Are Bankers Paid Too Much? Are Technology CEOs?

DavidHumus writes with this excerpt from a New York Times article: "Big paydays on Wall Street often come under laserlike scrutiny, while Silicon Valley gets a pass on its own compensation excesses. Why the double standard? The typical director at a Standard & Poor's 500 company was paid $251,000 in 2012, according to Bloomberg News. Mr. Schmidt [Google's CEO] is above that range by over $100 million. ...The latest was the criticism of Jamie Dimon's pay for 2013, given the many regulatory travails of his bank, JPMorgan Chase. The bank's board awarded Mr. Dimon $20 million in pay for 2013, $18.5 million of which was in restricted stock that vests over three years. ...For one, the outsize pay for Mr. Schmidt doesn't square with Google's performance. Putting aside the fact that he is not even the chief executive, Google had net income of $12.9 billion last year. JPMorgan was higher at $17.9 billion...." DavidHumus notes "Maybe the bigger question is why is CEO pay so entirely disconnected from company performance?"

Comments

tl;dr

[Anonymous Coward]

Yes

Re:tl;dr

[ArchieBunker]

and also yes.

Re:tl;dr

[amicusNYCL]

Seconded, yes.

Here's the difference: technology CEOs run companies that make things and contribute to society. Bankers earn a profit by moving other peoples' money around and taking some off the top. One of those jobs is necessary for us to progress.

Re:tl;dr

[slapout]

I find having a bank account very handy for handling my money. Banks do contribute to society.

Re:tl;dr

[Frobnicator]

Compensation is whatever you negotiate.

Fairness is an interesting concept. "Fair" and "Equitable" are different. "Fair" and "Equal" are different. Is it fair that you can have two similarly-skilled, similarly-trained, similarly-experienced programmers working side by side but they have a difference in pay?

If you think it is unfair, then push for labor unions and publicly shared compensation details at every level. Most (all?) state already do this, publishing the salary tables for every job from governor and legislator to university coach to public school teacher to public park janitor. You can look up exactly how much anybody earns, and you can petition the government to change their rates.

If someone is hired when the team is in dire need and the other is hired when the team is flush with workers, then at negotiation time one will be in a better position that the other for compensation. Some people don't like that, and want everyone to be paid based on a standardized table of years of work experience and years of education; look up where they cross, that is your salary.

Personally I prefer a market wage of whatever I can negotiate. Of course, I can negotiate a fairly strong package based on projects I have worked on, roles I have lead, and other measurable results in my history.

Re:tl;dr

[Anubis350]

I find having a bank account very handy for handling my money. Banks do contribute to society.

Bear in mind that investment banks and savings banks used to have huge firewalls between them, so that the one you find useful wasn't the one taking huge risks (it is, or was, also the smaller banks that typically extend credit to local businesses, not the huge investment banks)

Re:tl;dr

[Dishevel]

Just because you hate bankers (Most people do for good reason) is no reason to abandon reasoned thought.

If I own a company and I hire someone I can pay them as much as I want. If I pay them too much my company suffers. That is my problem. In the case of bankers, their salary comes from the profits of the banks and therefore is paid for by the people on the board. It is their choice. If you do not like the fact that taxpayers are bailing them out then take that up with your idiot, beholden senators and representatives. Tell those bastards you do not want to pay to bail out financial institutions. That you think automatic federal deposit insurance entourages people to not care where their money is.

But people are stupid so ... Fuck those bankers. They make too much money!

Re:tl;dr

[geoskd]

The Banker? Because without him, those technology CEO's wouldn't have any money to make things and contribute to society.

Horse crap. When the technology company critically needed money, the investment bankers are nowhere to be found. The only people that will put money in that direction are the angel investors. The bankers only become involved when all of the real risk has been removed. Without investment bankers, companies would still be formed and grow, it would just be a much slower, more natural, growth. Investment bankers are, as stated, parasites.

Re:tl;dr

[interkin3tic]

Straw man argument. No one said that banks are useless, just that "bankers" (in the wall street sense) contribute less to society (in the "where most people live" sense) than one would expect, given how much they are paid.

It's not like repealing glass-steagall gave us the internet, smart phones, and a cure for cancer. All that I can see it did was continue a feedback loop whereby the super-rich get richer, get more power, and change the laws to make themselves richer at our expense.

Credit unions serve the purpose you mention, yet they don't at the moment leech off society like chase does. We could do away with the too-big-to-fail entities, and it wouldn't hurt you or me too much. Well, in theory, anyway, I'm sure the extraction process in reality would leave something worse, be it through reform in the current political climate or violent revolution.

Re:tl;dr

[Penguinisto]

I have a fun question: Why do media reporters complain about CEO pay, when many of the really big media journalists themselves pull in $20+ million a year in salary?

Re:tl;dr

[Penguinisto]

I find having a bank account very handy for handling my money. Banks do contribute to society.

I find that Credit Unions do a far better job of it, and without the rapacious fees, policies, and hassles. They also happen to have better rates (for what that's worth nowadays).

For awhile, I even experimented with using just a simple pre-paid debit card, where my paycheck was deposited into an account tied to the card. It cost me something like $7/mo flat-fee, and I could even have the one I used generate and mail certified checks if needed (I think some of them have online bill-pay services now on top of that.)

I guess I really don't understand what makes people want to use, say, BoA or Chase, when it seems that their sole purpose is to rake as much money out of you as possible. :/

Re:tl;dr

[almitydave]

An interesting thing about bitcoin is that mining is required to validate transactions, and as mining becomes less (and eventually un-) profitable, the only financial incentive for miners to run their 1TH space heaters is transaction fees.

In other words, a little off the top of every transaction to the guy who helps you move your money.

It's worth noting, however, that these are less likely to be "millionaire money pimps" and more likely large pools of many individuals.

Re:tl;dr

[amicusNYCL]

Bankers should not be in the business of buying and selling companies. A banker's job is to store your money until you need it again. What they actually do is move your money around and take points off the top, and enrich themselves. And yes, without Glass-Steagall they most certainly do buy companies, but that should not be the job of a banker.

Re:tl;dr

[geoskd]

If you do not like the fact that taxpayers are bailing them out then take that up with your idiot, beholden senators and representatives.

Bailing out the banks was not optional. Congress failing to act when the crash happened would have resulted in deaths. Even a 50% colapse of our global economy would cause millions of people to starve to death or die fighting for food. A 90% collapse would kill half the population in the US in the first winter alone. We have built a system where the banks are in the position where they are too big to fail. If we let them fail, the economy colapses.

It all goes back to the way companies pay their employees. Back in the 19th century and before, companies kept huge cash reserves so that when they issued payroll checks, the checks didn't bounce. for a company like GM or UPS, that payroll reserve would be on the order of billions of dollars. With the advent of the modern banking sector, a brilliant banker thought up the idea of payroll lines of credit. This allows a company to spend its entire payroll reserve, and if there isn't enough in the coffers, they temporarily run a line of credit until the funds come in. In practice, this allows the company to average pretty close to zero in their payroll accounts. It means that companies can re-invest that money into growth.

The down side to that, is what happens when a bank is insolvent. That bank can not loan any money (they dont have any to lend), so they close their customers payroll accounts. Now, the bank can't honor withdrawls because they have no cash, and the companies have not paid their employees because they have no payroll credit account anymore, and they dont keep cash reservces anymore. Now, the employees cant buy anything because they have no cash, cant get cash, and the ATM/debit cards arent working anymore. So they stop buying *anything*. Now they cycle gets viscous. Companies no longer have any income because people have no money, so they cant even honor their outstanding payroll, nevermind next weeks paychecks.

If one bank does it, the economy can absorb the hit. If 25% of the banking sector does it, the shock waves will eventually (a few months out) colapse the entire banking sector, and with it everything else. Everything stops. This happened with the great depression, but at that time the credit economy was only 30% of the whole economy. Today, the credit economy accounts for 98% of the worlds economy. You take that away, and its like taking away 98% of the air under an airplane. It simply cant function, and the result is gonna be messy.

