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CEOs Get Paid Too Much, Says Everyone

If CEO pay is too high, raise the marginal tax rate on incomes over, say, $5 million a year to 50%.
 
The Central Scrutinizer said:
Citation needed.
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+1

I'd love to see where any CEO awarded themselves a pay rise, simply because they can't. Their Salary is determined by the Board of Directors (well technically a Committee within the Board which is responsible for determining Executive Compensation.)

The only case where a CEO might be able to do so is where they are a Director and owner of a smaller company, but then they aren't likely to be earning millions of dollars either.
 
Lorentz said:
Hear hear, you heart surgeons! THAT's what real heavy responsibility looks like!
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If you want to get technical you could do some math to figure out whether a CEO of a large company or a heart surgeon has more impact.

How many heart operations can a heart surgeon do per year? Some amount of those they are saving a life. In other cases their patient may die. I'm sure someone knows the numbers.

Now, CEO's have influence, in some cases, over 10's of thousands of people. In some cases millions of people are their customers.

So now all we have to do is figure out the exchange rate between doing surgery on someone and having them as a customer of your company.

So is a million people buying a product cheaper equivalent to a surgery on one person?
 
Fudbucker said:
If CEO pay is too high, raise the marginal tax rate on incomes over, say, $5 million a year to 50%.
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All of a sudden a lot of CEO's move to luxemburg. Or wherever the tax rate is less.

Hmmm Luxemburg or Grand Cayman. Maybe best to hedge and buy places in both and just keep the jet warmed up...
 
SezMe said:
I won't argue with the rest of your post but this part needs comment. Just because something is legal does not mean it is right or fair. I think there are LOTS of things that could be done to balance the corporate playing field.

Second, we don't have a progressive tax system for the very rich. So to think they are funding the infrastructure is to be blind to the facts.
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Well, it certainly isn't as progressive as it ought to be, but it is progressive. The ability of the rich to avoid taxes is at least somewhat exaggerated. Generally, rich people pay high taxes, as they should.

As for the lots of things that could be done, I just don't see what government can do that wouldn't ultimately make things worse. In the end, CEOs make the salaries they do because they have convinced someone else to give them a bunch of money. Educate people to realize what's going on,and maybe the people would be harder to convince, but I don't see what government can do to correct the problem. If shareholders aren't willing to protect their own money from confiscation, I'm not sure government should do so on their behalf.
 
NewtonTrino said:
All of a sudden a lot of CEO's move to luxemburg. Or wherever the tax rate is less.
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Not if they're U.S. citizens, in theory they will have to pay the tax they owe (Mrs. Don and Daddy Don have to fill out all kinds of IRS forms to demonstrate that they do not owe any additional tax and that they are adequately taxed here in the U.K.).

edited to add....

While some high profile executives are prepared to relocate, the expected flight from the U.K. when the incremental tax rate went up to 50% simply didn't happen. I suspect that's because Mrs CEO (or Mr CEO in the case of female executives) was very happy in her (his) Holland Park mansion and didn't want to move to Luxembourg. Mr CEO could have moved but once you factor in Wimbledon, Henley, Ascot, salmon fishing, grouse shooting and so on he was going to spend 90 days in the U.K. anyway and he wanted to see his wife, kids and mistress ;)
 
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Meadmaker said:
Well, it certainly isn't as progressive as it ought to be, but it is progressive. The ability of the rich to avoid taxes is at least somewhat exaggerated. Generally, rich people pay high taxes, as they should.

As for the lots of things that could be done, I just don't see what government can do that wouldn't ultimately make things worse. In the end, CEOs make the salaries they do because they have convinced someone else to give them a bunch of money. Educate people to realize what's going on,and maybe the people would be harder to convince, but I don't see what government can do to correct the problem. If shareholders aren't willing to protect their own money from confiscation, I'm not sure government should do so on their behalf.
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It's up to the shareholders (and these are almost always large institutional shareholders) to determine whether they are getting value for money. I think that executives and their pay is a lot like Premiership Footballers and their pay. There are a few exceptional talents out there who really do deserve what they get paid but there is a far larger number of journeymen who have seed their pay far outstrip their value to the business. Just making sure that the lights stay on is not worth a multi-million pound annual reward.

