A question, CEO pay versus regular worker pay ?

[frayne]

I see these comparisons all the time on social media and frankly I don't understand the relevance.

[joeea]

Some view the pay of CEOs increasing dramatically in recent years while the pay of the average worker has been stagnant, and say "Hmm".

Some folks seem to think that indicates a problem in the system.
Others don't seem to care.

Some folks feel that the sums going to CEOs would be better spent elsewhere.
Others think "How can I get me some of that C-level money?"

Some folks wonder how executive can get huge bonuses even when the company is faltering.
Others figure that as long as it's not their money, it's not their problem.

Some folks feel that the growing gap between the haves and have not is a societal problem.
Others feel that's someone else's problem, not theirs.

Some folks see relevance.
Others don't.

[Rustward]

I think it is safe to say that CEOs take on significantly higher risk and have much more responsibility than the average worker, (they probably work more hours, also), but I suspect that the average worker does not realize this or see it this way.

[bUU]

One more aspect to this: There are a number of other countries, successful countries with better metrics on standard of living, quality of life, freedom, etc., has CEOs and employees, but all of them have smaller disparities than we have in the United States.

[REWahoo]

Quote:

Originally Posted by frayne I see these comparisons all the time on social media and frankly I don't understand the relevance.

They foster the posting of threads like this which provide full employment to Porky the Pig.

[joeea]

Quote:

Originally Posted by Rustward I think it is safe to say that CEOs take on significantly higher risk and have much more responsibility than the average worker, (they probably work more hours, also), but I suspect that the average worker does not realize this or see it this way.

Take on significantly higher risk? I'm not sure what that means.

I don't think anyone would argue that CEO shouldn't be paid more - they always have.

But the disparity is increasing from what it was in years past. Why is that? Is the CEO role somehow riskier than it ever used to be? Is the responsibility of today's CEO much more than CEOs in the past? Is the ratio of CEO work hours to average worker hours much more than it used to be?

And even if some or all of those were actually true - does it have to be that way?

[MoneyIsMyHobby]

Quote:

Originally Posted by frayne I see these comparisons all the time on social media and frankly I don't understand the relevance.

IMO employees of a company shouldn't be worried about this... investors, perhaps should (well, be worried about CEO compensation, not the ratio). As an owner of the company, you're paying that gals/guys salary. If s/he is worth it, GREAT! If s/he isn't then fire him/her!

I think the ratio comes into play in relation to the diminishing middle class when folks say has been happening for a while. As pay gaps increase (which are represented by this ratio) the middle class either get sucked into the upper class or pulled into the lower class... at least that is the theory.

I, for one, believe that, while some of us get better/easier opportunities than others (often by connections, luck of the draw, or being born into the right family), anybody can make good decisions and improve their livelihood. If you think the CEO has such a good gig, figure out how to get his job!

I own my own company, and I can tell you that those who put in 110% get way better bonuses and raises than those who put in 90% at my company... and it irritates the cr*p out of me when legislatures try and standardize pay to avoid discrimination... as managers, business owners, or whoever else has control of the purse strings, we need to be able to compensate those who work hard better than those who hardly work. I've tried to explain this to the 90% group at my company, but they still just think they're getting discriminated against. The alternative, if standardized wages get enforced, is the 90%ers get fired and we only keep the 110%ers on staff and hire more of them!

MIMH

[Rustward]

Quote:

Originally Posted by joeea Take on significantly higher risk? I'm not sure what that means. I don't think anyone would argue that CEO shouldn't be paid more - they always have. But the disparity is increasing from what it was in years past. Why is that? Is the CEO role somehow riskier than it ever used to be? Is the responsibility of today's CEO much more than CEOs in the past? Is the ratio of CEO work hours to average worker hours much more than it used to be? And even if some or all of those were actually true - does it have to be that way?

OK Joe. At least we know which side of this discussion you are on.

[pb4uski]

Quote:

Originally Posted by Rustward I think it is safe to say that CEOs take on significantly higher risk and have much more responsibility than the average worker, (they probably work more hours, also), but I suspect that the average worker does not realize this or see it this way.

+1 on the higher risk.... you can be gone overnight at the Board's whim.... and the buck stops with you irrespective of whether you were at fault or not... often as a scapegoat. Whereas for many lower level workers you have to build a file of poor performance, warnings, probation, etc. before being fired.

But higher reward accompanies the higher risk.

[mamadogmamacat]

Mgmt, even at much lower levels than CEO, is in many ways a thankless job. I saw plenty of this in my decades in mega corp, which is why i never wanted to be in mgmt.
I suspect corporate boards have a tough time finding someone who is the right fit for the position and that it is not anywhere near as large a pool of qualified applicants than we think , especially if all we focus on is the salary and benefits, and not on the fact that it is a very difficult position to be effective in and the consequences of failure, or even 'benign incompetence" that plays out slowly, are immense for all the employees of the company. Then throw in the societal condemnation that hits the CEO from the get go just because of "issues" such as the pay ratio.

