From NY times
CEO pay as a multiple of employee average
us 531
Brazil 57
Mexico 45
Britain 25
Canada 21
France 16
Germany 11
Japan 10
Edited 1/26/2004 7:16:21 PM ET by wain
Edited 1/27/2004 8:43:34 AM ET by wain
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Edited 1/27/2004 8:43:34 AM ET by wain
Discussion Forum
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Companies are wising up though. I read an article recently showing that there are many reverting to the old understanding that the CEO is not Regal but is only a hired hand, much less than a hired gun. As such he is worth about twenty to fourty times what the worker he manages is worth, in actuarial terms.
Excellence is its own reward!
This weekend's Dilbert may provide the answer:
View Image
Always thought they were pulling something out of their ... um ... Back door.
Picture didn't take. Bummer. Would have had more impact that way. Oh well. Try:
http://www.dilbert.com/comics/dilbert/archive/dilbert-20040125.html
Edited to ge the strip, or at least the URL, in.
Edited 1/26/2004 11:45:40 PM ET by 4Lorn1
here's your dilbert...
a couple years ago... the chairman of Fleet Bank was awarded a $3million dollar bonus.. the same year he eliminated 3,000 full time jobs...about $1000 for each ruined life...
Mike Smith Rhode Island : Design / Build / Repair / Restore
Let's put things in context here Mike, just to stay in practice.
Did you take a poll to be sure that every person whose position was downsized in those cuts found their life to be ruined.
I only lost one job in my life, but I considered it a favour with positive results. I've known plenty of other people who have simply shrugged their shoulders and goine on to another job in similar circumstances.
Also, Most downsizing takes place by offering early retirement incentives, at least in the first round, in corporations like this. It lets the corp shed a little highly paid upper level people and make room for the dynamic younger ones without hurting anyone. I think the word is attrition.
Another method of doing this that both corps and employees have favored is for the individual employee to be turned into a self employed consultant or sub contractor. I've only known two who were subject to this method but both really loved the change.
Sure some folks had their lives ruined, but not half as many as you portray, eh?.
Excellence is its own reward!
no ... those are the ways progressive corporations downsize... this one was a friday night massacre.. don't let the door hit you in the a$$ on the way out type...
were each of the 3000 lives ruined... no.. that was hyperbole.. did he get a $3million dollar bonus.. u bet..
'course.. it might not have been for the 3000 ex-tellers.. it might have been for all the widows they ripped off in Georgia & Massachusetts... you remember Fleet?
anyways.. good to see you comming to his defense....hah, hah, hah......Mike Smith Rhode Island : Design / Build / Repair / Restore
Not him specifically. I just hate to see folks get the idea that all downsizing is done with a hatchet and the floors running red with blood..
Excellence is its own reward!
>>I just hate to see folks get the idea that all downsizing is done with a hatchet and the floors running red with blood.
In the mid and late 80's corporate downsizing was the big corporate fad. There was even a book written by some management guru type advocating it as the end-all and be-all of corporate existence.
Every announced corporate downsizing was hailed by wall street and the stock of each and every company rose with those announcements, regardless of the merits.
Subsequent studies done in the early 90's found that very few companies actually had any increased value or performance as a result of that corporate fad.
Did every single person suffer? Of course not. But one heck of a lot of people were put through one heck of a lot of stress and turmoil because of rote downsizing.
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I'm matching tool donors to a church mission to Haiti - we're shipping a bus converted to a medical facility in (now it looks like) April and can fill it with clothes, tools and all sorts of stuff needed in that poorest of all countries. A few hand tools or power tools can provide a livelihood for an otherwise destitute family. Please email me if you have tools to donate.
Thanks to Jeff and David and Jim and Rich and Steven and Mark and Jason and Shep and Jen and Mike and Joe and Bill and Ken for their offers!
Several donations have arrived! Thanks and God bless!
Bob , since 911 it is again popular to downsize and cut bills where ever they can before they lose out to overseas locations. Its been a tough world for plants in USA. Its not a lot better now.
