Executives and bonuses

[3point14]

Flicking through some old threads, I find this from Mirrorglass, neatly summarising the oft-repeated reason for having to pay bonuses to workers in the financial sector:

There's also another problem with simply freezing bonuses; namely, if you don't pay your top executives, they'll just find new jobs. And then you'll be in the middle of a financial crisis, with no-one who'd be qualified to lead your company, and a lot of people who know the company inside and out working for the competition. All in all, not a situation you'd want to get into just so you could feel morally superior.

My thought in response to this is that this assumes an infinite number of jobs in the financial sector? Is this the case? Can a company cram in as many traders/executives etc. as want jobs? If not, then where are all the jobs that the non-bonused employees are running off to coming from?

I fear I may have stated this very badly. I rather hope it makes some sense.

[Ethan Thane Athen]

Supposedly to other countries that do pay bonuses, taking their customers with them. It's all nonsense....well largely. In extreme cases you may of course lose some people but that just creates a promotion opportunity for some gifted up and comer. After all, we in the public sector are always criticised for not having enough of a turnover because fresh blood is good for the organisation so I don't see why a sector that usually extols such virtues should be worried by it. It used to be considered that high-flyers in the banking or financial trading sector were burnt out after a few years anyway....

[Dave Rogers]

Seems to me that it's just another version of the Prisoner's Dilemma. If everybody cuts bonuses, everybody benefits. However, if one company maintains bonuses while every other company cuts them, that one company gets to cherry-pick all the best executives, so that company wins big while all the others lose. Every company wants to be that company, so every company maintains bonuses, and nobody wins at all. But, as Ethan Thane Athen points out, that all assumes that past performance is a reliable indicator of future performance, which is by no means certain.

Dave

[drkitten]

My thought in response to this is that this assumes an infinite number of jobs in the financial sector?

No, it just assumes that the people who are earning the bonuses are worth what they're paid.

Is this the case?

Someone thinks so, yes.

Can a company cram in as many traders/executives etc. as want jobs?

Traders, yes. You can have as many traders as you like, especially if they bring their own clients with them. If I'm running $2 billion in institutional funds for Citicorp, I can just as easily tell my clients that I'm now working for Credit Suisse and that they can stay with me or with Citi as they see fit. Most of them will stay with me.

Executives,.... not as much. There's a good chance that some of the top executives would have to move down from the top tier to the second tier. But most second-tier investment banks would be happy to make room for them. (Imagine the opportunities BB&T could create for itself if it got a chance to hire the current CEO away from Citi; the board would be all over that like a fat kid on a pizza.)

[3point14]

No, it just assumes that the people who are earning the bonuses are worth what they're paid.



Someone thinks so, yes.



Traders, yes. You can have as many traders as you like, especially if they bring their own clients with them. If I'm running $2 billion in institutional funds for Citicorp, I can just as easily tell my clients that I'm now working for Credit Suisse and that they can stay with me or with Citi as they see fit. Most of them will stay with me.

Executives,.... not as much. There's a good chance that some of the top executives would have to move down from the top tier to the second tier. But most second-tier investment banks would be happy to make room for them. (Imagine the opportunities BB&T could create for itself if it got a chance to hire the current CEO away from Citi; the board would be all over that like a fat kid on a pizza.)



Thanks for that. With regard to traders, that makes perfect sense, all you need is a desk and a phone for them and they bring their cash-cows with them.



This bit:

"No, it just assumes that the people who are earning the bonuses are worth what they're paid."

Confuses me slightly. Could you elaborate?

[drkitten]

This bit:

"No, it just assumes that the people who are earning the bonuses are worth what they're paid."

Confuses me slightly. Could you elaborate?

Well, the trader who can generate $200 million in commissions, fees, and profits on a $2 billion portfolio is worth up to $200 million dollars, right? While the trader who can only generate $50 million with the same portfolio is only worth $50 million dollars.

So, speaking as the company exec who is responsible for compensation, I'd be willing to pay an extra $10 million in bonuses if I'm able to land the first trader (as a replacement for the second, if necessary). As a matter of fact, I'd probably be willing to pay a hell of a lot more than $10 million in bonuses if I needed to.

Turning it around, if Trader Vic expects a $10 million bonus, then he's implicitly promising you that he'll be generating at least $10 million in revenue for you.

The principles for CEO pay are similar; CEOs get paid because they generate value for the company. A CEO who can generate $10 billion in value for the company through his strategic planning is definitely worth a $100 million bonus.

[seayakin]

Well, the trader who can generate $200 million in commissions, fees, and profits on a $2 billion portfolio is worth up to $200 million dollars, right? While the trader who can only generate $50 million with the same portfolio is only worth $50 million dollars.

So, speaking as the company exec who is responsible for compensation, I'd be willing to pay an extra $10 million in bonuses if I'm able to land the first trader (as a replacement for the second, if necessary). As a matter of fact, I'd probably be willing to pay a hell of a lot more than $10 million in bonuses if I needed to.

Turning it around, if Trader Vic expects a $10 million bonus, then he's implicitly promising you that he'll be generating at least $10 million in revenue for you.

The principles for CEO pay are similar; CEOs get paid because they generate value for the company. A CEO who can generate $10 billion in value for the company through his strategic planning is definitely worth a $100 million bonus.

I think where the question comes up sometimes is, do CEO's get the bonus whether they have generated the value or not. I've read articles that provide both sides (e.g. CEO of company X get $10 million dollars in option while company lays off 20% of its workforce. Is the CEO being strategic in cutting costs or is this a measure of the CEO's incompetence?) Whatever the case, stock price and even profits aren't always the best metric of a CEO's performance whereas for a trader, revenue they generate for you is fairly obvious.

[NewtonTrino]

The main point though is that some people are in fact more valuable than others and in many cases this can be quantified. Supply and demand dictates what they actually get paid.

In my case I get paid in direct relationship to my competency in generating profits for the company. If I screw up I may actually lose myself money so my salary can potentially go negative.

[Dave Rogers]

The principles for CEO pay are similar; CEOs get paid because they generate value for the company. A CEO who can generate $10 billion in value for the company through his strategic planning is definitely worth a $100 million bonus.

The problem there is verifying that it's the CEO's strategic planning that was responsible for the $10 billion value generation.

Dave

[Mister Earl]

Yeesh. How does one become a trader, anyway? I wouldn't mind a salary like that. :D

[seayakin]

Yeesh. How does one become a trader, anyway? I wouldn't mind a salary like that. :D

I've always thought that as far as ROI, finance is probably one of the best degrees you can get especially if you get in on the investment banking side. However, be prepared to work long hours, the investers I've known easily work 80+ hour weeks.

[drkitten]

I think where the question comes up sometimes is, do CEO's get the bonus whether they have generated the value or not.

Well, that's an issue for the board and specifically for the compensation committee. The CEO isn't an idiot, and will correctly recognize that a $10 million guaranteed bonus is worth more than a $10 million -- or even $15 million -- bonus that he's only got a 50/50 chance of getting. So if the compensation committee wants to put specific milestones for earning the bonus, they can try,.... and the CEO will either say "no," or demand higher bonus to compensate him for the risk.

Handling negotiations like this is what the compensation committee is supposed to do.

I've read articles that provide both sides (e.g. CEO of company X get $10 million dollars in option while company lays off 20% of its workforce. Is the CEO being strategic in cutting costs or is this a measure of the CEO's incompetence?)

Almost certainly strategic in cutting costs in this instance. Remember that the CEO is responsible not to the workforce, but to the shareholders, and his mandate is to increase shareholder value, not employee well-being. If he's being paid in stock options, then his pay is directly tied to the value he creates for the shareholders, so he's doing exactly what he's being paid for.

This is in fact a very good use of performance-based bonuses. The more shareholder value he creates, the more he gets paid. Since his job is to create shareholder value, he's directly incentivized to do what he's supposed to be doing anyway. But in the case of a conflict between the shareholders and the workforce, the workforce loses. By law.

Whatever the case, stock price and even profits aren't always the best metric of a CEO's performance.

No, they're not, but they're generally a pretty good metric. Of course, the compensation committee can use whatever metric they like.... but they're constrained by the same rules as the CEO, that they're supposed to maximize shareholder value, not workforce satisfaction.

[NewtonTrino]

The problem there is verifying that it's the CEO's strategic planning that was responsible for the $10 billion value generation.

Dave

Well in my case the link is pretty direct. If I make good deals and can manage the team to execute on product then we are successful. So with a much bigger company I would expect the strategy and the management to have a huge impact. In other words what makes a large company different from a small one like mine? Since the link holds on the small end I would assume it would be there with larger companies. When you are making decisions about millions or billions of dollars the quality if your decisions matter.

[kittynh]

CEOs are about contacts and their standing in the Illuminati.