Re:tl;dr

[Penguinisto]

I suspect that a simple change such as requiring a bank be contained to just the state their HQ is located (and break up or spin off the out-of-state assets/customers into separate companies) would be plenty enough to retract a lot of the damage that they've wreaked over the years... plus there would be no more "too big to fail!!!111OMGBBQ!one!" banks.

Re:tl;dr

[cayenne8]

I have a fun question: Why do media reporters complain about CEO pay, when many of the really big media journalists themselves pull in $20+ million a year in salary?

Why don't they bitch about the high salaries professional athletes bring down? Famous rock stars? Movie stars?

My thing is, why do we complain at all about who makes how much?

I mean, it isn't really a zero sum game. A CEO or basketball star making millions of dollars a year, doesn't take money out of someone doing another job that make significantly less.

The salary of the vice president at McD's isn't taking money meant for the burger flippers pocket....

Re:tl;dr

[dryeo]

Bailing out the banks was not optional.

There were other options such as nationalizing the banks, breaking them into smaller pieces and reselling them after the crisis calmed down.

Re:tl;dr

[QRDeNameland]

Here's the difference: technology CEOs run companies that make things and contribute to society. Bankers earn a profit by moving other peoples' money around and taking some off the top. One of those jobs is necessary for us to progress.

Unless/until humanity overthrows the global captialist/monetary economic system, banking is just as necessary for 'progress' as the tech sector.

Banking is not inherently evil...the problem arises when the financial sector grows too politically powerful and can twist the laws to permit them greater and greater capacities for rent-seeking. This is not limited to the financial sector, they just seem to be in a better position to do so than most other enterprises.

The problem is with an electorate that is politically disengaged and doesn't notice when the laws are gradually changed to allow economic players to shift from active wealth creation to passive wealth accumulation, until one day you notice that bankers are ignoring the traditional risks of their business because the laws permit them to privatize their profits while shifting their losses to the public. But this is not limited to banking/finance...even in the tech sector you have the telcos and the trend towards walled gardens where they are more looking to simply skim fees rather than provide better and more useful technology.

I am by no means a dyed-in-the-wool capitalist, but as long as we are stuck with the system we have, it is not very useful to single out banking as a whole as the cancer on the system, and instead focus on how we regulate the actors in the system we have.

Re:tl;dr

[Anonymous Coward]

The salary of the vice president at McD's isn't taking money meant for the burger flippers pocket....

Um, yes... yes, he is. That's exactly the point.

Re:tl;dr

[PopeRatzo]

many of the really big media journalists themselves pull in $20+ million a year in salary

Please give an example of a journalist in any media who makes $20+ million. Not a "personality" mind, but an actual journalist.

Re:tl;dr

[master_kaos]

Are you sure? I find it hilarious how huge companies have to lay off thousands of employees, yet the CEOs are still making their 10s of millions in salary. How about first eliminating bonuses, as well as dropping salary before eliminating employees. For example ,Blackberry CEO getting a compensation package of 88 mil literally days before laying off a bunch of employees. How about offering him 50 mil instead and keeping on 700 workers,
And he gets a private jet to travel between his home and Waterloo headquarters at an approx value of 50k per round trip (almost someones full yearly salary) because he is too fucking lazy to move to waterloo to do his job even though he is getting a shitton of money.
And yes I am a bit better because I do live near (and work in)waterloo and know a few people affected by the layoffs.

Re:tl;dr

[PopeRatzo]

The salary of the vice president at McD's isn't taking money meant for the burger flippers pocket....

He absolutely is.

In fact, in the specific case you cite, low-end wages are kept below poverty so that not only is the vice-president of McD's taking money away from the burger flippers, but he's taking money from each and every taxpayer by having the government subsidize his employees.

There are even laws now to codify such arrangements. If a Southeastern state lures a manufacturing plant from say, Washington or Oregon, one of the ways they do it is to agree to allow the company to keep any state income taxes that are withheld from employees wages. The taxes are still taken out of each paycheck, but the money never goes beyond the company's coffers.

Corporations are seeking out this kind of deal, and states, in a rush to the bottom, are giving in so they can show how they're "bringing jobs" to their area.

The issue of sports stars or movie stars is a red herring. There are so few of them as to make it irrelevant, and their pay is directly tied to the profits they are expected to generate for the owners.

CEOs' salaries on the other hand, are entirely a function of a buddy system in corporate boards. Everybody gets a nice income and lifelong security and they scratch each others' backs. You will never hear of the board of directors of a big company or bank asking if maybe they can find a CEO from Pakistan or China who's willing to work for $250,000 instead of $40,000,000, even though there is very little evidence that the CEO has that much impact on a company's bottom line. Despite the fact that it's absolutely the job of the directors to do so. And even if that did ever happen, it wouldn't explain the huge salaries for unproven CEOs for companies getting huge bonuses even when the company is not doing well, which is much more common than most people would imagine. You will often hear, on the other hand, about sports teams deciding not to pay a veteran $40,000,000 if there is $400,000 rookie who can do the job. One of those "minimum wage" players was the quarterback who won the Super Bowl this year, in fact. The guy he replaced was obscenely overpaid and the rookie showed promise and the owners gave him the job.

And there are plenty of other ways in which income disparities directly hurt most people. Just have a look at the work of Richard Wilkinson and co, who have done a lot of work on this issue. Yes, when people at the top make a lot of money and their incomes increase out of proportion to the rest of society, it takes money away from the people flipping burgers and making cars. And writing code.

http://www.ted.com/talks/richa...

Re:tl;dr

[Anonymous Coward]

Not to mention that both actors and athletes have benefited from being unionized workforces, which is one of the reasons they've been able to negotiate a percentage of profits in the first place.

Re:tl;dr

[ultranova]

My thing is, why do we complain at all about who makes how much?

Because if you indoctrinate people into believing income should be earned, they don't conveniently forget all about that when it comes to your income. CEOs are not perceived as pulling their weight, producing nothing but seemingly endless bankruptcies and layoffs, so all that "welfare queen" rhetoric is now turning against them.

I mean, it isn't really a zero sum game.

Of course income is a zero-sum game. Economy produces a certain amount of value per year. If your share of the pie grows, mine must shrink. And if your share is perceived to be unfairly large, then you can expect other people to act against you, driven by both self-interest and a desire to right an apparent wrong.

Of course it's possible to justify larger share as an incentive to grow the pie a a whole. The problem is, the CEOs haven't done so. The 1% are the modern nobility; the accusations about overcompensation are simply the warning rumbles of a good old peasant revolution every king who fails continuously risks facing.

Re:tl;dr

[NoImNotNineVolt]

You forgot the other options:

Summoning Zeus to smite the offending banksters.
Riding the invisible pink unicorn to a world with a sane banking system.
Abandoning currency and moving to a Star Trek economy instead.

Of course, if we restricted this conversation to plausible options, none of our suggestions apply.

Re:tl;dr

[Quila]

I find it hilarious how huge companies have to lay off thousands of employees, yet the CEOs are still making their 10s of millions in salary

The reasonableness of this is, "it depends." If the company is healthy and making a lot of money, but it found an area that is not profitable and decides to liquidate or downsize it (and has no place else within the company to absorb all of those skillsets), the employees go with that. High CEO pay is perfectly in line with this.

However, if the company is hurting and they are laying off employees in order to cut costs and stay afloat, then the CEO's pay should be the first to be cut.

How about offering him 50 mil instead and keeping on 700 workers,

OTOH, if those 700 workers are making no profit for the company at all, they should be transferred to profitable positions or laid off regardless of CEO pay.

Re:tl;dr

[mythosaz]

http://www.huffingtonpost.com/...

You probably consider Matt Lauer a "personality" at 25M.

Not listed on that report is Brian Williams who makes 10M/year now.
Diane Sawyer makes 12M/year.
Scott Pelley rounds out the nightly news anchors at a paltry 5M/year.

Leading up cable is Maddow at 7M/year.

CNN says the average anchor makes between "$40,000 and several million" depending on tenure and experience.

Re:tl;dr

[Anonymous Coward]

many of the really big media journalists themselves pull in $20+ million a year in salary

Please give an example of a journalist in any media who makes $20+ million. Not a "personality" mind, but an actual journalist.

