
Britain Looks to Address Inequality with Executive Pay Measures - chollida1
https://www.nytimes.com/2017/08/29/business/britain-ceo-executive-pay.html
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otakucode
JFC.... In the late 1970s, the US FTC was worried about rising executive pay.
So they pioneered similar 'transparency' requirements, forcing publicly traded
companies to reveal the compensation of their executives.

Do you know what the result was? MASSIVE increases in executive pay. Rather
than shaming companies by making them admit to paying their executives
hundreds or thousands of times more than they pay their average employees who
are actually creating all of the companies value, they turned executive
compensation into a signal to investors of corporate health. 'Would that
company be able to pay their CEO $650 million a year if it was failing? Of
course not!'

This move in Britain appears to be nothing more than an attempt to radically
amplify economic inequality, not reduce it. And it will succeed at that as
well as it succeeded in the US.

~~~
adventured
> Do you know what the result was? MASSIVE increases in executive pay.

That's not what massively increased executive pay. The stock market boom -
starting from the early 1980s and accelerating in the mid 1990s to now - is
what generated the hyper spike in executive compensation. You can directly
trace all big increases and drops in executive compensation, going back 50
years, with the S&P 500's movements.

Jul 1964 to Apr 1982, the S&P 500 went from 84 to 109. Call it 30% over 17
years. Read that again and again until it sinks in.

From Apr 1982 to Oct 1993 it went from 109 to 466. Call it near 300% in 11
years.

From Oct 1993 to today, 24 years, it has gone from 466 to 2457.

The only reason executive compensation has soared so dramatically, is because
so much of it is tied to stock compensation.

If we're talking base salary, the NBA's total league roster (~450 players)
earns as much as all Fortune 500 CEOs combined.

~~~
r00fus
This is a much better factually supported hypothesis than it's parent post.

I find it silly that transparency alone would cause pay raises or gas price
increases.

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chollida1
One test I have always applied when looking at joining a company is "do the
majority of managers, including C level execs have an employee who makes more
than them."

In the well run tech companies I've worked at, the programmers tended to make
more money than their managers, which I find to be a good sign.

Ditto for almost all hedge funds I've seen, though to a much larger extreme,
those who produce the value get the largest paycheck regardless of their
pecking order. though to be fair the huge hedge funds buck this trend by
making soooo much money and having a single person own the management company
that the fund pays the management and performance fees into.

It doesn't help with measuring the ratio of the lowest paycheck to the
highest, but it does help ensure that people get paid based on what they
produce rather than their title.

But I find its a good question to ask when interviewing. Find the manager and
ask how many of his/her reports make more than them. If you get squirming or
push back about a top down approach with salaries that follow the same logic,
then you've got a decent data point that you won't be all that valued at the
company.

~~~
albertgoeswoof
What's the incentive to go into management if you get paid less?

By management I don't mean product/project management, I mean general &
strategic leadership of a large organisation.

~~~
gaius
_What 's the incentive to go into management if you get paid less?_

One organisation I worked for had a very elaborate grade system, I was a Grade
20, the highest non-management grade. At that level you had a choice: try to
get promoted to Grade 21 at which you would officially be management, but you
would lose your overtime pay, and it wasn't until Grade 25 at least that it
would be financially worthwhile. Or you could divert your efforts into
avoiding getting promoted... Guess what the majority of engineers did?

The guy I reported to there however embraced the promotion. He loved "being a
manager". He loved the attache case, he loved going over the minutes of
meetings, he loved pre-meetings to plan the next meeting, he loved travelling
to attend more meetings... It takes all sorts I guess. He was an unremarkable
engineer before, and he wasn't any good at actually managing either tho'!

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addicted
While I do believe that inequality is one of the biggest, if not the biggest,
issue in modern developed nations, isn't the rise of the inequality largely
due to accumulation of wealth, and not income amongst the richest?