Well, it's a small group where they all know each other. Worth what they get paid, heck NO!

A lot of companies pay a lesser salary and bonuses are based on how the company does. THis includes the CEO. A lot of these are very stable places to work.

The company my husband works for just took over another company (that was glad to sell out because they were in total disarray). First order of business, no more free coffee, no more new computers every 2 years, no more big parties on the company tab, no more on site gym (you can get a gym membership paid for, it was found most people never used the onsite gym). Even the "little people" want perks. They don't always get SOMEONE has to pay for those perks. There is NO FREE COFFEE!! It was hilarious how many people quit. Now they are 6 months later begging to be rehired.

I think everyone likes to think that ONE DAY they might be a big wig with an office and limo and giant bonus. And that's ok. But for others, a company with a responsible fiscal policy that rewards everyone for a good year, equality is not what everyone always wants.

[drkitten]

CEOs are about contacts and their standing in the Illuminati.

Well, it's a small group where they all know each other.

Yes, that's part of the skillset of being a successful CEO.

Think of it this way -- suppose I and several friends want to start up a publishing company. I'd be a terrible CEO; I lack contacts in the literary world (so I don't have any easy way to get authors), I lack contacts in the book sales world (so I can't get easy access to distributors), and I don't even have any decent contacts in printing.

Knowing the players is a key aspect of being able to play the game.

[seayakin]

Its a little dated but I found this article interesting regarding CEO compensation

http://knowledge.wharton.upenn.edu/article.cfm?articleid=1481

It strongly emphasizes maintaining openness and transparency for stockholders.

[GlennB]

No mention of commensurate penalties for royally (but legally) screwing-up and seeing your once magnificent mega-corp being flushed down the tubes? Or even moderately shagging the entire world's economic system?

For a lot of people it's the lack of balance that grates. Whether that's a reasonable reflection of how 'the world' really works I don't know.

A thought to kick around - pay top executives a handsome salary plus periodic bonuses that relate to the performance of their company during their tenure, i.e. not based on an unrealistically low initial stock-option figure. Retain a portion of this and make it reclaimable in the light of future performance, in order to deter cheap manoeuvres to inflate share prices temporarily (see Dogbert's advice on this technique). In short, make it truly performance-related.

[NewtonTrino]

CEOs are about contacts and their standing in the Illuminati.

Well, it's a small group where they all know each other. Worth what they get paid, heck NO!


The illuminati? You're kidding right?



A lot of companies pay a lesser salary and bonuses are based on how the company does. THis includes the CEO. A lot of these are very stable places to work.


Yes, many places work like this including many fortune 500 companies like Intel, Microsoft etc. Almost all of them use a combination of salary, cash bonus and stock bonus. At microsoft they give part of your bonus in stock and then vest it over 4-5 years.


The company my husband works for just took over another company (that was glad to sell out because they were in total disarray). First order of business, no more free coffee, no more new computers every 2 years, no more big parties on the company tab, no more on site gym (you can get a gym membership paid for, it was found most people never used the onsite gym). Even the "little people" want perks. They don't always get SOMEONE has to pay for those perks. There is NO FREE COFFEE!! It was hilarious how many people quit. Now they are 6 months later begging to be rehired.


My company may be a bit unusual but we have free coffee, drinks and snacks. Now when I say coffee I mean espresso with a professional level espresso machine. We buy fresh roasted (1-2 days old) beans, grind them ourselves and make the espresso. We also stock a selection of high end teas.
We pride ourselves on the quality of our coffee.

Good luck finding it in the budget though! Salaries, health insurance and taxes dwarf the cost of coffee. People really appreciate great coffee and to me it's one of the perks we offer. Why would we remove it? If we wanted to tighten up on costs I would rather lay some people off and keep the quality work environment.


I think everyone likes to think that ONE DAY they might be a big wig with an office and limo and giant bonus. And that's ok. But for others, a company with a responsible fiscal policy that rewards everyone for a good year, equality is not what everyone always wants.

I agree that everyone should be cut in on the action. We gave 25% of the company to the employees and regularly pay out bonuses. To me this is one of the keys to attracting the best people, which is the key to success.

[drkitten]

No mention of commensurate penalties for royally (but legally) screwing-up and seeing your once magnificent mega-corp being flushed down the tubes? Or even moderately shagging the entire world's economic system?

For a lot of people it's the lack of balance that grates. Whether that's a reasonable reflection of how 'the world' really works I don't know.

Well, it's basically how the world works. Would you accept a job offer where the boss put in a penalty clause that you had to pay for repairs to any equipment you damaged, even if those repairs cost more than your actual salary?

I wouldn't. I'm good enough at what I do that I no longer have to put up with stupid clauses like that; if ABC Corp wants to nickel and dime me like that, I'll go with XYZ Corp, instead.

One of the reasons that Google can hire the best people is because it provides a great working environment.... not just free coffee, but free catered lunches. If I had a choice between Microsoft and Google, all else being equal, the Google lifestyle might tip the scales.

Do the free lunches "add value" to the company? Maybe not. But if you are trying to hire the best engineers around, you need to offer them something that will make them want to work for you instead of just picking a company at random.


A thought to kick around - pay top executives a handsome salary plus periodic bonuses that relate to the performance of their company during their tenure, i.e. not based on an unrealistically low initial stock-option figure. Retain a portion of this and make it reclaimable in the light of future performance, in order to deter cheap manoeuvres to inflate share prices temporarily (see Dogbert's advice on this technique). In short, make it truly performance-related.

Sounds like a truly mediocre offer. If I can get a better offer from Credit Suisse, I have no reason to work under that kind of red tape. If you don't think I'm worth what I'm asking, don't hire me.

[Twiler]

I'd advocate stronger government control, such that there are restrictions on how much people can be paid in specific circumstances. For example, you could make someone's maximum salary proportional to the length of time they've spent working for one business.

Putting this together while avoiding loopholes is beyond me, but I think that it should be possible.

[drkitten]

I'd advocate stronger government control, such that there are restrictions on how much people can be paid in specific circumstances. For example, you could make someone's maximum salary proportional to the length of time they've spent working for one business.

Putting this together while avoiding loopholes is beyond me, but I think that it should be possible.

Possible, but stupid.

Just as an example, there are CEOs that specialize in turning companies around. If the last CEO you had decided that his strategic vision included fur-bearing trout ranches, and the last product you actually had resulted in a $10 billion dollar lawsuit, then you probably need someone like that.

The new CEO will charge you a fortune, because he knows he's taking a difficult job. He also knows it will be high-risk, because turning a company around is not a guarantee. He also knows that once he turns the company around, you're not going to want him to stay around after that; he plans for a very short tenure. If you tell him that you want to link most of his compensation to performance, he'll tell you to get stuffed. You obviously don't need him as much as you think you do if you're trying to play games like that.

[Malerin]

Well, it's basically how the world works. Would you accept a job offer where the boss put in a penalty clause that you had to pay for repairs to any equipment you damaged, even if those repairs cost more than your actual salary?
I wouldn't. I'm good enough at what I do that I no longer have to put up with stupid clauses like that; if ABC Corp wants to nickel and dime me like that, I'll go with XYZ Corp, instead.

One of the reasons that Google can hire the best people is because it provides a great working environment.... not just free coffee, but free catered lunches. If I had a choice between Microsoft and Google, all else being equal, the Google lifestyle might tip the scales.

Do the free lunches "add value" to the company? Maybe not. But if you are trying to hire the best engineers around, you need to offer them something that will make them want to work for you instead of just picking a company at random.



Sounds like a truly mediocre offer. If I can get a better offer from Credit Suisse, I have no reason to work under that kind of red tape. If you don't think I'm worth what I'm asking, don't hire me.

So your job comes with a golden parachute (http://en.wikipedia.org/wiki/Golden_parachute)?

It doesnt? Why did you accept such a job???

[drkitten]

So your job comes with a golden parachute (http://en.wikipedia.org/wiki/Golden_parachute)?

It doesnt? Why did you accept such a job???

Because I didn't feel that I was likely to be offered such a job, so I didn't hold out for it.

Employment is a negotiation; if I ask for too much, negotiations will fail and I'll get nothing. If you offer too little, negotiations will fail and you'll have no one to hire.

Especially at the CEO level,.... if I got a $20 million annual bonus at my last job, why should I settle for any less at the next one? Why should you expect me to settle for any less?

[Twiler]

Possible, but stupid.

Just as an example, there are CEOs that specialize in turning companies around. If the last CEO you had decided that his strategic vision included fur-bearing trout ranches, and the last product you actually had resulted in a $10 billion dollar lawsuit, then you probably need someone like that.

The new CEO will charge you a fortune, because he knows he's taking a difficult job. He also knows it will be high-risk, because turning a company around is not a guarantee. He also knows that once he turns the company around, you're not going to want him to stay around after that; he plans for a very short tenure. If you tell him that you want to link most of his compensation to performance, he'll tell you to get stuffed. You obviously don't need him as much as you think you do if you're trying to play games like that.

