Interesting Article

[Texas Proud]

So, we seem to be good at whining about the income inequality situation, but how do we fix it? I'm convinced that simply taxing those who make a bunch isn't necessarily the best idea. Sure, we can seize, through sky high taxes, most of what those making 150X average make, but they're still making it and will simply focus on eluding the tax man. How can we have them not make it in the first place? How can we control the income of pro athletes, entertainers, CEO's, entrepreneurs, highly compensated professionals and the rest of those devils?

I don't have an answer, but I have a question that is a subset of your question. I have been trying to figure what has caused CEO salaries to sky rocket. Their salaries have been increasing at an unproportionate rate for a couple of decades.

Did the salaries start to go up excessively when the tax rates dropped on the upper income tax brackets?

Or, would it have anything to do with the popularity of mutual funds? I'm thinking that there are a larger of number of share holders via 401k plans. Perhaps I'm way off here...

Why should we be trying to limit the amount of income someone earns As far as I know, we are not a socialist country... at least not yet...

Athletes, actors etc. make their money when they are good at what they do... and the rewards to the people who pay them are even greater...

IOW, a move with Tom Cruise in it is almost sure to bring in over $100 million and could bring in $1 billion... he might not be the best actor for that part, but why take a chance on someone else when you are investing so much to produce a film...

If people stopped paying to watch sports on TV, or going to the games, stopped buying products, then the salaries of the athletes would go down... but that is not going to happen... heck, The University of Texas started their own cable TV channel so they can rake in more money... I am sure others will be doing the same (if they have not done so already)....

And I am going to lump in CEOs in this part.... most of these people have a short span where they can make money that seems outrageous... I think a football player career is 5 years on average... even if it were 10, that is a short career... CEOs are the same... not many that have decades in a position... and since there are few who have shown the ability to do the job well, companies are willing to bid the salaries up... having a good CEO can make a huge difference in the value of a company... the goings on at Netflix can show how a stupid decision can take 60% off the market value of a company....

 

[youbet]

I have been trying to figure what has caused CEO salaries to sky rocket. Their salaries have been increasing at an unproportionate rate for a couple of decades.

The BOD's want to "win." The rewards to a business for winning, as opposed to just being "good enough" are high. (Think of Apple vs Motorola in the smart phone business.) CEO's seem to be like sports coaches. There are lots of folks with the basic skill set to do the job but a few seem to consistently produce winning results. At least over some time period.

Why does a major university pay a highly successful football coach $1M/yr (or more) when an experienced, PhD history prof makes only $120k? Because they think their coach who has had them in the top 10 for several years in a row makes $contributing$ alums happy and TV contracts lucrative. Lots of folks, probably half of the instructors in the athletic dept, have the basic credentials to do the job. But somehow this one guy brings home the bacon....... and gets the big bux.

 

[GregLee]

Why should we be trying to limit the amount of income someone earns

Limiting income makes no sense to me at all. Limiting what people have, on the other hand, might be good -- it would depend on the details. The system of progressive income tax that we used to have worked pretty well, I thought, since it not only reduced wealth disparity but also provided more money to pay for government services. At some point, for reasons mysterious to me, we turned away from the idea that government services should be paid for by progressive taxes, or any taxes. I recall that school bond issues started getting turned down by voters, then there was the taxpayer revolt in California, which spread elsewhere. Now, a few decades later, governments are heavily in debt and services have deteriorated. Surprise, surprise.

 

[youbet]

Why should we be trying to limit the amount of income someone earns

Because they are evil devils intent on destroying civilization as we know it. Their high pay is part of a conspiracy with it roots in historical extraterrestrial visits. We must act now to save ourselves!

Once the Administration provides us with a printout of all individuals making over $200k/yr and couples making over $250k/yr we can grap our ropes and pitch forks and lynch those Satan-like money machines!

Let's start with the Simkowski's who live nearby. She's a special ed teacher and he's a dentist. Everytime I see them pull into their driveway in their fancy Audi, it makes my skin crawl. Hang 'em high!!

 

[haha]

So, we seem to be good at whining about the income inequality situation, but how do we fix it? I'm convinced that simply taxing those who make a bunch isn't necessarily the best idea. Sure, we can seize, through sky high taxes, most of what those making 150X average make, but they're still making it and will simply focus on eluding the tax man. How can we have them not make it in the first place? How can we control the income of pro athletes, entertainers, CEO's, entrepreneurs, highly compensated professionals and the rest of those devils?

