Why is it that every time you address economic inequality you get accused of being a socialist?
I have been saying for many years that senior executive salary packages are excessive in comparison to the value they bring to companies.
I do not want some major left uprising, merely a re- setting of what share holders consider reasonable.
I personally feel these payments should reflect the value of employees to the company.
A base salary, a percentage of the average salary paid to all workers (eg 150% of average) then bonus payments based on increased market share, increased profitability or increased share value. In other words large salary based on performance and value to shareholders.
Like many share holders I am horrified at massive salary payments to individuals that do not bring value to the enterprise.
There are only two classes of individuals that should legitimately be concerned about senior executive compensation in my opinion.
The first class is the senior executive.
The second class is the board of directors or voting shareholders(depending on how your company is structured) that hired the senior executive and produced the contract (signed by the newly hired senior executive) that detailed the senior executive's compensation package.
That's it! If you are not one of those two classes, then you should do some serious soul searching and find out why it is that you care so much about what they earn. Yes I said earn. If being a senior executive was easy, then anyone could do it. If that were the case I would highly encourage you to apply for the position. The board of directors or voting shareholders know what they are doing when they make these contracts. They know that you get what you pay for when it comes to attracting competent senior executives.
If your senior executive is not producing the promised gains, or what their resume says they should be achieving, and your shares give you a vote; I would get off this Internet forum post-haste and campaign your fellow voting shareholders to buy that senior executive's contract out quickly before they do any further damage. Alternatively if their contract doesn't allow for an early buy out, then campaign your fellow voting shareholders to not renew their contract when it comes up again.
If your shares do not give you a vote, and you still feel this strongly about how the company is run, then I would suggest that you sell your shares immediately and invest your money in another company that runs their business in a way that you agree with.
In any case, complaining on an Internet forum about economic inequality reeks of the class-envy based philosophy of Marxism. My guess is that right or wrong, this is why people reading your ideas label you a socialist.
Why? Perhaps because some amongst us tend to find reductionist arguments persuasive, or at least easier than having to really think about, and answer, a complicated point.
To my mind, whilst a market economy is clearly the way to go, the market for senior executives isn't working at all effectively, or even in accordance with the law of supply and demand. It is also the case that the small shareholder is extremely limited in insisting that pay and performance are correctly linked. Thus, essentially, a small elite have constructed an artificial market where they have set the rules of the game, and are paying themselves vast sums without any justification or reflection upon / of their actual performance. As the majority shareholders are large institutions, run by senior executives who benefit from this artificial market, the 'rules' are likely to go unchallenged. This is unhealthy, as indeed is any culture whether where there are extremes of rich and poor.
There is a whole lot of neoliberalism-flavoured kool-aid being drunk around here.
Look at where we were for most of human history in terms of inequality. Most people living short, hard, often brutal lives in dire poverty. And then, through hard-fought class struggle, organized labour, collective bargaining by the working class and so on, we got to something a lot fairer.
And now, in the name of "freedom", we're are heading in the opposite direction. Greater levels of inequality. Labour is forced to compete with cheap exploited third world labour. Collective bargaining and organized labour has been defanged. Employers no longer need to pay a fair cut of their revenue to workers, they simply pay as little as they can get away with. Because, hey, the wisdom of the markets. And to all the millions who used to be middle class and can now barely scrape by.... pull yourselves up by your bootstraps. Clean your room bucko.
I'm not saying you're a socialist, I'm just saying you haven't thought this through.
We have two options:
Which do you choose?
It sounds like you want executives to get paid less, but you aren't sure how to accomplish that without government control. You can't.
And why does it matter to you, anyway? What right do you have to dictate or approve a voluntary transaction between other people?
Ultimately the (admittedly bad) situation you describe is a result of the Federal Reserve and over dollar bein fiat currency, not tied to any real commodity value.
First of all, most “Senior Executives” are not strictly “Employees” they tend to be “Officers”.
Secondly, you are running into that thing that most people tend to complain about ... Percentages.
There are very few people in ANY Industry who rise above the pack in terms of Ability, Effectiveness or Output.
