America's best-paid CEOs have the worst-paid employees | Hacker News Reader

America's best-paid CEOs have the worst-paid employees

pluralistic.net

110 pointsjanandonly134 comments

I don't know how we could through legislation mandate things like banning the US government from doing biz with companies that underpay their workers and enrich their C-Suite handsomely, but I support it.

With executive pay being over 500x what the average worker at the company makes, no wonder there's effectively 2 Americas - our social contract has been broken. While Japan has its own issues, the social contract between low-wage and high-wage workers has been intact and there's a reason they don't have some of the issues that we do in terms of class disparity and the long-term ramifications of one class of already privileged individuals making astronomical amounts of money by screwing over everyone else.

We also need to ban buybacks, or tax them REALLY heavily - over 100%. Make it wildly unprofitable to do so. Or, I like this idea better: for every $10 million you spend on buybacks, you loose your right as a corporation or an officer of a corporation to lobby local, state, and federal governments in any way for a year.

There's a legitimate use for buybacks, but I don't like seeing them used as a tax dodge over dividends. Rich shareholders can borrow more against their appreciated assets post-buyback. But they're useless to poorer shareholders unless they plan to sell at that exact time.

The recent proposal to tax borrowing against assets as realized gains might be the best way to thread the needle.

Buybacks shouldn't have ever been made legal in the first place, as the fears that cause them to be regulated in the first place have really come to pass. I'm sure someone will right on queue chime in and talk about how buybacks are superior to dividends for a whole lot of reasons, the least abstract being that they're ostensibly tax advantaged. I really believe we'd all be better off if they went back to being banned and equities go back to just issuing dividends (which I strongly believe is better and more intuitive for small time investors).

If nothing else, even though I'm sure a lot of wall street types will lose their mind, buybacks absolutely should not be tax advantaged in relation to dividends.

I like this, hit 'em where it hurts, which for most corps is their ability to lobby the state

If you want to hit em where it hurts we need to make money printing and the directly associated deficit spending and national debt accumulation, a cost of the top ~5% of income and asset holders.

To your point, the only reason that it makes any sense and that corps can even pay for lobbying is precisely because of the inflation fraud, robbery. It is the very scam and theft of value through inflation (among other methods) that provides corporations with an abundance of money to lavish on politicians who then have an abundance of money to lavish on those corporations ... rinse and repeat. Make the cost of inflation directly payable by the ruling class through taxation on both their income AND wealth and so many problems are solved immediately, literally overnight things would start shifting. Work would become valuable just like your savings from that work that you could put to good use for yourself rather than having is stolen by the ruling class/government woudl also increase; and CEO con artists (persuading into having confidence) would lose value and so would "investors", which is just people who know how to get close to the spigot of value theft from the middle and lower classes, for distribution to those who seek favor and pledge loyalty. In essence what we now effectively have and seems to be emerging ever more is a new kind of feudal and aristocratic structure.

We still have the titles and posesions that are given out by the lords and dukes and kings, and we have the peasants that are exploited; only it is now made a lot more efficient and profitable through the currency based money system. Remove the fraud and theft of inflation and you bring the whole system down and you can do that by simply making those who enriched themselves through deficits and national debt that is nothing more than taking out loans in other people's names (yours) in order to bank the money, then also responsible for paying the debt they plundered off/down.

I don't really like such socialist ideas, but, really the company's directors aren't helping shareholders much by paying the CEO of Starbucks so much. Is he really going to have any impact? This is Starbucks after all. Is he going to come up with a new killer coffee flavour or snack? I guarantee this person will make zero difference for shareholders. Static companies like Starbucks shouldn't even bother with a CEO.

It's not really socialist to say that a massive corporation, that already profits in the billions, doesn't really need to have a CEO that's compensated to the tune of 10s of millions annually, and also gets a massive stock grant. It's common sense if we want to keep capitalism as we know it from eating itself.

And yes, no new CEO of such an organization will fundamentally grow the company to a large enough degree that small shareholders will see significant gains. It's something we should have an AI do. I've met a few CEOs of massive companies, and the ones that don't really have a product/engineering background are good talkers who happen to know how to delegate really well. They aren't in the hotseat to grow the company, they are there to keep the company going on its current path.

It's not a socialist idea, there's nothing in that idea pushing towards collective ownership of the means of production by workers. The idea that high-earners should contribute more to the society enabling them to even accumulate such wealth is not socialist on any principle.

