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

[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

[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

[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

[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?

Because

[boristdog]

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

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

[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.

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: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: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

[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.