I seem to recall reading recently that Bill O'Reilly made $20 million working for Fox News. Of course, whether we should call him an actual journalist is, at best, debatable.

Re:tl;dr

[JonnyCalcutta]

You don't? That's sad really and I guess explains why they get away with it.

Re:tl;dr

[mspohr]

Ah yes, the glories of the free market will cure all ills.
Do you really believe this or are you just trolling?
"Because if you don't like the job, you can leave, and they can replace you in a couple hours. I fail to see how that is greed when so many people are willing to work for that, and get by on it."
Are you aware:
- Most people don't have an option to just leave and get a better job. Have you heard about the unemployment problem?
- People aren't "getting by" on minimum wage jobs. They need food stamps to eat and Medicaid for health care (if they can get these programs).
- Average Walmart / fast food worker is not a teenager but is a 30 year old trying to support a family and is not "getting by".
Do you actually know any minimum wage workers or unemployed people?

Re:tl;dr

[KingMotley]

Is it fair that you can have two similarly-skilled, similarly-trained, similarly-experienced programmers working side by side but they have a difference in pay?

The problem there is people often have an inflated sense of self-worth, or skill in any particular area. I remember reading one study that showed that when asked a large pool of people how well they knew a subject, the people that rated themselves the highest actually knew the least. As people actually get better at their field, they understood better what they didn't actually know, and rated themselves much lower.

I have really never met two similarly skilled, similarly trained, similarly experience programmers working in the same place. That however, didn't stop one of them from thinking they were as good, and often much better than the other one.

Some people don't like that, and want everyone to be paid based on a standardized table of years of work experience and years of education; look up where they cross, that is your salary.

And usually the people that I find that advocate that type of arrangement are the absolute worst of the bunch. Just because they went to school, and learned nothing (or things that are mostly irrelevant), and sat in a chair in front of a computer for 20 years does not make them better than the guy next to him that lives and breathes it 24x7 for the past 5.

Re:tl;dr

[Pinky's Brain]

Money is power ... and people are very good at rationalizing how hanging on to their power is in everyone's best interest even when it isn't. By creating this political ruling class of the uber rich we are simply rebuilding feudalism.

Re:tl;dr

[Anonymous Coward]

The best option going forward is this.

Kill FDIC.

Hoo, boy! You need to do some reading to find out why FDIC was created in the first place. Hint: it had nothing to do with offering customers free toasters.

Re:tl;dr

[johnlcallaway]

I guess when you get to be so good people are willing to pay you that much, you will politely refuse it. But you will still put in 7 day work weeks, never get an uninterrupted vacation and be willing to away from your family for long periods because you are just such a nice guy.

Or is it because you will never get to be that good at anything, you feel that you have some right to tell other people how to spend their money.

That 'compensation package worth 88mil' isn't all cash, so dropping it to 50mil doesn't translate into necessarily being able to hire more workers. If the company tanks, all of the stock options in the package are worthless. Their compensation is very much tied to the company's success.

I suppose you are also in favor of getting rid of multi-million dollar sports player salaries and high-priced actors also, especially since they don't really earn it. For that matter, how about we limit the ability of people like Bill Gates and Steve Jobs to make billions also. Let's just put a cap of 50mil/year max for everyone.

That should make it much better for companies .. they won't have to pay as much and can lower their prices. They'll still lay off people, since NOT SELLING ENOUGH STUFF IS USUALLY THE REASON PEOPLE GET LAID OFF YOU IDIOT!

Re:tl;dr

[WheezyJoe]

Are you sure? I find it hilarious how huge companies have to lay off thousands of employees, yet the CEOs are still making their 10s of millions in salary. How about first eliminating bonuses, as well as dropping salary before eliminating employees.

For example ,Blackberry CEO getting a compensation package of 88 mil literally days before laying off a bunch of employees. How about offering him 50 mil instead and keeping on 700 workers

Here's why that didn't happen: Blackberry was in financial trouble, losing money each day, which gets the biggest shareholders (including the Board members) really nervous. When a company is losing money (or widely perceived to be), it can't get (or has to pay a lot more for) loans, like the short-term kind (commercial paper) it needs to do day-to-day stuff like pay salaries. The Board demands quick action, and that requires an intact management structure. The Board can't get things done if all its executives are jumping ship to save themselves. But to stick around, the senior-type executives gotta get paid.

Eliminate bonuses? Take a pay cut? Here's the thing: dollar-for-dollar, most senior executives are better off quitting ("retiring"), unless some divorce, gambling addition or coke habit has eaten away all their savings. Also, it's just a thing that senior management types tend to find new jobs (e.g., consultant) more easily than your typical laid-off worker (or just about anyone else). All this adds up to one thing: Mr. CEO can demand the kind of pay that makes it worthwhile for him to come to work each day for a company that isn't sexy, that may not be around much longer, and requires that he do, well, unpleasant things. Like fire 1000's of workers.

And by shedding thousands of workers the company can't afford to pay, he makes the books look better, which gets Wall Street to lend money again, which pays the bills to keep the lights on a bit longer, and makes the Board members a little happier, who pays him a bonus to stick around longer and save them the hassle of having to find someone else to do his job. At least until the company is worth enough on paper that it can be sold off and finally be someone else's problem.

Awful, isn't it? That's how shit happens!

Re:tl;dr

[master_kaos]

Actually yes, I do think that reducing sports player salaries, actors, etc would be better. It is pathetic how someone who provides almost zero value to society is getting paid millions, while a farmer down the street who is feeding the local community is struggling to keep afloat after a drought.
And yes I wouldn't accept that much money, or take it and donate it to a worthy cause. I make an average salary and I already donate some of it to the needy. I honestly wouldn't even know what I would do with that much money and have zero use for it. If I had 2 mill in my account right now I could easily never earn a dime for the rest of my life and be content.. I don't want a mansion, I am perfectly happy in my 250k home. I dont want a 300k car (although maybe I would buy a 60k car). I don't want a private jet, yaht or whatever. Sure I would live a tad more extravagantly that I do now if I had the money but not much more.

Now you mention people like Bill Gates and Steve Jobs -- they earned it. I have ZERO problem with people making billions of dollars from something that they built with their own bare hands. And I also wouldnt have a problem with the CEO of Blackberry getting 88 million dollars if he completely turned Blackberry around and made it extremely profitable, but not until that time comes. Maybe dropping the package to 50 mil wouldn't translate to hiring more workers, but I can guarantee you some of those workers would rather rather take a paycut for stock options of equivalent value then to be laid off.

I am not saying layoffs didn't need to happen, of course they did. I just find it disgusting how they offer a new CEO such a huge compensation package when they are in the financial turmoil they are in. I know it is mostly stock options, but that is present value, so sure if it bombs to 1/4 he still makes out like a bandit with 22 mil all while doing a piss poor job. If it goes to zero, well obviously he didn't deserve a penny of it anyways..

Re:tl;dr

[PopeRatzo]

You probably consider Matt Lauer a "personality" at 25M.

You have an extremely broad definition of "journalist".

Re:tl;dr

[whoever57]

Sure there is. A great CEO can spend an hour doing something that leads to several hundred new jobs. Is that hour worth 60 of those newly employed people? I suspect they'd think so.

Running a major enterprise isn't easy. There's an awful lot of information to absorb and decisions to make, and the implications of those are immense. That's why a good CEO is worth a lot of money, and a bad one takes down an entire company.

Is the CEO putting his own money (not salary, but personal wealth) on the line if he makes a bad decision? If not, then your value argument doesn't work. What about engineers who invent something that may earn a company hundreds of millions of dollars, do you expect them to be paid millions?

The fact is that CEOs are worth what it would cost to replace them with someone broadly similar, and probably there are many people who could do the same job but never get the opportunity.

Re:tl;dr

[KingMotley]

Are you aware that the current US unemployment rate is just slightly over HALF the european unemployment rate, and is almost (but not quite) back to normal pre-collapse levels?

Are you aware, that if you are working a minumim wage job, and you skip starbucks, iPhones, and live with either your parents, or roommate(s), that you can indeed get by quite well?