I can simplify all of that for you. The core bottom of the rabbit hole cause is that detrimental things are profitable for the ruling class, which is inverse of a positive or universally desirable outcome, and that has only gotten exponentially worse over time. So, making things like costs of wars, crime, foreseeable natural disasters, drugs, immigration, inflation, deficits/national debt, etc all the financial responsibility of those who profit from these things and are responsible for the outcomes; would immediately stop things like the kinds of wildly disproportionate CEO pay, because it would stop "money printing", which would end deficits, which would end national debt piling higher, which was used to inflate corporations and make "buy-backs" and which would have turned off the need for immigrants to undermine the salaries of workers in order to turn the delta in to profits and executive bonuses. It's not even really that hard, it's basically just a derivative chain that is getting out of hand and will likely cause the collapse of the USA because it has even been driving all the accumulating and overshadowing geopolitical issues. Do you think we would be in the Ukraine trying to ankle bite Russia and bleeding ourselves dry if the ruling classes were suffering massive costs for their little 2014 regime change consequences adventure, rather than making massive corrupt and plundering profits and gains?

Think we would have invaded Iraq if it had cost the ruling class $5 Trillion dollars of their wealth? Or Afghanistan for another $5 Trillion? Do you think that 9/11 would have even happened if listening and acting on all the warnings preceding the event would have meant costing them another $10 trillion of their wealth? Would the housing cricsis have happened? Would they have pushed the "target 2% inflation" and would the inflation be "transitory" if it had cost them, effectively all their wealth they accumulated only through that inflation and deficit spending and national debt accumulation?

It always frustrates me that people cannot understand that the things they support on one hand that makes them feel virtuous (I won't even mention one because peopel can't handle having their delusion pierced), are exactly the things that empower the things they are opposed to on the other hand.

We cannot solve "500x what the avg worker at the company makes" without even really understanding the black box that you get immediate aggression in response to even suggesting we maybe open up and take a look.

There are so many sacred golden calfs that people will defend to their proverbial or even literal death; all the while lamenting the things their golden calf causes.

>(I won't even mention one because peopel can't handle having their delusion pierced)

Do go on. Let's hear it!

Would be interesting to see if you could track CEOs by "built / grew a company into something more than it was" vs "extracted value for shareholders".

I suppose to shareholders it doesn't matter so it doesn't get much attention.

When I worked for either type executive it was almost immediately clear what type they were by their actions. It was no mystery.

In those cases, did you become a shareholder?

Enough to participate in the stock discount program and then sell ASAP.

That was less an expression of confidence in the company as it was just a personal policy to not hold stock in a company I work in for as little time as possible.

This is the existential problem. Are you building value or extracting value?

I always wondered if and how things would be different if we had regulations like: "the highest paid job can't be more than 10 times the lowest one, including all benefits", or like "where there is a well defined hierarchy, each upper level can't be paid more than +50% than the one that immediately follows", so that giving a raise to high rank executives would also propagate to other workers thus reducing those huge discrepancies.

I think you'd just end up with more tenuous employment situations under that setup. If I'm an owner or an executive, that would discourage hiring low-level staff as full-time regular employees. Better to make them part-timers or independent contractors or deal with a staffing firm to skirt the responsibility of paying employees proportional to my pay.

When we're proposing a rule, and someone points out that it won't work because of X, Y, or Z, the solution is to integrate X, Y, and Z into the rule--not give up and say "oh, companies are very clever and they will get around whatever you write!"

So, instead, add that to OP's proposal: "the highest paid job can't be more than 10 times the lowest one, including all benefits, and including all part time work, annualized, and including temp workers and all hired contractors, and all sub-contractors."

It's a rather interesting form of learned helplessness isn't it (and one suspects not really an unwitting one)?

Unless you include the rule "nobody can ever leave your jurisdiction", Iron Curtain style, all you'll see is the entrepreneurial equivalent of brain drain to other jurisdictions that don't have such rules. Almost by definition, people with entrepreneurial ambitions are those willing to take calculated risks like relocating. This is kind of what's happening to the EU.

And, to be crystal clear, I'm not delighted by high CEO pay but the cures proposed always seem worse than the disease. If you want to eat the rich, do it in a way that makes them willing to hop onto the plate and offer you a napkin.

Let them go. You just have to prevent them from selling to in your jurisdiction in that case. There is no reason they should be allowed to extract value from your population without abiding by the social contract.

The émigré entrepreneurs have no reason to care because they're still financially better off than the would have been staying.