Yes...

The essential problem is, how do you quantify the quality of someone's work, aside from the value that naturally arises from economic pressures?

[NewtonTrino]

Yes...

The essential problem is, how do you quantify the quality of someone's work, aside from the value that naturally arises from economic pressures?

The same way you value anything. CEO's aren't any different from janitors. It's supply and demand. You take your best guess and place your bets! The same as any business decision whether it be how you price your product, how much you spend on R&D etc etc.

[drkitten]

The essential problem is, how do you quantify the quality of someone's work, aside from the value that naturally arises from economic pressures?

It's a difficult task, of course. But it arises in literally every area of human endeavor, so I don't see why you should be particularly concerned about this one.

How much of a football team's success is due to any particular player? How do you decide how much any one wide receiver is worth once his contract is up for renewal?

How much of the rave reviews your restaurant got are due to the quality of the chef, and how much to the quality of the buyer who gets the ingredients?

When the doctor prescribes a set of pills for you, and you get better, is that just a coincidental recovery or is she actually worth what you paid her?

The usual practice includes looking at what everyone else has experienced. If other 1000-yard receivers are worth at least $3 million/year, probably so is this one. And if most doctors agree that genericillin is good for strep, then it's probably a good treatment.

And if the CEO got a $10 million bonus at his last job, he's probably worth $10 million.

[Malerin]

Because I didn't feel that I was likely to be offered such a job, so I didn't hold out for it.

Employment is a negotiation; if I ask for too much, negotiations will fail and I'll get nothing. If you offer too little, negotiations will fail and you'll have no one to hire.

Especially at the CEO level,.... if I got a $20 million annual bonus at my last job, why should I settle for any less at the next one? Why should you expect me to settle for any less?

And if the CEO got a $10 million bonus at his last job, he's probably worth $10 million.


Is Richard Fuld (http://abcnews.go.com/Blotter/story?id=5965360&tqkw=&tqshow=NL&page=1)worth $400 million?

Or would you not want him anywhere near your company?

[NewtonTrino]

Here's another way to think about it. People get paid what they negotiate. Even within a particular job there is often room for different salaries based on negotiation. I have coached many people into increasing their income substantially by negotiating better pay and raises. It's almost always worth it to play hardball when negotiating salary for various reasons I can get into if people care.

So, now think about someone who is capable of managing a large company. As much as you would like to consider most of them greedy incompetent idiots (which some of them are) you also have to consider the fact that some of them are brilliant people. Now these brilliant people are for the most part going to be brilliant negotiators who are going to maximize their own value. If they aren't brilliant at negotiation per se they will bring in someone who is to negotiate for them. I'm pretty good but I still bring in older more experienced people on occasion for large deals. A CEO would know how to maximize their value. Voila, massive pay packages that are out of proportion to the "average".

[Twiler]

The same way you value anything. CEO's aren't any different from janitors. It's supply and demand. You take your best guess and place your bets! The same as any business decision whether it be how you price your product, how much you spend on R&D etc etc.

'Supply and Demand' is what I meant by 'economic pressures'. Isn't it that system that has led to our current problems? I'm suggesting that there might be a better way of doing it.

But even if there is, we'd still need to work our way into it, via incremental changes.

[NewtonTrino]

'Supply and Demand' is what I meant by 'economic pressures'. Isn't it that system that has led to our current problems? I'm suggesting that there might be a better way of doing it.

But even if there is, we'd still need to work our way into it, via incremental changes.

Well, propose something specific. What would the better way be? As soon as you try to centrally plan or put rules in place you've, for lack of a better word, created a "Game".

[GlennB]

Well, propose something specific. What would the better way be? As soon as you try to centrally plan or put rules in place you've, for lack of a better word, created a "Game".

Make it performance-related, rather than based on an assumption of future performance.

[NewtonTrino]

Make it performance-related, rather than based on an assumption of future performance.

Ok, so explain in detail how this would work.

[blutoski]

No, they're not, but they're generally a pretty good metric. Of course, the compensation committee can use whatever metric they like.... but they're constrained by the same rules as the CEO, that they're supposed to maximize shareholder value, not workforce satisfaction.

I've seen a trend toward including industry peer comparison in compensation formulas.

It prevents a CEO for taking credit for an improvement in the economy.

If the company's shareholder value increases by 50% in a 4-year phase while the industry (excluding this company) saw a 200% value increase, then this CEO is considered an underperformer and bonus would be impacted.

[blutoski]

Possible, but stupid.

Yeah, that was my thought, too.

Well... not stupid but maybe not thought-through.
It's a seniority model, basically, and that's largely divorced from merit.

The main problem is that these days, as managers become more specialized, it's very common for them to move from company to company performing the same function over and over again. As a project manager who works on a specific type of problem, I don't expect to stay with a company after the project is finished.

[geni]

Here's another way to think about it. People get paid what they negotiate. Even within a particular job there is often room for different salaries based on negotiation. I have coached many people into increasing their income substantially by negotiating better pay and raises. It's almost always worth it to play hardball when negotiating salary for various reasons I can get into if people care.

So, now think about someone who is capable of managing a large company. As much as you would like to consider most of them greedy incompetent idiots (which some of them are) you also have to consider the fact that some of them are brilliant people. Now these brilliant people are for the most part going to be brilliant negotiators who are going to maximize their own value. If they aren't brilliant at negotiation per se they will bring in someone who is to negotiate for them. I'm pretty good but I still bring in older more experienced people on occasion for large deals. A CEO would know how to maximize their value. Voila, massive pay packages that are out of proportion to the "average".

The problem with all these explantions is that they have applied for decades. If you want to explain the high rate of increase of Executive pay you need to find something new.

[NewtonTrino]

The problem with all these explantions is that they have applied for decades. If you want to explain the high rate of increase of Executive pay you need to find something new.

I'm not completely familiar with the numbers but there could be a number of factors at work. One is simply the pure amount of new wealth created in the last 30 years. Entire new sectors have been created. Companies like google, microsoft, amazon, intel, oracle, dell, cisco and many others have created immense fortunes extremely quickly. Many CEO's are paid in stock and the market has seen a number of bubbles which has created immense pay packages for some CEO's. In addition the largest companies have gotten even larger. I wonder what CEO pay has done when controlled for company size and efficiency. It makes sense that a CEO of a larger company would make more than at a smaller company. I think the main statistic people are talking about is the ratio between the highest and lowest paid employee. At least I hear a lot of people talk about that one. In my opinion this metric doesn't really explain a whole lot about what's going on.

[3point14]

I think it's fairly well accepted* that, relative to the workforce, the pay of senior executives has increased manyfold. Were they previously underpaid? Or are they now overpaid? Or has the nature of the job changed so much that it's apples and oranges?

I think the point about senior executives having to be good negotiators is a good one, no-one would really want to employ someone who couldn't negotiate a cracking package for themselves.



*But I haven't checed the acutal figures.

[JJM 777]

Well, the trader who can generate $200 million in commissions, fees, and profits on a $2 billion portfolio
A Leftist / Socialist critical comment:

Traders don't "generate" anything. They just tax the flow of products or services "generated" by workers. "Managers" can be said to actually generate something, by planning and instructing work.

[NewtonTrino]

A Leftist / Socialist critical comment:

Traders don't "generate" anything. They just tax the flow of products or services "generated" by workers. "Managers" can be said to actually generate something, by planning and instructing work.

Hold on there a second. Are you saying that traders don't add value to the system? I think you're quite wrong and naive in thinking that. The primary value of traders is to make sure that all of the goods and services flow around the world and are allocated according to demand (price). This liquidity that we get by having a world market drastically increases everyones efficiency and increases competition which keeps prices low for consumers. In fact in most cases it's protectionism that causes people problems (food subsidies being an obvious place of concern imho).

Trust me, if the traders weren't adding value to the system then the system wouldn't be able to support them.

[NewtonTrino]

I think it's fairly well accepted* that, relative to the workforce, the pay of senior executives has increased manyfold. Were they previously underpaid? Or are they now overpaid? Or has the nature of the job changed so much that it's apples and oranges?


Controlling for which factors though? For example if the average company is 2x the size and the pay of top CEO's has gone up 2x then there may not be a discrepency. I personally haven't seen the numbers but simply looking at the pay ratios doesn't seem all that useful to me.

[3point14]

Controlling for which factors though? For example if the average company is 2x the size and the pay of top CEO's has gone up 2x then there may not be a discrepency. I personally haven't seen the numbers but simply looking at the pay ratios doesn't seem all that useful to me.

I was referring specifically to executive pay as a % of the non-executive staff working under them.

