical anti-capitalist politics-of-envy bollocks. "Democracy starts to unravel"? Really? Getting paid the going rate *is* the sign of a free society. Attracting the best talent cost real money. I bet most of the commenters here don't complain when their favorite sportsperson gets paid millions.
Switzerland voted on that too. Why not give everyone enough for food and housing and healthcare. Only let the 1% get rich after society is taken care of.
It's not even theirs.
http://www.reuters.com/article/2013/10/31/us-oracle-shareholders-idUSBRE99U13720131031
Confucius say, "Find worm in apple - bad. Find half a worm - worse."
Our Founding Fathers are spinning in their graves at the very idea of it.
Correct. Couple this with a requirement that all companies pay a living wage, and most of the problem would be solved.
America is about allowing one to rise to their highest potential. The problem is that we have a system that does not encourage individual as well as small to medium sized business growth. The dinosaurs we kept alive on life support were too big to survive, not too big to fail. Jobs and financial growth happens rapidly and in greater numbers with small to medium sized businesses. Give me 100 startups with growth of 20% or more a year for the next 10 years over one large company any day. Even with attrition being high in startups, they will bring more job growth then any one large company is able to. We require an environment where all sizes of business can grow, but the small to medium grow faster just like in nature. Besides It's easy to circumvent for a large number of industries. Replace people with machines, remove the lower rank and file, make more money.
Note that the Swiss proposal is a tax on INCOME, *not* wealth.
Of all the ills of runaway Brazilification of the West and galloping inequality, disparities of income are not the same as disparities in net assets (e.g. wealth). This proposal does not touch wealth. Most rich people don't make most of their money in income (that's for the merely-comfortable); they make it through things like dividends and capital gains.
I doubt, if put into place, it'll move minimum wages much; the modern large company is really a feudal structure, where the lords take most of the loot, and the great unwashed masses make very little. That said, if the peons get comparatively tiny bit more, then that'll push some businesses over the edge.
The wannabes and corporate climbers at the top won't welcome pay restraint, as won't the doctrinaire right-wingers; long-suffering shareholders certainly will, since it's not unheard of, of the C-suite parasites to rape companies to death through anything ranging from excessive perks to full-blown control fraud.
Randroids will just hate this proposal, because they think that's what the boss-class are against.
A pay ratio should be the metric for achieving a more egalitarian society, not the means. If we tried to make it the means, corporations would just find loopholes. First they'd hire outside contractors to mop the floors. Then they'd form companies to provide the service of executive management. "The lowest-paid employee at our company makes $1 million, so I can make $20 million!"
What we need is a progressive individual income tax structure in which the top marginal tax rate approaches 100% as income approaches minimum hourly wage * 24 * 365. Close all the investment and offshore accounting loopholes. With this in place, we can completely eliminate all corporate taxes.
yes, but shareholders are generally the problem because they are usually "friends" of the directors i.e. of the same mind. They give pay rises to directors even when the public company is failing.
If a private company is owned by the person who risked his own money then they should be exempt from this kind of rule but public companies should be subject to a rule like this.
"The hands that help are better far than lips that pray." - Robert Ingersoll (1833-1899)
"American CEOs usually make more money by wrecking the company for short-term gain rather than steering it towards long-term success"
its not just American CEOs, they are in every country. CEOs should only get the average pay rise of the rest of the workers in the company. The only exception would be private companies.
"The hands that help are better far than lips that pray." - Robert Ingersoll (1833-1899)
So you're saying that paying someone a higher minimum wage makes them poorer... hmmm....
Paying EVERYONE (not "someone" a higher minimum wage, makes MOST people poorer.
Because businesses can hire fewer people, so there is much more unemployment.
Because then it never makes sense to hire teenage labor, so kids can't find starter jobs and drain resources from parents more.
Because you can't hire as many people, you are labor constrained and the price of pretty much everything goes up by some amount.
And even the person who DOES have a job gets reduced hours because the amount companies can pay workers is usually pretty fixed.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
Whether it is a problem and whether France of Switzerland can come out of these laws unscathed (or bettered), we in America obviously can't hope to do the same. We can't even copy the rest of the modern world and implement a decent healthcare system, so who thinks we could solve this issue?
shareholders are part of the problem, they are of the same mindset. The shareholders very rarely do the job they are supposed to.
"The hands that help are better far than lips that pray." - Robert Ingersoll (1833-1899)
Wouldn't making a min/max pay ratio result in companies sub contracting out the work of the lower paid employee's to sub contracting companies? It sounds like a regulation that will only result in more paperwork and chaos without solving any problems.
It seems to me the bigger point is simply that the progressive tax system, which is meant to capture a lot of the diminishing marginal returns on such ridiculous pay, isn't setup to actually scale to the rates discussed. As it stands, the highest US tax bracket is in the 450,000+ range. Yet the pay range being discussed is in the multi-millions. Considering how the tax pay scale currently is setup, it'd seem that tax brackets should automatically extend as pay goes up*. So long as it's eventually an asymptotic at some point (say at 80 or 90%), then it shouldn't really matter too much how much people are paid.
Oh, and yea, this does presume that capital gains are no longer treated special and that money laundering through loans on stock or similar is harshly punished as tax evasion--ie, actually jail time.
*Something like low_bracket(x) = (x == 0) ? 0 : 16000*2^(x-1)+1, high_bracket(x) = 16000*2^x, tax_rate(x) = (x >= 16) ? 90% : 10%*5%*x; and yea, this doesn't consider the complexity of marriage and such so it's obviously not so simple, but for those curious the above reaches 90% at $524 million+. Feel free to play around with the rates if you'd rather see an asymptotic rate at closer to 50% or at different cut off. Never the less, the idea that all rich people are treated the same and yet there's much more effort to sub-divide the upper middle class (the poor and lower middle class seem well grouped) in the current tax code does tell you something.
Eurohacker European paranoia, gun rights, and h
How about making them answerable to the workers?
The workers are just as free to buy shares in the company as anyone else is. If they don't like it, they're free to start their own company where their co-workers can vote on how much they will be paid.
Only because we have tied political access to campaign contributions. Break this connection and let the average citizen's voice count for the same as the rich. Democracy is supposed to be one person, one vote. Not one dollar, one vote.
Have gnu, will travel.
I get the idea that market forces set the CEO wage through a combination of shareholders and customers, but I'm not sure it works well in practice.
Who tells the shareholders that the appropriate wage is for the CEO is $10 million? It's the boardmembers. And who are they? Other CEO's and highly ranked executives. They sincerely believe that company is above average and so their CEO is above average and deserves an above average salary. The marginal pay hike to the one individual is relatively mild to the company as a whole so there's no real market deterrent to this behaviour.
I don't think this Swiss proposal is the solution but I don't think the market forces are doing a good job either.
I stole this Sig
I mean they say they want to tie CEO salaries to some multiple of the lowest paid employee. However I thought they made their big money through stock options and bonuses.(Hence once of the bigger complaints that CEOs do something that will boost stock price short turn and then take their stock bonuses and run, not caring that they fucked over the company long term.)
Did you know 80 to 90% of the moderators on slashdot wouldn't recognize a troll even if one dragged them under a bridge.
Here's why the CEO of my last company makes way way more than he is worth:
Compensation is set by the board.