Yes, I know minimum wage workers, all of them have iPhones or iPads, cable tv, cars, etc and don't collect food stamps or use medicaid for health care, do you?

Re:tl;dr

[flaming error]

"Is that hour worth 60 of those newly employed people?"

No.

In the first place you have a dimensional analysis problem of non-matching units.

In the second place, one CEO can't do the work of 60 people. That's why he had to hire them.

You're right that his job isn't easy. No interesting job is. Lots of people work hard.

The average CEO makes 340 times his average employee. The CEO does not work 340 times harder than his average employee. He doesn't know 340 times more than his average employee. He doesn't single-handedly bring in 340 times more productivity than his average employee.

Instead he gets the credit (and sometimes blame) for what every other person in the organization accomplished.

Good CEOs deserve respect. Not worship. And not money disproportionate to his contribution.

The reason CEOs get paid so much is not because the free market prices them so high. It's because they are on each others' Board of Directors and they all figured out they could overcharge their companies and share the spoils amongst themselves.

Re:tl;dr

[mspohr]

Lazy, lazy people. You'd rather believe your random observations (which are worthless) than actual facts and won't take a minute to just Google it.
Here, bozo, I Googled it for you (try "average fast food worker") and the first page has all the answers (and more):
Take the first result on the page:
http://www.motherjones.com/pol...
Median age of fast-food workers:
29

Median age of female fast-food workers:
32

Percentage of fast-food workers who are women:
65%

Percentage of fast-food workers older than 20 who have kids:
36%

Income of someone earning $8.94/hour:
$18,595/year

Federal poverty line for a family of three:
$17,916/year

Income of someone earning $15/hour:
$31,200/year

Income needed for a "secure yet modest" living for a family with two adults and one child
In the New York City area: $77,378/year
In rural Mississippi: $47,154/year

Growth in average real income of the top 1 percent since 1960:
271%

What the current minimum wage would be if it had grown at the same rate as top incomes:
More than $25

Re:tl;dr

[Anonymous Coward]

Of course income is a zero-sum game. Economy produces a certain amount of value per year. If your share of the pie grows, mine must shrink.

Whoa there. Hold up.

This isn't true and if you run with that assumption it forms into some very dangerous ideas.
Income, the economy, all that jazz, is most certainly not a zero-sum game. It's only zero-sum if you ignore all the actual work and all the actual spending. The middle part, where the decision about who gets paid what for the work that happened in-between, sure, that's zero-sum.

The restraunt brought in a million bucks in revenue, it spend half a million on rent/food/taxes. How much does the waiter get? The cook? The owner? The busboy? That's a zero sum game.

But if the waiter and the owner kick out the busboy and the cook, do you think there's going to be a $1m in revenue next year?
If the waiter busts his ass and draws in more customers, or the cook just doesn't give a fuck if half the grill burns then there is simply more or less pie to go around. Step back a bit and you'll see the game is not zero sum.

Same goes for the economy on the whole. People can work harder. Huricans can fuck up your shit. People can face existential dread at having to compete with China.

If you fall into that logical pit of thinking that the problem is merely a matter of distribution, then you might be tempted to take the whole pie and distribute it manually. That really didn't work out so well for the French, Russians, Chinese. Revolutions TEAR IT ALL DOWN, and subsequently there's simply less pie. Now, if you go from getting 1/100th of a pie, to 1/5th of half a pie, then it's a step up. But don't pretend that HALF the GDP didn't just go down the pipe.

Now. All that said, even in non-zero-sum games, those fuckers can steal your slice of the pie. CEO's pay has gotten ludicrously out of porportion for the "work" they do.

Re:tl;dr

[PopeRatzo]

I've heard of states (or counties or cities) giving breaks to corporations for income, property, or other taxes, but I've never heard of an arrangement where the company is allowed to keep any withholdings from employee's payrolls as you claim... do you have a concrete example you could share?

No problem. Reuters says there are at least 2700 companies with such arrangements.

http://www.csmonitor.com/Comme...

http://thinkprogress.org/econo...

http://www.huffingtonpost.com/...

Re:tl;dr

[sjames]

So why do CEOs that crash the company usually find a chair pulled out and waiting for them elsewhere?

Re:tl;dr

[sjames]

Only if that person and ONLY that person could have managed it. Otherwise, no.

The building's maintenance engineer put in a siphon break that kept everyone in the building from getting dysentery with a non-zero fatality rate. Does that mean he's worth at least two weeks worth of the CEO's productivity?

Re:tl;dr

[sjames]

It barely counts as a layoff when they give you a parting gift that could support a family for life.

Re:tl;dr

[laddiebuck]

I used to think like that until somebody's comment put it into perspective. The average worker's screw-up can cost the company X dollars. The average CEO's screw-up can cost the company a thousand times that, can tank the company. I find it reasonable that people be paid to do their jobs without mistake in proportion with the responsibility they bear - paying for risk rather than achievement. However, I also think that by this standard, military officers and commanders should be much much more highly paid.

They are all paid too much

[cfulton]

But, the kitty that they are paid from is soooo large that from the corporate perspective they are not all that expensive. And free enterprise etc. So, paid too much yes. Anything we can really do about it no.

Re:They are all paid too much

[SQLGuru]

At the top tier (VP, Pres, CxO), pay should be capped as some (documented) multiplier of the lowest level salary. Bonuses should be tied to company performance. That's it. If the CIO wants to get paid more, he either needs to raise the rates of those below him or improve the performance of the company in some meaningful way. When a company making billions pays its executives $50M but lays off thousands making $40K, it feels really crappy. Sure, I understand that sometimes those layoffs boost performance and what not, but there really is a point where having MORE money doesn't really do much for you.......whereas losing your job is VERY disruptive.

Re:They are all paid too much

[Billly Gates]

*devils advocate*

Why should they be capped?

It would distort the free market and no one would take the risk or the very hard work like 70 hour work weeks, MBAs, and other things for dozens of years without the compensation.

Doing so would make great talent do something else or not try as hard and everyone looses out.

If someone is paid too much the market takes care of that with something called a firing. Losing your job does suck and is very disruptive but the shareholders need a return and who is the shareholder? Your elderly mom, YOU, etc. If you have a savings plan you own shares. Also investment money is needed to expand or go into more markets. They only way to do that is to have great accounting books.

Yes it does suck to be laid off at a human level, but ask yourself what are you providing? The reason you are let go is because you fix some computers. The CEO on the otherhand changes the lives of milllions of people.

You want that cash and job security then you ought to be a better worker and provide greater value. The sky is the limit and the CEO didn't start out like this overnight. It was not luck. Even company founders are poor. It took Zuckerberg 10 years before he became very wealthy.

The free market takes care of everything if you just bud out and not interfere.

Re:They are all paid too much

[mrchaotica]

At the top tier (VP, Pres, CxO), pay should be capped as some (documented) multiplier of the lowest level salary. Bonuses should be tied to company performance. That's it. If the CIO wants to get paid more, he either needs to raise the rates of those below him or improve the performance of the company in some meaningful way. When a company making billions pays its executives $50M but lays off thousands making $40K, it feels really crappy.

The fact that executive pay being so disproportionate to employee pay "feels really crappy" is not a problem. The fact that executive pay being so disproportionate to employee pay destabilizes society by destroying the middle class is a problem!

Re: They are all paid too much

[Anonymous Coward]

Too bad that free markets are a theoretical ideal that doesn't really happen in real life. Sure, market forces shape outcomes. But market failure is a real thing that happens. You can't rely on the market to correct it's own failure.

Re:They are all paid too much

[CastrTroy]

I've heard about this idea, but I think there are some major flaws. Basing the CEOs pay on the pay of their lowest paid employees doesn't work out. Microsoft probably has very few low paid employees by virtue of business sector they are in. They design software, so the majority of their employees are going to be paid quite well. Starbucks on the other hand sells coffee. Even though they pay pretty well, I would have to say that the average Starbucks employee makes nowhere close to the same amount as the average Microsoft employee, and they shouldn't because that job simply doesn't require the same expertise. Should the Apple CEO get a large salary because their employees are well paid, or should he get a small salary because Apple's devices are made by low paid workers in China. Sure they are directly employees of Apple, but if it wasn't for the low paid factory workers, Apple wouldn't have so much money to spread around to their official employees.