You haven't been paying attention. The government must seize everything, including the NFL, MLB, NBA, Don King's Empire, UWC UWC - Extreme Cage Fighting - MMA - Mixed Martial Arts - Fairfax, VA

and all fine restaurants where these evil doing bankers, Wall Streeters, executives and athletes take their social climbing free-loving dolls.

Life will be simpler, the IRS can just take its cut from everyone's paycheck at the source, and there won't be anything left that anyone would want to do, so we can all stay home and watch government TV. Road deaths will plummet, we can stop importing gasoline, those terrorists will no longer envy us and life will finally be perfect.

Ha

 

[youbet]

You haven't been paying attention. The government must seize everything, including the NFL, MLB, NBA, Don King's Empire, UWC UWC - Extreme Cage Fighting - MMA - Mixed Martial Arts - Fairfax, VA

and all fine restaurants where these evil doing bankers, Wall Streeters, executives and athletes take their social climbing free-loving dolls.

Life will be simpler, the IRS can just take its cut from everyone's paycheck at the source, and there won't be anything left that anyone would want to do, so we can all stay home and watch government TV. Road deaths will plummet, we can stop importing gasoline, those terrorists will no longer envy us and life will finally be perfect.

Ha

Finally, a view that makes sense!

BTW, [-]one of our ex-presidents [/-] our gov't already tried to seize all the "social climbing free-loving dolls."

 

[Hamlet]

Of course, since no BOD would ever admit that the CEO they hired might not be one of these high producers, they end up paying all the mediocre CEO's like they are high producers.

There seem to be a lot more Bob Nardelli's (to pick my favorite failure who got paid like a genius) than Steve Jobs'.

The pay of the CEO doesn't seem to correlate to their performance very well. It seems like they get paid massively well regardless of their track record.

As a University of Mnnesota Alumni, I'm starting to wonder if we should just find a moderately good high school coach, save the million + a year and accept that we are going to have a losing football team.

I doubt that our record would end up being much worse

The BOD's want to "win." The rewards to a business for winning, as opposed to just being "good enough" are high. (Think of Apple vs Motorola in the smart phone business.) CEO's seem to be like sports coaches. There are lots of folks with the basic skill set to do the job but a few seem to consistently produce winning results. At least over some time period.

Why does a major university pay a highly successful football coach $1M/yr (or more) when an experienced, PhD history prof makes only $120k? Because they think their coach who has had them in the top 10 for several years in a row makes $contributing$ alums happy and TV contracts lucrative. Lots of folks, probably half of the instructors in the athletic dept, have the basic credentials to do the job. But somehow this one guy brings home the bacon....... and gets the big bux.

 

[Nords]

So, we seem to be good at whining about the income inequality situation, but how do we fix it?

Why would we want to fix it?

Instead of beating them, we should want to join them...

 

[arebelspy]

Why would we want to fix it?

Instead of beating them, we should want to join them...

Only if your only interest is yourself. This also implies none of them would or should want to fix it.

 

[Amethyst]

Ha's ideas remind me of the "equal" society in the short story "Harrison Bergeron," by Kurt Vonnegut. Many in the forum probably had to read it in high school.

So that everyone will be equal and no one will feel slighted, the world government forces all the beautiful people to wear ugly masks, the athletic or graceful people to carry heavy weights, and (worst of all) the intelligent people to wear headsets that blast noise into their ears every 30 seconds, so they cannot maintain a continuous thought. In Vonnegut's vision, once everyone has been reduced to the lowest common denominator in the name of self-esteem, all people want to do is watch game shows on TV. (He doesn't get into how the world government is funded).

Amethyst

You haven't been paying attention. The government must seize everything, including the NFL, MLB, NBA, Don King's Empire, UWC UWC - Extreme Cage Fighting - MMA - Mixed Martial Arts - Fairfax, VA

and all fine restaurants where these evil doing bankers, Wall Streeters, executives and athletes take their social climbing free-loving dolls.

Life will be simpler, the IRS can just take its cut from everyone's paycheck at the source, and there won't be anything left that anyone would want to do, so we can all stay home and watch government TV. Road deaths will plummet, we can stop importing gasoline, those terrorists will no longer envy us and life will finally be perfect.

Ha

 

[rescueme]

Why would we want to fix it?