The board positions are overpaid cush noshow jobs.
The board is appointed by the CEO.
If Slashdot were chemistry it would look like this:Cadaverine
I'm the sort who prefers a more socialist state but I don't see how a wage disparity causes democracy to unravel
Here's a thought experiment:
1) Allocate an array of floats and set each value to 1.0.
2) Randomly choose a float, weighted by its value, and increase its value by 1%, then replace it.
"Weighted by its value" means that the probability of choosing any float is it's value divided by the sum of all values in the array.
3) Repeat 2 above for a large number of rounds.
What you will find is that over time some values will skyrocket exponentially. This happens regardless of the number of floats or the amount of increase, or whether the increase is gifted or zero-sum (ie - whether the increase is deducted from the other values). It's an effect inherent in the "increase by percent" rule, which defines an exponential growth. It also doesn't depend on the initial values, so long as the value isn't zero (negative values will skyrocket the other direction).
This mathematical model underlies much of our current economy, with net (invested) worth being the float value, and compound interest being the rule. The old saying "the rich get richer, and the poor get poorer" is rooted in mathematics.
Different rules affect the rates in different ways: compound interest is an exponential increase on value, but inflation is an exponential drain. The difference between two exponentials is itself an exponential (unless they are exactly equal), so the result is still an exponential. Government subsidy is the zero-sum rule of increasing the value of one float by taking it away from others, &c.
Consider now the effect of a fixed consumption level: food, shelter, and so on. As the system becomes more mature, ever more of the total value is stored in fewer floats, and the majority of floats become proportionally small. As mentioned, government subsidies serve to increase a few values at the expense of others, as does inflation.
When the situation matures enough that most people cannot afford food and shelter, they will revolt. They will burn down the system and try something new. (Viz: French Revolution)
Something that takes us out of the exponential mathematical model might serve to defuse discontent and revolution. Whether capping executive pay is effective or sufficient remains to be seen, but on the surface it looks like a rational response to avert a foregone outcome.
We are limited to second and third-tier execs....
The problem is, nobody has identified a metric to measure the tier an executive belongs in. So we recruit a CEO by offering them $10 million a year, reasoning that if we are paying them that much, they must be first-tier.
If Slashdot were chemistry it would look like this:Cadaverine
When the company's not "above average" it's pretty common for someone to organize the stockholders and vote them out. And doing a "good job" of what? If neither the people getting paid and the people paying them (stockholders) are complaining, who's harmed?
^mod up
I came here to say the very same thing.
I'm a left-leaning libertarian policywise & the minimum wage issue gives me trouble.
the progressive/liberal in me says we need minimum wage laws for the same reason we need worker safety regulations...
the libertarian in me thinks it's a temporary fix for a broken system
the Republican in me does another shot, does a line off a hooker's ass, & calls my wife to tell her I'll be late for Sunday school
but i digress...
I can't think of a good reason to oppose this whole minimum wage law Renaissance...but I see trouble brewing...
TFA is a sing of it...some sort of national "Salary Cap"???
Why don't we just raise taxes back to their...idk...Dwight D. Eisenhower levels?
Thank you Dave Raggett
Let's say I'm a CEO. Anyone below the 20:1 salary ratio gets "outsourced" to a different company sharing the same parent company.
Not going to happen. After replacing official slavery with economic one, group of American oligarchs is O.K. with the current status quo.
This type of mentality is still strong, their success depends on suffering others, in order to win some have to lose.
Don't expect CEO's to give up any gains, their families, often previous slave owners raised them to keep wealth within "trusted" circle .
Income inequality in the US has been like this before in the 1920s, then flattened out during the Great Depression into the 1950s. It'll flatten out again. The only question is "how?". It can be more or less disorderly. We can suffer from inequality for a long time though. Why does it cause problems?
I used to be part of the "oh noes! socialism" crowd, but when you look around the world and start thinking about it, you realize disparity is a problem.
I always like to pull this out of politics, and conduct a though experiment. The experiment is this: What would happen if one king had all the money?
That's the absurd projection of where we're headed. IMHO, what would happen is that money would lose its value. Long before the king had all of it, people would give up on money. They'd go to barter, or invent their own form of money.
Well, guess what? We've seen alternative currencies that people ignored like gold and silver become more popular. We've had people taking interest in novel currencies like BitCoin. Why?
Because the original money is hoarded by the wealthy. The original money game has been won. A strange thing happens when you win the money game though. Your money doesn't circulate, so it's no longer worth as much as money. Surprise, surprise, the elites are pressed to devalue the dollar. The Fed is just responding to the fact that a hoarded dollar cannot have much value.
So. If you want the dollar to have value again, it must circulate more widely. The dollar might die, but money will live on. A new generation will build wealth some other way, because the old generation is winning the money game, and... if they are allowed to fully win it they'll be left with a lot less than what they think they have. It may be due to loss of relevancy or loss of revolution.
For all intensive purposes, "whom" is no longer a word. That begs the question, "who cares"?
I've been having plenty of discussions on the topic. It's funny, as Switzerland is probably the country that needs something like this the least. The median salary is around 75,000 USD, and although there is no global minimum salary in the law, there are sectorial conventions. The salary for a supermarket cashier starts at around $4,000 USD per month, but a gardener with technical training, for instance, will not earn less that $4,600.
It's also one of the few where citizens can change their constitution easily and directly, i.e. one of the few where this could ever happen. It won't happen this time (according to the polls), although many voters I talked to just disagree with the number, not the principle.
The BBC has a nice article on it, showing the minimum and maximum salaries, and of course the ratio, for a few major Swiss companies. If you want to learn more about the direct aspects of Swiss democracy, the federal government publishes some information in English.
In Upstate New York State the minimum wage in $8.25 per hour, and x12 is $99 per hour or $205,920 per year based on a 40-hour work week. In theory, that is the same amount for the CEO of a super-regional bank as we as the POS community bank across the street. Same for the CEO of the auto parts store versus the CEO of Ford. How does one differentiate between a CEO managing 100 billion versus 1 billion? Or 1.8 trillion versus 1 billion. Don’t tell me it’s the market because setting the maximum pay at x12 removes the market, IMHO. I think you’d get better results by modernizing the corporate code. That is, stop treating people, executives and their boards, as untouchable unless they steal from the till. Make people responsible for more than profits and I maybe you’d have your answer.
The problem with the 12:1 or 20:1 ratio is that you take the mail-room guy who is earning minimum wage, and you limit the executives seven levels and thirty floors up. What'll happen is quite simply that this company won't hire any mailroom employees -- instead they'll simply contract it out. Personally, and professionally, I like that. But it won't solve your problem at all.
Not allowing a company to deduct more than 100:1 as an expense makes a lot of sense. It's also quite consistent with your laws in general -- it's not socialism at all. It simply because taxable revenue. It won't stop the executive from making the same amount as now, it'll just give you tax dollars when he does -- something that you desperately need these days.
no ,that is up to the shareholders, you know, the owners of the company. if they want to pay someone XX who are you or the government to tell them no?
have you seen my sig? there are many others like it but none that are the same
The wage gap is a symptom, not the problem. The problem is self entitled democracies, and the fiat money banks created to accommodate populist demands. It'd be like trying to cover up herion convulsions, with seizure medication. It reminds me of the old south. When the plantation masters beat the fuck out of their slaves, they wanted to micro-regulate the treatment of slaves, instead of getting rid of slavery. In retrospect, the people advocated those regulations, were just prolonging the problem, and head so far up their fucking ass, they were beyond stupid.
