I like the idea of building in greater alignment of incentives between all the workers at the company, from the lowest worker to the top.
By all means CEOs should be highly paid, but if the company is successful and doing well, the workers that are enabling that success should see their fortunes rise as well.
It’s a balance. A 100x pay gap between employee and ceo is close to a 1000x gap in disposable income. How many ceos are truly better than 1000 employees?
I think it's better to ask "what percentage of an employee's output is attributable to the ceo's leadership?"
A reasonable answer, IMO, would be somewhere between 0.5% and 5%. The average CEO gets maybe 1%, which I think is pretty fair.
Often if a CEO makes 1000x an employee, it's because there are tens or hundreds of thousands of employees under them. The executives still get a relatively small portion of employee output.
I must say though that being more valuable than 1000 employees seems like a very low bar to me. I'm sure there are many people who are more valuable than even 100,000 employees.
Why should the answer be positive? I have worked places where the CEO's contribution was obviously negative. But that didn't matter, because the CEO's goal wasn't to maximize total societal wealth, or even the company's health, but to maximize the CEO's income. So anything that resulted in a stock price bump that lasted through their tenure was plenty. And given that CEO tenures are much shorter than they used to be, it's easier than ever to juke the numbers.
That’s one of … 10 million CEOs? The vast majority of CEOs are not capable of this, Steve Jobs undoubtedly had lieutenants and plain engineers who did brilliant work under him.
A long winded way to say that you are probably not working with Steve Jobs and regardless you need great employees to make a Steve Jobs successful.
> regardless you need great employees to make a Steve Jobs successful
A great CEO knows who to hire.
> Steve Jobs undoubtedly had lieutenants and plain engineers who did brilliant work under him
That didn't happen at random. Jobs also set them to work on the right things. When he took over Apple, he went through everything the company was doing and reoriented it all.
Similarly, Terrence Tao was taking university-level mathematics courses at age 9. Does that justify teaching all 9-year olds mathematics at that level?
That's stretching the analogy a bit; in today's economy, a great number of CEOs think that they deserve to be paid as if their impact was on par with Steve Jobs. If there were legislation to prevent a large Gini index at companies, Steve Jobs could have still been paid exorbitantly, if only his employee's compensation increased proportionally. And that's fair, because Steve Jobs wouldn't have gotten anywhere without excellent people to execute on his dreams.
I don’t think it’s particularly stretching the analogy, unless you think it would be appropriate that Terrence Tao could only be taught as he was if the lowest 9th grader would be taught Algebra II.
I'm having trouble making sense of what you're trying to say but note that Tao was 9 years old and not grade 9. Even I knew a kid in high school who was taking university classes.
The best ceos will work at the highest paying firms. This does not mean that this is the most efficient arrangement in aggregate or for an individual company. How often have we seen claims that lowly engineers are overpaid?
Is it though, or is it the best CEOs at marketing themselves work at the best firms? The idea is that you're sort being Skinner boxed since each CEO and company is different and it changes with time too.
Quite a lot I would say. A CEO is making daily decisions, any one of which could be be the start of a company’s death spiral that results in tens of thousands of job losses. The amount of leverage they have over a company dwarfs that of any other individual worker.
Besides what should I care what they earn if they pay me well for what I do, relative to the market?
This is lazy, greedy socialist thinking where they want money for nothing’s
CEOs have a lot of leverage, yes, but how do I know that a particular CEO is making good decisions? If we look at a random CEO who is making XX,000,000/year, can you make an evidence based case that they are providing millions of dollars worth of value over a replacement level manager? I'm genuinely interested to know if there is a meaningful way to demonstrate this, because I have looked and haven't found one.
> …but how do I know that a particular CEO is making good decisions?
We used to call that “profit”.
As a measurement over time at how well a business is performing this used to be the standard measurement but it seems to have been supplanted by other measures such as wealth inequity and twitter mob ragefests.
The visible decisions that I've seen attributed to CEOs range from "absurdly and obviously bad" to "good, until you find out the same decisions are already echoing throughout the industry". It begs the question did they come up with it themselves? Or did they just happen to hear rumblings before the grunts did?
I would argue that an above average CEO has a negligible effect on the company and an average one actively damages the company. The good ones make the decisions that everyone copies shortly after. We could probably replace >90% of them with AI and be better off.
CEOs are also the ones setting things up so that everything important is in the hands of the CEO, which just happens to justify their spiraling pay. Can you imagine if we ran countries that way? The president/emperor/whatever keeps hoovering up more power, which then justifies giving them more and more of the wealth?
Capitalists talk a lot about the power of marketplaces, but internally companies are little feudal empires with ongoing wars of succession. And as The Economist points out, actual marketplace competition is in decline, so there's little in the way of external checks. Especially given that CEO tenure has dropped dramatically, meaning that the correlation between CEO pay and CEO value delivery has also dropped.
I don't see this addressed in the article, but maybe Canadian working culture is different than the US:
Wouldn't this create a perverse incentive for companies to continue the trend of eliminating their lowest-wage employees from the books, either via contractors or automation?
You're reading about the efforts of the third place political party's leader to get attention so people remember he exists, since politically all he does is prop up the existing minority Liberal government.
This is purely for the headlines/clicks so people remember he's there and so he can pretend he does something.
the irony with this (as with all such laws) is that all you have to do is ask a mathematician to give you a function that is maximally un-manipulatable in this way, and the law would immediately be much harder to game.
but instead we insist on writing all our laws as though the only tools available to us are +-÷×, and people who recall middle school math can find ways to game them.