Re: They are all paid too much

[Anonymous Coward]

Too bad that free markets are a theoretical ideal that doesn't really happen in real life. Sure, market forces shape outcomes. But market failure is a real thing that happens. You can't rely on the market to correct it's own failure.

Too bad that fairness is a theoretical ideal that doesn't really happen in real life. Sure, government force shape outcomes. But government failure is a real thing that happens. You can't rely on the government to correct it's own failure.

Re:They are all paid too much

[AchilleTalon]

You are right since the devil is right as well.

There is absolutely no reason to cap the CEO or anyone else salary based on whatever equation anyone can come with thinking he is clever than the next door guy.

CEO salary is determined by investors, those who are taking risks in the company and hired him to take care of their investment in that company.

If the investors believe this guy to earn that salary, it is up to them to reduce the salary and compensations or to fire him to hire someone else capable to take care of the investors' money.

It is not a matter of how much money someone needs to be comfortable, it is a matter of how much money this guy will bring to the investors and shareholders.

No investor wants the CEO to spend more money than needed in employees wage and salary. No investor wants the CEO to not spend enough money that the company will be put at risk or go to bankrupcy lacking the talented people it needs to make money. You can disagree with what the investors think and their strategy for the company, that's fair. However, it is not to someone which have no money in the company and who risks nothing in the enterprise to decide.

Re:They are all paid too much

[nine-times]

It would distort the free market and no one would take the risk or the very hard work like 70 hour work weeks, MBAs, and other things for dozens of years without the compensation.

Huh? People do work very hard for 70 hours a week without making 20 million dollars for it. It happens all the time. Sometimes because they have to, and sometimes because they enjoy their jobs. And getting MBAs? Do people actually need to get MBAs?

If someone is paid too much the market takes care of that with something called a firing.

Are you sure about that?

the shareholders need a return and who is the shareholder? Your elderly mom, YOU, etc.

Except often they're not, at least not to a meaningful degree. Your elderly mom probably has a 401k that gives her a 0.001% share in the company without knowing it. Mostly "the shareholders" are rich people.

The sky is the limit and the CEO didn't start out like this overnight. It was not luck. Even company founders are poor. It took Zuckerberg 10 years before he became very wealthy.

You're conflating some different issues here. The sky is the theoretical limit, in abstract, but not really so much for everyone. Zuckerberg did not start off poor. He started out upper-middle class. And he was lucky. He found himself with a good idea at the right place and at the right time and with the right help. Any number of things could have gone against him, resulting in Facebook never becoming the company that it is today.

So while it wouldn't be fair to claim that Zuckerberg sat around doing nothing and just happened across success, like finding the winning lottery ticket, it's also not fair to everyone else to paint the picture as though Zuckerberg created his own success through pure brilliance and hard work. He made smart decisions and worked hard, but others made equally smart decisions and worked equally hard without ever making a million dollars.

Re:They are all paid too much

[Anubis350]

Interesting to think about actually. Using your 2 examples I would bet that MS has a much larger Janitorial and Maintenance/Physical plant staff directly on the payroll, many of whom likely make less than the average Starbucks employee

Re:They are all paid too much

[AchilleTalon]

BTW, bankers are an exception due to what happened with the financial crisis which ended with governement pumping tons of dollars to keep them afloat no matter how bad they did. At then end, everyone did pay for the risk, not just the shareholders and investors. That's what was unacceptable. The rules were bent in that case at the advantage of bankers.

Re:They are all paid too much

[ERJ]

Came here to say this. In addition, all this would lead to is contracting out all the low wage jobs. Walmart Store Staff, Inc. a separate but wholly owned subsidiary of Walmart Management, Inc.

Re:They are all paid too much

[Manfre]

Wrong. CEO pay is determined by the board, not investors.

Re:They are all paid too much

[Billly Gates]

Jobs was worth every penny after what he brought to Apple.

Apple didn't magically invent the iphone, imac, ipod, appstore, and Steve led the way. It brought value to hundreds of millions of people.

Yes if you are skilled doing programming/network design/chip design/ you can get wealthy. The key is to not work for someone elses dream.

Think of a product or server you and your fellow coworkers can provide? Start a company with your partners and make something. Or move to a place with startups in Silicon Valley where you make less starting out but have options in owning shares of the company. Many will fail but you will have many clients on your resume fast until one sticks and you strike gold.

You are more valuable than you think. Just because your current company doesn't value what you do as part of the bottom line, doesn't mean your skillset wont benefit someone else more greatly. ... of course if you have a baby and a wife there is also risk. Are you willing to take that? If not then being paid a lot less is worth the price in terms of job security and benefits.

Re:They are all paid too much

[Billly Gates]

The middle class is being destroyed in western nations due to not being as valuable as they once were due to globalization and an over supply of college educated folks

Not because the rich can force us all to work for less. The middle class is growing in Asia and in India at an exponential rate. It will return back again as the price of dollar declines and inflation goes up in these countries. Some companies are manufacturing back in the US as the cost savings have dwindled.

The market determines your salary and it goes up and down for each individual/company. My example in another post was you can get rich programming. ... at a .com or inventing a new app rather than POS code at pizza hut, where food production is valued higher.

You can't pay an engineer minimum wage. He will find a job elsewhere where he is valued more.

Some is true with the middle class here. Many jobs were lost because India can do them for a fraction of the price and Americans are lazy (seriously not flamebait) and do not work as many hours as foreign counterparts.

Re:They are all paid too much

[geoskd]

CEO salary is determined by investors, those who are taking risks in the company and hired him to take care of their investment in that company.

No, CEO pay is not determined by investors, it is usually decided upon by an executive compensation committee whom the board of directors has selected. Individual investors have about as much say in the whole process as individual voters have in controlling the laws that congress passes. For all intents and purposes, they two are wholy separate. I would agree that the process is working, if each individual investor got to select what percentage of their share of the profits should go to CEO compensation. Let the CEOs earn their pay the way politicians do. Make them campaign for it. Make them explain to every investor what they are doing to earn that pay. If each investor had real control over their own piece, you would find CEO compensation to be far more reasonable, and far more tied to their performance...

Re:They are all paid too much

[pitchpipe]

So we socialized the risk. Let us also socialize the profits.

Re:They are all paid too much

[mrchaotica]

Nothing in your post explains why executive pay has risen from 50x average pay (in the 60s) to 500x average pay now.

Re:They are all paid too much

[swb]

"Say on pay" wouldn't be such a hot topic in corporate governance (it even has its own wikipedia page) if investors actually had that much influence over executive compensation.

Most top executive compensation is detrmined by compensation committees made up of board members, many of whom are also top executives elsewhere. I don't want to risk you limiting my compensation if it exposes me to a risk you might limit mine. There's a moral hazard for these people.

The consultancies who get involved in executive compensation face the same risks -- those that come out and say that compensation should be decreased will likely find themselves losing business. Another moral hazard where self-interest keeps them from advocating for anything but the status quo.

The end result is that rank and file investors have little to no control over this and many barriers are erected to prevent shareholders from voting in more than an advisory way on this, let alone an up/down vote or even less likely, dictating compensation strategies.

Even in situations where CEOs have the concentrated authority to make big decisions unilaterally, I find it hard to believe that they are *individually* performing all the work required to make them. They are instead relying on legions of experts and other labor to make a decision, something which I don't think is magical enough to warrant the sheer scale of pay they recieve because they individually aren't doing the work but are demanding the scale of pay as if they were.

Even then, when they make terrible decisions that cost billions of dollars or oversee others who lose this and they lose their jobs, they still walk away with so much money its difficult to see any accountability they face. Maybe if you face the prospect of earning $20 million dollars you should also face the risk of losing $20 million dollars personally. But the current system is just win-win for them outside of bragging rights at the club.

Gee..

[3.5 stripes]

I'm guessing people are focusing on the bankers because google didn't fuck the world's economy.

I still think it's bullshit.

Because

[boristdog]

Because the tech sector hasn't crashed the world economy...yet?

