
No CEO should earn 1,000 times more than a regular employee - pmoriarty
https://www.theguardian.com/business/2018/mar/18/america-ceo-worker-pay-gap-new-data-what-can-we-do
======
maxharris
If doing the job of a founder/CEO were so easy, why do so many people fail at
it?

When Steve Jobs came back to Apple, it made terrible products. It had a market
cap of $3 billion, hadn't had profits in years, and was _six weeks_ from
bankruptcy.

During his tenure as CEO, Apple made consistently excellent products, and it
entered the right new markets. Its market cap rose to $350 billion. It has
since doubled that, and is now the largest and most profitable company in the
world.

The value that CEOs bring to their companies is exclusively in the _decisions_
they make. That's why Jobs deserved to be paid well over 1000X a "regular"
employee!

~~~
pmoriarty
Was it really Steve Jobs or the people that worked for him that deserve the
credit for Apple's success?

~~~
maxharris
Also, what about the decision to stop licensing the MacOS to cloners in 1997?

A decision this big has to be made by the CEO. At the time, Apple was dying,
and Jobs was the one that made that call. It was quite unpopular at the time.
But it was also absolutely the _right_ thing to do!

You might find this hard to believe, but Gil Amelio (Apple's CEO before Jobs)
floated the idea of splitting Apple into two disintegrated companies - "Apple
Hard" and "Apple Soft." Can you guess how that would have turned out? (You
can't build an iPod, an iPhone, an iPad or a Mac that way, because the entire
point is to make the product better by integration.)

~~~
pmoriarty
_" A decision this big has to be made by the CEO."_

Or it could be made by the employees of the company as a whole, or their
representatives. The currently popular hierarchical structure isn't the only
or necessarily the right way to structure a company. Companies could be
worker-owned and allow employees much greater participation in decision
making.

Anyway, even if one person's decisions are exceptionally consequential doesn't
mean they have to be paid an exorbitant amount of money to do it. I'm sure
plenty of other people would have taken a fraction of Jobs' salary to make the
same decision.

There's a cult of personality around Steve Jobs in SV, and I for one find it
very hard to swallow.

~~~
davrosthedalek
If the hierarchical structure is inferior to a worker-owned structure, why
aren't the most successful companies worker-owned? Same to your second point:
It is obviously a market advantage if you get the same quality of CEO for less
money. So why are the CEO's salaries so high? If the supply of cheaper but
equally good managers is there, why does the usual supply-and-demand price
finding system of the market not work? Is something stopping it?

That being said, I really don't like the cult around Jobs. However, the cult
was clearly an advantage for Apple, and it made him a rare manager. And thus,
expensive.

~~~
eesmith
You are defining success as "large market cap" or "large number of product
sales", yes?

There are other definitions, like satisfaction of the employees, or corporate
social responsibility. These are harder to evaluate, and empathy and humane
interactions costs money - that's why company boards want robots.

Suppose it takes something like Microsoft's policy of "embrace, extend, and
extinguish", or the FUD policy associated with IBM, or the LBO-and-loot-the-
pension-plan of KKR, for a company to become huge.

These are rather cutthroat approaches, and not examples of what I would
consider to be good corporate social responsibility.

If a worker-owned structure is less likely to be socially irresponsible,
because so many people are involved in the decision making instead of the
dominating personalities that tend to be at the top of a hierarchical
structure, then that would explain why the most successful companies are not
worker-owned.

I have no idea if this is true, but based on the lectures I've heard by pro-
worker-cooperative people, it's not unreasonable.

As to the second point, Richard D. Wolff's most recent "Economic Update", at
[https://youtu.be/KrPHl1s9MNw?t=864](https://youtu.be/KrPHl1s9MNw?t=864) ,
comments about the recent rejection by doctors in Quebec of a pay raise their
union negotiated. Quoting from the translation of the rejection letter, given
at
[http://home.nzcity.co.nz/news/article.aspx?id=265449](http://home.nzcity.co.nz/news/article.aspx?id=265449)
:

> "Contrary to the Prime Minister's statements, we believe that there is a way
> to redistribute the resources of the Quebec health system to promote the
> health of the population and meet the needs of patients without pushing
> workers to the end."

Wolff comments (at t=1002) "the capitalist model: you pay the people at the
top a great deal and part of that money is to keep down everybody else.
Because you know something, it's been learned by capitalists that if you pay
the top _a lot_ you can avoid paying the mass of your workers what they ought
to be paid. It's cheaper to pay those at the top a lot more than it is to give
everybody a fair shake. So you're top-heavy, with overpaid folks at the top.
And you know something? This happens everywhere. ....

Remember, Apple was one of the many large tech companies involved in an anti-
trust lawsuit that charged they colluded to avoid poaching each others'
employees. Such a collusion would have the effect of depressing everyone's
wages, and therefore increase corporate profit. Just like that model predicts.