The real mind fuck for me was figuring out that this has been true for the vast majority of laws since we ran out of obvious stuff that needing banning like murder.
It would cause some shifts, the obvious abusive cases would likely move on to something more subtle (if they could pivot in time) or get snuffed. But it wouldn’t be long before another hole would be found, and it would be even more convoluted and hard to detect next time.
Assuming a roughly continuous distribution, unless >50% of workers earn the lowest wage, increasing the wage of the lowest-paid worker will do nothing to affect the wage of the median worker, and thus nothing to change the ratio in question.
On the other hand, no longer employing the lowest-paid workers will move the median point up the pay scale.
Not sure how you got there. The ratio is between highest and lowest paid, not median. So you’re measuring something I’m not interested in targeting for this particular protocol
There’s no downside to anyone other than someone wanting outsized pay at the maximum pay level
Further, it’s anyone paid by the cooperative for work. So “outsourcing” doesn’t offer a workaround as it’s a contractual agreement that sets a labor wage-price during the contract negotiation.
>Further, it’s anyone paid by the cooperative for work. So “outsourcing” doesn’t offer a workaround as it’s a contractual agreement that sets a labor wage-price during the contract negotiation.
That's straightforward to enforce if you're hiring a consultant for $500/hr, but what about a consumer electronics company (think Apple) that decides to outsource all of their low paid manufacturing to a contract manufacturer? Or for a tech company to outsource all of their catering and janitorial services to a third party? In both those cases, the exact contract doesn't contain anything resembling an hourly rate. You could argue that wages of the employees that the contractor hires can be used, but that can quickly get out of hand. If Tesla is getting its lithium from a third world mine, and that mine is paying its workers $0.5/hr, should that be used as the "lowest paid" figure?
> If Tesla is getting its lithium from a third world mine, and that mine is paying its workers $0.5/hr, should that be used as the "lowest paid" figure?
Yeah it should
That is exactly the point, to rebalance the power and wealth equation so that we don’t have these extreme disparities
>That is exactly the point, to rebalance the power and wealth equation so that we don’t have these extreme disparities
Okay, but what about software firms that only hire highly paid programmers? They'll be allowed to paid their CEOs orders of magnitude higher salary because... ? Why should a CEO's compensation be kneecapped because the company ventured into manufacturing?
If we’re at the point where that’s the problem I think we won’t have a problem anymore
This isn’t an academic exercise, there are millions of people struggling while a small handful live in extreme luxury, the whole point is to fix this problem
The actual number figure is less relevant than having things rebalanced - greed based inequality is like ebola it rapidly destroys families and communities. Just eliminating that alone is a great start
> If we’re at the point where that’s the problem I think we won’t have a problem anymore
You're making it sound like that's an issue that won't show up for years or decades down the line, but the effects (ie. manufacturing companies being penalized more than high tech/knowledge work companies) will show up on day 1.
>This isn’t an academic exercise, there are millions of people struggling while a small handful live in extreme luxury, the whole point is to fix this problem
>The actual number figure is less relevant than having things rebalanced - greed based inequality is like ebola it rapidly destroys families and communities. Just eliminating that alone is a great start
Easing inequality is a laudable goal, but doing it in an unfair way is no way to get public support for it.
Nobody is penalized anywhere - it caps how much greed can net you
It means that if you're in the business of strawberries then your overall value is tied to the relative increase in value of a new strawberry producer. and the accompanying competitive labor rate. There's likely an equilibrium between relative wages across an industry given this constraint.
Aka if you want to start a strawberry farm you're never going to be a billionaire. If you're in manufacturing your overhead is higher, so wage inputs are higher, so you'll never be a billionaire but your employees will be better off than they were in a regime where you took the majority of the ownership.
But I'll let you define what would be a "fair" way for you
Limiting and checking power is the entire purpose behind democracy
We should do everything we can to eliminate the possibility of outsized ownership of any productive capacity. Diffuse power is the best kind.
I think we're arguing over different things. I'm not arguing against the concept of CEO pay caps in general, only the specific proposal of capping CEO pay by the lowest paid employee.
> Not sure how you got there. The ratio is between highest and lowest paid, not median. So you’re measuring something I’m not interested in targeting for this particular protocol
From TFA (emphasis mine):
> The plan would raise the corporate income tax on a sliding scale, depending on the ratio between the pay of a company's CEO and the median pay of the company's workers.
I don't think headline-grabbing CEO pay differences from the average worker are the thing driving broad based economic inequality in our economies today. Cutting the salaries of every CEO and redistributing it to their company workers would hardly give every employee an extra $1,000 at most places.
Economic inequality springs from (among other things) the fact that each and every one of us chooses to buy things & engage in our economy which has gotten more and more efficient, and reward a few hundred thousands (or millions) of people who happen to be able to produce disproportionately more things that the rest of the population will pay for and reward them for. I'm not saying they're deserving of it or anything like that, just to say that's what it is (or part of it). And I'm not addressing the asshole PE CEOs which are a different breed of leech, but are their own sliver of headline-dominating but not significant to the general population's wealth concerns.
At the same time, efficiency and labor supply means that low skill wages have not moved much.
You're not going to defeat these economic tides by handicapping a couple of CEOs, as much as that might feel gratifying or even politically symbolically meaningful.
We each of us have made the economic inequality that we sit in. And I might also point out, what is at the bottom of our economic ladder is still in an absolute sense, well above what is the bottom of the ladder in many, many other countries, in material wealth and security.