[USGrant1962]

The other problem with these comparisons is that the implied (or explicit) "solution" is for more of the CEO's pay to go to the workers. Unfortunately the math doesn't work.

I just googled CEO pay and found that CVS was the "worst" with over 420:1 ratio of CEO to average worker pay (2014 data). BUT, the CEO was paid $12M and there are 160K employees - redistribution of the CEO compensation is only $75 per employee per year.

It is usually huge companies that pay 8-digit sums to CEOs, and those companies usually have a 6-digit number of employees.

I agree with MoneyIsMyHobby that this is a shareholder issue, but politicians gonna' politic.

[target2019]

It's like the FA's fee. If all is right with your account, no problem. When the wheels go off the rails, comp is under the microscope.

[Texas Proud]

CEOs get paid big bunks even if they do a really crappy job...

Look at Ron Johnson at JCPenney... it wasn't the best run company, but when he took it over he almost sent it into BK... he got paid very well....

Look at GE... going downhill fast, but I bet the last CEO who probably started the problem and the current one who is probably making it worse are doing quite well...

[bUU]

Quote:

Originally Posted by pb4uski you can be gone overnight at the Board's whim.... and the buck stops with you irrespective of whether you were at fault or not... often as a scapegoat. Whereas for many lower level workers you have to build a file of poor performance, warnings, probation, etc. before being fired.

That's no longer the case for many jobs. Besides, many lower level workers don't face a higher risk of, but rather are guaranteed, continuous underemployment.

[marko]

Quote:

Originally Posted by joeea Is the CEO role somehow riskier than it ever used to be? Is the responsibility of today's CEO much more than CEOs in the past?

Yes it is and getting fired is the least of the worry.

What has changed is that CEOs are now more legally responsible for many aspects that they weren't in years past. You can also be personally sued in certain instances.

Recent laws have made CEOs a lot more liable personally and financially than years gone by. Jail is always unlikely but there are still personal risks that the hourly worker or general managerial sector doesn't worry about.

Years ago at CEO could hide behind executive deniability, 'the other guy' and "I didn't know". Not anymore even if true. And juries are a lot less sympathetic too.

This is not only for financial balance sheet but product liability, employee situations, facility safety and so on.

[marko]

Quote:

Originally Posted by USGrant1962 I just googled CEO pay and found that CVS...... BUT, there are 160K employees -

How'd you like to be responsible for 160,000 people, any single one of whom could do something stupid that might send your company into litigation, headline news or a social media nightmare?

And then wake up every morning with shareholders (like many of us here) demanding how you're going to improve their bottom line? Where's my dividend increase? What's your next move? Your competitor just did X...what are YOU going to do?

And then the regulators, the financial weenies and CNBC chasing you around and oh, by the way, 60 minutes is in the lobby.

Not saying it's not a bad job but the idea of some fat cat sitting in the corner office smoking cigars is pretty outdated. As I noted above, CEOs are now legally and personally financially responsible a lot more than in the past.

[pb4uski]

Quote:

Originally Posted by bUU That's no longer the case for many jobs. Besides, many lower level workers don't face a higher risk of, but rather are guaranteed, continuous underemployment.

On the first part, you're just plain wrong so we'll agree to disagree.

On that last part, if they are chronically underemployed then it is their own fault for not finding a job more commensurate with their abilities. If they can't find a better job then perhaps their opinion of their skills is overinflated and they are really not underemployed.

[broadway]

Quote:

Originally Posted by pb4uski On that last part, if they are chronically underemployed then it is their own fault for not finding a job more commensurate with their abilities. If they can't find a better job then perhaps their opinion of their skills is overinflated and they are really not underemployed.

Yeah, it is always the worker's fault.



CEO club = mostly white, mostly male
it won't change in my life time

[USGrant1962]

Quote:

Originally Posted by joeea But the disparity is increasing from what it was in years past. Why is that? Is the CEO role somehow riskier than it ever used to be? Is the responsibility of today's CEO much more than CEOs in the past?

Yes. As one data point, the Code of Federal regulations increased from ~20,000 pages prior to 1960 over 185,000 pages today. CEOs of large companies are responsible for complying with all of it.

https://regulatorystudies.columbian....CodeFedReg.JPG

And that doesn't even count the Federal Register which runs 80,000 pages per year.

I still think they are overpaid, but it is not totally irrational.

[ownyourfuture]

Never had a problem with CEO's making big bucks.
But when they're rewarded with golden parachutes after being at the helm while the company does poorly, I get a little irritated.

A few cases like that are included here.
10 of the Largest Golden Parachutes CEOs Ever Received