Today, our fiat/populist systems create all these credit bubbles, housing bubbles, stock bubbles, excessive government debt, high prices, inflated executive pay. And these retards want to go around regulating everything, instead of attacking the problem at the source. Fuck them, just fuck them. Irrelevant worthless idiots who will accomplish nothing anyhow.
CEO salaries are set by the board of directors, not the workers or even the shareholders. Exec wages are high because the boards are stacked with people rubbing each others backs.
Anarchists never rule
There's only one problem with this: CEOs are mostly useless aristocrats who nonetheless have too much power, like setting their own salaries. Thus no market forces are involved.
no, but it also doesn;t mean the CEOs own the company either, they are just employees
"The hands that help are better far than lips that pray." - Robert Ingersoll (1833-1899)
Then you'll have no problem finding a shareholder vote on executive pay that was binding.
There is no "free market" any where in the world - least of all in the USA.
Any time government has allowed a fairly unfettered free market it has led to wealth concentration, resentment, and revolution. this revolution might be the raise on unions, violent overthrow of the current government, but it happens eventually.
Anarchists never rule
Trying to regulate this, as others have pointed out, won't work. There will always be those who can and will find a way around it. I remember Ben and Jerry's attempt at a 5:1 ratio - they had to give it up after they couldn't find/retain high level staff to work for them. Better would be a "name and shame" campaign, offering consumers a chance to take their business to companies who were closer to 20:1 than 400:1. If consumers don't care enough to make that decision in numbers great enough to have an effect, than they are effectively endorsing the high salaries. Not to mention the fact that something like this could NEVER get passed in the US, with the 1% having such a tight control on the way things run.
See how it works. Look at what really happens when you do this, because I am confident that this law will solve not a thing and will instead create a new atmosphere where the best companies will attract CEO's with other perks and other bonuses. A company car and driver? Check.... Its going to become all about the benefits, and while the CEO is going to be swimming in benefits (as companies want the best and will shell out for this) the lowly worker is going to get fewer and fewer benefits as his salary does increase slightly. Perhaps its just human nature, but people will align it so that the lower rungs of the company still have the worst jobs and the worst benefits. And things will not change even one iota as exec's end up cashing in on all sorts of benefits that in the end does keep their pay higher in proportion and the lowly worker is in the same boat as before. But sure, we can wait, but I am willing to bet those things happen, because the rich typically get rich by out-smarting the system in some way normally.
Either that - or simply fire the cleaning lady, and outsource cleaning the building to a non-employee. Fire the bottom earners, cut costs and raise the CEOs pay #WhatElseCouldGoWrong
I have mod points and I am not afraid to use them
In many cases the US government has specifically intervened to not allow capitalism/free-market to works as it should. You see, if a company goes after the maximum risk and fails taking down the economy with it, free market is supposed to let the company die and be an example, so that more efficient companies can replace it and be aware of the risks. Instead, the government bails out the company and the CEO gets a golden parachute, which pretty much breaks the free market model.
Violence is the last refuge of the incompetent. Polar Scope Align for iOS
You actually think any policy like this would get past a first draft from an intern? Any such a ideas would be quashed faster than you can say "campaign contributions."
America is fucked.
At what point does an exorbitant executive salary burn money that should be returned to the share/stakeholders? Personally, I think we've reached that point in the US. I believe executive pay should be in the hands of shareholders and out of the hands of handpicked compensation committees. It's likely we wouldn't have a need for this type of legislation at that point.
There are two problems with America's economy right now:
Real wages haven't gone up in decades, which is squeezing the low and middle class. They're having to spend on credit to buy, which is a recipe for disaster.
In addition to that, free trade agreements (Yes, Clinton signed NAFTA, I know. He also signed the DMCA. I hate him for it, because I'm not beholden to a party and I think for myself, unlike those that just blame everything on one guy...... hint hint)... anyway, free trade agreements made it easy to move jobs overseas and not be tarriffed on the goods coming back in.
Really, these are kind of one problem. Wages are low and there are no good jobs. The American Dream is a little broken, and I know who broke it. Hint, it's not immigrants. Yes, the government DID pass those laws, I'm glad you all noticed. Now.... WHY did they? Who asked them to? Who paid them to?
It's not Obama. Moneyed interests want more money. They did the logical thing and squeezed their workers. It just so happens that they're so big that their workers are .... Everyone in the country. So now we're fucked and they make more money.
If you want to blame something on Obama, lets get angry that he hasn't been pushing for the kinds of things that actually WOULD help the economy. He needs to push congress to regulate the banks. He needs to push congress to get some boots on the ground infrastructure projects going to help unemployment. He needs to stop making deals with people that won't work with him at all. He needs to grow a pair.
Yes, I hate CEOs. They don't do shit that any of us can't do. They don't deserve their pay. I work for a large company. The management have been driving it into the ground... I can do that. :D
I would vote for it. I wish it was on a US ballot somewhere. They should tie the head to the feet and keep the organism from becomming too serpent-like.
Our market are (thankfully - see polution, health, company script scam, worker security from the robber baron time) regulated to the wazoo. And what is not regulated tend to natural monopoly, and not even counting that copyright, patent, distort the market. And don't start me on "information" as it is supposed to be the value we use for the free market, but it is distorted.
There probably hasn't been a real free market for quite a time.
C. Sagan : A demon haunted world:
http://www.amazon.com/gp/product/0345409469/
visit randi.org
No, Communism is worker controlled means of production. Socialism is using a large, powerful institution to regulate the distribution of wealth.
Words can and do change their meaning, and people can improve on systems through careful application of basic Scientific principles. e.g. not taking anything on faith and being willing to admit when you're wrong. Socialists have long since recognized that the State can't take over the means of production. You never get past the "Dictatorship of the proletariat" phase. Instead we advocate a complex system that lends itself well to checks and balances.
That's sorta what makes real Socialism work. The only "principle" we have is that everyone is entitles to a good life, with food, shelter and health care. And we're willing to admit when we're wrong and adjust accordingly. The result is a system that is harder to maintain but also harder to exploit.
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Do you even understand what a shareholder is?
I don't think you do. Hint: They are the ones that stand to lose when "a public company is failing".
When Fascism comes to America, it will call itself Anti-Fascism, and tell you to give up your guns.
This depend of the kind of company. While this is very true for a lot of big companies, in a country like Switzerland, the majority of the PIB is moved by smalls companies where the few shareholders are also the executive of the company. The initiative will in fact only affect a few very big companies where the executive and the shareholders are very decoupled.
This is already done in Switzerland: http://en.wikipedia.org/wiki/Swiss_referendum_%22against_rip-off_salaries%22
Swiss citizens vote on November 24 to consider capping executive pay at 12 times what the lowest-paid worker at a company makes in a referendum.
Senior executives then move to a less hostile environment and manage their Swiss investments through subsidiaries.
The resident Swiss manager loses prestige and power at home as it becomes clear that the important decisions will be made elsewhere.