> redistributing it to their company workers would hardly give every employee an extra $1,000 at most places
You're ignoring secondary effects, which are hugely important here.
An economist (maybe Brad Delong?) pointed out that one of the things that's changed in recent decades is that even among rich people there's more inequality. A rich person is likely to know somebody way richer, which scales their expectations up. People, being primates, tend to be status driven, so relative wealth drives a lot of behavior.
If we get CEO pay down, everybody else is going to be more chill about pay, because they'll feel less behind the Joneses.
I don't think that's a meaningful distinction. At the billionaire level, they can easily convert one into the other and do much more complicated things. I'll note also that you're ignoring an important category of wealth, which is rentier activity, where people with money don't create jack, but instead get control of something other people need so as to extract cash from them.
Someone who has all their wealth tied up employing thousands of people and making the world a better place is a lot different than an anonymous billionaire who just lives off their savings and does nothing for society.
Whenever this topic rears its head people always assume the latter and try to convince others to do the same.
No billionaire has all their wealth tied up like that. None. Zero. Their wealth managers would have kittens if they did, because from a wealth management perspective, it's inefficient and too risky. Above a certain level of wealth, you're going to "take money off the table" so that you can do important things like guaranteeing your comfortable future and paying your wealth managers.
But even that's conceding too much to your fantasy. The gauzy notion that a billionaire owning shares in something means they're "making the world a better place" is sus in all sorts of ways.
One, a lot of shares in things are making the world worse. The fossil fuel industry alone is worth trillions of dollars, and they're vigorously exacerbating an existential threat to humanity. There are trillions more tied up in finance, most of which is not serving anybody, but instead is parasitic on actual productive work. And don't even get me started on private equity's vigorous (and profitable) destruction of value.
Two, another huge chunk of richie-rich money is from rentier activities. Look at all the shitty landlords out there, for example. Are they making the world better? No, not at all. They're going to buy a thing that people need and squeeze those people for all they can get, generally doing the minimum (or well less) in terms of maintenance.
And three, the productive stuff would still happen in a world where we didn't have billionaires. The magic power of the market would still be there to organize flows of value. Indeed, I'd be glad to argue that it would work better. Billionaires face very little in the way of market discipline. Look, for example, at Elon Musk and Twitter. Even he admits he burned $24 billion so far. Has that slowed him down? Nope. He's still stepping on rake after rake. While his car company also isn't doing so great, having lost $500 billion or so in value.
Either way, should that person become unhinged, or is a bad person, they can do enormous damage to the world, unilaterally, or jeopardize democracy by bribery and influence, as the Koch brothers (buying Supreme court seats) and others (Trump, insurrection) have done.
We are heading into feudalism. A few people hoard all the properties, companies and services. Antitrust laws are ignored, corruption is the norm. Student loans, medical bills and mortgage cripple common people without possibility to pay them off. People become economic vassals
And no human being needs however much you're earning, as people in third world countries survive on far less. Life's about more than "need", and if you give the government enough power to prevent people having more than they need, you inevitably create a horrible dystopia, probably accompanied by genocide, like happened in Russia, Chinaa and Cambodia when they let the government make the final decision on how much wealth people are allowed to have. Because when the people in the government have that power, they'll inevitably decide that they're the only ones who should have wealth.
Note, for example, that the Nordic countries do very well by this measure. I'm no expert, but why do you think Denmark is a "horrible dystopia, probably accompanied by genocide"?
Those are very dodgy numbers. Created by one company from patchy and suspicious data, and then just SWAGging the numbers for most of the countries. No peer review. Source data and code both unavailable. And even they say their numbers are "based on the view that wealth inequality is likely to be highly correlated with income inequality", so I think the numbers I used are the better ones for this case.
That's why our forefathers figured out antitrust laws, that we stopped enforcing around early 2000s.
If there are 10 companies competing for the same market instead of 1-2, that's 5x more CEOs, 5x more accountants, 5x more engineers, much less inequality, and much more chances of actual innovation.
The chance to become the trillion dollar FAANG is what motivates those unicorns into existence. Without the latter the probability of getting the former decreases.
I do when I track when my money goes. A lot of the products I actually spend money on are either made by 10+-year old companies from the West, or newer companies from China.
This is quite disturbing actually, the "new wave of companies" isn't here anymore.
Basically trained by Microsoft's investment [1]. This fits with the parent commentator's thesis, which I also agree with.
There hasn't been a significant effort to enforce antitrust in the software domain since United States v. Microsoft Corp in 2001, and we are seeing the consequences.
No one is arguing that there hasn't been any innovation, just that it's by the same 5 or so companies; and that there could probably be more if there was more competition.
Cracking down on CEOs who perform disastrously and then cut staff while paying themselves giant bonuses is no more about funding the treasury than slamming mega-billionaires with some punitive tax: taxes (at the federal level in a nation-state that denominates its sovereign debt in its current) aren’t first-order about generating revenue, they’re first-order about creating incentives.
The IRS is trying to incinerate dollars at something like the rate the Fed generates them, which is not a bad system (you’ll notice how many people invented the “gold sink” in game economies). Keeping deficit spending inside some tolerance is about sovereign debt auctions, not like, running out of green ink.
The argument for not doing this kind of shit is that no one will work hard or innovate if there isn’t permanent dynastic wealth and legal immunity as an incentive: wrong. People will work insanely hard for mere absurd luxury and favorable treatments by the courts.