Tim Mooney
It's not hard to figure out why a CEO would ask for that much money, but why do you suppose the shareholders agree to pay that much money?
I suspect it has a lot to do with CEOs selecting, directly or indirectly, their own board. It also has something to do with people sitting on multiple boards and each others boards, a well paid position demanding no real skills. Word gets out you don't take care of a fellow rich guy and the number of boards your on goes down. Could end the gravy train life. Might have to work for a living.
Yes, I can see that CEO's and directors have an incentive to take care of each other like that, but the same question applies, why do the stockholders keep electing those directors?
How many share holders do you think would go to the annual meeting? Of all present who do you think hold the most vote?
>> How many share holders do you think would go to the annual meeting?
All the ones who object to paying the CEO 531 times as much as the average employee?
The message being displayed is that its bogus pay . Why would the board vote the pay? They vote a percentage of the profits to management as incentive .
Coaches in major college have reached 2.5 million a year . In the cases Ive read about its been an incentive program . It was quoted that "if " you win a national championship , you will be the highest paid coach by one dollar. It happened . Why?
Several reasons support it . The cost of tickets if they are sold out can go up to thin out over flow. National coverage per game can be a few million . The higher the bowl game the better the pay. Im thinking the national championship game split 18 million . Lets say they get televised 5 times next year as one of the hottest teams people want to watch at say a meger 5 million per game just from tv . The stands are still sold out every game. Arkansas basket ball only has one game televised because of a poor record the last five years and their bowl game only paid 1 million and change . What is a coach worth where half the stadium is empty? No coverage of any kind and folks wont come to your house to play because of reciepts . Why would a good football team come and play a team that only half fills its stands . The teams get a split of the reciepts. What would a board member vote to pay a coach that lost millions of dollars ?
I would be happy to pay a percentage of profit to anyone that could make my organisation a billon a year versus someone who loses money , a fair wage . Its all about money as it should be . Give the board members some credit in most cases.
Tim Mooney
Edited 1/27/2004 9:09:29 AM ET by Tim Mooney
ceo make large amount of momey. I feel they worth ever bit of it. The ceo is usually the founder of the company. It was his idea, his sweat, his connection that made the company. It was his reputation. He owes no one but the stock holder. Only thing he owes to the workers is a safe work area.and a paycheck for hours work.
It be like your company that you have build for years and a then a carpenter helper making $6 a hour telling you how to run the company.
You right some ceo might not do much but they did build the team to do his work load. If the company can support the ceo salary, he worth every penny. Those who feel this is wrong want something free, a share of the wealth for no sweat, like the socialise party , like the democratic. the ceo takes the risk of big business.
as it is and will ever be. what possible forced legislated "solution" can there ever be that would not then be an absolute windfall for attorneys, accountants, courts, bureaucrats, etc? funny how you compare the USA to other countries but how many of those are the perennial economic powerhouses that we are? i'll save you the trouble of looking it up- NONE. (i mean c'mon- Brazil?- you gotta be kidding me, why not include Zimbabwe?) i don't think it's too much of a stretch to theorize that the possibility of a HUGE payoff for busting your a$$ to get to the top is one of the major reasons the USA is at or near the top of the economic heap year after year. did every last person who ever made it to upper mgt do it purely on merit? of course not. should shareholders be more involved? a qualified "maybe". is there too much incestuous dealing? probably. but without making it a yet another bureaucratic boondoggle what do you propose to do about it? do you REALLY want the govt deciding what people "should" make in a supposedly free market economy? here's my suggestion- if you don't like a company's pay structure, don't buy their products or services or stock and tell all your friends, too. simple as that. btw- ben & jerrys ice cream had one hell of a time finding a new ceo when they had to go shopping for somebody to manage their burgeoning enterprise a few years back because they were fans of your philosophy. seems the talent they needed was more expensive than they anticipated.
m
I agree with you. It is earned if they are truly doing a great job they may earn it. If they are cooking the books and screwing everybody and everything to the wall to get it then no. Their bonus should be free vacation to place with bars and no putting greens.
