
Top-CEO Pay Isn’t Driven By Talent, New Study Says - anigbrowl
http://blogs.wsj.com/economics/2015/06/22/top-ceo-pay-isnt-driven-by-talent-new-study-says/?mod=trending_now_3
======
quadrangle
Yeah, but these are systematic problems. None of the super-rich CEOs deserve
their pay, period. But the problem is a comparison. A CEO who feels like they
are underpaid _relative to other companies_ may feel undervalued merely by
that comparison, regardless of being super wealthy.

The rise in CEO pay actually correlates partly with transparency. People
thought reporting the pay would shame the waste, but it resulted in CEOs paid
more reasonably feeling undervalued, and that drove their pay _up_.

There needs to be systematic rejection of this nonsense, like all companies
agreeing together to pay more reasonably and otherwise pay employees
reasonably.

The real best answer is probably a more progressive income tax (ideally with a
Universal Basic Income funded by a negative income tax). Then CEOs can brag
about how much more taxes they pay than others given how much higher their
salary is, but we don't have to have so much waste and inequity.

~~~
bobbles
I'd rather see a system where a CEOs pay could be capped as a multiple of the
lowest pay full time worker. ie. CEO payrises must coincide with base pay
rates also increasing.

~~~
jedrek
I'd love to see that too, but instead every department of a company would
become an "independent contractor" and the highest-level management would end
up a tiny, 100 person company with salaries starting at 300k.

~~~
dagw
Or perhaps a large company of low wage workers overseen by 100 highly paid
independent contractors hired by the board of directors.

------
QuantumRoar
Switzerland publicly voted on a strict 12x salary limit for CEOs compared to
junior employees. The proposal was rejected after 65% of voters opposed it.

[http://www.bloomberg.com/news/articles/2013-11-24/swiss-
vote...](http://www.bloomberg.com/news/articles/2013-11-24/swiss-voters-
reject-strictest-executive-pay-limits)

The article also says that the same law (with public voting) would have had a
much larger success rate in Germany where apparently three quarters of the
population would vote in favor.

I wonder how such a public vote would turn out in the USA.

~~~
cft
This has also been tried in the USSR. The economic success of such a measure
is evident.

~~~
gjm11
Yeah, there was definitely nothing else different in the USSR that might also
make affect economic success. Apart from how they paid their CEOs, they were
just like the USA.

------
mc32
How can the pay gap fluctuate so wildly in the last twenty years? I imagine
compensation packages tied to the stock market drives some of that, but some
of it seems pretty huge (376 -> 188 -> 345 -> 195 -> 303x.)

My question, out of curiosity, would be, if lowering compensation for top
execs would not lower productivity (as the article predicts), why isn't it
done then?

~~~
pmorici
Think about it, CEO pay is determined by the company board. Those boards are
made up of people who are often CEOs or former CEOs (look at the board of
Apple for example 6 of 7 are CEO's or former CEOs) In other words you have a
situation where a relatively small group of people are determining their own
pay.

What do you think would happen to engineer pay if compensation were determined
by a vote of a group of peers and you knew that the person who's pay you were
voting on today might well be among the group of people determining your pay
tomorrow. Personally I would always vote to increase pay by as large a number
as I could possibly justify with a straight face.

~~~
mc32
That's a good point I hadn't thought about. So it's governed by game theory
moreso than by market forces, i.e. even if candidate1 is not a great
candidate, she's the best candidate available and we can get in our industry
niche.

Perhaps a movement could be begun where companies use low ceo/worker
multiplier as a marketing tool to highlight how pro-staff they are and by
extension how pro-consumer they are.

------
pmorici
I've always wondered why instead of minimum wage laws they don't have a law
defining the maximum difference % wise in total compensation between the
highest paid and lowest paid worker at the company. That would at least align
the CEO's incentives with that of their employees.

~~~
sloanesturz
That basically fixes the CEO's wages at whatever that multiplier is * minimum
wage because the lowest paid worker's wages probably won't increase over time.
A large-enough company is always going to have entry-level employees and even
if each individual's wages increase, the lowest paid worker is always going to
be an employee who is brand new to the company in the lowest-paid position.

Hiring CEOs is a competitive marketplace like anything else and boards need to
attract the best individuals in whatever way works best -- maybe the most fair
way to compensate CEOs is through one-time, slow-vesting stock grants so that
the CEO's "salary" they make each year is closely correlated to the value of
the company (and therefore, to their success).

~~~
Someone
_" A large-enough company is always going to have entry-level employees"_

I bet they would outsource all such jobs, even more so than they do now. The
typical big company doesn't employ cleaners or restaurant staff, they hire
companies who do it for them.

I also bet that 'schools' would be created where what used to be new employees
get trained for years, partly on the job, and get some compensation for it (a
bit like the partner system in legal firms, but one where the not-yet partners
technically work for a different corporal entity)

At the companies providing those low-paid services, there would be pressure to
automate away the lowest paid jobs not because they can be done cheaper, but
because they would allow management a pay rise.

It would be interesting to see what people would come up with, but I'm not
sure I would find it an improvement over what we have now.

And that competitive market place may only exist because those in the set of
CEOs artificially keep that set small by only shopping within their group.

------
DanielBMarkham
Four things spring immediately to mind.

1) This is research by a partisan think tank. That's not to impeach the
source, only to encourage deep criticism about what the data is actually
saying -- whether you agree with it or not. (In fact, I find that stories like
this that I agree with I need to be _especially_ careful of embedded spin
because of the difficulty I have difficulty in seeing it.)

2) If we're all going to have robots working for us in 100 years, the
effective ratio between the bottom workers and the top ones will be infinity
-- that is, the entire idea of a happier future is machines doing all the
grunt work and people just doing creative things that they find value in. This
data may be a sign we are on our way there -- I'd be careful about destroying
our future before we get there.

3) The measure here is being made with "comparably-paid workers" So the
inference is that you can compare specialty doctors and CEOs, or stock brokers
and CEOs. No matter how you justify it, I don't think such a comparison holds
water. Are good stock brokers making 20x the money that bad stock brokers
make? Perhaps. But does that mean that there would be a similar 20x range
among CEOs? No, of course not.

4) I hate statistics-based social policy advocacy because there's always this
underlying idea of the old "We take an aggregate number, make some broad
generalizations about causality, then announce that the conclusion we had
already reached before beginning our work is now evident." mentality. Carrots
are poison? Sure, because 100% of the people who eat carrots are dead within
115 years. The only causal relationship I can come up with for CEO pay is the
obvious one: highly-paid CEOs get that way because they manipulate the board
into paying them that kind of money. This in itself is a skill. Creating large
majorities of agreement among diverse stakeholders while maintaining a vision
may also be a highly-paid skill among CEOS, and it may be related to their
ability to manipulate boards, but even that is a bit of a stretch.

Beware facile arguments about complex topics.

------
ianstallings
I disagree. Negotiation is their talent, obviously.

------
qnaal
wait- so what _is_ it driven by?

so I can min-max

