Limit executive salaries?

[navychop]

Let's see, some executives get paid hundreds of millions of dollars, many perks and fantastic severance packages, and probably more than I can imagine.

Anybody think they're doing a better job than someone could do for say, a few million a year? Or one million a year? Are they really earning this money, or just able to keep "one upping" their buddies? No real controls on limiting this (in this country), since Boards of Directors tend to be their friends, and may have even been hand picked by them.

Would we be better off if we limited this? Hasn't it gotten to the point where the "few billion" paid to a few thousand is actually hurting stockholders, and the economy in general?

Perhaps we should consider doing something like this:

1. Raise the POTUS salary to one million dollars per year.

2. Calculate the value of the compensation package for all big business executives. Publish it, as a matter of public interest overriding privacy.

3. Anyone receiving more than ten times what the President (POTUS) is paid is subject to a surtax, paid by the corporation/organization.

4. Phase in the tax. First year, the surtax is equal to entire compensation package. Second year, double. Third year, triple - and so on up to ten fold.

5. Institute controls to ensure the surtax isn't evaded by paying them thru several organizations.

6. Add an income tax bracket of 80% or 90% for earnings over $100M.

Maybe Boards of Directors could somehow be made more independent. I believe in Germany they must have Labor representation. Perhaps we could require some sort of outside representation.


Not likely we'll ever see anything remotely like this. But would it work to reign in outlandish salaries?

 

[denisincalif]

Much as I wish it were true, I don't believe your methods will work. Companies will find ways to get around the rules.

The only sure way to limit the excesses of modern CEO salaries is to encourage and strengthen labor unions. In the 19th century there were no unions. People like the Robber Barons made enormous wads of money that have enabled their descendants to be kingpins of society for over a hundred years. Meanwhile, their employees were little more than slaves.

When labor unions grew the CEO salaries became more reasonable and the middle class got stronger. Sure, there were some abuses and silly rules forced on companies by some unions. And there were some unions taken over by a criminal element. But for the most part, unions were good to their members and society benefitted.

In recent decades the power of unions has declined considerably. The Reagan and Bush administrations were strongly anti-union and they have prevailed. The result has been a steady weakening of the middle class and unrestricted growth of CEO salaries.

The way to rein in CEO salaries is for employees to refuse to work for a company that pays their CEO 400 times what the average employee makes. But people can't do that sort of thing by themselves. If I refuse to work for a company, someone else will, especially in hard times when any work is hard to get. Only organized employees in large numbers can hope to fight this problem. It won't be easy and it won't be quick. But if it isn't done, the US will eventually become a third world country, with a tiny number of immensely rich families ruling over great masses of peons.

 

[snathanb]

Ooh... really tough question. I think CEOs should get paid whatever they can negotiate. That's a key tenet of our free market economy. Capitalism relies on it.

Without that drive, technology and innovation would not be where it is today. (Yes, I fully acknowledge that is a debatable opinion).

However, there is the little voice in the back of my head that says that it isn't right that some people get paid so much, while the people who work for them get paid so little. That sentiment also extends to sports figures, pop artists, and actors. Actually, more to them than CEOs, truth be told.

 

[navychop]

I don't think the CEOs are "negotiating" anything. They're doing a wink and a nod with their cohorts - er, buddies. There are no limits on how much they can plunder. And I'm a conservative!

 

[VinceT3]

Institution no executive can make more than X times their lowest paid employee.. see how quickly they will raise salaries of the lowest employees..

 

[navychop]

That's a thought. Doesn't some European country require something like that?

 

[bhelms]

...I think CEOs should get paid whatever they can negotiate. That's a key tenet of our free market economy. Capitalism relies on it...

My take exactly! It's that same relative freedom of capitalism that has taken this country to the top of the heap in such a short history. Allowing labor to strongly influence policy will lead the US to the same economic mediocrity as is strangling most of western Europe. Our system is far from perfect, but it's still the best and without well intended but misguided unnecessary regulation can still get better.

As far as capping the compensation execs can command, I would agree with that if there was only a limited number of marbles for us all to share. But there is no apparent limit to the total productivity of this country or its value to society and the rest of the world. There need to be laws (already are) to prevent overt acts like dumping waste, absconding with resources, and "cooking the books". But that should be it! Those who are honest and productive should have NO limits placed on them. It's the artificial "equalizer" limits that make folks look for the loopholes!

Those who feel left in the dust need to re-evaluate their own motivations and priorities. There are plenty of rags-to-riches stories out there to support my contention. What leads to the current situation is too much "entitlement" mentality which in turn leads to complacency and lack of personal accountability. The Dec. of Ind. only guarantees the pursuit of happiness. It's up to each of us to find our own way there. For those who define it as having personal financial weath and prestige, they need to lead by example (most do) to encourage others to take the same path, and those who want the same would be better off to follow the true leaders, not the gov't. with its false promises of "security". The regulators just need to get out of the way.

In most ways I am a conservative. One pundit I follow defines that as "having something to conserve". And in terms of my policy fundamentals I am becoming very much Libertarian in order to best do exactly that...!

 

[rad]

I don't think the CEOs are "negotiating" anything. They're doing a wink and a nod with their cohorts - er, buddies. There are no limits on how much they can plunder. And I'm a conservative!

That's what I've always read, board members approve the salary of the executives and who makes up the board, usually other CEO/COO/CFO etc from other companies. If they allow exec A to get a $5,000,000 base salary then exec B can go to their company and say see what exec A is making, I should get $5,500,000, and it never ends. Something needs to be done to stop salaries that are way out of line and the golden parachutes that allow them to make even more if they screw up the company.