Instead of beating them, we should want to join them...

+1

I feel the same way as you do.

Like they say during pre-flight instructions, put your oxygen mask on first in case of emergency, rather than trying to help those around you. If not, the two (or more) of you might pass out - or worse.

I have no problem in helping out those in need, but I don't feel that they are owed the results of my efforts in life, just because they have (or think they do) less, and are still breathing.

If they think they have little, let them travel to other areas of the world and see what real life can be when you and the ones around you have little/nothing...

It reminds me of a discussion that I had with my dentist many years ago. I would harass him on his perceived "wealth" as a doctor (hey, it must be true - he drives a nicer car than I do and lives in a much nicer neighborhood).

His answer? So why didn't I take the risks of going to school, taking out a big loan as he did, to start up his practice and delay my immediate wants for the future?

He was right.

 

[justplainbll]

+1


His answer? So why didn't I take the risks of going to school, taking out a big loan as he did, to start up his practice and delay my immediate wants for the future?

He was right.

Given the trend towards a nanny state, the risks of becoming a dentist are becoming more ominous.

 

[justplainbll]

Part of my employment compensation was a drug plan that carried through into retirement. Thanks to W's drug plan I now have a drug plan surcharge being deducted my SS retirement benefit despite the fact that my prescription costs (currently $0) are covered by my former employer. Events like this make me inclined to disbelieve "Hello I'm from the government and I'm here to help you" bs.
I believe that the combined value of my and my employer's FICA contributions, if prudently invested with a 4.5% return, would have been worth well over $300,000. The FICA retirement benefit has now been lumped into a category (entitlements) that used to be more commonly used to refer to payments to people who are not earning their own way (welfare, home relief). Given the spectre of means testing that appears to be on the horizon, it's not likely that I'll ever collect an income stream commensurate with the amounts contributed and that the employee contributions were just another tax on earnings that already been bled by income taxes .

 

[ERD50]

Of course, since no BOD would ever admit that the CEO they hired might not be one of these high producers, they end up paying all the mediocre CEO's like they are high producers.

Never say never. CEOs are fired all the time. Here are two high tech examples from 2 seconds of googling.

I agree there are problems with the BOD/CEO system, but hyperbole does not serve the discussion.

-ERD50

Carly Fiorina - Wikipedia, the free encyclopedia

In early January 2005, the Hewlett-Packard board of directors discussed with Fiorina a list of issues that the board had regarding the company's performance.[41] The board proposed a plan to shift her authority to HP division heads, which Fiorina resisted.[42] A week after the meeting, the confidential plan was leaked to the Wall Street Journal.[43] Less than a month later, the board brought back in Tom Perkins and forced Fiorina to resign as chairman and chief executive officer of the company


Christopher Galvin - Wikipedia, the free encyclopedia

Galvin was forced to resign on January 4, 2004.

 

[HFWR]

In Vonnegut's vision, once everyone has been reduced to the lowest common denominator in the name of self-esteem, all people want to do is watch game shows on TV.

Done. Next...

 

[Hamlet]

Your examples both got massive payouts when they were fired ($42 million and $29 million). I'd love to have that be the reward for complete failure at my job.

The HP board managed to hire and fire another guy already, and have brought in Meg Whitman. She may be successful, but her background doesn't include anything like running HP, so I'm a little sceptical of the choice.

Ultimately, there isn't a practical way for the shareholders to reclaim their company from a terrible BoD. In the case of HP, it sounds like the BoD has appointed some new people and are having some of the old folks retire, but if they weren't doing that, the BoD would likely withstand any shareholder outrage just fine. The bulk of shares are held by institutions that don't as a rule mess with the BoD.

There are tons of bad CEOs, but underpaid CEOs are pretty rare.

Never say never. CEOs are fired all the time. Here are two high tech examples from 2 seconds of googling.

I agree there are problems with the BOD/CEO system, but hyperbole does not serve the discussion.

-ERD50

 

[rescueme]

Given the trend towards a nanny state, the risks of becoming a dentist are becoming more ominous.

He already made his bones - he's retired.

The practice was bought by his DD (Dear Daughter, not Doctor of Dentistry , who is, along with her dad, a DDS, FACS).

 

[MichaelB]

Your examples both got massive payouts when they were fired ($42 million and $29 million). I'd love to have that be the reward for complete failure at my job.