Re:Because

[swillden]

Because the tech sector hasn't crashed the world economy...yet?

In addition to that, I think there's a perception that bankers make their money by exploiting the people, by charging them more for mortgages, paying them less in interest, etc. Basically, by sucking money out of these common transactions that everyone has to make. The money paid to bankers could, the argument goes, have been left in the pockets of the average person.

In contrast, doing business with tech companies is more voluntary. No one has to buy an iPhone or an iPad, while buying a house or condo is more mandatory (even renters get hit, since their landlords have mortgages and pass the costs along). Using Google is perhaps harder to avoid, but the average person's perspective is that they don't pay Google anything, so the money paid to Eric Schmidt doesn't come out of their pocket. In fact, the advertisers who pay Google get their income from the people, so the average person actually does contribute to Schmidt's income, very indirectly (though there's a good argument that the advertisers would have needed to advertise regardless and since Google has made advertising more efficient the net effect of Google's work has been to reduce the amount consumers pay).

Anyway, without getting into the degree to which these perceptions are accurate (not very), banks are seen as parasites, while tech companies are seen as adding value, and that has a strong impact on whether people feel the companies have the right to pay their people exorbitant amounts of money.

Re:Because

[Anonymous Coward]

1999-2000 Tech bubble?...

Re:Because

[phantomfive]

1999-2000 Tech bubble?

The tech bubble crash is really interesting to compare to the banking crash. More money was lost in the tech crash, but the impact on the economy was much less. The reason for this is because in the tech bubble, equity was lost, but in the banking crash, it was debt.

Some economists see this as an indication that banks should be financed the same way tech companies are financed, with shares of stock instead of savings. Hard to say but it's an idea worth thinking about.

Pay Out of Whack

[techmage]

As with all things, once you know you have access to the cookie jar, you can get what you want. The CEOs all get these great payouts because the board of directors agrees to it. Why? Because then the CEO can give them nice big Director fee checks. So the CEO gets the cookies and shares them with his friends. As long as the stock goes up, the stockholders will look the other way too. "It is all the cost of doing business," they will say. Everyone but the workers and customers win.

Re:Pay Out of Whack

[mrchaotica]

As long as the stock goes up, the stockholders will look the other way too. "It is all the cost of doing business," they will say.

The other problem is that the stockholders mostly aren't people. Instead, they're large mutual funds managed by a single person who is in the CEO/director good ol' boys club too.

ELOP

[Billly Gates]

One word ELOP.

See what happens when one bad CEO comes into a great innovating company like Nokia?

Another word JOBS.

Even if you hate Apple look what happened to Apple since 1997 when Steve Jobs came back who is considered one of the best CEOs? CEO's get paid a lot because they have a HUGE impact on stock price and company performance. You can argue how unfair it is until you are blue in the face. Fact of tthe matter they are worth every penny and have a huge pull that the average slashdot reader and I can only dream of in terms of benefits and compensation from our jobs.

Bankers on the otherhand is tricky. Bankers get paid like they were before deregulation. That is they were once paid only on interest grown. Not principal plus interest accured like today saying yeah I earned that 6 million today and need 10% of that NOW! ... in reality the customer put down 5.99 million and you made $10,000 but claim it was really 6 million in assets. This was because of the way paperwork used to handled prio to the mid 1980s.

So yes many are worth every penny but something should be done but wont because that is evil socialism that we can't allow etc. Politicians need that money to fool stupid voters with fancy commercials every 2 years.

Re:ELOP

[mbone]

Another word JOBS.

Even if you hate Apple look what happened to Apple since 1997 when Steve Jobs came back who is considered one of the best CEOs? CEO's get paid a lot because they have a HUGE impact on stock price and company performance.

Steve Jobs had a salary of $ 1 per year. He shared in the success of the company because he owned a good chunk of it.

That, I have no problem with.

Re:ELOP

[Enigma2175]

Steve Jobs had a salary of $ 1 per year. He shared in the success of the company because he owned a good chunk of it.

That, I have no problem with.

Yes, but that salary structure wasn't because of some nebulous "belief in the company" it was structured that way to avoid taxes and for public relations purposes. link

Re:ELOP

[wiredlogic]

It's a nice little fantasy to think of the $1 CEO as a brave soul who is willing to risk all for their dog food but the reality is that it's a tax avoidance scheme that only wealthy people can indulge in.

Re:ELOP

[Princeofcups]

Steve Jobs had a salary of $ 1 per year. He shared in the success of the company because he owned a good chunk of it.

That, I have no problem with.

Until you understand that the $1 a year is one of the most egregious tax dodges today. You pay tax on salary, not on "capital gains." You then borrow against your stocks if you need cash.

The larger question is...

[fahrbot-bot]

... how much money does someone really need? I'm not against Capitalism, but seriously, does one person really need $100 million, or even $20 million as an (semi?) annual salary or bonus? Does a CEO need 500 times (recent figures) the average salary of his/her own employees - you know, the people doing the actual work?

Re:The larger question is...

[Anonymous Coward]

When you run a society based on what people want and are willing to work for themselves, you end up with South Korea. When you run a society based on what people need, you get North Korea. Take your pick.

Re:The larger question is...

[Tony Isaac]

It's not about how much money someone needs. It's about how much money someone is worth to a company.

CEOs are much harder to replace than tellers. And the loss of a CEO is much more detrimental to a bank than the loss of a teller. This is what makes CEOs worth more than tellers (to a bank) and why it makes sense for banks to pay CEOs much more.

Are some CEO's overpaid? Yes, of course. But should CEOs make less money just because tellers make less money? No.

Re:The larger question is...

[tompaulco]

I don't "Need" $200 million, but I would really be pissed if someone offered me that as a salary and some dumb law said that they can't pay me that much.

Re:The larger question is...

[dave562]

Are CEOs really that hard to replace though?

Even if you look at a bell curve distribution of intelligence and ability, there are still plenty of people who are capable of leading projects, making rational decisions and thinking strategically. Granted, I am only at the top levels of middle management, but I have worked with enough executives at this point to realize that they spend most of their time selling shit, and networking with their colleagues. The only reason that CEOs are hard to replace, IMHO, is because of those connections. There is a small group of individuals who have formed what more or less amounts to a cartel, and they will only deal with each other. They sit on each others boards, graduate from the same schools, belong to the same country clubs, and have decided that their shit doesn't stink and that everyone else should toe their line.

They are smart people, have no doubt about it. But they are not so much more superior in terms of intelligence or skills or abilities than plenty of other people out there who are working for them.

You get, what you negotiate

[mi]

"Maybe the bigger question is why is CEO pay so entirely disconnected from company performance?"

The even bigger question is, why is this any of our business? As long as it is not the taxpayers footing the bill, count your own money...

Re:You get, what you negotiate

[SeaFox]

"Maybe the bigger question is why is CEO pay so entirely disconnected from company performance?"

The even bigger question is, why is this any of our business? As long as it is not the taxpayers footing the bill, count your own money...

Taxpayers are footing the bill. Or did you miss the recent media attention about all the people who work at Wal-Mart, McDonald's etc and have to get food stamps and other government assistance to make ends meet. This isn't the rhetorical lazy bum leeching off welfare or unemployment benefits, there are people being good citizens and actually working.

Re:You get, what you negotiate

[Whorhay]

The point is that Walmart is not a company that is just scraping by. It is a hugely profitable company. Someone did the math awhile back and found that they could double the wages of their work force and it wouldn't affect their profits in a noticeable way. Instead Walmart keeps wages low, and over hires so that employees can't even count on a regular 40 hours. As a result their employees have to rely on government welfare programs to survive. So everyone else in the US that pays payroll taxes is footing part of the bill for Walmarts extreme greed, whether or not we shop at their stores.

Perhaps...

[Anonymous Coward]

Perhaps if Google and Apple had done the same damage to the economy as bankers did a few years ago and had to be rescued with 700 billion dollars (from a government that argues that a few billion in homeless shelters is wasteful expending) people would be pissed at them too.

Of course they are.