You punitively tax this stuff to make “wannabe serial killer” seem like a comparatively attractive job opportunity vis-a-vis CEO of Herman Miller.
>taxes (at the federal level in a nation-state that denominates its sovereign debt in its current) aren’t first-order about generating revenue, they’re first-order about creating incentives.
Income taxes makes up 50% of federal tax receipts, and disincentivize productive individuals from working by taxing their income more. According to your theory, income taxes aren't there to collect revenue, they're to... incentivize people to work less?
I wasn’t talking about rationales for or against taxing the people who aren’t yet rich enough to cheat constantly on their taxes: everyone agrees that Joe Doing Okay is getting hit with a higher tax rate than John Capital Gains Optimization.
I’m saying that there’s a legitimate debate about whether Bond-villain, capture-oriented, smash-and-grab, “how many TVs can you carry” career tracks should pay off for anyone.
HN is in general the smartest crowd on the net, but there are a few blind spots, and being able to throw one rock in any direction and hit 9 “temporarily impoverished billionaires” is one of them.
disincentivize productive individuals from working by taxing their income more.
And yet the most productive societies have the highest tax rates...
Clearly, this theory that taxes disincentive productivity does not comport with decades of empirical evidence. Literally nobody who values money says, "I could make 1 billion dollars but since I'll only get $450 million after taxes I'm just going to sit on this beach and do nothing instead."
>Clearly, this theory that taxes disincentive productivity does not comport with decades of empirical evidence. Literally nobody who values money says, "I could make 1 billion dollars but since I'll only get $450 million after taxes I'm just going to sit on this beach and do nothing instead."
1. Income tax applies to everyone, not just billionaire startup founders. Doctors might be well paid, but I'm very skeptical that they'll be equally willing to work more hours if their marginal returns from working was halved by taxes.
2. going back to the claim that "taxes [...] aren’t first-order about generating revenue, they’re first-order about creating incentives", what are income taxes supposed to incentivize then?
As a tax lawyer, my clients are the people who would be most affected by high taxes. Literally none of my hundreds of clients has ever turned down making more money just because a little more of it will be taxed.
And shockingly, despite the "high" tax rates of CA and NY, almost of my clients prefer to live in these high-tax jurisdictions over low tax jurisdictions like FL where they would keep more of their money. Some of them even choose to live in the EU, where even more of their money goes to taxes.
What’s the measure you’re using to rank “most productive societies”?
The first one that comes to mind for me is “GDP per capita” and when I sort that list in descending order my first thought isn’t “those are some high tax rate jurisdictions at the top!”
> and reward a few hundred thousands (or millions) of people who happen to be able to produce disproportionately more things that the rest of the population will pay for and reward them for.
To be accurate, these people don't produce anything themselves. The labor that goes into creating the products and services is what's producing things. These people move capitol around. The boards of directors of the corporations that employ them are populated by other people like them. They're all a group who primarily are in the same occupation, and have a vested interest in seeing coordinators of capitol be paid extremely generously.
Compare this with CEO salaries in Scandinavia or Japan, which are significantly lower and yet their companies are highly competitive.
My theory is that this country never got over its yearning for a stratified class system, with a full-blown landed aristocracy and monarchy. We have a little taste of class mobility, but as soon as people move up the ladder they frantically scramble to pull it up behind them.
Norway actually dominates the US in GDP per labor hour. Japan doesn't compare favorably, however they have a lot of other factors to consider in the equation beyond CEO salary. They have an extremely productive manufacturing sector, but a less productive service sector, and the service sector drags down the average.
The main thing to consider is this: what's the point of diminishing returns? Are we missing out on eve greater GDP per labor hour because CEOs are only making ~250x the average worker salary? Could we 10x our GDP per labor hour if we paid them 2500x? Or is it possible that CEOs would work just as effectively at "only" 30x average worker salary?
>Norway actually dominates the US in GDP per labor hour
That's mostly due to fossil fuel reserves rather than the people actually being more productive.
>They have an extremely productive manufacturing sector, but a less productive service sector, and the service sector drags down the average.
That raises the obvious question: why are their service sectors so much less productive, so much so that their overall productivity is lower than the US?
>The main thing to consider is this: what's the point of diminishing returns? Are we missing out on eve greater GDP per labor hour because CEOs are only making ~250x the average worker salary? Could we 10x our GDP per labor hour if we paid them 2500x? Or is it possible that CEOs would work just as effectively at "only" 30x average worker salary?
By what mechanism do you think that cutting CEO pay will 10x GDP per labor hour? As other commenter shave mentioned in this thread, CEO compensation is a drop in the bucket compared to rank and file compensation. Getting them to work for free will at best raise the rank and file compensation by a few percentage points.
> That's mostly due to fossil fuel reserves rather than the people actually being more productive.
If fossil fuel reserves determined productivity, Venezuela should have some of the most productive workers in the world. I invite you to compare GDP per hour worked to oil reserves per capita and point out the correlation. Ireland actually also dominates the US in GPD per hour worked, and they're down around 87th in the world for oil reserves.
> That raises the obvious question: why are their service sectors so much less productive, so much so that their overall productivity is lower than the US?
An even better question might be: Why does Japan outrank the US in standard of living even though they have markedly lower productivity? Seems like US workers are getting a terrible deal.
> By what mechanism do you think that cutting CEO pay will 10x GDP per labor hour?
I never said it would, I'm saying that we're well beyond the point of diminishing returns in CEO pay.