[NewtonTrino]

I was referring specifically to executive pay as a % of the non-executive staff working under them.

Ok, so controlling for what factors? Interpret the data a little bit for me and show me what conclusion you want to draw from this. It seems like people assume that it's bad for this number to go higher. Why?

[geni]

I'm not completely familiar with the numbers but there could be a number of factors at work. One is simply the pure amount of new wealth created in the last 30 years.

If that was the case we would expect to see across the board pay inflation.


Entire new sectors have been created. Companies like google, microsoft, amazon, intel, oracle, dell, cisco and many others have created immense fortunes extremely quickly. Many CEO's are paid in stock and the market has seen a number of bubbles which has created immense pay packages for some CEO's. In addition the largest companies have gotten even larger.

Not true. Which existing company do you think matches the size of the east india company?

[geni]

Ok, so controlling for what factors? Interpret the data a little bit for me and show me what conclusion you want to draw from this. It seems like people assume that it's bad for this number to go higher. Why?

Because it means more money going to CEO's rather than shareholders.

Personaly I suspect the effect is due to instutional investors trying to play safe mind.

[CriticalThanking]

Recent executive bonus news (http://www.msnbc.msn.com/id/40795080/ns/business/).

Sigh.

CT

[NewtonTrino]

If that was the case we would expect to see across the board pay inflation.


Why would you assume that? It doesn't necessarily follow that the distribution of new wealth would be uniform.


Not true. Which existing company do you think matches the size of the east india company?

Total strawman. Are you saying the economy back then was even close to the size we have now? In terms of actual goods shipped I bet there are a ton of companies that drawrf the dutch east india company. Ships today are slightly larger and goods are even more valuable.

[geni]

Why would you assume that? It doesn't necessarily follow that the distribution of new wealth would be uniform.

If it isn't uniform extra wealth alone is not enough to provide an explanation.



Total strawman. Are you saying the economy back then was even close to the size we have now? In terms of actual goods shipped I bet there are a ton of companies that drawrf the dutch east india company. Ships today are slightly larger and goods are even more valuable.

However the east india company effectively owned most of india. Throw in what was then one of the world's more effective armies, a navy of sorts and a significant trading fleet. About the only modern company that can really compete with that is Saudi Aramco.

[BobTheCoward]

However the east india company effectively owned most of india. Throw in what was then one of the world's more effective armies, a navy of sorts and a significant trading fleet. About the only modern company that can really compete with that is Saudi Aramco.

First, we would have to decide if that is even relevant to this idea of size of a company. Second, comparing a company in many industries to larger, but more specialized ones could be difficult. Third, after a quick search of my school's journal library, I don't think we can resolve this debate on the east india company without paying researchers.

[GlennB]

Recent executive bonus news (http://www.msnbc.msn.com/id/40795080/ns/business/).

Sigh.

CT

"The group was being compensated for how much it took, not whether it made money.
............

What became of the bankers who created this arrangement and the traders who took the now-toxic assets? They walked away with millions. Some still hold senior positions at prominent financial firms."

Presumably the perps will be prosecuted?

[NewtonTrino]

If it isn't uniform extra wealth alone is not enough to provide an explanation.


Not unless you explain why this assumption is made.



However the east india company effectively owned most of india. Throw in what was then one of the world's more effective armies, a navy of sorts and a significant trading fleet. About the only modern company that can really compete with that is Saudi Aramco.

Yes but modern trade dwarfs what you are talking about.

[3point14]

Ok, so controlling for what factors? Interpret the data a little bit for me and show me what conclusion you want to draw from this. It seems like people assume that it's bad for this number to go higher. Why?



Okay, I don't want to draw any conclusion. I think that's very much putting the cart before the horse. I was hoping for a little interpretation from people who know more than I. So I asked the following questions:

Were they previously underpaid?
Or are they now overpaid?
Or has the nature of the job changed so much that it's apples and oranges?

The way I see it, they are the options. There may be others, if there are, I'm not aware of them, but those more educated may be.

[NewtonTrino]

Okay, I don't want to draw any conclusion. I think that's very much putting the cart before the horse. I was hoping for a little interpretation from people who know more than I. So I asked the following questions:

Were they previously underpaid?
Or are they now overpaid?
Or has the nature of the job changed so much that it's apples and oranges?

The way I see it, they are the options. There may be others, if there are, I'm not aware of them, but those more educated may be.

I don't see how any of these questions can be answered without first agreeing on the correct way to look at the stats. For example as I've brought up earlier the company sizes may be different. If you control for that how does pay look? Should pay not be related to the size of the company (e.g. the difficulty of the job)? If we control for factors like that then the data may look different. I don't have access to the raw stats nor the time to do any kind of analysis. All I'm saying is that it's easy to take on statistic and naively make an interpretation of the data.

So I ask again. Why is it automatically assumed that rising CEO pay is bad?

[Segnosaur]

So I ask again. Why is it automatically assumed that rising CEO pay is bad?
I think its a combination of 2 factors:

- bonuses/high salaries paid out when companies are currently failing/require government bailouts. (e.g. someone pointed out Richard Fuld before, who's actions may have been a major contributor to the failure of Lehman Brothers. Tony Haward of B.P. may also be an example.) After all, you expect a high salary if you can bring success, but if you drive your company into the ground, then what exactly are you being paid for? (Note that I recognize that not all bonuses are given in companies that were failing. Heck, its even possible for companies to have portions that are successful and deserve bonuses even while the rest of the company looses money)

- The presence of 'golden parachute' deals (given to executives that resign/are fired) that are given to people that are out of line with regular employees. Yes, if a CEO has a high salary, you'd expect a high severance package. But a regular employee may expect an equivalent of a few weeks/months salary if they loose their job; some executives can receive the equivalent of a year or more of salary/benefits

[skepticalbeliever]

If I had a 2 billion $ book of bus. and my firm wouldn't pay me an adequate portion of the comissions on that book than I would leave the firm. Why should I accept a pay check that doesn't pay me what I'm worth? As a broker, it doesn't matter to me if I work at Goldman or a smaller firm. To me, if you excell you should get paid a lot, and if you do poorly you shouldn't get paid a lot.

I don't see a correlation between big bonuses and failures or sucesses. If I worked at a big bank and felt I could make more at a big hedge fund I would leave. Most financial advisors and analysts at banks are there because they aren't profitable in terms of their stock picks to run a billion dollar hedge fund.

[Corsair 115]

Just to add this element to the discussion, the compensation given top executives in companies in Japan and Europe are on average well below what American executives get. Are American executives overpaid? Are European and Japanese executives underpaid? What would be the reasons for the difference in levels of compensation?

[USEagle13]

Just to add this element to the discussion, the compensation given top executives in companies in Japan and Europe are on average well below what American executives get. Are American executives overpaid?

Nope



Are European and Japanese executives underpaid?

Nope

What would be the reasons for the difference in levels of compensation?

Bigger consumer market.

In America our system is not perfect (no system will ever be which is created by man); but even our lower class people live like kings when compared to any other countries lower class. So I assume it would be the same way as you go up the tier.

That is why I believe China and Russia in the past had been molding their systems more similar to ours.

Why we would ever start shifting more their way is beyond me....All that would happen is.....our "brain" guys would go work overseas if they paid higher wages

[GlennB]

In America our system is not perfect (no system will ever be which is created by man); but even our lower class people live like kings when compared to any other countries lower class.

My extra bolding. Did you mean to write 'any' or did you really mean 'many'?

[USEagle13]

So I ask again. Why is it automatically assumed that rising CEO pay is bad?


It usually isn't in a booming market.

The Timing is what is bad.

Millions of people have not gotten raises in some cases years due to the economy. Others have actually had to accept wage and other various cut backs due to overhead cutting and a huge workforce pool they are in competition with so to speak. This is in both private and public sectors.


Others lost had their nest eggs and secured futures and retirements in the blink of an eye.

Even though it may be in bad taste...it is the companies money so if they want to spend it on bonuses....so be it. That is called capitalism. If you want bonuses then go get more schoolin.

[USEagle13]

My extra bolding. Did you mean to write 'any' or did you really mean 'many'?

any

[GlennB]

any

Then you might want to offer some evidence for your remarkable claim.

Meanwhile:

Tent cities (http://www.dailymarkets.com/economy/2010/11/19/tent-cities-pop-up-everywhere-in-the-u-s-as-homelessness-skyrockets/) (though I won't comment on the analysis in that article, the facts speak for themselves).

Not something you'll find much among the citizens in the more 'advanced' European countries. And should a Brit (say) find him/herself long-term unemployed they'll still get the excellent free health care that they got while relatively well-off. Just for example, of course.

[drkitten]

If you really mean "any" other countries, then this statement is simply wrong.

In America our system is not perfect (no system will ever be which is created by man); but even our lower class people live like kings when compared to any other countries lower class. So I assume it would be the same way as you go up the tier.