From where you stand, you don’t see that these Senior Executives are immeasurably more valuable to the company than any 10 or 20 or More people of the “Rank and File”. You also don’t seem to see that dozens or hundreds of the “Rank and File” employees have come and gone as this person worked ... or manouvered ... their way up the ladder to where they are. It is through the efforts of those people usually that ALL the rest of the employees have work to do ... even have a job at all.
Companies don’t simply decide to arbitrarily hand out enormous paychecks or massive benefit packages. That’s not to say that there aren’t some who benefit unduly because of something like being a relative but that’s very rare.
The Skills, the Connections, the Work Ethic, the Knowledge One has are all important points but tge Ability to Tie them all together into an Effective Package AND KNOW Their Own Value is simply beyond the standard 98% though that number is more reasonably written as the 99.999%.
Honestly, Companies get what they PAY for and, if not, they quickly throw the person out BUT that person is usually a well known entity BEFORE they ever get offered the position.
Because you are inferring we need a quota or a cap as a solution as opposed to letting the market. You have a collectivists comical view of “executives.” In what world do you live that all executives earn millions of dollars a year.m? That’s an effect of being raised by Hollywood. The vast majority of executives earn good salaries on par with say university professors. However, the obsession with free market executives while ignoring subsidized professions like professors is why you are fairly labeled a socialist. Life is not fair.
I don't think that it's the idea of income inequality, itself, that marks someone as socialist. It is the method by which that supposed equality is achieved, and what is meant by income inequality. As heartless as it may seem, there is a real disparity in the value of labor. Someone who is at the bottom of the totem pole has far less responsibility and therefore is far less of a risk. You can have a bad employee at the bottom and they won't destroy a business and they are likely easily replaceable because it's probably going to be a lower skilled job. The higher up you get, the more responsibility and the more risk. A lax supervisor can do more to damage the reputation of a company than a single lax entry level employee, and they have significantly more responsibility. How does it not make sense that they would be paid more? That reality goes up the chain of command; the higher you are the more you can do to make or break a company. It is perfectly reasonable that you would pay someone who you feel is going to help the growth of the company as much as it takes to keep them around, as long as you see the value in the investment.
Let's suppose that you agree with what is stated above, as your post indicates that your issue is with the compensation vs. value. In that case, it's become a situation of bad business practice and not an issue of income inequality. The company will wind up paying in the market for someone who brings nothing to the table, but the value of a good ideas man or financial planner can turn a failing business into one that thrives. Those are the people you want to do anything to keep.
As it concerns a disparity between lower level employees and higher level employees, you not only have to consider the value to the company, but also the effort willing to be put forth by the employee. I have never worked anywhere where the was no opportunity for advancement, and one of the things I have most frequently heard from entry level employees who choose not to pursue those opportunities is that they don't want the responsibility. And in my experience, the places that have the most difficult time keeping people in higher level positions are those who don't provide financial compensation that makes it worth it. If you are going from entry level and making, say, $9.00 an hour, to a supervisory position with twice the responsibility and making $10.50 an hour, the juice might not be worth the squeeze. You're paying for people to take on that responsibility, and the added stress. More responsibility = more risk = more stress. Why should people not be compensated accordingly?
Someone decided their value was worth what they are getting. You may not see that value but it does not mean it is not there. Once you get into those higher echelons of the corporate world, they are working constantly and it is highly competitive. Somehow in the survival of the fittest gauntlet, these people make it and have to continually perform and produce results or they are gone.
I do not worry in the least about "income inequality". Nobody is poor because someone else is rich. The economy does not work that way. It is not a zero sum game. A person with the right skills and leadership can keep a company afloat, not only making money but keeps food on the table for potentially thousands of employees, roofs over head and cars in the garage. The wrong people in those spots can ruin the company. So that seems pretty valuable to me.
Now, does your take on limiting this make you a socialist? Depends how you are going to try to change this. If you are going to encourage shareholders and CEOs to chose to change, no you are not a socialist. If you want to use the power of government to take away the choice and freedom of the companies to pay what they value these employees high amounts..... yes, you are socialist. Why should you be able to dictate their choices and freedoms under threat of government penalties?