Beyond a certain level, wealth isn't about being able to meet one's needs and it becomes a lever of power. This is well evidenced by the fact that the wishes of the voters have almost no correlation with policy outcomes in the US, but the wishes of the upper class are strongly correlated. This goes back to my earlier point, the purpose of stratospheric CEO pay isn't about compensation for value delivered, but rather a way for a class of people to entrench their dominance through an unchecked focus on their own interests.
I do see the value in paying high performing individuals but there has to be some moderation even in that. The CEO pay gap is now obscene.
The CEO pay gap in the US was 399x that of the average worker! that is ludicrous! What that means is that if that company cut the pay for the CEO by half, it would leave enough money on the table to pay about 200 new hires at the average salary - which may bring down the number of hours each person currently works.. or if you decide to just pay employees a bit more, they may be able to meet their expenses a lot easier.
It is indicative that the boards and the CEOs are extremely self-serving. If you believe the company is doing well, reward the employees more than yourself. That is what ethical human beings do.
To quote the article above:
“Businesses are mostly rational actors that pay what they need to, to find the right talent. On the other hand, the US differential exceeds other sophisticated economies by far,” Professor Bailey says. “Why in Europe and other economically evolved economies, is this differential so much less? In Switzerland -- one of the richest countries in the world -- the difference is $150 to $1. Our salary gap between executives and workers isn't in sync with the rest of the world.”
It's not measuring CEO pay to median employee, it's "The CEOs at America’s largest low-wage employers". So they basically looked at the largest companies that paid the lowest wages.
CEO pay tends to align quite well with not just performance, but also company size. Would you expect a CEO of a low wage company that has revenues of $10B to be paid more than the CEO of a similar company with $100M in revenues? I would. Larger companies are more complex, the CEO is managing a lot more employees, the stakes are higher and you'd like hire a very different CEO for a $10B a year company versus a $100M a year company. Hence, you'd normally expect that larger companies would have a higher ratio of CEO to lowest paid employee.
That is likely one factor in why the US stands out compared to Europe. The country USA was compared to was Switzerland! A country that is 41x smaller than the US.
And look at the top Swiss companies by revenue [1]. They are commodity trading companies! They were likely entirely excluded from the analysis.
But the point stands - what is the right ratio? 100x? 50x? Should it be exactly the same for every company? Why link pay solely to the lowest employee wage and ignore all the other factors - size of the company, revenues, profits, median employee wages, wage distribution, etc?
I think this is a larger discussion and not limited to just a conversation about the pay a CEO gets.
Well, of course, a CEO's pay is indicative of what board considers as the CEO's contribution towards the bottomline/topline vs the contribution of all employees and when a CEO's pay is so much higher than that of other employees, it is in a sense, a statement that devalues the contribution of other employees.
Given that most boards are full of top-tier executives from other organizations, clearly it is in their narrow interests to favor high payouts to CEOs. But that is also indicative of a very high sense of entitlement and so the question is not - what should the ratio be? the question should really be - is the CEO really a team player? and does he/she value the team they have setup and if so how do they honour the team when the company does well and how will they as a team deal with a situation when there is a big downturn in the company?
I am not at all arguing for a socialist/communist type of mindset - but there is a point at which the sense of entitlement that CEOs feel that does damage to their own teams in ways that they don't realise. And I say this as someone who is a CEO.
> How is that? The board sets the CEO salary, not the other employees.
If you pay someone disproportionately higher than others in the same team, what message are you sending to others in the team? When a CEO goes with that decision, they are devaluing their own team
I would say there are a ton of factors that influence how much a CEO gets paid.
I worked for a large corporation and the CEO makes at least 100x what I do, but she is also running a company of 150,000 employees, so I don't feel devalued at all. I'm paid quite well.
100x is nothing these days. Now the ratio is 399:1 or thereabouts.. and often even higher. Of course, there is no perfect ratio - but there is a point at which it becomes obscene. It varies from organization to organization.
And a few years later your have no job and no income, because anyone with any entrepreneurial bent would have moved somewhere else where they're not going to have all their wealth stolen in the name of a bunch of entitled, envious graspers, and there'd be no more new job or business creation in your country.
It’s a myth that this happens to any significant degree, your business / home / family / friends can’t all move with you as easily, so more than enough just suck it up and that counteracts the negative effects of the few that do leave.
Even an extra $100 is fine. If it requires no extra effort, then why not.
Will anyone say no to something that's "free"? Assuming it's electronically transferred no interaction is even required.
Even if you asked a billionaire if they'd like an extra dollar, are we expecting them to say "no, my account is too full - don't you dare put it in!". !?
This is actually why a lot of people say the left and the right are the same and just give up - I'm one of those people. They're different in different ways, and crazy about different issues, and lie about different things, however the methods are the same.
CEO salaries are actually not that high. All these claims of the high salaries lie by calling total compensation "salary." Some of that is options, some of that is stock. Bernie is great at that, making inflamatory tweets designed to make people angry - like claiming trillions were made by the top 1% during covid. And this angers people. What he doesn't say is that he's lying. Some stocks went up. Heck, the value of my used car during covid went up. Did I make money? Heck no.
What we're talking about here, is taxing unrealized capital gains. What the left does, is lie to a bunch of financially-a-doorknob cashiers, teenagers, and poor people to make them angry and violent. Well guess what, after some of these stocks went up during covid, they crashed. So are we giving back billions in tax refunds after taxing those unrealized cap gains? Bernie seems to be suspiciously quiet about that. Instead he's now yelling how oil companies are making record profits.