The second-rate man stays on while talent and ambition moves on.
That doesn't promise well for the worker on the line.
Japan had laws like this for years, and they kept worker wages high. It was only when the laws were repealed you started seeing traditional western style wealth inequality. Now Japan's back to tent cities for the homeless. Something I never thought I'd see in that country.
As for the rich using loop holes; just because something is hard to do doesn't mean you don't do it. I've noticed that capitalists throw their hands up and say "I give" at the slightest challenge. As near as I can tell the "Free Market" means leaving things to chance and hoping for the best. I've never once in my life seen a situation where people just let the chips fall where they will and had it be anything more than a cluster-!#$@.
What I'm saying is the solution to our problems isn't hoping some vague principles and ideas will guide us to utopia (an "Invisible Hand" if you will). We need direct human action followed by careful adjustment of policies based and continual testing and data collection. You know, someone should give that method a name. It sounds kinda, I don't know, "Scientific"...
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How about making them answerable to the workers?
When the workers start paying the CEO's salary, then he/she absolutely should be answerable to them.
If I can be modded down for being a troll, can I be modded up for being an orc, or a balrog?
Your example is a private case, not a regulation.
CEO pay should be set by the stockholders. This is a right of ownership that has been taken away from stockholders. Stockholders need to take it back.
Each year, stockholders get the proxy, and put in a number. The maximum pay for the top 5 employees (the SEC tracks that) is then limited to the weighted median (by stock ownership) of that figure.
The right to vote the proxy belongs to the party that pays taxes on the stock. Pass-through entities like funds have to pass through the voting rights. For funds, holders can choose to pick a figure for the whole fund, and that's their figure for all stocks in that fund, or they can pick a figure for individual companies.
This would put an end to excessive CEO pay for loser companies. Some CEOs are worth paying a lot of money, but that's under 10% of the CEO population.
CEO salaries are set by the board of directors, not the workers or even the shareholders. Exec wages are high because the boards are stacked with people rubbing each others backs.
The Board of Directors is elected by the shareholders as a whole. If the company is running inefficiently because the Board is giving unreasonably high salaries to the execs, then the Board will be voted out, or the company will be ripe for a hostile takeover (which is basically the same thing: a majority of shareholders votes out the current Board.)
If I can be modded down for being a troll, can I be modded up for being an orc, or a balrog?
If I want to buy or sell any product I want, or inject any substance I want into my body, who is the government to tell me no?
Oh wait, that's exactly what happens. The government already sticks its nose into the personal business of every citizen, but when it's a rich guy's pay on the line, we'd better stop and evaluate what we're doing, right?
What huge responsibility? What is the worst *individual* consequence of doing bad job?
Compare to the responsibility of a mundane low-pay bus driver. One lapse in concentration at wrong moment, and there are dozens of immediate deaths. Including the driver him/herself.
A CEO has never been fired by a vote? If it includes proxies for shareholders, it counts.
No. I've a far better idea. ...
No problem ! in Switzerland you are welcome to present your idea in a popular initiative. If you can have 100'000 supporters of your idea (you just have to collect signatures), all the country will vote it.
Great no ? Actually, the 12:1 initiative is the product of this exact process. So let the Swiss vote on it. There will certainly be other vote on that matter in the future.
In France for example, there have now a 75% tax on high revenues. We will see how this will work on the long term...
yes, but shareholders are generally the problem because they are usually "friends" of the directors i.e. of the same mind. They give pay rises to directors even when the public company is failing. .
I think you mean board members, not shareholders?
It's all too common to see an executive do shitty job at high pay, then accept a golden handshake and resign. They usually have very little personal risk. Compare to a "grunt", who gets laid off and may have trouble paying rent next month.
Free market has its problems. When the whole rich elite is interconnected to a degree, also implicitly (such as general criminal responsibility for fraud or negligence), the good can not out compete the bad. Free market breaks due to corruption, too. And then there is the whole issue of classes. US is fast becoming a class society, where your status is defined by how rich your parents were, and where the wealthy live off from what they have by inheritance and family, not by what they do.
There are two approaches:
- limit the ratio to within the company
- have the ratio based on minimum wage
I feel the first approach may be the better solution to start with, since this is an environment where a CEO controls the wage scale. If the CEO wants more money, then they would have to consider how much the staff is being paid and how to boost things overall. This means that they can't tell the staff there is no money, while allocating themselves more if the pie. If they can't afford to raise pay overall, then maybe they need to see how they are running the company. If they can only pay people more short term, then give them a bonus, since that does not need to be maintained the next year.
The second approach is a bit more complicated, since a company may be performing well, while the rest of the economy is not doing so well. There is a risk that even a non CEO in a successful company may pass the 20:1 ratio?
Jumpstart the tartan drive.
Actually it's a popular initiative in a direct democracy: nothing related to the a specific party.
there is no need for such a law is the point. that is how it currently is. the shareholders have a meeting and decide what is fair pay for their CEO, the less the government gets involved in day to day activities the better off we all are.
have you seen my sig? there are many others like it but none that are the same
frankly i agree with you, if you want to buy XX or use YY, as long as you dont physically hurt anyone (other than potentially yourself) physically or steal from people to support your habit, go for it. No the government should not be in the business of regulating our bodies, The liberals are always talking about how the government is meddling with "womens bodies" I say take it a step further, keep the government out of all our bodies.
have you seen my sig? there are many others like it but none that are the same
The government already sticks its nose into the personal business of every citizen...
Is your argument that because government does one thing that is wrong it's OK if it does other things that are wrong? Really?
I don't think things are quite that dysfunctional.
Most of the actual ownership is represented in the board (most of the time), by proxy or otherwise.
It's just that executives tend to be good at selling this superstar payroll leads to superstar company performance pipe dream...
Yes which is exactly what the GP stated when he said " Try buying a large screen TV in Venezuela this coming January. "\
Oh wait a Large Screen TV is not a staple.
If you are going to rag on someone for bad analogies, maybe you should follow the thread first.
Sorry, teleporters just kill you and then make a copy. A perfect, soul-less copy.
Oh wait a Large Screen TV is not a staple.
If you are going to rag on someone for bad analogies, maybe you should follow the thread first.
In the US; a large screen TV is a widespread commodity product, that you won't be waiting in line for hours to buy.
It is not a "staple" in the sense that it is a life essential product such as water or flour; HOWEVER, economically speaking, a large screen TV is a staple in the US.
In Venezuala, things are different, partly because of socialist promo behaviors by officials and government political fiascos.
The answer is usually no.
if you're willing to admit you're wrong when new data becomes available. Socialists are. We're also not willing to let something as complex as an economy or as important as the future of civilization be dictated by random chance and the whims of a few lucky (or ruthless) winners.
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I wasn't able to find statistics but my understanding is boards don't get booted that often, and if they are afraid of being booted "I helped recruit star CEO X" is a better argument to stay around than "I made sure we paid the CEO 2% less than we would have otherwise!"
As for doing a "good job" there's a few ways that might be the case. First the CEO's increase in pay might cost the company more than the increased revenue over the cheaper candidate. Or the lure of CEO pay might draw talented individuals into management away from other jobs where they might do more good to the economy.
The market is good, but it isn't flawless, and large organizations have the ability to build structures that subvert the will of the market just as effectively as government.