Generally because when speaking about income inequality most aren't talking about that.
Then some where along the conversation the solution becomes Government hammer.
It's a perfectly fine conversation to have but it's rarely a conversation made in good faith.
Might as well be asking;
Why do some actors/actresses make Millions but Most barely make enough to survive?
Why do some musicians make Millions but Most barely make enough to survive?
Why do some Artists ... Atheletes ... the List is Truly Endless ...
Market Forces and Competition for People of Known Skills drive the Price Structure ...
My first comment would be to do away with income tax altogether. Throw up a sales tax - and make it work that way - look at the FAIRTAX. Seriously. It's worth thinking about.
Second, do away with minimum wages altogether! (seems odd, I know) The few studies that looked at them and claimed that higher wages didn't change employment levels missed a few points and were severely skewed. The reality is, minimum wages keep young people from getting a first time job when they aren't even worth the $10 an hour (I know it is less than that, I'm being generous). Instead, we bring in people working illegally under the table for cash or by scamming the Indentity of someone else to work... we got to get a handle on that and stop it.
If we can't work out how to get the FairTax in, and we're stuck with the horrible income tax - then we need to address non-cash payments, bonuses, stock swaps etc. And bluntly, since we're still taxing corps if we do it that way (which, again, I think income tax is a jacked up mess, and we need to do things differently) then if the CEO, CFO, any officer, makes 100x (yes, one hundred times) the base pay per hour of their lowest employee - then anything above that should be taxed as income on the Corporation - and the Corp should NOT be allowed to use any of that as a deduction (as they do now) instead should have that portion excluded.
Again, I'm no fan of income tax at all - I like the idea of the retail level sales tax to capture all the blackmarket money spent already in this country - and if the jet-setters want to go fly elsewhere, well, fine, but every purchase made in USA gets taxed anyway - and anyone here visiting gets taxed as well.. it's just a good system.
I agree! And why limit it to executives of private companies? In Canada, we have public hospitals, community colleges, and universities that are funded by tax payers yet their CEOs and presidents make almost a million dollars a piece, and they create a huge castle of hierarchies and middle management all of whom bring very little value to the organization. Instead of hiring more doctors, nurses in a hospital (or professors in a college), they end up hiring more coordinators, project managers, and each of these middle managers gets paid almost as much as doctors, yet they bring much less value to medical services. The president of the local community college gets paid almost 500,000 CAD per year from taxpayers' dollars. Why?
I definitely believe in "meritocracy", but when top executives still get bonuses while profits decrease? There's something wrong here.
I am more than a little amused.
So many of you have overlaid vast webs of assumption; which as you do not know me are entirely your own problems/issues and not mine. You may find it hard to understand other peoples positions when you keep adding your own extras without hearing what is being said.
My question was why do people call a shareholder who is encouraging other share holders to review executive remuneration a Socialist?
For the record I am not at any level a company executive, I am an investor concerned about the governance of companies I am invested in.
I did not suggest nor do I think Government intervention is warranted or needed. The intent of my argument is to convince enough other share holders we need to take action. Last time I looked this is 100% in line with the way companies and shareholders should act. If I am unable to convince enough shareholders then my idea won't take off, which is fine that is what shareholders do.
Finally I am Australian. In Australia our CEOs and senior executives are often paid vastly more than equivalent office holders in similar size companies in other jurisdictions . We have also had some significant failures in corporate Governance in recent times which has seriously called into question both the levels of competence and the payments of senior executive staff.
Jordan Peterson laid it out nicely during the attached video. Simply put, these executives a hard chargers. They have a drive and ambition, not to mention overabundant work ethic, that is lacking in the other 99.9% of people. They sacrifice quite a lot to get there, and quite a bit more to maintain it.
I think the reason you are accused of being a socialist is because that is a socialist concern. If you were concerned about the economically dispossed, that would be different. Socialism is basically a cover for covetousness, and I cannot see it any other way than you are being covetous by looking at the salaries of senior executives.* The only way to enforce what you are proposing would be by regulation, thereby growing the government, which is the antithesis to capitalism and free markets.