~~~
davrosthedalek
I define success as "the company is still around many years later". All the
alternative ways to construct a company are nice, but they are worth nothing
if the company will not exist for long. The market is, in some very real
sense, an evolutionary system. There is clearly a fitness function, and only
the fittest companies survive. You can not freely pick your fitness function,
it's implicitly defined by the boundary conditions of the market.

Anti-trust laws are important facets of these boundary conditions, especially
because they keep the market from falling into degenerated states. In the end,
the different local markets, shaped by the laws of each country, are competing
on a world scale.

I am not saying that worker-owned companies wouldn't be nicer, but they are
clearly less effective/less fit in the current market system. Otherwise we
would have more of them. It is not clear to me that this is just because a
"strong leader" system is cheaper and more easily extorts the workers. I am
not convinced that steering by committee, especially if most of the committee
members are maybe less educated than the average CEO, works very well from a
long term strategy perspective.

~~~
eesmith
In that case, most of the longest-lived companies are privately held.

The current market system is built by capitalists, for capitalists, and
include the goal of squeezing everything they can out of the workers.

Of course a worker-owned cooperative will be a less effective fit. The current
system should not be the final arbiter of what success means.

You mentioned anti-trust laws. What of worker right laws, and laws related to
unionization? (In the last, I include laws like the Taft-Hartley Act which
limit what unions can do.)

I don't understand your last sentence. Most large companies are already run by
committee, no? There's an ongoing negotiation between the C-level officers and
the board of directors. It isn't that the CEO sets policy by dictate.

Perhaps
[https://en.wikipedia.org/wiki/CEO#Celebrities](https://en.wikipedia.org/wiki/CEO#Celebrities)
is relevant?

> Business publicists since the days of Edward Bernays and his client John D.
> Rockefeller and even more successfully the corporate publicists for Henry
> Ford, promoted the concept of the "celebrity CEO". Business journalists have
> often adopted this approach, which assumes that the corporate achievements,
> especially in the arena of manufacturing, were produced by unique talented
> individuals, especially the "heroic CEO". ... Journalism thereby exaggerates
> the importance of the CEO and tends to neglect the harder-to-describe
> broader corporate factors. There is little attention to the intricately
> organized technical bureaucracy that actually does the work. Hubris sets in
> when the CEO internalizes the celebrity and becomes excessively self-
> confident in making complex decisions. Indeed, there may be an emphasis on
> the sort of decisions that attract the celebrity journalists.

~~~
davrosthedalek
That's my point. The current system defines what success means now. You cannot
fault current companies for trying to stay alive. And indeed, I think the
behavior is ethical, in the sense that they don't have a survival alternative.

This does not mean that the situation is static. The current system can be
changed, by setting different bounding conditions. Anti-trust, unions etc. are
all instruments to affect such a change. But again: Since you cannot dictate
the global boundary conditions, you have to build a system which can survive
in the global economy. Socalist planned economy, for example, has been proofed
by experiment to not work. Unions often work, if balanced in power. Consumer
protection laws often work too. Note here: Survive, not be the biggest. Your
economy can fulfill a niche role with better social aspects, but other
downsides. Take Germany for example. The social security and general high
level of living goes hand in hand with general good education and, for
example, larger investment in science. On the other hand, this sets a minimal
productivity a job must have to exist in the first place. There a no "Apple
store greeters". This means that low-education jobs which pay enough to
actually live in Germany are rare. These jobs are often filled by guest
workers from countries where cost of living is significantly lower. The
problem is that not everybody can be brought up to a high enough education
level. Having not enough viable jobs available for those who cannot make that
jump is tragic. While in Germany the social system takes care of them to some
extend, not having a job is bad for your psyche even if you have enough money.

I wouldn't say big companies, especially privately held ones, are run by
committee in the sense that everybody has the same power. There is a
hierarchy. But even if so, it's a committee consisting of selected people from
a special pool, not from the general pool of workers.