I stole this Sig
The big rewards should go to the producers, or to the providers of risk capital. A CEO is a hired hand and does not deserve entrepreneurial rewards.
CEO pay is no more a free market phenomenon than Congressional pay. Compliant boards and "compensation consultants" (wonder who pays them?) rig the system.
The current system is like paying Michael Jackson minimum wage while his business manager becomes a centimillionaire.
Unless, of course, you think Carly Fiorina made her money with her Randian inventions and "creative contributions".
we don't think laws are going to do anything magical. But we do think doing something is better than nothing. And history pretty much bears that out. Things got better when we stopped letting bankers do things that caused busts. That's what Glass-Steagal was going and it worked great until Clinton gutted it (because he felt being pro-Corporate was the only way to win a US Presidential Election).
We _can_ learn from the past. We _can_ do better. The only magic I see is the slight of the "Invisible" hand swiping my wallet...
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They can go home, but they don't get to take the ball. If they don't want to participate in the economy they don't get to own it. That's what "Eminent Domain" is for. If you let them a small group of people will claim ownership of everything. What you end up with is a huge amount of under utilized capital. It sits around doing nothing and the entire economy grinds to a halt. Before long you see "Dark Ages" like Europe. Once that happens you either tax the rich and use the taxes to get people moving again or wait for a plague to kill them off...
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If they are really that good as opposed to being experts at looking good, they can
o Found their own company and get rich as it grows
o Buy stock in the company they lead to success and profit from that. That's "buy", not "be granted options".
They will just find other ways to pay them the money like stock or give them 30 jobs each making X.
Maybe just raise minimum wage people or change the Taxcode to increase the tax rate but offer more deductions for paying people.
See my blog http://ilovecookes.blogspot.com/ for light hearted technical information.
As long as you can still legally own your own business, how does this change anything?
Instead of a 20 million dollar salary, they will just agree to give them a 5 percent piece of the profit, annually. Or some other incentive.
If you are going after the obscenely rich, increase taxes a huge amount on the multi-multi-millionaires and billionaires, going after CEOs who make a handful of millions every year is akin going after the middle class.
Troll is not a replacement for I disagree.
While I like the idea of a maximum cap, I see three huge problems. First, since the top moneymakers practically own everything from media to politicians (I'm just waiting for the "This candidate sponsored by Johnson & Johnson" signs), convincing them to do this will be next to impossible. Second, if they did somehow slip this through, most CEOs will leave, possibly taking their companies with them, to a cap-less place. (They've been doing it to factories where workers wanted rights and wages, why wouldn't they move out of country to protect themselves from caps?) Finally, 12:1 is way too low to set that ratio should it happen in some countries like the U.S., who may lose incentive to work towards becoming responsible for leading larger companies. (I could see 20:1, legitimately - a little too high in wage differential, but about the right spot where loss of incentive might be very minimal.)
In addition to maximum caps, continuous minimum wage increases - where the wage increases as the cost of living goes up so that people can continue to improve their lives without demanding that the government steps in to help them - and a fixed flat tax rate across all states and wages, we need to consider options in case of such a fallout on the major CEOs and brands leaving here. I'm against any idea of banning companies from outside the US from selling goods and services, even if they do move - some of the stuff may prove to be inaccessible to us any other way. However, I'm for encouragement and assistance in entrepreneurial growth, and think that building companies from the rubble of those companies that do leave is a great way to get back at those that do leave, and providing adequate competition is one of those necessary steps towards getting all companies to play equally.
One last thing that would need to be done is the encouragement of such caps in all countries with organized governments. As I stated before, any cap is going to spook some CEO's into taking their countries and running, and they're going to do what they can to scare other countries, particularly developing countries where they can get away with slave wages, into not doing this. The more countries that fall in line with some of these actions (if not all of them), the fewer places there will be for such cowards to run to. Making sure almost everyone can live without government dependence and afford to grow and achieve greater opportunities not only benefits the U.S., it benefits the world markets and economies.
Geez, way to miss the point of the article.
Capping CEO pay will do absolutely nothing, because they will just find creative ways (see stock option vesting) to get that money.
What needs to happen is something closer to "The highest paid PERSON doing any work for the company (usually the CEO, but can be anyone) can not exceed a 1:12 ratio of the lowest paid PERSON doing any work for the company" So if the janitor is being paid under the table 5$ an hour (about 10,000$/yr), then the CEO should not be paid more 125,000$/year
This also solves two other problems
a) All employees are now full time employees, since anyone not full time would destroy that ratio (places like walmart and unionized stores sometimes have a ratio of 20:1 of part time employees to full time employees that are only given 4 hours a week)
b) Outsourcers who in turn hire people for minimum wage or under the table.
A more creative solution should be a ratio ladder.
The highest paid person in the company, their immediate subordinates can not be paid less than 75%, this ratio goes down the line to a maximum of 6 steps
CEO (100%)
Board/Managers (75%)
Supervisors (54%)
Team Leads/shift-supervisors (40.5%)
Full time staff (30.4%)
Part time staff (22.8%)
So in theory a CEO who makes 14 million, would be paying their part time staff 3.2mil. To avoid that the CEO should be paid 225,000$ in company stock (lowest paid would be 100k as an example,) while everyone else has the option to be paid in cash or in stock.
I use 75% as an example because it's the easiest to see the end result. A more realistic ratio might be
CEO (100%)
Board/Managers (35%)
Supervisors (26%)
Team Leads/shift-supervisors (18%)
Full time staff (10%)
Part time staff (8%) = 1:12 ratio
At any rate, CEO pay is not the only problem, the other half of the problem is the company's performance versus the stock price which is why I mention it. A CEO and it's board/management must have their pay >50% in stock, otherwise there's nothing to stop them from looting the company by being paid exorbitant amounts of cash regardless of the company's success or failure. Anyone below Management should have the option of all cash or "minimum payout in cash, rest in stock" for lowering tax burden reasons.
Like Tim Cook (Apple's CEO) probably deserves what he earns from Apple, because the company is successful, but the wild swings in stock price raise some eyebrows. Where as someone who runs their company into the ground (Microsoft, RIM, Nokia, Hostess) should suffer the consequences of the stock price devaluation.
How is it the business of government to be directed by the public to use force to coerce a company and CEO to not engage in a mutually acceptable transaction that is - other than this particular arbitrary delineation - legal?
Hey let's get more folks health care by making a rule that any full time employee (over 30 hours) gets health care.
Great, now it's really hard to get a full time job.
But that sure are a lot of part time jobs without benefits.
Hey, lets make a rule that the CEO can't make more that 100x the lowest salary.
Great, now all the low wage jobs are outsourced temps.
Or worse, there are no corporate offices in the US.
While I agree that the social contract needs work,
these folks seem to have no clue as to what to do.
Maybe China would be kind enough to teach us what we have forgotten before it's too late.
I guess they could also take a CEO from that other country. Problem solved.
The initiative only count the gain from a company to one of his employee. So a mandate or outsourcing is not bound by it. In your example, the star will probably be mandated in person.