The line workers, carps, whatever should have reasonable and fair wages and benefits and be treated as a very important part of the product. However lets face it the guys who moved the rock for the pyramids (true they were slaves) would not have deserved the same as one who had the intellectual ability to pull the whole thing off.
While those above are indispensable, if one does his job poorly there is usually some check and balance that will prevent slipshod work or a mistake from sinking the ship. At the top the mistakes are much more far-reaching.
I spent 20 years in the Army and feel that while the privates through captains on the front lines bleed more and take the ground the strategists way in the back win or lose the battle. They have (as ceo's) survived a long up-our-out battle to get where they are and deserve a fitting reward.
Why would a good football team come and play a team that only half fills its stands . The teams get a split of the reciepts.
Flip that around though. Suppose you can get a team with a bunch of die hard fans to come to your stadium. A nice overflow crowd or two can keep your program afloat. Sound odd? Perhaps. Seven of the top 12 sell out crowds in Floyd Casey (Baylor) are Texas A&M games. Nebraska probably is similar in visiting Kansas (sorry Neil) or at Ames or Columbia (until this year). The "big time" teams can get a good draw in many places (some occasionally seem to like aschedule with "lighter weight" teams, too--but that's a whole separate argument <g>). Money is definitely the driving force.Occupational hazard of my occupation not being around (sorry Bubba)
It is all about money.
Tim Mooney
Most stock holders don't have enough of the right stock to bring a vote, or in some cases even vote. The board members and CEO hold large blocks of stocks giving them protection and a considerable amount of control.
That these same people also have inside information, Martha Stewart thinks she did nothing wrong because she can't imagine it not being her right, only adds to the amount of control and power they hold.
In many communities it is common to see a clanism of class, its class warfare if the little people rise up but 'the way it is supposed to be' when the rich and powerful pull the strings to their own benefit.
In this system the SEC and most of the government is not there to protect the public from the powerful. Their mission is two fold: To prevent open warfare between large empires and to provide a patina of honesty and propriety to the running of this nation by those who own it.
one of the large charities is trying to get the SEC to include on the proxy vote forms some sort of choice where a shareholder can vote to require the CEO pay to be restricted in some manner less there is proof the CEO had really done something great
Depends upon which CEO. In the cabinet shop the multiplier was about 9. I;ve worked some places where the numbers ranged from 45 to 5.
Last employee I had was earning about .7 of the "ceo's" pay.
A 1993 change in the law allows companies to pay "performance-based" bonuses to employees, and that expense is a chargeable expense. So, Mike Dell or Bill Gates can get paid, in actuall salary, say, $120K. Then they can get a perfomance bonus of x million per year--which can then be brought back to the corporate bottom line.
Depends upon who the "average worker" is, too. An M & A broker working at a merchant bank will starve on a paltry $250-350K per year. But, then, flashy living in Manhattan doesn't come cheap.
Their performance bonuses are often based on the short-term performance of the stock, without any factor for the long-term viability of the organization. Want the stock to go up? Lay off 20% of your employees- the mutual funds jump in right away, expecting that 80% of the people will now generate 100% of the projected revenue...
Face it- this is a massive old-boys club, the land of directors and CEOs. The board and the management are supposed to have an arms-length relationship, but in reality they're taking each other out for dinner all the time, and often the auditor is comes along for the ride...
We small investors are the meat in the sandwich. We're the sucker money...
There's one investment which gives a guaranteed high after-tax return- it's paying down debt. My grandfather knew that, and he only managed to get to grade 6...Even more incentive to do so up here in Canada, where you can't deduct your mortgage interest...
high after-tax return- it's paying down debt . . . Even more incentive to do so up here in Canada, where you can't deduct your mortgage interest
Good points. Mond you, while I could have deducted mortgage interest, I had no reason to, the standard deduction was greater than the itemized (bought, and financed, way less house than I could have--and at a very low rate). Occupational hazard of my occupation not being around (sorry Bubba)
It always got me how the real estate people stress the deductibility of mortgage interest. If you had a true marginal tax rate of 30% then paying $1000 in interest would save you $300 in taxes. Most of us low to moderate income folks usually pay considerably less. Another piece of possibly poor advice is to do home equity loan to pay off cards, car etc, you end up paying for it a lot longer.