Of course when the left says "record profits" that means they're comparing them to some other periods of profits - and they are. They are comparing them to the profits oil companies made during covid lockdowns, when an oil barrel had negative cost because no one was driving or flying.
There are huge compensation difference between the average worker and CEO. The reason CEOs are given huge stock options, is because their income then depends directly on the company value, so it's in their interest to drive it up. The compensation of a cashier does not depend on company value, so he doesn't get those options - he gets minimum wage.
Then the left goes "you can't live on minimum wage" - and they're right. And the cashier doesn't have to. He's a 16yo kid who lives with his parents. People under 25 - school and college, make up half of minimum wage earners. Of those, only 5% of teenagers made minimum wage, and only 1% of people over 25 do. Keep in mind, minimum wage federally, is a lower bound - it's what you get in a small town in iowa where rent is $400 for a studio. In other places where it costs more to live, local minimum wage laws make it higher - like $15.
But that's not how it's presented. It's presented like minimum wage earners are supporting families, and make $7.50/hr in NYC. This is a lie.
But let's say it's not. Why is it up to a corporation to make sure people make enough to support themselves? Why is it up to a corporation to pay for a mother's time off when she has a kid? What in the world does a company making gaskets have to do with Wendy having a baby?
These tasks are up to society, which needs to redistribute money so no one is in dire need, and no one is left behind. Taxes need to go up - not just on the rich CEOs, but on the middle class and especially the corporations. And the corporations need to be left alone to pay employees their market rate - even if it's $3/hr. Our issue is, we are assigning social support tasks to corporations making gaskets, and social support is not a company's responsibility. Neither is making sure the CEO compensation is closer to the average worker's. They're a private entity, they can do whatever they want. The gov shouldn't dictate to a company who should get paid what. They need to tax that company, put the money into a pool, and distribute it back to the people to make sure we are all well.
I don't understand your argument, somehow you are saying the claims are conflating salary and compensation. But the very article we are discussing quotes Singh:
>"At the very same time, the CEOs of the companies they work for are making more salary, making more compensation than they've ever made before."
Moreover to claim that other compensation (you call it unrealised capital gains, how do you know they are unrealised, at least part of them are realised), is not contributing to the" pay gap" seems to me a much bigger lie. And yes the pay gap has largely increased because execs are given much higher stock packages, but it is still an increase in compensation, effectively they are being given more value while normal workers salaries have stagnated.
So you argue that the CEO salary depends on stock options so he is interested to drive the company value up. Well lots of exec emails claim that all those workers should be doing their best because they are crucial for the company, but they are never given the same sort of options. Why should regular workers not get stock options amounting to potentially 100s of times their regular salary, just like the CEO?
I think there is a very obvious reason to not give the rank and file stock options, which is that the hard work of Janitor #1654 no matter how much they make urinals sparkle is not going to make a meaningful difference to their compensation or bottom line. It's only as most of your compensation becomes stock options, and you have great influence over the future of the company, where being paid in stock options instead of salary ought to have a real effect on behaviour.
> Taxes need to go up... especially [on] the corporations
This is a bit complicated. What does it mean to "tax a corporation"? Do you tax revenue (even on unprofitable companies)? Do you tax profits (when Finance can instead divert profits to stock buybacks etc.)? Do you tax assets (even illiquid ones)? It's difficult to touch this without unintended poor consequences.
It's better to tax personal assets above an exempted minimum, plus capital gains taxes. Allow tax-free: up to x acres of land, 1 apartment up to $x million (indexed to inflation) in value, x% ownership in enterprises valued at $x million or less, etc., then tax the rest annually at x%. As a matter of policy, balancing this against the illiquidity of assets is then a question of the size of the assets, asset types, cash flow of the illiquid asset, other liquidity in an individual's portfolio, etc.
Does this mean that some of those assets will need to be sold or diluted to either pay or reduce the tax bill? Yes, but that's the societal good, because it dilutes the concentration of capital.
> Economic inequality springs from (among other things) the fact that each and every one of us chooses to buy things & engage in our economy
It's a delusion to imagine that everyone could choose to go live in the woods and revert to a subsistence lifestyle. For most people, there's no meaningful alternative.
It is also impractical to take the middle ground, i.e. start your own division of labor because the regulations have been written with a ridiculous minimum amount of division of labor in mind. I mean go ahead and try starting a tiny community with its own currency and banks. You won't get regulatory approval and even if you do it will cost so much you need ten thousand people to join you.
In that world, specifically Europe, people have gotten much richer but economic inequality isn’t through the roof like it is in the Anglophone countries.
That disproves the idea that it’s some sort of natural law that has led to the massive rise in inequality in Anglophone countries as opposed to deliberate policy choices.
It’s really fascinating seeing Americans, whether on the left or the right discuss issues in the US. At least 80% of the claims and arguments can be dismissed by simply looking at the rest of the world.
Yes, if you want to lay around, not do much, and have an average life, Europe is great. If you strive for more, the US is a much better place to achieve that.
Europeans move to the US to start companies. Americans move to Europe to retire.
> our economy which has gotten more and more efficient, and reward a few hundred thousands (or millions) of people who happen to be able to produce disproportionately more things
And where do the heirs expropriating surplus labor time from those of us who work fit into this constellation of efficient people able to produce more? Where does the aristocracy of the Rockefeller/Vanderbilt/Hearst/Mellon dynasties come into this inequality picture?