The goal is precisely to force the split of operations that have very different values. If a star team need some low task, there can still mandate or outsource it. But if the company is basically a big money pump that exploit lower workers to enrich a few top exec, then the company will have to make a better sharing of the profit. If it choose to split the company in two parts, the "lower" part will be even more profitable and the "higher" part will lost his main revenue. This way the power is inverted. The "lower" company can make a better sharing, and can use services from an other, more concurrent company to do the few tasks remaining in the "higher" company.
According to the Swiss federal statistics the initiative will affect only a few companies. A private company is not a excuse to exploit others. If you privately are the value, you don't need the help of the others for your success. If you need the help of the others to success, it's normal to share the common success. Again, this depend where is the value.
Uhm. Why not? If the government hadn't been around, what would have prevented them from doing the exact same thing? And lets not forget that if the government hadn't been around, they never would have been stopped at all. You'd be an indentured servant of theirs living in a Carnegie town, working a Carnegie job, your kids going to Carnegie school so they could grow up to be good little workers for Carnegie.
but yeah, sure, the Government ENABLED them. :/
That's a good post, spot on and insightful. Thanks.
It's China. He's probably worried about how much Lead is in that watermelon....
The US and everywhere else on the plent should absolutely adopt a "maximum wage" of 100:1 or closer, but the US won't due to their fiscal libertarian tendencies and/or wealth worship.
I think that they will be pressured to do so eventually though. Countries that adopt such laws will become wildly successful, for every selfish successful sociopath who packs up their wealth and leaves, there will be many more successful businessmen who stay and are propelled to levels of success never seen before. Simmering social unrest will dissipate and the country will become a better place to live with greater upward mobility. The US will probably be the last holdout, a hellhole of massive inequality among developed countries. At that point they'll join the rest of the world in short order, one way or another.
Maximum wage and mincome are the two most powerful ideas to buy us some time with capitalism and allow a bloodless transition to something better.
"When information is power, privacy is freedom" - Jah-Wren Ryel
Seriously. Companies would be flattened out and become wholly owned subsidiaries of offshore conglomerates. The head of the US subsidiary would be paid 12x the janitor's wages*. But the overseas corporate HQ would be made up of the highly paid management types. And even applying the 12 times rule to them and then their US subsidiaries, this would still result in a 144:1 ratio between the top and bottom of the enterprise in its entirety.
*Of course, this ignores the secondary effect of companies pushing their low wage tasks out to subcontractors.
Have gnu, will travel.
Democracy starts to unravel when people with no skin in the game can vote. I know this sounds odd, but a person earning welfare from the public dole will always vote for more welfare. Democracy is two wolves and a lamb discussing what's for dinner. Also, democracy only works when you have an educated (or interested??) populace.
I like your take... Obama isn't the cause of our problems. So many I hear want to vilify him for all the woes of the country. There are things he's to blame for, certainly... but by and large he's just doing what his predecessors have done - on steroids.
"The problem with socialism is that you eventually run out of other people's money." - Margaret Thatcher.
Harrison's Postulate - "For every action there is an equal and opposite criticism"
Create a new "Employee rental company" with separate management whose sole purpose in life is to manage all the low-wage employees. For example: "McDonalds Employee Rental company." or "McDonalds Outsourced Customer service and Kitchen Operatins Inc."
If I were the sole manager left who got shuttled off to run the McDonalds Employee Rental Co. (MERC?), I'd find myself pretty unhappy to be the one Executive that had to live with the new wage cap. Time to subcontract to a new McDonalds Employee Rental Rental Company.
Turtles all the way down!
This is patent nonsense, once you understand that a "mutually beneficial contract" is a fiction that already needs intervention to enforce. Contracts are pieces of paper with no value. They only have meaning and value because some government intervenes by deploying police with guns, and books with laws written in them, to prevent two parties from treating contracts as meaningless, which is what they naturally are in the absence of said enforcement.
There's no moral difference between a government that enforces contracts, and one that enforces a pay scale ratio, or any of a miriad other things.
Their thought process to receive such high pay is that somehow they are special and provide high value that they are worth it. Meanwhile, the staff who are tasked with executing the CEO's vision are not receiving such rewards. If the CEO is that good and according to intolerant Republicans that that a rising tide raises all boats, then shouldn't their staff's lot in life also be better? Shouldn't the staff's pay also show the fruits of a successful strategy which they had a part in? Without a successful execution a winning vision is meaningless. So if companies want to pay millions to a CEO because "he is worth it", then they should raise the staff pay. This keeps the pay ratio in line, and more indicative if the CEO's real value.
Quit playing Monopoly with Bill.
Linux - of the people, by the people, and for the people.
Conservatives hate this because they want to be able to complain about how unfair "taxes" -- which they are if they tax economic activities -- while receiving, for free, the primary service of government.
Liberals hate this because it starts to treat government as a service business and unleashes true paleo-libertarian economics such as that promoted by Henry George and Martin Luther King Jr in his last book (the one that got him assassinated) "Where Do We Go From Here?" because what the paleo-libertarians (and Dr. King) recommend is to treat citizens as owners of the business that maintains the infrastructure of property rights by paying out citizens dividends rather than attempting to deliver social goods through bureaucratic management. Liberals serve the bureaucratic management class -- not the people -- so they oppose this even though their "saint" MLK supports it.
BTW: I find it somewhat interesting, although not too surprising, that /. isn't talking about the Swiss referendum on the unconditional basic income -- which is essentially the citizen's dividend.
Seastead this.
Do this but first, eliminate the minimum wage. Then start with universities, medical professionals, lawyers, and civil employees, making the ratio adjusted by some index, so that it can increase as the economy becomes robust and contract as the economy weakens. Let that percolate a few years and see how it goes.
You should sell those things and buy gold. I hear it's going up to $10,000 per ounce.
You can't spell "oneiromancy" without "roman".
I hate to break it to you, but payments in stock really don't work either.
Most such payments are structured so that they get their stock options based on some performance measure. The problem is that the performance measure is continually tweaked so eventually they get their options. They either select different thresholds due to "economic" problems or adjust the mix of companies they compare themselves to so they look better. Unless you force the companies named officers to hold the stock they are paid in for a long time, there is a built in failure mode as they can just sell their stock. And, whether we like it or not, disallowing people to spend their paycheck as they see fit and when they want to - even if it is obscenely large - is just wrong.
I'd much prefer them to get paid only in dollars - no benefits of any sort that every employee in the company isn't also entitled to, no stock options, nothing except pure hard cash. Then apply the ratios. Let the employees see just how bad it is.
If you really want to change things, then start buying company stock directly and vote the proxies you get. Don't invest in mutual funds. Almost all of company proxies have approval options for the stock incentive plans and pay of named executives now. If there is a problem with how a particular company is run, vote against the plans, the pay, and any director who seems to be a problem. Until enough individual investors start picking their own stocks again, it is an uphill battle, but there are votes you can make as a stock investor that are sometimes enough to get noticed and get things changed at companies.
This.
There's already all kinds of incentives for companies to outsource the lowest end of the employment scale. A law like this would make it standard practice.
CEO's and executives are going to get their high-end pay. If they don't, some other company that's willing to pay more will get the good talent. Plain old competition. (You can dislike it all you want- that's what's going to happen.) The only way to keep the high-end pay is to get rid of the lowest level of the org chart. It's easy, and it's been done. A lot.