[Max Threshold]

Some jobs are harder than others, and deserve to be rewarded more than others. But absolutely nobody "earns" more than a small multiple of minimum wage, and this should be enforced with a progressive tax structure based on an algorithm in which the only variable is the minimum wage. At today's minimum wage, astronauts, brain surgeons, and the President of the United States should be making about $60K a year, and it should only go down from there.

Re:Of course they are.

[Max Threshold]

Because the upper middle class is both beneficiary of and political buffer for the uber-elite. If the tax structure made them the new upper class, their wealth and power would actually increase despite their nominal decrease in pay. Their resistance to this is both self-destructive and harmful to the rest of us. If they can't be made to see that, then they should be thrown under the bus.

Yes, but with a caveat

[brunes69]

CEO pay in general is too high I agree.

But I find it easier to stomach Silicon Valley CEO pay for a reason - they are producing an actual product whereas investment banks do not - they actually harm the economy, they don't help it.

http://en.wikipedia.org/wiki/F...
http://www.huffingtonpost.com/...

Furthermore, most Silicon Valley CEOs are either founders of the companies or were involved from an early phase. They put a lot of blood and sweat into these companies over the years. They are not just MBAs flown in for a couple of years to later on bail with golden parachutes when things get rough.

http://en.wikipedia.org/wiki/F...

because ceos arent paid for their work.

[nimbius]

a CEO arguably isnt an employee anymore. the position of CEO is no different than the badge on an expensive luxury sedan or the star on your christmas tree. A CEO's competitive salary is directly proportional to the level of success you wish to project to the markets at large. the CEO, much like the badge, exists to be stroked and admired for its performance and implied success. And once you come to invest in it, rarely do you accept negative criticism. Heres an example: Ed Lampert, the CEO of Sears and KMart, nearly bankrupted both companies on numerous occasions. he was arguably the worst CEO on the face of the planet, with the exception of maybe Albert J. Dunlap who was nicknamed "the chainsaw." (or hell, lex luthor) Both CEO's were paid in excess of 2 million dollars per year. Now you might say, "but lampert insists his new salary is only a dollar a year!" and while this might be true, Sears fully insists he is available to earn up to 4.5 million dollars in bonuses a year (cited in a 2013 AP Article.)

so yes, if you consider the CEO a real employee (let alone a real person) just like you and me, then she/he is stratospherically overpaid.

Re:Pay is exactly where it should be

[qwijibo]

I don't think the school comment was about teachers - it was more likely referring to the increasing sizes of school district administration staff making 6 figures and contributing basically nothing to the education process.

Control of information

[EmperorOfCanada]

Quite simply the CEO controls the bulk of the information flowing to and from any groups such as the board of directors, the shareholders, the "executive compensation committee". etc.

Basically you have two factoids at play: One is that the CEO and those immediately surrounding them often even control such things as the candidates for board of directors election and those on the executive compensation committee. So there you have quite a bit of bias. Then after that you have literally nobody above the CEO. In theory board of directors answer to the shareholders and the CEO answers to the board but if the shareholders don't pick who is nominated for the board and the board is owned by the CEO then the CEO pay is limited to just how greedy he thinks he can be; not limited by other factors such as actually deserving his pay.

So when you are being so foolish as to try and find a correlation between CEO pay and their performance then you are wasting your time. The only correlation should be between their pay and a combination of their level of narcissism and their level of psychopathy.

What this quite simply calls for is that shareholders need to have vastly more influence on who is nominated to a corporate board. Another thing that this screams for is a relationship between the typical pay within a company and the top executive pay. Quite simply the higher this ratio then the higher the taxes should be on the top executives. This way you can exploit the greed of the top executives in that they will rationalize paying the typical employee much more so as to lower their personal tax burden.

Finance is a valuable activity

[sjbe]

Bankers earn a profit by moving other peoples' money around and taking some off the top.

True, and the reason they can make money at this is because it is a VERY valuable activity to society. Far more valuable than the bit they keep for themselves most of the time. If you need evidence of how valuable it is, merely look at our recent financial crisis when the flow of money froze up.

There are plenty of jobs that don't involve making things but nevertheless are very valuable. Don't confuse the value of the activity with the behavior of the parties involved.

One of those jobs is necessary for us to progress.

Think so? Try building a company without access to banking or financial services. You won't get very far. Anyone who thinks banking and financial services aren't necessary for progress doesn't understand finance. It's like saying your car doesn't need oil. Technically true for a little while but it won't work very well or for very long.

Re:Finance is a valuable activity

[amicusNYCL]

I'm sorry, but I don't see a reason why I should necessarily need the services of a banker to run my company.

If we're talking reality, then in this reality the bankers have paid the lawyers and the lawmakers to make sure that all of them are needed for everything. But just because that's the way it is, doesn't mean that's the way it has to be. The American financial system is not necessary in and of itself (proof: the world got along fine before there was an American financial system), all of the necessity in the system has been created by the people in the system. We need to bring back Glass-Steagall and take a step back from the cliff.

Re:Finance is a valuable activity

[Actually, I do RTFA]

. Far more valuable than the bit they keep for themselves most of the time.

That's very true, except for the fact that it's totally false. From an investors point of view, the fees from certain types of financial institutions outstrip their supposed returns. Not, returns relative to index funds, or returns relative to inflation, but nominal returns. And not for "bad mutual funds" but for things like "the entire hedge fund industry from conception til now".

If you need evidence of how valuable it is, merely look at our recent financial crisis when the flow of money froze up.

So, these overcompensated people were so bad at their jobs that they practically destroyed the world market? Maybe, if we assumed that these jobs weren't super-important things a rare few could manipulate, we would have avoiding concentrating billions of dollars of investment power in a few people, so there would be more common, bust less ghastly, failures?

Try building a company without access to banking or financial services.

Being able to borrow money: important. Being able to have reliable accounting: important. However, access to Goldman: meaningless most of the time.

Re:Finance is a valuable activity

[epine]

If you need evidence of how valuable it is, merely look at our recent financial crisis when the flow of money froze up.

That's just about the dumbest thing I've ever heard.

I guess you don't recall the August 1981 strike air-traffic controllers strike. Most of those wealthy bankers could be replaced by people being paid 10% as much, and after a few years we'd hardly notice the difference, except perhaps that the new lot wouldn't be nearly so adept at screwing the system over.

I guess if you were running NASA you'd pay a billion dollars per o-ring, because--gosh--look at what happens if it won't deform, and the size of the bill if we need to replace the dumb thing. Ten thousand parts at a billion dollars each sure adds up. When you think about it, with each o-ring protecting the safety of a ten-trillion dollar shuttle, a mere billion dollars per ring is a screaming deal, wouldn't you say?

Finance wasn't rocket science until the inmates figured out that astrobucks are a good living. It doesn't need to be rocket science any more than an o-ring needs to cost a billion dollars.

The controllers had Washington by the balls. Big mistake. The bankers have Washington by the carotid artery. We can therefore infer from this that bankers do more important, more productive, more difficult work. Or we can infer that bankers are better at pouring over Grey's Anatomy if it serves their personal interests.

Re:Finance is a valuable activity

[jfengel]

The activity is indeed valuable, but that's not the same as saying that they are entitled to as much compensation as they are making.

They're entitled to it in the sense that they've managed to gull stockholders into giving it to them, but that money "belongs" to the stockholders in the bank, who are underwriting the banker's paycheck but have little say in negotiating his salary. Is there some other person who could do just as well at a third the price? Or a hundredth of it?

The financial crisis proves that the job is indeed very important, but it also suggests that a lot of them aren't very good at it. Several major banks failed; more would have failed if the US government hadn't stepped in to save their butts. If they earned their money, it was in convincing the government that they should do that, saying out of the left sides of their mouths that the banking industry was too important to allow to fail, while using the right sides to convince people that it wasn't actually their fault and that banking sector is well run if only it weren't for those dastardly (Chinese, poor people, regulators, etc.)

In the end their compensation is indeed a tiny sip of the gusher of money that flows through their hands, and it wouldn't fix the problem to turn that sip into a sniff. It does, however, imply that they aren't being hired to protect the long-term health of either the bank itself or the economy, but instead engaging in a lot of back-slapping and hand-shaking to use other people's money. If it were a better measure of their relative skill compared to other bankers, rather than merely taking credit for the rising tide that lifted all the ships (and their heavily-leveraged ship higher than most), I wouldn't mind that their salaries were so high. But they don't seem to have gotten there through any meritocracy, and their incompetence puts the entire country in jeopardy from time to time.