Who are these aristocrats running these companies that dominate your belief in what the problem is?
Tim Cook, Sundar Pichai, Satya Nadella, Carl McMillon (Walmart), Jamie Dimon, John Stanken (AT&T), John Hammergren (McKesson), just to take a random sampling of top companies going down the list. I find that they're all from non-rich dynasty beginnings.
So do we go making policies based on your stories about children of robber barons?
That's not as contradictory as you think. Having an inheritance tax neatly solves the issue you raise without having to alter the parent's proposition.
Or, CEOs receive 50k/yr compensation, but the company will approve a certain discretionary spending amount every year to cover living expenses for the CEO. This may or may not include dining at the most expensive restaurants around, free travel to anywhere with any arbitrary amount of number of people, house purchases, luxury spending like a yacht... No, these are not regular compensation. We are simply subsidizing the living expenses. There is no concrete amount involved. No sir.
Or pick any other number of convoluted schemes to mask "compensation". Best way to do this is the easiest way, raise the corporate tax directly.
> According to an NDP news release, the tax increase would be 0.5 per cent if a CEO makes 50 to 100 times the median income of workers, and would rise to a five per cent increase if a CEO makes a salary 500 times or more higher than the median income of workers.
Doesn’t this seem kind of… tame to the point if nothing? Do it right!
I’d want to see something like +10% for the lowest ratio up to say +50% for someone making 1000x their workers. And of course it needs to be total (including deferred) comp so they can’t avoid it with obvious accounting shenanigans.
I’m past the point of wanting to make the rich pay their fair share. The wealth gap is too wide for that to help. I think it’s time to start talking about clawing back the wealth they’ve accumulated.
>’m past the point of wanting to make the rich pay their fair share
How much is "their fair share" then? They already pay more taxes than someone who's not rich; how's it even fair for them to be punished for their success like that? Are you sure you're not just motivated by ego and envy; you can't possibly imagine that someone else legitimately produced a lot more value than you, so the only way to protect your ego is to view any gains of anyone significantly richer than you as unearned?
Actually, the very wealthy pay significantly lower tax rates than the rest of us. This isn't just ego and envy, the very wealthy have undue influence over politics; democracy is fundamentally broken by the ability of billionaires to buy politicians and even supreme court justices. Billionaires have broken the social contract.
I would say their fair share is as much as it takes until resources get allocated in a way that meets the basic needs of society. If there's $1 for lobbying that $1 should be allocated to building affordable housing, infrastructure, etc.. To be clear, I don't think their "fair share" of future profits is enough to make that happen. They've already accumulated so much of the wealth that I think the flow of money is going to slow down and taxing the profits won't be enough to reverse the effect.
> the only way to protect your ego is to view any gains of anyone significantly richer than you as unearned
I don't know anyone that would say people like Jeff Bezos or Bill Gates "earned" their extreme wealth. I think they earned the right to be wealthy to the point where they can live on a nice estate or travel the world and never think about money again. Aspiring to that point is important in terms of incentive.
However, I think the "extreme", multi-billion dollar, impossible to spend portion of their wealth is not earned. It's accumulated through exploitation and unfair competition that's only possible once you hit a certain point of wealth. That part should be clawed back.
So I would say a "fair share" of the wealth for successful people to have is enough that they don't ever have to think about money again, but not so much that they're able to influence global economics to the point we stop building real things like houses and hospitals and only build intangible, high margin products that no one truly needs.
How many schools is Jeff Bezos worth? Do you think his "innovation" of having others work so hard they can't take a bathroom break is worth society allocating him the resources equal to 4000-5000 schools? I think the retail side of Amazon is a net negative for the environment, product safety, product quality, etc. and I think we should send him the bill for it.
Um, you might want to look up effective tax rates. At least in the US, the highest earners pay absurdly low rates in reality. I would be delighted to pay double the rate the average billionaire does.
don’t start a sentence with um. its arrogant. and you are wrong. just go and look up what proportion of the population pays the most tax by income band. the rates are irrelevant
I am correct and there is a great deal of public information you could read to verify this if you so choose. Here's one example showing the effective tax rate of the wealthiest American's as 8.2%[0], which is consistent with other sources I have seen. Again, I would love to pay only double that rate for my taxes.
Please show your work. The top marginal rate in the US is 35% plus state taxes of up to 12.3% (California). If you can arrange to take your income as long term capital gains or qualified, you can get the federal rate down to 20% (but you're still on the hook for state taxes).
I'm talking about rates people actually pay. The listed tax rates are fairly meaningless once individuals pass a certain amount of wealth. Effective rates increase to a point and then drop precipitously once a person has enough wealth to game the system. The richest Americans pay a rate of less than 10%.
This is a huge flaw with the legal system in general. I wish we could somehow encode the spirit of the law instead of trying to use a shitty language (Legalese English) to fully specify it, since we all know it's futile.
Sounds like it would be a great lesson in unintended consequences:
- it would punish low skill industries over high skill industries; the PE shop of a dozen people where the lowest paid worker makes $500,000 doesn't have to worry, but the retail chain with 100,000 employees is going to be hit hard
- provides a strong incentive to outsource low paying jobs, rather than bringing them in house, or come up with other corporate structures (franchises for retail operations, move headquarters out of the country) to avoid having low paying employees on corporate payroll
Completely unsurprising suggestion by the NDP who has never been elected to lead the country before, so tends to have a ton of half-baked populist ideas that don't appear to be thought through very well and will never actually be implemented, but are very good at attracting voters.