First of all, American's don't even enjoy the highest standard of living in the world; the United Nations Development Programme ranks countries by their "Human Development Index" and puts the US as fourth (http://hdr.undp.org/en/statistics/) (below Norway, Australia, and New Zealand). Similarly, the food security situation in the United States is good by international standards, but substantially worse than most of the rest of the highly developed world.

It's fair to say that poor in the US live like kings would in Zambia, but the European poor (and especially the Scandinavians, who routinely top out these measures) live substantially better than the US poor.

[geni]

Not unless you explain why this assumption is made.

In absense of an active force opposing it distribution of any increase in items within a system would be expected to be even. Basic physics.


Yes but modern trade dwarfs what you are talking about.

The total of modern trade isn't relivant since CEOs tend to stick to no more than 1 major company. In any case if you want to argue transaction value you need to explain why there is anyone on the planet who earns more than 2/3rds of Admiral Michael Mullen's pay.

[NewtonTrino]

In absense of an active force opposing it distribution of any increase in items within a system would be expected to be even. Basic physics.


I think you are very confused. Care to explain in more detail? I think I've given plenty of reasons why CEO pay could reasonably increase faster than pay of the average employee.


The total of modern trade isn't relivant since CEOs tend to stick to no more than 1 major company. In any case if you want to argue transaction value you need to explain why there is anyone on the planet who earns more than 2/3rds of Admiral Michael Mullen's pay.

We trade many many many many more goods today than we did centuries ago. By the standards of the days gone by we are fantastically wealthy. The average person is much better off. Hell I'm sitting in an AIRPORT with a bunch of regular middle class people waiting to FLY 1000's of miles in the blink of an eye. Get some perspective will you.

Anyway all this thread has convinced me of is that people knee jerk react to anything involving rich people making money. The jealous streak in people is a mile wide and is IMHO the main reason people get up in arms about this. As I've become wealthier and made friends with other people who are I've realized that most wealthy people are incredibly discreet about their wealth simply because of the insane reactions of regular people. I've seen it over and over both in person and on the internet.

Nobody has yet to put forth a coherent argument as to why rising CEO pay is a problem at all.

[geni]

I think you are very confused. Care to explain in more detail? I think I've given plenty of reasons why CEO pay could reasonably increase faster than pay of the average employee.

Well list them.


We trade many many many many more goods today than we did centuries ago. By the standards of the days gone by we are fantastically wealthy. The average person is much better off. Hell I'm sitting in an AIRPORT with a bunch of regular middle class people waiting to FLY 1000's of miles in the blink of an eye. Get some perspective will you.

Even Delta Air Lines isn't particularly large.


Nobody has yet to put forth a coherent argument as to why rising CEO pay is a problem at all.

Because it takes money away from shareholders.

[NewtonTrino]

Well list them.


Company size? Increased complexity of the world (e.g. CEO's have to be more capable than in the past due to the rapid pace of technology)? Increased effeciency? All I'm saying is that if you don't consider some of this you can't immediately assign a moral value to changing ratios.


Even Delta Air Lines isn't particularly large.


You're missing the point. Airline travel wasn't available 150 years ago AT ALL at ANY price. There are myriads of items we have today that make life immensely better that simply weren't available at all. In addition the average person has access to many goods that only the elite would have had access to in the past. The size of our economy dwarfs our previous agrarian based economy and everyone is richer for it.


Because it takes money away from shareholders.

If the market rate for a good CEO has gone up then they don't have much of a choice. I suppose they could risk it on a 2nd rater. Ultimately if you don't believe that a CEO can positively influence a company then we aren't going to ever agree on this.

[geni]

Company size? Increased complexity of the world (e.g. CEO's have to be more capable than in the past due to the rapid pace of technology)? Increased effeciency?

Size can be ruled out by looking at the past giants and goverment bodies. No company is the size of the US millitry yet there are plently of people who out earn the Chairman of the Joint Chiefs of Staff.
The other two equaly apply to pretty much every employee.


All I'm saying is that if you don't consider some of this you can't immediately assign a moral value to changing ratios.

There are other values that you can apply. For example in a US type system money begets power. Power if it becomes to concentrated causes issues.


You're missing the point. Airline travel wasn't available 150 years ago AT ALL at ANY price. There are myriads of items we have today that make life immensely better that simply weren't available at all. In addition the average person has access to many goods that only the elite would have had access to in the past. The size of our economy dwarfs our previous agrarian based economy and everyone is richer for it.

And if that was the driving factor the equiverlent of CEO pay would have jumped in the late 18th century and would have continued at a fairly steady rate of increase (okey there would have been a jump in the 1850s and the 1950/60s) since that point.


If the market rate for a good CEO has gone up then they don't have much of a choice.

You fail to understand the market. For a modern board of directors hiring a good CEO is secodary to hiring a CEO you can sell to the shareholders.

[3point14]

I don't see how any of these questions can be answered without first agreeing on the correct way to look at the stats. For example as I've brought up earlier the company sizes may be different. If you control for that how does pay look? Should pay not be related to the size of the company (e.g. the difficulty of the job)? If we control for factors like that then the data may look different. I don't have access to the raw stats nor the time to do any kind of analysis. All I'm saying is that it's easy to take on statistic and naively make an interpretation of the data.

So I ask again. Why is it automatically assumed that rising CEO pay is bad?


I'm pretty sure that I haven't, at any point, said that raising executive pay was bad. If I have, I didn't mean to, but I was very careful not to.


As to the questions, well all those factors you wanted to know about existed before. The landscape of companies has always had such variety, so I don't think that the points you're asking really make much difference to the answer. I think you're telling me it's apples and oranges, but you're being terribly defensive about it.

[NewtonTrino]

Size can be ruled out by looking at the past giants and goverment bodies. No company is the size of the US millitry yet there are plently of people who out earn the Chairman of the Joint Chiefs of Staff.
The other two equaly apply to pretty much every employee.


Hold on you're comparing the military to private organizations? Talk about a silly comparison. Apples to oranges.


There are other values that you can apply. For example in a US type system money begets power. Power if it becomes to concentrated causes issues.


Proof?


And if that was the driving factor the equiverlent of CEO pay would have jumped in the late 18th century and would have continued at a fairly steady rate of increase (okey there would have been a jump in the 1850s and the 1950/60s) since that point.


Keep in mind it's only ONE factor. Without doing a really thorough study I'm not sure that you can draw any conclusions here. All I'm saying is that nobody has sat down and showed me a solid theory of what's going on, let alone proven that this is a bad thing.


You fail to understand the market. For a modern board of directors hiring a good CEO is secodary to hiring a CEO you can sell to the shareholders.

So what? If it costs them X and X has increased for this reason it's still the market.

Again nobody has made any point other than "OMG CEO's are making more money the sky must be falling". Connect the dots or admit you don't have a point.

[NewtonTrino]

I'm pretty sure that I haven't, at any point, said that raising executive pay was bad. If I have, I didn't mean to, but I was very careful not to.


As to the questions, well all those factors you wanted to know about existed before. The landscape of companies has always had such variety, so I don't think that the points you're asking really make much difference to the answer. I think you're telling me it's apples and oranges, but you're being terribly defensive about it.

I'm being defensive about it simply because people automatically assume wealth = evil. Please, connect the dots. Why are we even talking about this? What's the point? It almost seems like if you don't automatically assume the line that rising CEO pay is bad that you are some kind of oddball. Sorry, but someone needs to throw out a theory about why we should care unless we're a CEO.

[USEagle13]

If you really mean "any" other countries, then this statement is simply wrong.



First of all, American's don't even enjoy the highest standard of living in the world; the United Nations Development Programme ranks countries by their "Human Development Index" and puts the US as fourth (http://hdr.undp.org/en/statistics/) (below Norway, Australia, and New Zealand). Similarly, the food security situation in the United States is good by international standards, but substantially worse than most of the rest of the highly developed world.

It's fair to say that poor in the US live like kings would in Zambia, but the European poor (and especially the Scandinavians, who routinely top out these measures) live substantially better than the US poor.


That is why for years I have been an advocate for the US "pulling" our funding to all the countries whom we help prop up whom in turn bash the one country (USA) whom is the #1 most charitable country in the world
(http://en.wikipedia.org/wiki/List_of_most_charitable_countries) for not caring about people.

If your not a wiki fan here is another (http://www.nationmaster.com/graph/eco_eco_aid_don-economy-economic-aid-donor)

We (just like other countries) have a lot of internal issues re-guarding old infrastructure, government money waste, and an almost criminal attitude some Institutions have had re-guarding the way the people's money is spent that need to be "fixed/upgraded" or at least addressed (The people of the US spoke with their votes this year).