Re:Finance is a valuable activity

[jafac]

Banking and financial services are clearly necessary for progress.

But the winner-take-all profit skimming model certainly isn't necessary. We could be just as prosperous and successful with a national banking model that treats this function as a utility, rather than an easy method for entitled white-collar crime.

Re:Insanely

[geekoid]

Vision is a legitimate answer. A strong vision of what they want a company to be is needed.
Now, very few CEOs actually have a vision, or a plan to make their vision come to fruition, but that's a different issue.

CEO pay IS based on performance

[Sponge Bath]

If a company succeeds, CEO pay increases because their super human abilities are solely responsible for corporate performance. If a company fails, CEO pay increases because their super human abilities limited the damage from incompetent workers and are needed to liquidate the company in an orderly fashion.

Possible solution?

[bradley13]

The problem has always been the "old boys network" where top executives take turns sitting on each others' Boards of Directors, approving each others' salaries. These nitwits are so disconnected from the lives of their workers that they probably sincerely believe they are worth such ridiculous salaries.

Starting this year, here in Switzerland, the shareholders must vote on the executive compensation package at the annual shareholders' meeting. This vote is binding: if they vote against (outrageous) compensation, then it won't get paid. I believe this will have a long-term effect, not only because of the vote, but also because it requires spelling out executive compensation in plain terms that the shareholders can understand.

I expect a number of Swiss companies will have a sudden urge to rethink things, before the next annual meetings take place...

My Question is Different

[Bob9113]

DavidHumus notes "Maybe the bigger question is why is CEO pay so entirely disconnected from company performance?"

My question, if we're considering how we as a society should respond, is how changes in CEO pay and tax rates correlate to changes in the long-run GDP growth rate. If we're paying more and getting more, I'm all for it. If we're paying more and getting less, I'm opposed. If we decrease the high income tax rate, and lower the highest income tax bracket, and GDP growth rate increases, it is the right decision for society. If we do that and the GDP growth rate stays the same or falls, we are wasting money.

The nice thing is that we have good records going back to 1917, and from about 1950 to present we have both a steady change in tax policy (reducing the top income tax rate and lowering the top income tax bracket) and no major external shocks to the economy other than the OPEC crisis and attendant massive increase in the price of energy in the early 1970s. We can actually come up with a pretty solid estimate of this simple question: Are we getting our money's worth?

It's really the same question a restaurant owner asks himself when deciding how much to pay a dishwasher -- if I pay less, will I still get sufficiently clean dishes? If I pay more, will the dishes be enough cleaner to justify the expense? As a society we need to apply the same standard at the top brackets: to pay as little as we can while still getting the GDP performance we desire. Paying more than that is wasting money. Paying less than that is leaving GDP growth on the table. That is what we as a society care about, when it comes to allocating GDP -- maximizing the ROI.

The real issue

[Trailer Trash]

The real issue is the disconnect between company performance and executive pay. We're seeing a lot now of people who run a company into the ground and end up with a golden parachute, anyway. It's doubly insulting when people who make literally 1/1000th the CEO's pay end up with nothing.

My belief is that the real problem is that we're disconnected from the companies that we own. I own stock in a bunch of companies. Through mutual funds. In my Roth IRA. I can't show up at their annual meeting and vote because I don't directly own them.

In the old days, the board really represented the shareholders and shareholders often had bought the shares. As such, they had a closer stake in the company and the outcomes. The idea of a CEO ruining the company and then being compensated for it would have caused the board to be changed at the next annual meeting.

I'm not sure what the solution is but I believe this disconnect is a big part of the problem.

Re:The real issue

[NoImNotNineVolt]

If you hold individual shares in your Roth IRA, I believe you can vote them.

Most Roth IRAs allow you to buy individual shares. Consider selling your stake in the mutual funds and then buying back your position with individual shares. Save yourself the fund fees, earn your voting rights back. Of course, you're stuck handling your own allocation then, and you'll be responsible for all the trading fees, but such is life! I'm no day trader, and definitely of the buy-and-hold mentality, so for me this has proven to be a worthwhile course of action. Then again, I have no idea what I'm doing. YMMV, IANAL, KTNXBAI.

Re:Fair v. Equitable: Who cares?

[DudeTheMath]

Note that the CEO is trying to get the most out of his (almost always "his") employer, too. Who's his employer? Why, the board, usually full of banking CEOs who love to negotiate their high salaries, bonuses, etc., from their boards. It's largely a big circle jerk.

Re:Employed

[Hillgiant]

Steve... Steve.... The name rings a bell. Wasn't he the guy who earned one dollar a year? What a fantastic counter example you have found. Clearly more companies need to follow this philosophy.

Re:Ahh yes, the progressive tax crowd again.

[NoImNotNineVolt]

Thinly veiled? No, people are openly and clearly calling for a return to the progressive taxation that made America what it is today (or, what it was until Reagan started us on this death march). The 80%-90% top marginal rates in the USA didn't drive out the rich in the past, so it's a bit idiotic to proclaim that they will in the future. Also, linking to the WSJ in this context is hilarious. Perhaps it didn't occur to you that they're a mouthpiece for the wealthy and unlikely to offer any impartial commentary on the issue. (I'm a subscriber, but only in a "know thy enemy" sense)

Your point about Obama is valid, to some extent. I agree that the salaries of the millionaires running the show ought to be suspended when the country's going broke. However, to claim that they get paid too much is absurd. They make a tiny fraction of what these CEOs make. If you're upset about Obama's salary, you should be orders of magnitude more upset about corporate executive salaries.

Despite not being a baseball fan, I very much am yelling about the great American pastime becoming something that the ordinary American just can't afford. It's fucking baseball, tickets are supposed to be virtually free.

I find the rest of your post relatively agreeable, but it doesn't make any points in the argument against progressive taxation. Yes, CEOs dodge taxes adeptly. Yes, there's a huge conflict of interest inherent in the way executive salaries are determined. Yes, there's shitloads of other problems. But that doesn't mean that progressive taxation is somehow bad.

There is such a thing as too rich. If Bill Gates had $72T instead of $72B, that would necessarily mean that you and I had no money. Trot out the "it's not a zero sum game" argument as much as you like, but there is a finite amount of wealth in this world (I said finite, not static/constant), and possession of it all by one individual necessarily means that nobody else has any. We're rapidly moving towards just such a scenario, where the poor have no money (but are kept warm and fed by social welfare programs) and the wealthy have it all. Is that what we collectively want?

Re:Meh

[tburkhol]

What incentive is there to work to succeed if the govt is to take it all from you?

If the only reason you work is for your salary, then you are a wage slave and will never join the C-level. Those people you work for, they put in their hours because they want to win, and most of them aren't keeping score in dollars. Or not just in dollars. They're keeping score in how many people use "their" brand of computer or how many hotels they control. BoDs use compensation to try to make those rare people adopt the board's brand, but the compensation is not why CEOs are CEOs.

Re:Employed

[PopeRatzo]

Yeah, there is a difference between a guy who bets he can make a company successful and the guy who gets a multi-million dollar salary plus stock options to help him avoid paying taxes.

The first is a rarity. The second is business as usual in US corporations.

Today, the average CEO makes $9.7 million annually, up year after year, while worker salaries are on a steady decline.

Two separate economies. That is not sustainable.

Re:Employed

[Quila]

If you're doing it for the money, GTFO.

So, basically, most people should quit their jobs.

Re:Employed

[stenvar]

You're misrepresenting the numbers (as is ThinkProgress, where you probably got the number). The $9.7m is total compensation for CEOs of large public companies. That's not "the average CEO". nor "the average CEO salary" (TP), and it isn't just salary.

As for what people get paid for, CEOs of failing companies often get paid more because (1) it's a crappy job, and (2) it's a big stain on their resume. If you don't pay people a lot of money for that job, you aren't going to get anybody.