You do realize low paying jobs are already rapidly being outsourced... right? This at the very least secures liveable wages for a substantial group of people. We can do more, but the argument that this shouldn't be done because this would negatively affect low paying jobs which are already horrifically negatively impacted while we do nothing, is an absurd argument to hold.
> Sounds like it would be a great lesson in unintended consequences
If you look into the history of progressive taxation in the US this holds true. When they got rid of it (lowered taxes) the government took in more tax dollars because it was cheaper to just pay the taxes instead of paying to not give 90% (or whatever the highest bracket really was) of your income to the government.
But companies don't set the pay for contractors, they pay contracting firms a lump sum for services. And contracts are basically every single service the company may need, whether business related or unrelated like gardening, trash pick up, snow removal, etc.
If a company hires an outside company to come pick up their garbage, do the garbage men also count? What happens when they switch vendors, do they report that back to the government? What happens if the outside firm gives their employees a raise? Does that get reported back to the main company, who then informs the government?
What if they hire an outside firm for only 1 month, does that count?
Who tracks all this? How does it get reported to the government?
That sounds like a massive regulatory mess and burden which of which the cost will be passed to customers.
Yeah. Make it include all direct and indirect employees. Outsourcing to a 3rd world country for pennies on the dollar? Great, enjoy your massive tax bill.
I feel as though if a corporation is hoarding billions of dollars worth of wealth (without reinvesting it or doing something positive to the economy with it) then I do think society should incentivize them by taxing the hoard.
Basically once you are rich enough, you can live off of loans collateralized by your property/stocks and then after you die the cost basis gets stepped up to market value thereby avoiding capital gains taxes for your descendants.
Corporate taxes are a hacky workaround for the game-able system of individual income taxes (specifically game-able at the rich level via things like real estate depreciation, art valuation, etc). And also game-able via the buy-borrow-die strategy.
We want to slow down the natural growth of inequality - it grows because the economies of scale that are available today lead to many natural monopolies which were not possible in the past, and because people closer to the source of money get more than others via the Cantillon Effect - not because of anything special that they did per se.
The problem is this is a fundamental misunderstanding of the actual problem. If anything, high ceo pay just tells you the board has been captured by the ceo because shareholding is too dispersed to form a coherent line to push back from and discipline the board by firing them when they overpay the ceo. This isn't a problem, this is actually usually great because ceos are often not old wealth, it is bringing middle class and upper middle class kids that made it into the 1% or 0.1%. That there is so much profit for a ceo to take if they can capture the board is because of the actual problem. The actual problem is structural in two parts, the first part is integrating third world labor has blown a hole in labors pricing power and will continue to do so for another couple generations but should sort itself out. The second part is government has failed at breaking up companies with excess market power and that problem needs people like singh to pull their heads out of their asses and fix it. Unfortunately singh doesn't even comprehend the real problem and that makes him unfit to lead.
Because if you enforce a maximum wealth, anybody with any kind of ambition is going to leave your country and you'll be left without any entrepreneurs, and hence no creation of new businesses or jobs.
All this does is encourage all the most successful/productive people in your country to move somewhere else, leaving your country poorer and less productive.
I believe that CEOS and higher execs should be first in the firing lane by law if the company do bad and not the janitors, contractors and baseline workers. They take all the glory, credit and pay for the company success and no accountability or risk at all. Now that's an incentive.
Isn’t the decision to either fire the executives/CEO or others the domain of the owners of the company? And perhaps rightly so?
It’s not like shareholders/boards LIKE paying CEOs more than they otherwise could - especially if performance is bad enough to warrant big cuts. They would pay them as little as they can get away with to maximize their own return, similar to all roles down the hierarchy.
To my uneducated mind, it seems far better to (1) have better gov-mandated worker protections around termination/layoffs - longer severance, continued benefits, etc; and/or (2) higher corporate taxes to fund programs that assist in job transition/EI/etc… than arbitrary rules around CEO pay ratios or “executives always get fired first” rules.
First companies aggressively outsource and making employees “contractor” mean it’s easy enough to manipulate “average” compensation.
It would need to cover all compensation as well, not just salary.
I think more interesting would be banning stock buybacks or dividends for a period of five years from any company that lays off more than X employees or X% of their employees, and zeroing all outstanding executive stock options, rsus, etc whenever such layoffs occur would do much more work
Anti new money sentiment in general could cynically be seen as the current elite being worried about the potential for anyone to become influential without a filter on their political alignment with the elite.
I do not know if Canada has done aggressive QE to keep asset values afloat, like the US has. As people with larger incomes are the larger holders of assets (including stocks, real estate, other property), they are the biggest beneficiaries. That is the driver behind regular workers falling behind.
At least in the US, creating the problem by voting for or encouraging QE, handing out stimulus checks like there's no tomorrow, and then turning around and playing to the crowds by attacking CEO compensation is cheap grandstanding. A little bit of honesty about how these things contribute to the problem will no doubt make any politician unelectable.
This is something which can easily be defeated with Hollywood accounting practices. The larger the payout, The more resources become available to protect the payout. Even if this ever theoretically passed it wouldn't really do anything except make CEOs hide their wealth rather than declare it.
A step in the right direction but the taxes have to apply to all C-level people, the board of directors, and their direct reports aka people who set the budgets.
By all means CEOs should be highly paid, but if the company is successful and doing well, the workers that are enabling that success should see their fortunes rise as well.