But all situations are somewhat different and what may seem bad is right for some.
Another piece of possibly poor advice is to do home equity loan to pay off cards, car etc,
Depends on whether you are already financing your debt as is <g>.
I can't see any reason to mortgage what little I own of my house just to buy more stuff (or to "leverage" my other irresponsible debts). But, that's me, the way I am.Occupational hazard of my occupation not being around (sorry Bubba)
"It always got me how the real estate people stress the deductibility of mortgage interest. If you had a true marginal tax rate of 30% then paying $1000 in interest would save you $300 in taxes. Most of us low to moderate income folks usually pay considerably less. Another piece of possibly poor advice is to do home equity loan to pay off cards, car etc, you end up paying for it a lot longer."
Dude, where do you live? Around here, a median mortgage would have folks paying well over 1k per month in mortgage interest. $300 per month is real money.
Also, the home equity loan advice is generally sound. If you make the minimum payment on a credit card, the real terms are often 10 years or more. Credit card rates are typically 14-24%, where home equity loans are around 5% (and tax deductible). Either can be paid back on an accelerated schedule to reduce interest costs. Credit cards make no sense, unless you have no other options, or you win the convenience game by paying within the grace period.
Personal finance is fun. But wait, wasn't this thread about CEO pay?
You are correct I was just picking up on the mortgage interest discussion, only used the $1000 figure as it is easy to show the math. I was only saying that the interest was not that major a factor in buying home (which is a good idea all things considered). Idea of not doing home equity is for people who cannot or will not pay it off early, too easy to forget about it if it is not staring you in the face.
Will say no more on issue, hijack over, return to normal flight.
Edited 1/27/2004 5:13:34 PM ET by RASCONC
Will say no more on issue, hijack over, return to normal flight.
Rasconc, you are not done with me yet. :)
I was only saying that the interest was not that major a factor in buying home (which is a good idea all things considered).
Financially? Yes. When you're talking about a large sum of money amortized over 15-20-25 years, interest and monthly payments are the only things that matter. Why do you think the housing market is so hot today? That's because people can manage their mortgage payments much more easily when interest rate is so low. To a point the price of the house is actually irrelevant.
Actually the Idea of not doing home equity is for people who cannot or will not pay it off early, too easy to forget about it if it is not staring you in the face.
That I agree wholeheartedly. For those people, I give up.
You can choose not to buy shares in a company because CEO pay is too high.
Or not... It's up to the shareholders [or potential shareholders] to decide.
The strategic decisions made by a CEO can make their pay worth every penny, or not...
Frankly, I'm not sure why this is supposed to be a matter of great concern to the general public. It's not their money.
I would differ with that last statement. I read someplace that over half of the population has money invested in the stock market in some way or another. Maybe that was over half of households.
Anyway, there are more people invested than commonly imagined.
I agree there is an element of greed and envy on both sides of this issue sometimes though.
I was pleasantly surprised recently to read in Fortune Magazine, that almost all of the stocks that I ahve chosen to own are listed in the top one hundred best companies to work for. They perform OK too, and they pay their CEOs pretty well. So it is not impossible to do it all well..
Excellence is its own reward!
"I would differ with that last statement. I read someplace that over half of the population has money invested in the stock market in some way or another. Maybe that was over half of households. "
Sure, just about everyone has some interest in the equity markets, either directly or indirectly.
But... one can still choose to own shares in companies that pay their management less if they desire. Many smaller public companies are more reasonable in this regard. Or, one can invest in foreign equities (with cheap CEOs, right?), bonds, or whatever they like. Mutual fund and Pension fund managers can do the same. This is not forced upon us by law or anything. If the market demands it, CEO pay in the US will be cut. Shareholders have explicit rights here. This is Compensation WITH representation. I still do not understand why this issue somehow keeps creeping into PUBLIC policy discussions. It's a private matter between a company and its shareholders.