Bonuses for accomplishing nothing out of the norm or for simply doing what is expected of an individual in any given position is a prime example of waste in the private sector that multiplies the government effect which in turn causes the cost to be shifted towards the "individuals" which the system feeds off of.

Where is China on these lists good will towards others BTW!? All the business booms they have had yet they help no one unless it directly benefits them more in the business of making money sector.

The USA responds to international emergencies (natural disasters, relief aid) sometimes faster than it does emergencies within its own border.

USA is the #1 country in the world in terms of economic aid given to other countries.

We would have more donations per citizen but a lot of our citizens (poor and rich) are dope heads whom give money illegally to drug cartels (by purchasing illegal drugs).

Mexico is a prime example of what happens when the world sits on their hands in the name of political/social correctness.

[3point14]

I'm being defensive about it simply because people automatically assume wealth = evil. Please, connect the dots. Why are we even talking about this? What's the point? It almost seems like if you don't automatically assume the line that rising CEO pay is bad that you are some kind of oddball. Sorry, but someone needs to throw out a theory about why we should care unless we're a CEO.


Putting cards on table, I have a belief that very high levels of remuneration for top level executives is bad. It is a belief, however, and I think we're all aware that just because we believe something, it doesn't make it true. So, I started this thread with the intention of examining my own prejudices and seeing if I could rustle up some information that might help me come to a more informed opionion than I have now. To that end, I have been careful not to state my belief as it's not something I've ever submitted to scrutiny.

I thought it might be a good idea to do this here, as there are a lot of smart people here who might help me out. Now I get told to "join the dots" (even with context, I'm really not sure what you mean by that).

I'd really like to learn more, and you seem like a man that knows stuff.

[NewtonTrino]

Putting cards on table, I have a belief that very high levels of remuneration for top level executives is bad. It is a belief, however, and I think we're all aware that just because we believe something, it doesn't make it true. So, I started this thread with the intention of examining my own prejudices and seeing if I could rustle up some information that might help me come to a more informed opionion than I have now. To that end, I have been careful not to state my belief as it's not something I've ever submitted to scrutiny.


Thank you for finally being clear!


I thought it might be a good idea to do this here, as there are a lot of smart people here who might help me out. Now I get told to "join the dots" (even with context, I'm really not sure what you mean by that).


By connect the dots I mean put forth a theory about why this is happening and most importantly why it's a bad thing.


I'd really like to learn more, and you seem like a man that knows stuff.

I don't really know anything about it other than the fact that I run my own company. I'm trying to get information just as much as you are.

[NewtonTrino]

We would have more donations per citizen but a lot of our citizens (poor and rich) are dope heads whom give money illegally to drug cartels (by purchasing illegal drugs).

Mexico is a prime example of what happens when the world sits on their hands in the name of political/social correctness.

Mexico is what happens when politicians try to overregulate a market like drugs. If they reduced regulation and just tried to take a slice in taxes life would get way better for many people just as it did after we repealed prohibition of alcohol. What a cluster F.

Also I like dope but I only buy homegrown ;)

[3point14]

Thank you for finally being clear!


Sometimes it takes me a while! :)

[geni]

Hold on you're comparing the military to private organizations? Talk about a silly comparison. Apples to oranges.

What makes it a silly comparison. Do nationaised companies have some magic ability that allows them to pay their CEO equivs less? Is there some trick that the entire private sector is missing?


Proof?


Russia.


Keep in mind it's only ONE factor. Without doing a really thorough study I'm not sure that you can draw any conclusions here. All I'm saying is that nobody has sat down and showed me a solid theory of what's going on, let alone proven that this is a bad thing.

You haven't shown it's a factor.


So what? If it costs them X and X has increased for this reason it's still the market.

It's a different enough market to allow for differing explanations. One thing that has chanaged is how companies are owned. Historicaly the board would generaly own a majority of the shares (excluding those owned by women who tended not to vote). Today they tend to be held by various types of funds. And that provides a an explanation for the increase. After all someone who is mearly likely to be able to run the company well is going to be a lot cheaper than someone you can show to third parties is likely to be able to run the company well.

[NewtonTrino]

What makes it a silly comparison. Do nationaised companies have some magic ability that allows them to pay their CEO equivs less? Is there some trick that the entire private sector is missing?


Yes. It's called being in the military where pay is set based on rank. People join the military for reasons other than money and the perks are good as well for senior officers. Plus once they retire the upper level officers can often make good money in the public sector.


Russia.


Now you're making me chuckle.



You haven't shown it's a factor.


And you haven't shown it is. In fact you haven't shown anything.


It's a different enough market to allow for differing explanations. One thing that has chanaged is how companies are owned. Historicaly the board would generaly own a majority of the shares (excluding those owned by women who tended not to vote). Today they tend to be held by various types of funds. And that provides a an explanation for the increase. After all someone who is mearly likely to be able to run the company well is going to be a lot cheaper than someone you can show to third parties is likely to be able to run the company well.

Ok, so it's a change in conditions then. Either way you haven't shown it's bad.

[geni]

Yes. It's called being in the military where pay is set based on rank. People join the military for reasons other than money and the perks are good as well for senior officers. Plus once they retire the upper level officers can often make good money in the public sector.

Strangely companies are quite able to set pay based on where people are in the company and I understand perks do exist in the private sector.


Now you're making me chuckle.


You think Yeltsin (which lead to putin) russia was a good thing.



And you haven't shown it is. In fact you haven't shown anything.


You are the one making a posertive claim you need to back it up


Ok, so it's a change in conditions then. Either way you haven't shown it's bad.

Oligarchies are always a problem. Sometimes it's civil war sometimes it's termination of rights for little people. By moving to a position where wealth is controlled by a very small percentage of the superich you get an oligarchy.

It's also not exactly great for inovation. Oligarchies tend to resist change.

[NewtonTrino]

It's also not exactly great for inovation. Oligarchies tend to resist change.

Russia is an oligarchy run by ex-KGB guys for the most part.

Are you claiming the USA is the same thing? Because I would hugely disagree there. I don't think our elections are fixed nor do I think we have people being assassinated by the government for criticism.

[UWdude]

That is why for years I have been an advocate for the US "pulling" our funding to all the countries whom we help prop up whom in turn bash the one country (USA) whom is the #1 most charitable country in the world
(http://en.wikipedia.org/wiki/List_of_most_charitable_countries) for not caring about people.

If your not a wiki fan here is another (http://www.nationmaster.com/graph/eco_eco_aid_don-economy-economic-aid-donor)

We (just like other countries) have a lot of internal issues re-guarding old infrastructure, government money waste, and an almost criminal attitude some Institutions have had re-guarding the way the people's money is spent that need to be "fixed/upgraded" or at least addressed (The people of the US spoke with their votes this year).

Bonuses for accomplishing nothing out of the norm or for simply doing what is expected of an individual in any given position is a prime example of waste in the private sector that multiplies the government effect which in turn causes the cost to be shifted towards the "individuals" which the system feeds off of.

Where is China on these lists good will towards others BTW!? All the business booms they have had yet they help no one unless it directly benefits them more in the business of making money sector.

The USA responds to international emergencies (natural disasters, relief aid) sometimes faster than it does emergencies within its own border.

USA is the #1 country in the world in terms of economic aid given to other countries.

We would have more donations per citizen but a lot of our citizens (poor and rich) are dope heads whom give money illegally to drug cartels (by purchasing illegal drugs).

Mexico is a prime example of what happens when the world sits on their hands in the name of political/social correctness.

All this was interesting, (and typical) USA #1 opinion, but had nothing to do with what Dr. kitten wrote.

I'd say the poorest Brits and Germans are better off than the poorest Americans. Free healthcare comes to mind as one reason in Britain, and unemployment benefits in Germany are pretty good, IIRC, and lst a lot longer than in America.

But yes, America is better than Mozambique. Yay America.

Furthermore, most of this "aid" you decry is simply subsidies for American companies. America gives country a loan/grant, with the stipulation the country uses American contractors for whatever the money was given for.

[geni]

Are you claiming the USA is the same thing?

If income equality increases it will be/


Because I would hugely disagree there. I don't think our elections are fixed


Fixing elections is so 20th century. It's questionable if putin bothers to fix elections. By the time things get as far as elections matters have already been settled.


nor do I think we have people being assassinated by the government for criticism.

As Berlusconi has shown assassination is not required.

[drkitten]

Yes. It's called being in the military where pay is set based on rank. People join the military for reasons other than money and the perks are good as well for senior officers. Plus once they retire the upper level officers can often make good money in the public sector.

And, of course, none of that applies in private industry. Higher ranking executives don't make more money in corporations. People don't join Google because the perks are good, and upper-level Googlers can't possibly retire and make good money elsewhere on the basis of their experience.

[NewtonTrino]

And, of course, none of that applies in private industry. Higher ranking executives don't make more money in corporations. People don't join Google because the perks are good, and upper-level Googlers can't possibly retire and make good money elsewhere on the basis of their experience.

