$20 for skilled labor in this industry seems very low. The bump to $22.13 when CEO gets a bump in the millions is really throwing the finger to workers everywhere.
The politicians in Washington have convinced everyone that we should blame CEOs for the fact that our representatives have done a terrible job of maintaining a stable competitive market for low wage earners. The problem isn't that there are too many CEOs. There are too few. The problem with John Deere isn't it's success, but more specifically it's success at forcing others out of the market.
When there are only 2 big employers in your town, guess what? You're going to make whatever they hell they want to pay you.
But yeah, let's blame the CEOs.
This is so false that I have trouble believing you are serious. All pay comes from a fixed source, "income", and the CEO/board is largely who determines how the CEO and workers split up the money.
The UAW situation is different. Unions negotiate contracts that affect all employees. These are set by the ability of the union and management to negotiate, with some pressure from market rates. These are closer to the “stone tablet” idea of yours, but only fixed until the next negotiation.
There is no ‘dividing up the income’ activity, like the other user suggested. Management just focuses on making more revenue than it’s paying for all expenses, and tries to employ as many people as it thinks it needs to acquire that revenue or grow future revenue.
This is a simple explanation that elides a lot of detail, but hopefully helps.
If those are done they are likely ignored or used to figure out how much lower the pay can be. And a strike is a result of that.
The idea that employees cannot profit from a company doing well, not profit from their own labor and simply get a fixed low pay is insulting.
Yes, that is effectively what is happening.
The value is 'divided' between customers, suppliers, employees, executives and investors and it will go to who has the most power.
If the power balance means they can charge higher prices (less surplus to customers), then that money will go to the remaining parties. If suppliers are commodity, then it's a 3 way fight between execs, employees and investors.
If the company sees increasing sales and is flush with cash, the execs and workers will try to negotiate for higher pay.
"Management just focuses on making more revenue than it’s paying for all expenses, and tries to employ as many people as it thinks it needs to acquire that revenue or grow future revenue."
That process boils down to dividing up surpluses.
Whatever the process is, it's walking along a gradient towards finding somewhere close enough to the balance of power.
A “better” CEO would surely minimize labor expenses, by automating, moving to cheaper regions, etc. In most businesses, labor is the largest expenditure.
... and if unchallenged by organized labor
Right now the market has determined that pay is too low to fill job vacancies, but employers are not raising wages, not the market.
The decided upon rate is determined by the outcome of this struggle.
That's how the market rate sausage is made. It's not an impersonal objective arbiter of truth. It's a reflection of relative levels of power and relative levels of desperation.
You know this is true as you are watching a situation where workers will no longer work for $x play out.
The difficulty in keeping one job filled is not dependent on another job. The difficulty in hiring a janitor does not impact the difficulty of hiring a software developer.
CEO salary / number of workers / number of working hours in a year = 14.75 million / 70k / 2080 = $0.10
On the other hand if you cut the entire c-suite, other board members and top management in half there is a significant amount. Usually with companies this size there are many mini CEOs in divisions and it starts to add up.
But to contribute what I suggest (again, without breaking ground): capitalists take 30% of all income generated, for themselves. I haven't looked up the financials for John Deere, but I mean that's the ratio when you take the U.S. as a whole. That 30% is a wayyyy bigger piece of the pie than divying up a CEO's income, which is probably a tiny part of that (on average) 30%.
- $15600000 CEO compensation [0]
- 69600 workers [1]
- 1760 hours average per US worker per year [2]
- $20.12 hourly wage for the lowest paid John Deere employees
$0.13/hour, 0.6%, or a bit over a dollar a day increase for the lowest paid group. That would be the increase if the JD CEO would work for $1, with all his previous pay evenly distributed to all employees. Not insignificant.
Now let's have a slightly different thought experiment. What if the CEO pay is cut by 50%, and evenly distributed only to the bottom 10%? A $0.64/hour, 3.2% or $5.09/day increase. That would be a very significant number to all involved.
I'm not saying this is what should happen or not. Just saying the number is significant.
[0] https://eu.desmoinesregister.com/story/money/business/2021/1...
[1] https://www.statista.com/statistics/278010/john-deere-number...
[2] https://en.wikipedia.org/wiki/List_of_countries_by_average_a...
When you are financially struggling, a 10¢ raise (extra $4 for the week) can make a big difference.
One of my friends worked 40 hours and had $20 to spend on herself after her bills (which were frugal, since she didn’t earn much). Low pay sucks when you earn a discretionary $0.50 for every hour of work.
As long as people are effectively forced to work under even the most exploitative conditions, the market rate is going to be depressed by desperation. The labor market without a decent social security net (aka unemployment insurance that actually works and is accessible, or outright UBI) is not a free market by definition!
That is why the COVID relief packages were able to overturn the market - they allowed people to leave their old jobs (if they still existed, that is) and search for new, better employment without the pressure of starving as somewhat around 60-70% of Americans, under normal conditions, would not have saved enough money to cover even a single week of unemployment.
That safety net is called your savings account. I could live off my savings alone for years before I find another job.