I see a lot of ire being targeted towards people making close to a million,
and while the 1% makes for a good slogan, I believe the real problem is
actually the 0.1 - 0.01% whose wealth has skyrocketed. And you don't reach the
0.1% with executive pay, but rather due to making money on existing capital.

Wasn't Picketty's research evidence that the problem isn't income, but rather
accumulated wealth?

~~~
r00fus
This is really prescient. It's not the "pay" but the capital gains. And
something like a very minimal transaction tax would probably do far more to
address inequality.

By focusing on people rather than the financial instruments, the politicians
can be seen to do something (which is guaranteed to not fix the problem
fundamentally).

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KaiserPro
The chances of this acutally becoming law are fairly small.

Firstly, most of the ruling party (Tories) are rabidly "pro buisness" which
translates to sounding tough on anything that could be twisted into "red
tape".

Secondly, this is an attempt to steal thunder from the current opposition
party, who are currently in disarray.

Thirdly, and most importantly, there is simply not enough time for this to be
implemented fully.

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randyrand
* Britain Looks to Address _jealousy_ with Executive Pay Measures

A few executives making large salaries is not an actual issue.

~~~
otakucode
Economic inequality is the sole reliable predictor of a high level of violent
crime in a society. Thousands of different indicators have been examined, and
economic inequality is literally the only one that correlates significantly
with violent crime rates. And that's before you even get into the principles
of the matter. If capitalism is supposed to be based upon people being paid
relative to the value they actually create, outsized executive pay clearly
betrays that standard utterly. While a small number of people could replace a
business analyst who knows the operations of the business inside and out,
almost anyone could do the job of a CEO who shows up and is gone within 3
years, off to a new company, serving as nothing more than temporary figurehead
and whose primary actual job duty is to cash large checks so investors think
the company is healthy.

~~~
harryh
Over the past 25 years in the US inequality has gone up while violent crime
has dropped.

~~~
zimpenfish
> Economic inequality is the sole reliable predictor of a high level of
> violent crime in a society.

It might have dropped but it's still "a high level" \- 10,000 gun deaths thus
far in 2017 would indicate that.

[http://www.gunviolencearchive.org/](http://www.gunviolencearchive.org/)

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tim333
They should figure a way for a shareholder vote to determine pay levels. I've
got shares and wouldn't vote for the managers to get stupid high pay. At the
moment the managers effectively choose their own salaries hence the excesses.
It is, theoretically at any rate, us shareholder's money.

~~~
guy_c
Remuneration of executive is up for approval at AGM in many countries. So you
probably can vote. You can also check the vote results, the majority of
shareholders vote to approve the remuneration packages.

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itaris
Isn't this capitalism working exactly as intended?

~~~
randyrand
That depends. Do you mean free market capitalism or crony capitalism?

To decide whether this is what free market capitalism intends, we'd have to
determine if their wages are large due to free market forces (e.g supply and
demand, etc) or if there is some government collusion going on inflating their
wages.

~~~
itaris
What sort of collusion would increase their wages?

~~~
randyrand
lobbying/bribing for laws intended to limit competition is the most common
weapon of choice.

~~~
itaris
But that wouldn't affect the ratio of employee wage to executive wage.
Lobbying/bribing would increase the company's total profit.

~~~
randyrand
Executives are often paid (or given raises) in-part or in-whole relative to
the companies total profit.

Typical employees are not.

~~~
itaris
Exactly, capitalism working as intended.

~~~
zo1
You say that as if it's a bad thing. A company is not a communist-commune
where everyone owns the "commune" collectively. The executives' compensation
is based on the company performance because they probably own shares and
because their specific "function" is to make the company perform better.

An employee's function, on the other hand, is to do their "task". They get
paid to do it. Now, you could argue that if they do their task well, then the
company does well as well, but that's not the way the relationship is
presented. It's more transactional in nature, because it's easy to quantify
the value being exchanged.