Regarding the celebrity CEOs: In the current state, it obviously works,
otherwise companies which do not fall into this pattern would outperform those
who do. If you want to change it, you have to change the system. It seems to
me that focusing on the salary is not the right way though, because they
follow from the celebrity system (which makes "good" CEOs more rare).

~~~
eesmith
I can completely fault current companies for inhumane and unethical practices,
even if they are completely legal. Including outsourcing work to countries
where child labor laws, sweatshop conditions, and environmental damage, while
possibly illegal, are a simple bribe away.

Sure, planned economies don't work. That's one of the reasons for social
democracy ("... a political, social and economic ideology that supports
economic and social interventions to promote social justice within the
framework of a liberal democratic polity and capitalist economy as well as a
policy regime involving a commitment to representative and participatory
democracy, measures for income redistribution and regulation of the economy in
the general interest, and welfare state provisions."; Wikipedia). But I don't
see why this comment is particularly relevant?

Abstractly speaking, a balance of power is good. Concretely speaking, I can't
make sense of it. Does Germany have the right balance of power? Does the US?
My sense is that unions rarely have enough power. Certainly not in the US,
where workers don't even have the right to a representative on the company
boards.

"this sets a minimal productivity a job must have to exist in the first place"

Sure. But given the several centuries of productivity improvements, why are we
all still working as long in the first place? Quoting Wikipedia again, in the
article on John Maynard Keynes: "Keynes thought that the pursuit of money for
its own sake was a pathological condition, and that the proper aim of work is
to provide leisure. He wanted shorter working hours and longer holidays for
all."

If we worked 28 hours per week, as IG Metall recently negotiated, then there
would be more jobs.

"not having a job is bad for your psyche"

I'm of mixed feelings of this. I know a lot of people who would love to work
on free and open source software, but cannot because it's not a viable source
of income. If there was a basic income, which was enough to live on, then I
think they would "have a job" doing software development, even if it wasn't
really a job.

A lot of rich people don't have a job, but volunteer to be on, say, an art
museum board or other organization. I think this helps the psyche, even though
it isn't a paying job.

Regarding committees, I used it to point out that most companies are not run
by a dictatorial head, which appears to be your argument. I brought up
"celebrity CEOs" to point out that that might be more a marketing and
journalism myth, or selection bias, than a reality.

DuPont is one of the longest-lived companies in the US, so by your standard
it's one of the most successful. What do you know of its management style?
Probably nothing. It's simply not flashy enough to make the popular press.

"It seems to me that focusing on the salary is not the right way though,
because they follow from the celebrity system (which makes "good" CEOs more
rare)."

As I pointed out in the quote by Wolff, the high salaries are true for more
than just celebrity CEOs. They are true of nearly all CEOs in mid-to-large
companies, and to many college presidents, and many non-profits (the Wolff
piece mentions the recent at a Chicago YMCA, but I can include the American
Red Cross and Susan G. Komen for the Cure).

------
whack
I agree that inequality is a problem, but I think the article is on the wrong
track. The richest people in society aren't business executives. They are
overwhelmingly entrepreneurs and finance-traders. Ie, Bill Gates and Warren
Buffet. Koch brothers and George Soros. Compared to them, CEOs and C-level
executives are mere pawns.

To give a sense of scale, Tim Cook, leading the most valuable company in the
world, earned $13M in 2017, working what is likely 60-80 hour weeks. In
comparison, Bill Gates with his $82B assets can sit on his couch all day, and
make $13M in investment returns in a couple days.

If anything, CEOs have more in common with regular workers, than with the
truly wealthy. This focus on CEOs as the bogeyman, causes us to overlook some
more important causes of inequality, such as the ultra-low tax rates on
capital-gains, the numerous deductions available to the 0.1%, and the
preservation of wealth across multiple generations via estate inheritances.

~~~
pmoriarty
_" CEOs have more in common with regular workers, than with the truly
wealthy"_

Someone who makes $13 million a year never has to work another day in their
life, and neither does anyone in their family. They can buy pretty much
anything they want, live anywhere they want, can send their children to the
most elite schools, and money is not just not an issue for them, unless
they're trying to buy themselves a country or trying to reshape the entire
political landscape of the United States.

Meanwhile, the median _family_ income in the US is about $60k and more than
half of Americans have less than $1k in savings. Many of these regular workers
struggle to survive, living paycheck to paycheck. They may never afford to
retire and could easily be bankrupted by medical bills.