>But yeah, let's blame the CEOs.
hmmm, who should we blame for destroying the job market in their town? or who should be blamed for trying to sabotage organized labor?
poor CEOs getting all the blame for the stuff that is being done by this unknown force...
They work for the same company, with the same surpluses etc.
They are very 'connected'.
I don't blame the CEOs, or their pay for that matter, I blame a system in which if a CEO goes home, s/he can spend one year golfing and the following one choosing among the offers from his/hers golfing friends, while if a worker becomes unemployed, s/he could starve within one month while having no way to find a new job.
When large corporations fail, they socialize their failures by getting bailouts from the government. There are never bailouts for individuals. Whenever a corporation has extra capital, they do things like buy back stock, rarely ever give it to employees, it simply isn't profitable for them to do so. These are choices a CEO makes in running their company.
The government allows for a bit much capitalism when it comes to health care, in my opinion. The added costs for health care are commonly thrust onto all employees, those at the bottom of the pay scale are impacted the most because they make the least. An out of pocket health care expense for a CEO is a rounding error but can be financially devastating to the lowest paid person that has coverage.
I get that they are different jobs. For example if there were a software error in a JD tractor that caused many deaths (i.e. some safety feature fails) its more likely a CEO/CxO would have to step down for mis-managing something than a bunch of factory workers.
In general, the pay differences are really out of whack though.
I doubt that. In larger companies - the ones that actually have a CEO and not just a very hard working company owner - CEOs are usually pretty much isolated from any strategy, policy or organisation. For that they have upper management.
> One CEO
alone can do shit. A successful company needs competent workers, the right ideas from engineers and artists, diligent bureaucrats and most of all; a hell a lot of luck.
Given all that, even a company with a mediocre CEO can be vastly successful.
CEOs are mostly there for the handshakes and because they know people that know people. That's about it.
Ah, I don't know about that. In the end what CEOs get payed for is to have someone to blame in case anything goes wrong. medicore performance never got a CEO fired, it's just when something goes terribly wrong that they have to take their hats.
Usually there's a golden parachute attached.
CEOs are overrated.
I've yet to work in a (large) company where the CEO is actually relevant. Most of the decisions happen at lower, departmental levels.
In the initial years, CEOs can make or break a company, but after that it's pretty random. You can have a brilliant CEO that just gets stumped and the company goes bust. Or you can have an incompetent CEO that just stumbles from success to success.
In my experience, CEOs get hired because of their old-boys networks that will allow the company to participate to the pay-to-play games with e.g. financial institutes or similar industry handshake-wink-wink-partnerships. They know people that know people, that's it.
At the companies I've worked at, lower levels never make far-reaching decisions for the company.
That's what incompetent CEOs usually do; they get in the way of competent people doing a heck of a job.
Good CEOs know that they are figureheads and try to stay out of the crucial decision making, handing off responsibilities to people that actually know what they are doing.
Hasn't been the case for me. Even if they didn't come up with, say, a market strategy, they're important in executing it. They lead rather than getting the hell out of the way.
>Good CEOs know that they are figureheads and try to stay out of the crucial decision making, handing off responsibilities to people that actually know what they are doing.
A good CEO makes critical decisions. Handing off responsibilities if they know their limits is indeed part of being a good CEO.
We've known the answer to this question for decades: Very important. You can export entire factories to China, layoff everyone in manufacturing, keep management and design in country. Works just fine.
Don't believe me? How about this short list: Computing hardware. Hand tools. Medical equipment. Home appliances. Office supplies. Power tools. Etc.
What do they have in common? Offshore manufacturing.
This is definitely the case. There's a huge pool of talent outside of the US and Europe.
One of the mistakes people tend to make is this assumption that you can torture (being dramatic) capital and it will not react, it will just bend to the pressure. This is as wrong as can be. Capital is the easiest thing to move from place to place. And capital, with enough pressure, will always move where it can achieve the same outcome with a lower pain-in-the-ass factor.
Despite the popular indoctrinated meme, no, it isn't about greed. It's about getting shit done and staying in business.
Our "leaders" over the last 50 years or so, setup a perfect storm, a chain reaction, that is unavoidable for anyone in manufacturing save a few corner cases (military contractors being one category).
Say you manufactured coffee mugs. You are doing great. You have two other competitors with equal market shares. One of them decides they'll be smart, move manufacturing to China, lower their prices and grab more market share. They do the math: They are going to make LESS per unit, but think they can increase their market share to compensate for that, and more.
They come into the market with their new Chinese made line. You lose a bunch of market share. So does the other competitor. What do you do?
You can (1) lower your prices and operate at a loss; (2) lay off a bunch of people to reduce labor costs and use automation to lower your costs; (3) shut down the business and exit the market or (4) move your manufacturing to China.
That's it. There might be other options which are generally combinations of the four options given above. You move you manufacturing to China. A few months later, the remining competitor does the same.
A year later all three companies are manufacturing in China. They all have about the same market share they had before the move. They are all selling at lower retail price point, which means they are all making less money!
Oh, it doesn't end there. A few years later the same Chinese manufacture that makes their coffee mugs decides to sell directly in the US at a lower price. One of the advantages they have is that our "leaders" signed a treaty that makes shipping within the US free for any Chinese product (within certain limits). A Chinese company can get a product from Los Angeles to NYC for virtually free. A US company has to pay full rate for the same shipping.