Accounted for properly (watch those options!), CEO pay affects the bottom line like any operating expense. You do the cost/benefit analysis, and make your own choices. Freely.
I see what you are saying now..
Excellence is its own reward!
If you rank those countries in terms of overal GDP, GNP, and average wages earned per capita you would find them to be in a similar order (US on top). Think that's a coincidence? Anybody remember the 10th comandment?
Anybody remember the 10th comandment?
Thou should not commit adultery?
Ex 20:1717 "You shall not covet your neighbor's house. You shall not covet your neighbor's wife, or his manservant or maidservant, his ox or donkey, or anything that belongs to your neighbor." NIV
Here is a game that they play on radio and I think it relates a lot to what we have been discussing.
The radio announcer phones up two contestants, 1 and 2. The prize money is $1000.
#1 and #2 are going to split the $1000 provided... #2 decides on how they split the money and #1 has the final say if he agrees or not. If #1 doesn't agree, nobody gets anything.
So you put yourself in the position of #1, up to what point would you agree to take your share, no matter how small, than going home with nothing?
I would take anything larger than $1.00.
Not that I would hope to only get a buck, but I'm assuming you have to call up, wait on hold, listen to the the banter and then make your decision. Either way, you have spent all this time and it's your choice. Benefit a little or none at all.
I think the real question is, what would you offer the person with the decision making power? I would go for me-$900, him-$100. Most would not turn down $100 even if they were a little miffed at you for taking 9/10's.
Jon Blakemore
Jon I would say you are a really astute business man.
The whole thing comes down to the element of fairness, your decision depends on how fair you think is fair and what's the end result on your decision.
Here we have two guys who have never met and none of them had any contribution to the $1000. In the case of the CEO at least he runs the business for you and hopefully generates enough earnings to justify his remuneration. If he makes $999 and you make $1 you have no grounds to complain. After all you are a willing accomplice.
I agree with you if the table is turned most people will accept the $100 while you get $900... but again, in fairness, I would offer 50-50. Call me stupid.
Ex 20:1717 "You shall not covet your neighbor's house. You shall not covet your neighbor's wife, or his manservant or maidservant, his ox or donkey, or anything that belongs to your neighbor." Funny thing about this commandment, some religions consider this two commandments and leave out the commandment about graven images.You get out of life what you put into it......minus taxes.
Marv
Never count another man's money.
Amen brother.
The point I am trying to make is that some of this discussions sound's like my 12 and 14 year old daughter's whining about who has what such as: "Well, (fill in friends name here) has a cell phone why can't I"?
You want more money? Go make it and stop sniveling about what others have. Companies with moron Boards of Diretors that overpay their management end up out of business or the bums thrown out. Thats the way the system works and it works.
In my early working years I was paid a salary + commission for sales. One day I went into my bosses office and asked for a raise in the base. His comment was "you want more money? Go sell more stuff."
Its OK to look at how well other people are doing and have that be a motivation for you to work harder, get more school, whatever so you can do better too. But to suggest that the "fair" way is for the other person to be brought down is wrong. At least insofar as what this country was founded on.
If you think the way to make everything "fair" is to have some power or authority (other than a free market or society) dictate who can have what then go to North Korea.
P.S. I'm not rich & famous
Nuff Said
I'm with you 100% charlie.You get out of life what you put into it......minus taxes.
Marv
>> remember the 10th comandment?
Apparently the CEOs don't
_______________________
Tool Donations Sought
I'm matching tool donors to a church mission to Haiti - we're shipping a bus converted to a medical facility in (now it looks like) April and can fill it with clothes, tools and all sorts of stuff needed in that poorest of all countries. A few hand tools or power tools can provide a livelihood for an otherwise destitute family. Please email me if you have tools to donate.
Thanks to Jeff and David and Jim and Rich and Steven and Mark and Jason and Shep and Jen and Mike and Joe and Bill and Ken for their offers!
Several donations have arrived! Thanks and God bless!