The HP board managed to hire and fire another guy already, and have brought in Meg Whitman. She may be successful, but her background doesn't include anything like running HP, so I'm a little sceptical of the choice.

Ultimately, there isn't a practical way for the shareholders to reclaim their company from a terrible BoD. In the case of HP, it sounds like the BoD has appointed some new people and are having some of the old folks retire, but if they weren't doing that, the BoD would likely withstand any shareholder outrage just fine. The bulk of shares are held by institutions that don't as a rule mess with the BoD.

There are tons of bad CEOs, but underpaid CEOs are pretty rare.

Even the legal way is pretty hard. Shareholders cannot nominate board members or approve executive compensation. The CEO nominates the board. The conflict of interest in US corporate governance is well documented, Warren Buffet has included it in his annual letter to shareholders.

 

[Nords]

The practice was bought by his DD (Dear Daughter, not Doctor of Dentistry , who is, along with her dad, a DDS, FACS).

Our kid's dentist went out on his own from the group practice. I used to wonder why he wanted to support his own office of 18 hygienists and clerical staff.

A few years later he announced that his twin daughters had joined his practice. The timing of his exit from the group practice was probably their start of dental schooling. Ah, I understand now...

 

[LARS]

I found this report on top 1% thresholds interesting...

Curious of others views. Money shot is:

"Until recently, most studies just broke out the top 1% as a group. Data on net worth distributions within the top 1% indicate that one enters the top 0.5% with about $1.8M, the top 0.25% with $3.1M, the top 0.10% with $5.5M and the top 0.01% with $24.4M. Wealth distribution is highly skewed towards the top 0.01%, increasing the overall average for this group."

Personally I was quite surprised that the research suggests that the top 0.01% skewed the entry into top 1% so much. Generally I've see studies that suggust to be in the top 1% meant approximately $5M.

EDIT: Sorry appears this has already been discussed! http://www.early-retirement.org/forums/f52/interesting-article-58261.html#post1119359


Who Rules America: An Investment Manager's View on the Top 1%

[mod edit--threads merged]

 

[MasterBlaster]

Curious of others views. Money shot is:

"Until recently, most studies just broke out the top 1% as a group. Data on net worth distributions within the top 1% indicate that one enters the top 0.5% with about $1.8M, the top 0.25% with $3.1M, the top 0.10% with $5.5M and the top 0.01% with $24.4M. Wealth distribution is highly skewed towards the top 0.01%, increasing the overall average for this group."

Personally I was quite surprised that the research suggests that the top 0.01% skewed the entry into top 1% so much. Generally I've see studies that suggest to be in the top 1% meant approximately $5M.


Who Rules America: An Investment Manager's View on the Top 1%

That the problem with statistics. They can really mislead if they aren't used in context of how they were measured.

People seem to think if only the government taxed a few rich people then all of our problems would be solved. The truth is there are so few (really rich) people that it just wouldn't make that much difference. What the government really needs to do is come clean with America and tell em' that either we need to really jack up middle class taxes or ratchet back all those middle class benefits. The present path we are on just leads to disaster.

Where is Ross Perot when we need him.

 

[LARS]

That the problem with statistics. They can really mislead if they aren't used in context of how they were measured.

People seem to think if only the government taxed a few rich people then all of our problems would be solved. The truth is there are so few (really rich) people that it just wouldn't make that much difference. What the government really needs to do is come clean with America and tell em' that either we need to really jack up middle class taxes or ratchet back all those middle class benefits. The present path we are on just leads to disaster.

Where is Ross Perot when we need him.

It also says that curing Social Security cannot be done by means testing. The pool of "rich" are a blip on the screen.

Also if this research is correct it puts into perspective how little savings there are across 99% of Americans. Very frightening actually...

 

[gerntz]

Yes, and he's a little off when he says

"Membership in this elite group is likely to come from being involved in some aspect of the financial services or banking industry, real estate development involved with those industries, or government contracting. ... Those in the top 0.5% have incomes over $500k if working and a net worth over $1.8M if retired."

because he's apparently unaware of people who have lived below their means, started investing early, and invested wisely (and luckily).

I don't know that he's not aware of the group of people you describe, but rather that his experiences are that they are not the predominant type of wealthy folks.

The other thing that strikes me is that people making $500k/yr typically wind up with $1.8M net worth when retired - as that's what puts both groups in the top 0.5% - if I interpret those numbers correctly as to their implication.