If you thought outsourcing make it hard to get a first job out of college, just wait until this kicks in. You'll have to work overseas just to get enough experience to qualify for the new "entry level" job here.
Dumb idea. Really, really dumb.
Will the NFL have to cap the highest earning player's salary to 12x the average fan's salary?
Either that - or simply fire the cleaning lady, and outsource cleaning the building to a non-employee. Fire the bottom earners, cut costs and raise the CEOs pay #WhatElseCouldGoWrong
please mod this up!
There's an interesting dichotomy that pervades this topic and the US in general. Christianity.
Most Americans ascribe to it so I'm told.
The basis of Christianity is to do right by your fellow human. To reject greed. To reject avarice. To be humble. To give away everything you don't need.
How the fuck does a Christian based nation allow a CEO to make enough money each year to buy a jumbo jet while the employees doing the actual work that earns the company the actual profits can't make basic ends meet on their salary?
How to the religious right... the conservatives... argue that capitalism (every man for himself, grab what you can) is an appropriate system when they state they believe the exact opposite?
Article X: The powers not delegated... by the Constitution...are reserved...to the people
Economic conservatives aren't generally complaining about "unfair taxes"; "fairness" is a principle progressives and socialists cling to, and when conservatives talk about it, it is only in response to progressive political arguments. Economic conservatives are concerned with wealth and creating wealth for everybody.
Furthermore, economic conservatives do not want to receive government services "for free", they want government to provide fewer "services" and therefore pay less for it. Economic conservatives are perfectly happy to pay for defense and limited infrastructure. What they object to is using taxes to pay rent seekers: bailouts, subsidies, handouts, bad services, and welfare.
If the US did this, I suspect companies would be small, and run other companies. For example: Company A would be made up of workers, direct supervisors and maybe another level of supervisors above them, keeping the bottom workers and top of this company in the 'Maximum Wage' Ratio. This company would be managed by Company B, who takes reports and consults, giving direction to Company A, providing professional resources like IT, Logistics, etc. Like Company A, Company B would have several layers, but all within the 'Maximum Wage' Ratio. However, entry level people in Company B are paid more than Top-Tier Supervisors in Company A. Two different companies, interlocking boards of directorate, but each company meets the 'Maximum Wage' Ratio.
That brings us to Company C. This company provides oversight, management and strategic planning for Company B, (which in turn gives guidance and direction to Company A.) Now, like Company B, the entry level workers for Company C make more than the top-tier supervisors in Company B. Company C is made up of what would have been the CEO, Senior VP and other VP's if Company A, B, & C were still all one big organization. but in order to not change pay rates, it simply re-organized into 3 different companies with interlocking boards of directorate, and each within the 'Maximum Wage' Ratio.
Don't get me wrong, I like the theory behind the idea. But, I'm fairly certain that US companies would come up with a way to circumvent the letter of the law and tromp all over the spirit of along the way.
Awk! Pieces of eight. Pieces of eight. Pieces of seven... ERROR: General Protection Fault. [Paroty Error.]
I was aiming for plus five funny. I don't seriously believe there is such a thing as a free market by and large. There maybe small temporary autonomous markets, that operate freely. But in this "capitalist" system (by which, the capitalists rule, and destroy free markets because they interfere with the process of getting rich), there are no big ones.
Also, I do support the idea, in this present system of capitalism, markets, and large government, which is not the best system by far, of taxing at 100% income over a certain level. Which would neatly negate the high levels of income for those CEOs.
I was attempting to write a parody (and I didn't even think it was very good), so as to invoke Poe's Law, but with the final line to make it obvious that I wasn't quite serious. But I guess people didn't read that last line...
HELP MY ACCOUNT HAS BEEN HACKED BY AN ILLIBERAL ART STUDENT SET TO DESTROY THE INTERWEBZ!
Because trolls and mental defectives don't deserve civility. As the nuance of it escapes them.
Chas - The one, the only.
THANK GOD!!!
Fuck off and die, Miss Manners.
Watch this Heartland Institute video
I would be happy to see the ceiling even set at 50 fold (lowest earner in the company).
Having said that, one worry I have is that one possible outcome is that the CEO outsources, say, the low paid cleaning staff and can therefore raise his/her salary. Next step, replace all assembly line workers with robots (yes, I know, already happening, but this might accelerate the process).
How would you prevent this?
That's bullshit. Why should he or the company pay more than market rate for common services like janitors and secretaries? The salary for these jobs should be constant regardless of what the company makes or loses. Do you want to be charged more for groceries than some guy living on minimum wage?
Under this sort of rule, Tom Cruise doesn't get $20M per flick, Tom Brady doesn't make $20M/year, and Oprah is not rtaking in close to $100M every year.
That is, there are far more small companies that are run by their founders as CEO than there are GEs or Microsofts being run by some "overpaid" come-lately executive. A lot of those CEOs pay all their employees first, then live with what's left, which might be less than zero in a bad year. And what about the NFL player's union allowing top QBs to make 20+ times what the rookie reserve long snapper makes? Or the rookie reserve snapper making 20+ times more than the janitor who cleans the end zone toilets? If we capped pay for all sorts of people at about $250K (10x poverty wage), we'd have to get $1B in tax revenue from everyone else. Remember that people in the top 10% pay 70% of all the tax revenues--that's people making more than $250K.
... of the Aerosmith plan; eat the rich.
In the US Drucker's 20/1 would still be radical. 40/1 might sound reasonable after Drucker's opening bid. Even if we set it to a 1m/1 ratio, we'll have someone whine about socialism. But, the complaint won't have much traction at that end of the spectrum. Somewhere in between there is a range that's close to optimal, and I think it reasonable for society to negotiate what that range is and even codify it. A hard ratio, seems like a poor way to go about it.
With the actual projections it look like 65% of Swiss citizens voted against this initiative. This initiative will not be added at the constitution. I voted yes, to set a signal. Call me a socialist if you like, but I life in a democracy. The main target, to speak about high salary's in wide public, was reached from the initiators from this political effort. I suggest you start speaking about democracy.
They overwhelmingly rejected it.
When Fascism comes to America, it will call itself Anti-Fascism, and tell you to give up your guns.
Socialist Feel Good reaction. If the proponents of this are serious and consistent, then they should also cap salaries of Rock Stars, Community Organizers (like Michele Obama's US$330,000 salary for not showing up to work at a hospital), Sport heroes, Actors, Producers, Hedge Fund managers (What! No Soros? Who will fund MoveON?), Union bosses, Al Gore's Trust (from Occidental Petroleum holdings) and on and on. Or, do you JUST want to cap CEOs?
Here a better link to the Wall Street Journal article that'll work for non-subscribers. Summary: Switzerland recently put in place some transparency rules and limits on golden parachutes, etc, but the voters decided against a strict limit on salaries (or. more properly, salary ratio) by a wide margin.
So you make it a percentage of growth over a minimum of NN years, maybe an increasing percentage over time. Of course that isn't entirely wonderful either, in that it would encourage growth at the expense of stability, a problem we already have with being beholden to stockholders as the #1 priority. So... say the CEO pay is delayed for an equal number of years after they leave the company, so stability is necessary if you expect to get paid.
Just throwing out wildassed notions; feel free to throw them back.
~REZ~ #43301. Who'd fake being me anyway?