Until the money runs out then there'll be no need to be more discriminating.
 
NewtonTrino said:
All of a sudden a lot of CEO's move to luxemburg. Or wherever the tax rate is less.
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In the early 60s, the highest marginal tax rate was 91%. Do you have some demographic data showing a mass exodus of CEOs moving to the Caymans? In 1980 it was reduced to 70%. Do you have some demographic data showing a mass influx back to the USA? In 1990 it reached a low of 28% and since then it has stayed pretty steady at 39.6%. Do you have any demographic data showing some level of exodus from the USA over that period?

Until you have such data, your claim is merely idle speculation. You'll also have to explain why such billionaires such as Gates, Ellison, Buffett, the Kochs and countless others remain in the USA.
 
Meadmaker said:
Well, it certainly isn't as progressive as it ought to be, but it is progressive. The ability of the rich to avoid taxes is at least somewhat exaggerated. Generally, rich people pay high taxes, as they should.

As for the lots of things that could be done, I just don't see what government can do that wouldn't ultimately make things worse. In the end, CEOs make the salaries they do because they have convinced someone else to give them a bunch of money. Educate people to realize what's going on,and maybe the people would be harder to convince, but I don't see what government can do to correct the problem. If shareholders aren't willing to protect their own money from confiscation, I'm not sure government should do so on their behalf.
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I'm not so pessimistic. If the marginal tax rate was where it was in the 60s (see my previous post) then it does not make sense for a high salaried person to make a lot of money when so much of it goes to the government. Instead, it would be used to fund R&D or plowed back into the corporate infrastructure or even distributed out to shareholders.

Now, I'm not naive to believe such a reversion to the previous rates is politically possible at this time, but theoretically the change would provide the right incentives.
 
NewtonTrino said:
If you want to get technical you could do some math to figure out whether a CEO of a large company or a heart surgeon has more impact.

How many heart operations can a heart surgeon do per year? Some amount of those they are saving a life. In other cases their patient may die. I'm sure someone knows the numbers.

Now, CEO's have influence, in some cases, over 10's of thousands of people. In some cases millions of people are their customers.

So now all we have to do is figure out the exchange rate between doing surgery on someone and having them as a customer of your company.

So is a million people buying a product cheaper equivalent to a surgery on one person?
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I look at it from the other end. When a CEO really messes up 1000 or 10,000 people can be fired. There are small towns in America in which 40% of the population works for a single business - towns that will fall apart if the local plant shuts down.

I am not prepared to say that all or even most CEOs have responsibilities that rival a heart surgeon, but the ones heading up large companies probably do.
Someone has to make the decision when the staff says recalling the product will cost X dollars, while not recalling the product will result in approximately 5 deaths - the total payout to the families would be 1/3 of X.

.............
ETA
Not to harp on the heart surgeon thing, but going back to the opening post, if we surveyed all sorts of people and they said that in a hospital, the highest paid employee can make no more than 4.6 times what the lowest-paid employee earns, then would that be the right way to determine a surgeon's salary? What about professional sports teams. Should the guy who bats .400 be paid only 4.6 times what the guy cleaning the shower stalls earns?
 
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3point14 said:
It's hardly scientific but almost everyone I know whether they work for the private or public sector has had a real world cut in their pay in the last few years because we're in a recession. Or just out of a recession. Or having a double dip. Or who know s what, but to have the pay of the leaders of industry be so dramatically increased while everyone else is 'tightening their belts' is a proper kick in the crotch.
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The data confirms that impression. Median income fell between 2007-2010. I couldn't find newer data.
 
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