*I am not suggesting you necessarily want their salary. However, you should do some serious soul searching on why you are so upset by this very specific concern in economic inequality.
Well, they earn that much because they can. They are expected to grow the company and take on legal liability. If there is a scandal that it is not the average employee who sits before congress. If things go sour then the execs are cut and may haze zero opportunity afterwards. It is worth remembering that for a large portion of c-level execs their huge numbers come from options and performance grants. If the stock tanks the options expire worthless and the performance grants do not vest. Is it right they make so much more? Entirely up to the company to decide.
Even in socialism there is no economic equality, no matter how LOUDLY they shout it. There never was, is NOT now, nor will there ever be equality in economics. Man kind is inherently an evil, greedy bunch. They will fight for control over a population, and the resources that they have.
You only have the right to try to set that value in proportion to your ownership in a specific company and only for that company.
If you hold no ownership, you have no right to try and force that company to decide on how much they do or don't value their CEO's contribution to the company.
Do you believe government can fix inequality? If you answer yes, then you are definitely a socialist. History shows it can’t.
The solution is cultural & on a individual level. And that has many layers of complexity and many moving parts all needed to be balanced into a mental structure. Destroying our current founding culture is a definite step in the wrong direction if you ask me because people were way more generous under our conservative mental structure created by itself then they are likely to be now under our more tribalistic culture. Even worse, corporate branding are tapping into our degenerate society as Personal Identity weakens Business are capitalized on it. It’s much easier selling a corporate brand identity to someone who has no real Identity of their own to begin with.
Well you might be a socialist but I suspect it is just because you challenge the status quo. And we live in an age where indignation is matched only by how fast we resort to name calling.
Would be nice if ‘only’ the markets set compensation figures but there are many other influencers. And there are many who wield influence better than others. Even our lack of a sense of propriety, i.e., what is fair or what is right or wrong has slipped considerably. And focus on short term at the expense of long term has made rock stars out of some CEOs who often leave companies in worse long-term posture than they found them. Stock holders are not immune to the pressures for short term gains of share holders. In the aftermath, were they worth 90 million in stock options. Somewhere around the 1970s the average compensation of shop floor workers was 30x less than senior manager compensation packages. After 2000 that had grown to 300x if I remember the study correctly. (Sorry, can’t recall the specifics of that study).
Regarding our sense of propriety, morality plays as large a part in keeping a free market upright as it does democracy. Criticism, questioning, reflections from within are essential for their continued health. We should despise corruption on the right just as we do on the left. Both threaten crumbling institutions.
Personally I started college around 35 yrs of age. Joined the Marine Corps at 18 in fact with my eye on the GI Bill. Family and life delayed it but in the 15 years before I trudged thru, working days and heading out nights ‘some’ of my motivation was simply to prove how a craftsman stacked up in the academic world given the perception that we unwashed were somehow worth less. I buckled down hard and graduated Summa Cum Laude (still have to look up the spelling). My education confirmed my conviction that this perception was false, even if the market will always determine value otherwise. Every day on the job was at least an equal education to what I got evenings but was earned in the hot sun or in freezing weather. Bones and flesh paid a cost. Cleaning muddy boots and rinsing sawdust from a sweat soaked body or simply thawing out before looking after tools was my homework.
All work is honorable. Too bad the value we place on it can be so skewed. I can accept 30x less but 300x? Gotta wonder what changed since 1970!
I look at things a little differently, capitalism or socialism are these labels we place to try and organize or define in a quick way. It saves us time in not needing to really think about people and what is motivating them. I like to dig into the root or motivation behind choices and statements.
Envy is a heck of a drug.
This is a bit over simplified, why do we even have a board of directors in the first place? Is this something required by law and if so when was that put in place, and what was the motivation behind it at the time? I am not going to do this research for you, if you care enough about this subject then enlighten the rest of us or do the leg work and become someone I respect...or don't and look like a socialist, it doesn't matter to me as you are not my kid.