Help me to understand how a CEO making $13 million a year can have much in
common with them.

~~~
whack
Yes, $13M is a whole lot more than $60k, but it's also a whole lot less than
$8B. One thing that CEOs have in common with most workers, but not most multi-
billionaires: The majority of their "income" is taxed as income, not capital-
gains. I suggest focusing more on the second part of that paragraph:

 _This focus on CEOs as the bogeyman, causes us to overlook some more
important causes of inequality, such as the ultra-low tax rates on capital-
gains, the numerous deductions available to the 0.1%, and the preservation of
wealth across multiple generations via estate inheritances._

------
makecheck
It would be a lot easier for executives to defend massive salaries if they
weren’t _also_ making money hand over fist when they _fail_ spectacularly.
What’s worse is that it seems like there are an awful lot of executives that
don’t execute perfectly.

While I don’t personally believe there is any job in the world worth one
hundred _million_ or more per year (I mean, these people aren’t even
physically in harm’s way!!!), why on earth aren’t companies making sure that
money swings far in the other direction too? If you want a chance at $100M a
year, the company should be able to FINE you _millions and millions of
dollars_ when you make costly mistakes, for example.

~~~
natecavanaugh
That all sounds great, in theory, and sounds super fair. But how do you
attract executive talent without large salaries and golden parachutes?

When one person's choices can make the difference between bankruptcy and
having surging profits, how should we compensate them? I do think our
distribution is a bit top heavy, but I think of it ethically, not
pragmatically or fiscally. Short of executives collectively deciding against
their own financial interests, or regulators choosing for everyone (and the
economy being exposed to regulatory capture), I don't see what you're
proposing.

And physical danger is like physical labor. It's not intrinsically tied to the
value society places on that work. Personally I don't think skydiving
instructors should be paid more than high school teachers.

~~~
jazzyk
The "large salaries and golden parachutes are necessary to attract top-notch
talent" is just typical b.s to justify awarding even more compensation within
the boys (and girls) club. In reality, you could easily find at least several
equally qualified executives to fill the position.

~~~
natecavanaugh
How many have you been able to find and attract?

Anyone who says "you could easily", wrt business, obviously is either a
business genius unlike the rest of us, or has never tried.

Trust me, finding top notch talent that you're willing to trust with the
direction of your company is probably harder than finding a spouse.

------
troydavis
This article doesn’t seem to give any reasons to support the opinion in the
title. It describes ways to accomplish this - mostly legislation and shaming -
but not why a limit should exist, nor why 1,000 is a more logical limit or
goal than any other multiple (10,000? 100?).

~~~
pmoriarty
I have a suggestion. Make the pay equal. The janitor and the CEO should make
the same amount of money.

~~~
crispyporkbites
then you'll have no CEOs and lots of janitors

~~~
jazzyk
You are kidding, right?

If money is not a factor, I want to feel important, have people suck up to me,
travel on corporate jet, etc.

:-)

~~~
crispyporkbites
You’d get bored of that after a week. If you’re not getting paid more you’ll
resent having to work 24/7, with no real breaks and suffer watching your
relationships and family crumble. You’ll have no hobbies, no real friends and
be incredibly lonely. But you won’t even notice because all you care about is
the business and your facade.

The janitor goes home after their shift and is completely free. They get their
4 weeks vacation and max 40 hour working week and can do whatever they want in
their spare time.

------
aphextron
Why? This article explains that inequality does exist, but doesn't say why
that's a problem.

~~~
jbronn
Because research has shown there’s an inverse correlation between CEO pay and
company performance.¹

¹
[https://online.wsj.com/public/resources/documents/CEOperform...](https://online.wsj.com/public/resources/documents/CEOperformance122509.pdf)

~~~
LyndsySimon
That doesn't seem surprising at all - a CEO's reputation is tied to the
reputation of their company, so it makes sense that a poorly-performing
company would have to pay more to attract the same level of expertise as a
well-performing one. If the poorly-performing company fails, then the CEO's
market value will decrease. Higher compensation offsets that.

------
stmfreak
This is a very misguided metric. A CEO Of a small company with 100 employees
and $20MM annual revenue is going to be compensated very differently from a
CEO of a giant company with 200,000 employees and $40B+ in annual revenue.
Although their line workers may have similar skills, jobs, and compensation. A
1000x ratio may be too much for the small company CEO and way too little for
the giant company's CEO.

Fortunately, shareholders can dedcide and influence each company's Board.
There is no need for the government to get involved unless politicians are
trying to raise another witch hunt for distracting peasants.

------
jazzyk
I think the title is imprecise.

I know exactly two people who deserve that kind of money: Jobs and Musk (there
may be a couple more) with a track of repeat success and world-changing
impact.

Most big-corp CEOs don't deserve the money they get. People who got lucky and
complete failures in particular (like Gil Amelio, or Carly Fiorina).

------
nkkollaw
It's not easy to find somebody who has the brain, knowledge, and experience to
run a big company.

It's extremely easy to find somebody that can serve food.

Evidently, it's 1000 easier to serve food (or whatever other job).

What is the problem with that?