My point is that they aren't paid that well when they are working for the military but that it sets them up for a big payday later. Kind of like being the president. People also join public service for reasons unrelated to monetary compensation. Comparing working as a high level google executive to being on the joint chiefs is apples to oranges.

[NewtonTrino]

If income equality increases it will be/



Fixing elections is so 20th century. It's questionable if putin bothers to fix elections. By the time things get as far as elections matters have already been settled.



As Berlusconi has shown assassination is not required.

So your point is what? That the US is just as corrupt as Russia? Sorry but I don't believe that if you do then you are part of the problem.

[drkitten]

My point is that they aren't paid that well when they are working for the military but that it sets them up for a big payday later.

Again, you suggest this as though it's somehow different from the private sector.

People also join public service for reasons unrelated to monetary compensation.

Again, you suggest this as though it's somehow different from the private sector.

Comparing working as a high level google executive to being on the joint chiefs is apples to oranges.

I stand by the analogy. If Google can get people to work for relatively low wages by being a cool place to work and allowing their workers to feel the self-satisfaction of doing something they want to do,... and if the military can get people to work for relatively low wages by doing exactly the same thing, how on earth can you claim that the private sector has no other options than to compensate its CEO's excessively?

[NewtonTrino]

Again, you suggest this as though it's somehow different from the private sector.


It is. In the private sector you get paid market rates. In the military you get paid based on rank, no negotiation possible. They are different when it comes to compensation. Do you really disagree with that?


Again, you suggest this as though it's somehow different from the private sector.


Which again, IT IS. Nobody joins Intel because they get to shoot "terrists". Joining the military for some people has very different motivations than joining a company.


I stand by the analogy. If Google can get people to work for relatively low wages by being a cool place to work and allowing their workers to feel the self-satisfaction of doing something they want to do,...


Google cannot do this. In fact Google just gave everyone an across the board raise to make sure they stay competitive. A good friend of mine is leaving MS to go to either Google or Facebook. I think Facebook is going to win because they are pre-IPO.

http://www.bnet.com/blog/technology-business/google-8217s-10-pay-raises-a-desperate-move-to-buy-employee-loyalty/6673


and if the military can get people to work for relatively low wages by doing exactly the same thing, how on earth can you claim that the private sector has no other options than to compensate its CEO's excessively?

I never said "excessively". CEO's are getting paid market rates (which some people seem to think is excessive). The military gets people to take low wages because it's effectively a service organization. A better analogy would be the Rotary club with guns, not Google.

[geni]

So your point is what? That the US is just as corrupt as Russia?

Which bit? And it doesn't need to be corruption. If someone happens to be by far the largest employer in an area it's hardly corruption if they leave because they don't like the politician who won.


Sorry but I don't believe that if you do then you are part of the problem.

Are you familiar with the concept of trends?

[BobTheCoward]

I was a nuke ELT on a submarine. When I was getting out, they offered me an 70,000$ re-enlistment bonus. Didn't take it. Some other people I saw were offered 90k. My infantry buddy was offered a pat on the back. While you don't exactly negotiate your wage (who negotiates their wage at WalMart anyway?) to say that military pay isn't in the the market for wages is wrong.

[NewtonTrino]

I was a nuke ELT on a submarine. When I was getting out, they offered me an 70,000$ re-enlistment bonus. Didn't take it. Some other people I saw were offered 90k. My infantry buddy was offered a pat on the back. While you don't exactly negotiate your wage (who negotiates their wage at WalMart anyway?) to say that military pay isn't in the the market for wages is wrong.

Call me back when they are paying some generals $20M a year.

[UWdude]

So your point is what? That the US is just as corrupt as Russia? Sorry but I don't believe that if you do then you are part of the problem.

Why do you think Russia is more corrupt than America? What is your definition of corruption? How are you measuring corruption?

Do cost-plus, no-bid contracts count as corruption? Or do they not, because they were legal? Is it corruption if it is legal?

Was the jailing of Khodorkovsky corruption, or was Khodorkovsky corrupt? If Khodorkovsky was corrupt, then would not jailing him be a sign of less corruption in Russia than what many corrupt tax dodging American corporations get away with every year?

Are Russian crime syndicates more powerful in Russia than American crime syndicates in America?

Seriously, what do you know about corruption, either in the United states or Russia? Or are you just assuming Russia has to be more corrupt because, well, it's over there, and you are over here?

[NewtonTrino]

Why do you think Russia is more corrupt than America? What is your definition of corruption? How are you measuring corruption?

Yes Russia is more corrupt.


Do cost-plus, no-bid contracts count as corruption? Or do they not, because they were legal? Is it corruption if it is legal?


All forms of graft and kickbacks count as corruption. Yes we do have some of that here, just less.


Was the jailing of Khodorkovsky corruption, or was Khodorkovsky corrupt? If Khodorkovsky was corrupt, then would not jailing him be a sign of less corruption in Russia than what many corrupt tax dodging American corporations get away with every year?


Yes and Yes. It's criminals fighting with other criminals.


Are Russian crime syndicates more powerful in Russia than American crime syndicates in America?


IMHO yes. In fact I don't know of a national crime syndicate in the US that has an substantial effect on politics.


Seriously, what do you know about corruption, either in the United states or Russia? Or are you just assuming Russia has to be more corrupt because, well, it's over there, and you are over here?

I only know what I've read on the internet. Every country has some amount of corruption but it's my belief that Russia has basically been stolen by Putin. Russia has also historically had high levels of corruption.

[UWdude]

All forms of graft and kickbacks count as corruption.


hate to repeat myself, but:

What about campaign contributions, or as I already mentioned, cost-plus, no bid contracts? They are legal, but still corrupt.

Yes we do have some of that here, just less.

Proof? Please provide some side by side comparisons.

IMHO yes. In fact I don't know of a national crime syndicate in the US that has an substantial effect on politics.

Where do you think big labor got its muscle from? How much influence does the Russian mafia have in Russian politics? Do you have any way of comparing the two underground societies... or are you just guessing based on a couple articles you read in the paper in 1996?

it's my belief that Russia has basically been stolen by Putin.

Belief. "Stolen". Good one.

Russia has also historically had high levels of corruption.

What? How so? Please cite some examples. I guarantee you, America also has a comparable "history of corruption".

Frankly, you are blowing hot wind. You have no idea what you are talking about. Your generalities are embarrassingly telling.

I asked you two specific questions, and the best you could do was sidestep them and give me generalities. You have a TIME magazine understanding of Russia, at best.

Please, tell me about Khodorkovsky, and tell me about cost-plus, no bid contracts.

Oh, and here is something that might just shatter your illusions about the less corrupt America:

http://abcnews.go.com/Blotter/video/state-senator-offered-bribe-11829159&tab=9482931&section=10268699&playlist=11829173

and this is just state level corruption.

[oggiesnr]

Google cannot do this.



Certainly up until the last year (in the UK) they could do. The rule of thumb was if it's "cool/cutting edge" you get paid less (Google/MS/Facebook), if it's boring and code crunching you get paid more (banks etc).

Steve

[NewtonTrino]

Certainly up until the last year (in the UK) they could do. The rule of thumb was if it's "cool/cutting edge" you get paid less (Google/MS/Facebook), if it's boring and code crunching you get paid more (banks etc).

Steve

You're going to need to support this better as you are quoting three companies that pay very good wages. Top engineers don't go to Google just because it's cool, they go because they think they will get rich. The perks are nice but if they can't deliver on the rich part... people leave. This is happening right now as people flee post-IPO Google to head to Facebook to catch the IPO fever. For example talking in specific numbers my friend who was being paid $160k+bonuses at MS was offered $180k+bonuses to go to Google (Google's bonus scheme is supposedly richer than MS's as well). He fully expects the compensation package that Facebook offers to be even better (and I talked to their recruiter so I'm fairly certain they want him badly and will pony up). Maybe young kids are going to these companies because they are cool but experienced people who can make a difference and are a bit older typically are looking for compensation.

It is true that some of these companies in the past had base salaries slightly lower than industry average but the wink wink under the table was always that you would make it back many times over in stock. It's always been about money, don't fool yourself.

[NewtonTrino]

hate to repeat myself, but:

What about campaign contributions, or as I already mentioned, cost-plus, no bid contracts? They are legal, but still corrupt.


Sure these are a form of corruption. Just not to the same level as Russia.



Proof? Please provide some side by side comparisons.


No thanks.



Where do you think big labor got its muscle from? How much influence does the Russian mafia have in Russian politics? Do you have any way of comparing the two underground societies... or are you just guessing based on a couple articles you read in the paper in 1996?


Putin heads the Russian mafia. Do you think Obama is included in organized crime?

