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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.

waynus 7 Apr 19
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38 comments (26 - 38)

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1

The planner would say, let’s make a law capping how much a senior executive can make and redistribute the wealth.

A free market advocate would say who are a group of old people in Washington with no knowledge of the business to say what someone is worth to a company? Just because someone seems to be paid more than the value they bring warrants does not mean they are. Additionally these people are not set in stone at the top (like many of our multiple term politicians). In a free market a person is in power so long as they bring value and help to deliver what customers want. They can be torn down from their thrown at any minute unlike our politicians.

The idea is to let companies decide if pay is excessive for themselves. It’s in their best interest to be efficient with their wallets. should they get too greedy to the point that their products or services suffer, then their company will suffer at the hands of competition.

It’s not a perfect system but it’s the best we’ve got. And FAR better than government getting too involved. Keep economics decentralized and free.

I recommend reading The Road to Serfdom by FA Hayek

1

Sounds nice you start a Business and you can do that! That's the free market. I don't want other people telling me how I have to run my business! That's socialism!

1

Here's the deal. There are very few people out there that can run a large organization. If you don't pay them enough, they'll go to someone that will. Who are you to decide a salary is too much? That's up to the share holders. How do you evaluate what value they bring to the company? What makes your opinion of that value better than the share holders? If they leave, will the company be able to get someone that brings more value for less money?

The market is setting the price. How would you interfere with that?

1

I suppose it depends on how you propose to enforce this. Would you run an educational campaign to influence shareholders to vote accordingly or would you have the govt. dictate this policy?

This system is already in place and Government is not needed.

1

Fixing the executive pay packages is fraught with peril, most suggested methods are a top down approach that would be administered by other executives.
I'd like to see what you suggest but implemented by stock holders. Harsh light of day on their books would help this happen but I have little hope.

@Mtrac There's a knee jerk reaction against gov't enforcement because we know it will end badly, I assume it will end up making Clinton richer and more powerful.
My libertarian bent is to shine light and let stockholders root out corruption. However, I just don't see it happening much in the real world. I'm not suggesting an answer but trying to define edges of problem.

@Mtrac Well, I do not have a knee jerk reaction to suggest the gov't solve any problem. Just not my bent.

1

A 150% cap over average does not account for differences in skill levels, different skill sets etc.

There is such a wide variety of skills within a trade, let alone the range of trades, range of professions, that anything other than a free market will not enable the best talent to flourish and for companies to prosper unhindered.

1

because "economic equality" is the very cornerstone of Socialist doctrine. It is absolutely antithetical to free market Capitalism which is really founded up principles of autonomous man and individual liberty - of course ideally these particular concepts are implicit of personal responsibility and integrity. When corrupted the socialists, the members of the ruling class ie; government officials and their cronies - live at the expense and are the very cause of suffering and privation of the lower, working, dependent class. Think of it this way; if gov't can regulate or tell companies and corporations or LLc's for that matter how much their owners, share holders, managers can earn then they can (and they will!) also dictate the same for everybody else. If Gov't says "executive X" salary is limited to no more than 200k dollars, then they (gov't) must also say employees xxxandx must receive 30k annually. There is no possibility for economic mobility under this kind of system - this is known as Socialism. period. Socialism brings all members of the population down to the lowest possible common denominator. See Venezuela.

0

The Gini coefficient characterizes wealth distribution.
Gini = 0 corresponds to equality
Gini = 1 corresponds to all the wealth held by one person.
The plot below shows the wealth and gini of nations. There are two goals: increasing wealth
and decreasing Gini. Never forget the importance of increasing wealth.

A possible way to improve the Gini of a corporation is if consumers reward companies with a good Gini.

Another possible way to improve the pay of low-end jobs is to create a surplus of well-paying jobs elsewhere,
and this requires a source of wealth that can be tapped.
For example, suppose that the mining of energy and minerals is regulated such that corporations must
adhere to a minimum wage. It's reasonable to regulate here because this is natural resource wealth.
This is entirely different from imposing a minimum wage on an industry that is not based on natural resources.

If you don't have a surplus of well-paying jobs then there is little you can do to legislate equality.

0

I see it like football (soccer) players receiving millions of pounds in wages, it's market forces based on skill.
And so for managers who can increase the company's growth, my problem is that the company itself must not cheat the tax system of the country

But many senior executives are receiving vast sums when their company's performance does not warrant it. Thus, a senior exec. could receive a £1 million bonus when the company's performance is comparatively poor (primarily because other senior execs decide on the renumeration policy operated), whereas a truly effective 'goes the extra mile' workers receives a 1% pay rise, even though they may well have given greater value to the company - it's just that their pay falls outside skewed rules.

0

If you are a "shareholder" -you own part of the company - you would be entitled to have a say in salary of execs. If you are not allowed that, you can always sell your shares and buy into a different company. It sounds like somebody feels the execs bring that kind of value to the company.

Indeed, and now that the fines and legal cases are being imposed on many of our main institutions it looks like I may have been correct. I am fully content if my opinions are heard but not reflected in final votes. After all I am but one investor and always have the option to sell up.

0

Only so far as free enterprise isn't restricted, perhaps a percentage of what the company makes in relation to average pay of workers? For instance Amazon Jeff Bezos, since they make over a certain amount his max salary could only be 1% or lower, while a mom and pop that doesn't make a lot can max it to 25%? These numbers are just for illustration.

I am suggesting a reasonable base salary, but that the total remuneration should allow for significantly more through marked bonus systems. Not that any of this is a new idea. What I would like to see is a lot more based on performance and value bought to the company.

Clearly at times this would be adjusted based on the economic and market situation.

0

Yup take a look at the nonprofit salaries such as United Way, etc etc

0

You sound perfectly reasonable to me and not at all some ideological SJW! I always think that bonuses should be linked to a) the company achieving its goals (not failing as happens in the UK, not sure about elsewhere but guess it’s the same?) and b) at least 10% of what is paid to the top
Tier staff should also be paid to all the other staff...after all, they are at the shop front and I think you’ll find that’ll curb the excesses!

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