 

[Cyclone]

Bah, the politians will always leave in the loopholes for the lawyers and the CEOs to get their share. Cutting salaries won't effect their true compensation.

 

[rad]

My take exactly! It's that same relative freedom of capitalism that has taken this country to the top of the heap in such a short history. Allowing labor to strongly influence policy will lead the US to the same economic mediocrity as is strangling most of western Europe. Our system is far from perfect, but it's still the best and without well intended but misguided unnecessary regulation can still get better.

As far as capping the compensation execs can command, I would agree with that if there was only a limited number of marbles for us all to share. But there is no apparent limit to the total productivity of this country or its value to society and the rest of the world. There need to be laws (already are) to prevent overt acts like dumping waste, absconding with resources, and "cooking the books". But that should be it! Those who are honest and productive should have NO limits placed on them. It's the artificial "equalizer" limits that make folks look for the loopholes!

Those who feel left in the dust need to re-evaluate their own motivations and priorities. There are plenty of rags-to-riches stories out there to support my contention. What leads to the current situation is too much "entitlement" mentality which in turn leads to complacency and lack of personal accountability. The Dec. of Ind. only guarantees the pursuit of happiness. It's up to each of us to find our own way there. For those who define it as having personal financial weath and prestige, they need to lead by example (most do) to encourage others to take the same path, and those who want the same would be better off to follow the true leaders, not the gov't. with its false promises of "security". The regulators just need to get out of the way.

In most ways I am a conservative. One pundit I follow defines that as "having something to conserve". And in terms of my policy fundamentals I am becoming very much Libertarian in order to best do exactly that...!

If a CEO was raising the salary of their staff, growing the company and increasing shareholder value that's one thing. But then you get one of the poster children of excessive executive compensation, Bob Nardelli (Nardelli: Out at Home Depot - BusinessWeek.com - MSNBC.com). Under his leadership Home Depot was on a downward slide while he raked in the $'s and even when they forced him out he walked away with a $210,000,000 package according to the link. I think that's one of the major problems that folks have, they see these folks get booted out of a company for doing a bad job and walk away with millions. Everyone else, if they get fired all they get is a box for packing up their desks.

 

[bhelms]

Folks only hear about the bad examples. What about companies like MS? Whether or not you agree with their products or predatory tactics (perfectly legal and economically the right thing to do) there's a company with more millionaire employees than probably any other you can name. When companies make big profits is when the employees benefit, the bonuses at all levels become available, and there is plenty of money for philanthropy. Start saddling those companies with more restrictions (it will only start with caps on CEO salaries) and all the incentives to share go away. A whole lot more than just the CEOs will lose in that environment.

No one is forced (yet!) to work for any particular company or own its stock. We are all wise to be educated consumers at all levels. If you don't like what you see, move on. Bad companies will have to change for the better or perish in a free market. Stockholders vote for the BOD, who hire the CEOs. Sounds like in your example the stockholders weren't paying attention. HD stock has plummeted. Everyone should learn their lesson and move on. We don't need the gov't to teach us anything here. See the attached. HD tanked, has undergone an "extreme makeover", and is poised to be an attractive investment again. What goes around comes around...

http://www.fool.com/investing/value/2008/02/15/stock-of-the-week-home-depot.aspx..

 

[docpadds]

Ooh... really tough question. I think CEOs should get paid whatever they can negotiate. That's a key tenet of our free market economy. Capitalism relies on it.

Without that drive, technology and innovation would not be where it is today. (Yes, I fully acknowledge that is a debatable opinion).

However, there is the little voice in the back of my head that says that it isn't right that some people get paid so much, while the people who work for them get paid so little. That sentiment also extends to sports figures, pop artists, and actors. Actually, more to them than CEOs, truth be told.

It is a basic part of the free market. It is the dream that drives many to work hard and make it to the top.

If we start putting the screws to what PRIVATE companies do, we will turn into a Socialist type country like half of Europe is. After 25 years in Europe i had enough of the government legislating everything in my life and being constrained like I was tied up. America isnt like that and shouldnt be.

There are haves and have nots, sure, but we are also on of the most generous nations ever in the history of the world, to our own who have not and those overseas.

We have two votes in this country, the one in the voting booth and the one with our wallets, i beleive change comes through the wise use of both.

 

[Tom in TX]

Previous two posters (#11, #12), excellent posts!!

Tom in TX

 

[vegassatellite]

Take away the incentive to succeed, and no one will.

 

[BobMurdoch]

Money for the rich will gravitate to a place where it is less abused.

Multinationals will merely shift their CEOs to another country for their basis of residence. At least this way, the US gets SOME of the income. Make it too onerous and they will move elsewhere.

The only way out of this mess is to cut spending.....

Ironically, one benefit of the stock meltdown..... It might help stall the drag Social Security will put on the economy.... Someone who might have retired with a cushy nest egg at 62 might now have to work to 65, 68, or even 70 to maintain their lifestyle. Once they hit those levels, the odds rise that they will pass away before they empty too much out of the US treasury.

I know that sounds cold, but I'm just talking the numbers, not the morality of the situation. Social Security is basically a pyramid scheme. Today's workers pay for the retirees. As long as there are enough workers, the system is fine.... when things get unbalanced, you're screwed. There is no magic savings account for every person who paid into the system over the last 20-40 years. Until the Boomer echo kicks in, things will be rough.....