Two out of the three companies go out of business and even more people lose their jobs.
> I wonder why that has not been done yet...
Oh, it has. Virtually every discipline you can think of has been offshored. From accounting to software engineering and more.
I have a quick personal example I can share: We needed to do a bunch of accounting analysis that required a bunch of data entry. Our accounting firm wanted somewhere in the order of $50K to get it done. We got it done by a team of business students in Romania for about a tenth of that. For security/privacy all we had to do was write code to redact (black out) private information (names, addresses, account numbers, etc.) on the thousands of documents they processed. This work required knowledgeable human analysis, so it wasn't a simple matter of OCR -> Excel -> summarize.
Capital always tends to find the most efficient way to get things done.
Except in government. In that case, assume half is wasted and that's probably about the right domain.
I've often posited that many issues at large companies would be solved if the VP and SVP level folks were down doing the 'grunt' level work from time to time - like your VP of customer care should be on the phones one day a quarter, your VP of manufacturing should work the line once a quarter and so on.
It's pretty easy to say from on high "well, how hard can it be, they don't deserve that much!" when you've never done the work - it's a whole lot harder if you have and do from time to time. The CEO, needs to be on the floor, and needs to understand every aspect of how the company does business, if not that (like for very large companies like GE and Tyco), at a minimum the division president level does.
Being a CEO is more than just sitting in an office making strategic decisions, it's also having enough of a fundamental understanding of how your business works to know when you're being fed bullshit - you only get that by going out there and doing.
I can use my operating just fine without having ever developed any of the software in it.
“How hard is running a company? Making “X” is what’s hard.”
They then point to the fact they are at the top of their game and an expert and have a post-graduate degree. Their job is very hard and they are very skilled, no doubt.
But once you get exposed to upper management you start to realize it’s really hard to get a large group of people to work towards a common goal. Stuff goes off the rails very easily when people don't understand, care of even know what the company is trying to accomplish and how that relates to their job. And convincing outside investors (public or private) that your business is actually worthwhile investing in and in "capable hands" isn't easy either.
Yes, giving speeches and making “best guesses” on where the business is going seem trivial. But it’s a critical role where if not done well shit falls apart quickly. Remember, some hedge fund doesn't want to know the intricacies of your CPU design - they want to know your company has a product people want and you can deliver it to them profitably. There is a definite "we trust this guy can deliver" filter when it comes to CEOs and it's often based on track record (fairly or not).
Look at Elon Musk. What is his value? Knowledge of rocket design? Knowledge of battery technology? Though I hear he’s technical his knowledge is trivial compared to the experts he hires. The depth of his expertise is likely asking his engineers which is best, asking some pointed questions and then making a call on the totality of everything at stake.
His value is also in being “the face” of Tesla internally and externally. Motivating his employees with a vision when everyone is betting the company will fail. Convincing people they can do something no one has done before. Very few people can do that well and even fewer can do it for years like Musk did.
Now of course very few CEOs are like that, but don’t underestimate the value of CEOs who successfully run even a small business. Those soft skills many technical people think are useless are critical and not many have them in one package.
As such, if you've demonstrated you have the chops to run a billion dollar business you can ask for (and will get) a pay package that dwarfs a typical job.
And of course you have grifter CEOs who are idiots, but say the right thing. No different than any other job. They don’t tend to last very long as CEOs either.
What this event in particular shows, and will likely continue at other organizations, is that absurd executive pay is absurd, and workers that are underpaid or given inequitable compensation for their work can demonstrably cease operations. The company does not hinge on a single CEO. The inequality is despicable, and the amount of paragraphs here defending that gap is beyond strange, at least from a hacker perspective.
And yes, of course, there are CEOs that are idiots. There are also moderately capable CEOs that surround themselves with idiots to insulate themselves from criticisms like "do you really need a $2MM raise?"
I'm not saying that all CEOs are like this, and I've known some incredibly dedicated founder/CEOs who truly bust their asses for the company. But charcircuit's insistence that it's the CEOs who actually make the business work ignores the other 99.9% of the people at the company doing back-breaking work, work the actual overtime, and don't get first-class (or private) flights to go play golf on the company dime. The fact that these people can be replaced is irrelevant. Treat them as disposable, and the company suffers. Underpay them and the economy suffers.
The CEO sets the overall business strategy with the advice of the board. They then have to delegate that strategy to their subordinates for the different activities necessary.
It's harder to find skilled workers with specific skills than it is to find a generic "CEO".
The studies im aware of show that quiet CEOs perform signicantly better than star CEOs on the long term (admittedly that is not equivalent to pay).
Anecdotally company performance does not change significantly with change of CEO.
The current CEO is paid $15m, and is currently responsible for the biggest strike in the company's history, an expensive settlement, and a huge number of unhappy customers who complain that they can't mend their tractors themselves to the point where the government has considered passing laws to ensure they can.
Is it really so hard to find someone who'd do a better job than that for less money?
I'd say he's doing a pretty fantastic job for JD stockholders.