I'm basing my view of Russia on what I've read. I have seen plenty of proof that they are using the justice system against people as well as simply assassinating journalists. Do you live in Russia? If so what's your take? If not why do you think we are as corrupt as them.


What? How so? Please cite some examples. I guarantee you, America also has a comparable "history of corruption".


I don't remember America nationalising everything and turning into a communist regime for 50 years. Maybe I missed that class?


Frankly, you are blowing hot wind. You have no idea what you are talking about. Your generalities are embarrassingly telling.


Then set us straight and make a point. What is it you're trying to say?


http://abcnews.go.com/Blotter/video/state-senator-offered-bribe-11829159&tab=9482931&section=10268699&playlist=11829173
and this is just state level corruption.

Corruption in America exists. I never said it didn't. However, for the most part it's simple graft. If you're trying to tell me America and Russia are the same I laugh in your face. I know what it's like to do business in Russia/China and the USA. There is no comparison.

Check out this Transparency International corruption index for 2010: http://www.transparency.org/policy_research/surveys_indices/cpi/2010/results

[UWdude]

I don't remember America nationalising everything and turning into a communist regime for 50 years. Maybe I missed that class?


pathetic.

[NewtonTrino]

pathetic.

I'm not the guy with the masonic conspiracy tagline on a skeptic site.

[oggiesnr]

You're going to need to support this better as you are quoting three companies that pay very good wages. Top engineers don't go to Google just because it's cool, they go because they think they will get rich. The perks are nice but if they can't deliver on the rich part... people leave. This is happening right now as people flee post-IPO Google to head to Facebook to catch the IPO fever. For example talking in specific numbers my friend who was being paid $160k+bonuses at MS was offered $180k+bonuses to go to Google (Google's bonus scheme is supposedly richer than MS's as well). He fully expects the compensation package that Facebook offers to be even better (and I talked to their recruiter so I'm fairly certain they want him badly and will pony up). Maybe young kids are going to these companies because they are cool but experienced people who can make a difference and are a bit older typically are looking for compensation.

It is true that some of these companies in the past had base salaries slightly lower than industry average but the wink wink under the table was always that you would make it back many times over in stock. It's always been about money, don't fool yourself.

I was talking graduate starting salaries (I accept the rest of your strictures) and accept it may be different for established engineers. Google/MS c£25,000, BAE/RAM £27,500, Barclays £32,500.

Steve

[UWdude]

I'm not the guy with the masonic conspiracy tagline on a skeptic site.

It really happened.

http://en.wikipedia.org/wiki/Propaganda_Due


And always remember when you fail: bluff, deflect, and then derail.

[NewtonTrino]

I was talking graduate starting salaries (I accept the rest of your strictures) and accept it may be different for established engineers. Google/MS c£25,000, BAE/RAM £27,500, Barclays £32,500.

Steve

Salaries are a lot lower in the UK than in the US from what I can tell as well. Possibly the perks are better in the UK (lots more time off for instance) so this could explain some of the difference.

Anyway yes working at Google is cooler and probably more fun than working at a bank and that does help them with salary requirements. However, traditionally the main reason people forego a bit of salary is that they expect the stock to make them rich. This is the real reason MS/Google have been considered "cool" even though people pretend it's the free food.

Now that these companies don't have a ton of stock growth left it's harder for them to recruit so they have to update their compensation packages by increasing cash or giving guaranteed stock grants.

[NewtonTrino]

It really happened.

http://en.wikipedia.org/wiki/Propaganda_Due


And always remember when you fail: bluff, deflect, and then derail.

I'm not sure what you're talking about. You haven't made a single cogent point.

You're the one that's claiming that the US is as corrupt as Russia which on the face of it is simply ridiculous. I posted a link to the world ranking of countries by corruption level and you ignored it. If you have any evidence feel free to post it. I feel I've proven my point that Russia is far more corrupt than the US.

I run a multimillion dollar business and I've *never* once had a public official of any kind try to take advantage of his/her position... IN THE USA. Other countries (especially Asian countries I don't do business in Russia much) it's basically expected. USA culture does have some corruption but it's a different kind of corruption and it's not nearly as expected and built into the culture like it is in most asian countries (especially China) and Russia. Basically former communist countries are trained to run on corruption. So put that in your pipe and smoke it.

[UWdude]

I don't remember America nationalising everything and turning into a communist regime for 50 years. Maybe I missed that class?

Fail.

[NewtonTrino]

Fail.

Again you don't make any point.

Please, feel free to post anything that makes your opinion known. As of now all you've done is ask questions that I have already answered.

I'm telling you right now that on any measurable scale Russia is more corrupt than the USA. Now show that I'm wrong.

[CatOfGrey]

A Leftist / Socialist critical comment:

Traders don't "generate" anything. They just tax the flow of products or services "generated" by workers. "Managers" can be said to actually generate something, by planning and instructing work.

Hold on there a second. Are you saying that traders don't add value to the system? I think you're quite wrong and naive in thinking that. The primary value of traders is to make sure that all of the goods and services flow around the world and are allocated according to demand (price). This liquidity that we get by having a world market drastically increases everyones efficiency and increases competition which keeps prices low for consumers. In fact in most cases it's protectionism that causes people problems (food subsidies being an obvious place of concern imho).

Trust me, if the traders weren't adding value to the system then the system wouldn't be able to support them.

Let me give a direct example.

You are an oil company, and you discovered a new well. It's a pretty good producer, but it's going to need a crew to operate it, so it's only going to turn at profit if the price of oil is over $60 per barrel. So right now it's great (oil is currently around $100 a barrel) but if oil drops, then you have to shut down the well and fire the crew. Alternatively, you could operate it (and other wells) at a loss, and risk going out of business (with the loss of all the jobs of all your crews).

So you have an idea: let's buy put options or sell futures contracts on oil. If you don't know what those are, let's just say they are contracts, that pay you money if the price of oil drops. It's a "negative bet on oil prices". You pay a little money now, and if oil stays up, you take a little loss (but you don't care, since the price of oil is high, you make money on oil).

Here's the important part. If the oil price drops, your "speculative bet" will be maintaining the well while it loses money, and paying the salaries of your crew. So those nasty speculators and useless traders actually have an important side effect: during economic fluctuations (good and bad) they help average everyday folk keep their jobs.

And what about the person on the other side of the contract? Yeah, some trucking company often buys it. So if oil prices rise, raising diesel prices, they can still do their job, keeping their drivers employed, and keep their delivery contracts, despite high fuel prices.

Under socialism, government automatically assumes all these risks. The price doesn't fluctuate as much, but there are often other steps (like rationing, for example) that need to be made in order to keep stability.

[JoelKatz]

Traders make it possible for businesses to reduce risk. Trading itself is a zero sum game, but a trade can turn a 2% chance of losing $1,000,000 into a 100% chance of losing $21,000. That may make the difference between opening a business being impossible because you would risk losing your life savings or you just needing a couple of extra dollars to open your business.

[Meadmaker]

No mention of commensurate penalties for royally (but legally) screwing-up and seeing your once magnificent mega-corp being flushed down the tubes? Or even moderately shagging the entire world's economic system?


The problem is that CEOs, and everyone else, works for what people are willing to pay them. I don't think most of them are worth it, so I, as an investor, pay attention to executive compensation before I purchase the stock. If it seems too high to me, I figure that the company is being run for the benefit of executives instead of stockholders, and I invest elsewhere. (Executive pay is only one factor, of course. It's just one thing I look at.)

Unfortunately, the stock market these days is dominated by totally uninformed people shovelling money blindly into 401ks, and short term traders looking for quick profits. People blindly shovel money into companies and only look at one, single, number, which is the stock price, to measure performance, and that only in the short run.

With so many people shovelling so much money toward executives in that fashion, is it any wonder that they are willing to scoop it up?

I don't want government action to do anything about high CEO compensation, but I wish investors would. I think there are plenty of guys who could do a great job for a mere million bucks per year at even the largest companies. I say if a guy won't show up to work for me unless I pay him 2 million a year, I want someone with a bit more drive.

[NewtonTrino]

I don't want government action to do anything about high CEO compensation, but I wish investors would. I think there are plenty of guys who could do a great job for a mere million bucks per year at even the largest companies. I say if a guy won't show up to work for me unless I pay him 2 million a year, I want someone with a bit more drive.

And I don't want a guy who sucks so much he can't negotiate more than a million bucks a year to run a multi-billion dollar company.

[Meadmaker]

And I don't want a guy who sucks so much he can't negotiate more than a million bucks a year to run a multi-billion dollar company.

Yeah, but do you want a Board of Directors who is taken in by him? The problem is that these days boards aren't exactly independent.

Still, you are correct. A mere million dollars per year really isn't appropriate for running a multi-billion dollar company. It should be, but it isn't. I tend to invest in smaller companies when I pick my own stocks.