Micro fixes to macro problems always creates more problems that it fixes. Companies will find ways to compensate CEOs that skirt the laws.
Overall social inequality is the macro economic problem that must be fixed, not just CEO salaries.
The correct way to address overall inequality, is with the other approach the Swiss will soon be voting on, which is a Basic Income for all citizens. That is the correct macro solution to the macro problem of inequality. That will fix CEO income relative to the average worker income, as well as all other forms of inequality, The US needs this far more than the Swiss do. Our inequality is far higher, and the social problems created by inequality are far worse in the US.
There's a petition at whitehouse.gov in need of more signatures to bring this problem to the atention of the American People. Please check it out and consider signing it.
Petition: Establish a basic income guarantee for all Americans, similar to what is being proposed in Switzerland.
What is your "correct" tax rate?
in my original comment, I explained it...
progressive income tax is **as american as Apple pie**
the income tax brackets and rates were sharply progressive
Thank you Dave Raggett
seriously?
progressive 'rich people' including many members on Congress vote for laws that raise taxes whenever possible and suggest raising them whenever it makes sense
many, many 'rich' people support policies that would raise their own taxes....Stephen Colbert jokes about it all the time while satirizing WASP culture
they vote for the policies...not just rhetoric!...when GOP obstructionists & their high finance overlords let it happen
Thank you Dave Raggett
The problem with that is people who only want to work part time are forced to work full time. Alternatively they make everyone overtime workers.
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First, I still find it amusing that people essentially equate communism and socialism. While there are similarities there are more than a few key differences...but I digress from the topic at hand. First and foremost, there is no need whatsoever for CEO's to make the money they do. It's ridiculous, especially considering that they make bonuses on top of their already exorbitant salaries...sometimes even when a company is failing, as we've seen in recent years. Secondly, as much as I like the intent of the law in question, it won't work...as many others have pointed out, the CEO's will find ways around it. In order to make something like this work, every single country in the world would need to be onboard, and it would require a complete revamp of laws regarding economic policy. Laws are never black and white, those that write them either leave the in shades of grey (loopholes), or lawyers find ways of adding loopholes. The unfortunate part of all of this is that we could have probably stopped this excessive executive acquisition of wealth decades ago, but unfortunately we didn't have information and communication technology like we do today (see: Internet). Now, barring armed revolution, it may be too late because big business is imbedded into the law books and governments like a disease-bearing tick. They've had a lot of time to gain influence and shape legislation right under our noses. Ahhh well. So, to answer the question posed more directly: yes , on the condition it could be made to work...otherwise, pointless.
What we really need is guaranteed minimum income of $20,000 to all citizens above the age of 26 without a job. That way people will be able to protest the decisions of upper management without fearing for their livelihood.
https://www.change.org/en-IN/petitions/obama-administration-put-a-cap-on-market-capitalization-of-listed-companies
Casteism
Intelligence? Talent? No, the ultra-rich got to where they are through luck and brutality. http://www.monbiot.com/2011/11/07/the-self-attribution-fallacy/
Casteism
Unlike Capitalism, Globalization is zero-sum. Globalization will destroy your middle class due to wage slavery in 3rd world.
Casteism
The CEO takes way more than 12 times the risk of the minimum wage employee. I work at a fortune 500 company (one of the Forbes "best" to work for) and I wouldn't want a $96/hour employee at the helm. (that's assuming we employe minimum wage workers at ~$8/hour). Let me ask you this, was Steve Jobs worth more than $96/hour? Look at where Apple was before and after his return and I'd say yes.
This law won't increase the lowest paid worker, it will (as others noted) increase outsourcing, loophole finding, or (worst case) promotion of incompetent people into positions of influence.
"Happy families are all alike; every unhappy family is unhappy in its own way." -- Anna Karenina by Leo Tolstoy
Yours is the first comment to use "exploit" on the page (at the moment), and I completely agree. The right that people have in forming a government that oversees business is largely to avoid the exploitation of others. This is why slavery, indentured servitude, human trafficking and such are illegal.
The question I have is, how can you define exploitation? Minimum wage laws have been the stopgap in place for some time, but they seem to have flaws; plenty of people making minimum wage still can't support themselves or their families, while many of these people are working for corporations that make huge profits and pay their upper level management lavishly. It's difficult for me to not call that exploitation.
(Raising the minimum wage is one solution, but it's easy to admit that there are industries where different minimums make sense, particularly in how they're calculated... home health care is a good example of a problem spot -- where 24-hour-a-day live-in care doesn't really translate to 24-hours of work the same way a 9-5 job is an 8-hour salaried work day with benefits and time off, or a 3-hour lunch shift at a fast food hourly job with no benefits is just, well, 3 hours.)
Enforced ratios seem to be a good way of mitigating those problems. Highly paid leaders will still be highly paid, but they will only grow their own compensation by growing the compensation of those whom they manage. A vested interest in the worker-bees wages seems to be a good way to avoid exploitation.
Still, it would have to be a well-written law. How are "wholly owned subsidiaries" considered... if "Fast Food Corporation" franchises its stores as individual "companies", who are the lowest and highest paid individuals in the structure? How is ownership managed (if I'm paid in stock, or if I'm an unsalaried owner taking bonuses from profits, how does it count towards the ratio)? What is the effect on business that rely on offshoring work or sub-contract labor (if I "fire" all my basketweavers and offer them the same low-pay as sub-contractors, am I breaking a rule)? There's a lot to be considered.
Also, the choice of 12x is going to be a huge point of contention. Should it be 10x? 50x?
It's an interesting concept. I don't think it will happen in the US... definitely not soon, but I'd at least strongly consider it if it were up to me.
Any scheme like this is bound to have unintended consequences up the wazoo. There is a reason centrally planned / price-controlled economies fail.
I think frankly that nobody cares about that extra $1B in tax revenue. It's noise.
A successful API design takes a mixture of software design and pedagogy.
https://petitions.whitehouse.gov/petition/establish-basic-income-guarantee-all-americans-similar-what-being-proposed-switzerland/jFbgDZ4h
A 21st century issue: the irony of technologies of abundance in the hands of those still thinking in terms of scarcity.
You know Ballmer was recently let go from MS, right? He had to leave because...
He had to leave with a fat paycheck and financial freedom to do whatever he pleases, pursue whatever new things he wants. For "ordinary people", that's not taking responsibility, that's reaping a fat reward for a crappy job.
and shares profits equally.
http://www.theglobeandmail.com/news/national/time-to-lead/how-one-company-levels-the-pay-slope-of-executives-and-workers/article15472738/
I never regret spending money w/ them, and the consideration for their workers shows in their customer service which is top-notch.
Sphinx of black quartz, judge my vow.
Of course, since I am also the sole owner and employee of a small business which acts as a supplier to the company which I am CEO of, and I have approved over $2,000,000 in annual retainer fees being paid to it, I am quite happy to accept a drop of my salary to $1 a year.
It shows how much I truly care about the lowest paid employee in this company.
i think you have insightful points, but they could receive more attention if they were phrased in a more neutral manner.
Yep.
In this case, all lower paid employees will be outsourced to a contracting company that may or may not be a fully owned subsidiary of the original employer.
Steve Jobs worked for one dollar
send + more == money?