Aside from that, that only works if the polity for that jurisdiction is equal or ahead in in technology. Cutting yourself off from de facto standard or superior tech is going to result in a massive drag on the economy for quite some time before local equivalents mature enough to compensate. Certainly the EU wouldn't survive such a shock; their finances are precarious enough already.

The OP point still stands: if we only complain "nah this doesn't work because..." and do nothing to address that "because", shit will definitely hit the fan later when the new royalty will get again beheaded in the public place, plus heaps of unrest and bad stuff we could have maybe avoided if we just addressed that "because" instead of sitting on our rears moaning.

Sure, that's true but the only proposals that seem to get posted on HN are clearly unworkable even under casual scrutiny. Doing something that's worse than doing nothing just for the sake of doing something is silly. When are serious proposals that withstand analysis going to be advocated?

Does it matter? You should remember it's HN not some parliamentary commission, so both unworkable and genial proposals matter exactly zero.

Corporations are all internally very corrupt and all the top execs are working to stuff their pockets first, second, and third, to lie the the shareholders fourth, and the employees are so disposable, they are not even worth lying to. CEO pay is so ridiculous because you are asking the wolves to take care of the sheep.

Just like we have evolved governmental organizations to be more robust against corruption, we need to do the same with corporations.

I dont care how much people are paid but C levels pay should be affected when cost reductions are being implemented.

But that's already a thing, and probably one of the reasons the article has so much data - C-levels ARE affected: cost reductions screw over the worker, and the C-level makes more money.

C levels work for the board, which works for the shareholders.

The rest of the company works for the C levels.

Companies go on cost reductions to increase shareholder returns.

Of course C level pay will be impacted - positively, because they know the C level is going to be shit on by employees, and they’ll need them to stay around to properly insulate them from it and implement what they want.

Most C-levels have performance-based stock packages as their main compensation.

Which is why I'm saddened by this article not having any actual data (like others have said). It would be useful to have a study that analyzes the overall landscape of performance-based versus non-performance-based compensation, the share of CEO comp that is or isn't performance-based, how often C-level is awarded for good performance when the employees aren't, etc.

Instead it reads like an opinion piece with a study linked that doesn't back up their claims and just tells us the cumulative amount of stock buybacks.

>Say a company is worth a billion dollars and has issued a million shares. Each of those shares is worth $1,000 (because $1,000 times one million is $1 billion). The company uses its profits to buy half of those shares, so now the remaining 500,000 shares are worth $2,000 ($2,000 times 500,000 is $1 billion).

Why would the company still be worth $1B after the buybacks? The company just spent $500M on buybacks. So the company has $500M fewer dollars in the bank. I assume the company would now be worth $500M less. So the company would be worth only $1B - $500M = $500M. So with 500k shares in existence, the stock price would be unchanged from the beginning: $1k.

He doesn't understand stock buybacks.

Close to how it work, but because of how money work, in practice the stock price would probably be a bit superior to $1k in most cases.

Well, if a company buyback half of its shares all at once, it's probably because it expects a lot of returns w/o the need for new investments, so probably the new share will be worth a lot, lot more.

[edit] I wanted to add more nuance but parents is basically correct and the OP example is dumb.

The more I interact with the business world, the less affection I feel to the entire concept of public companies. Software companies, in particular, seem like a bad fit for the entire concept.

What is a share, and why is valuable? More importantly, why should profits of the business be of any value with regards to stock price? In the world of dividend-paying companies, the connection between profit, dividend, and thus stock price is obvious. But most tech companies don't pay dividends. With voting shares, there is value in control over the company's direction, and the more successful the company is, the more power you control a share of. But most shareholders don't vote, and many companies issue shares that don't grant the owner a vote. That leaves the base value of shares as being tied to the fact that you have a claim on whatever assets are left when the company goes bust. But software companies don't hold much in the way of resellable assets, and few would shutter their doors before their debts wipe out what little assets the company holds. Maybe you can bet on the company being bought out by either a bigger company or a private interest, but that rarely happens anywhere near the peak of a company's market cap.

> the less affection I feel to the entire concept of public companies. Software companies

I don’t disagree.

I do think though that it really depends on the companies that are highly visible (arguably successful).

All the other companies maybe don’t make the news but I’ve worked for smaller orgs that do right by shareholders and code and customers.

But maybe to your point you don’t know unless you’re on the inside.

>Why would CEOs prefer buybacks to dividends? Because CEOs sit on tons of shares. Even if only some of those shares have vested, a CEO who uses this ruse to increase share prices can cash those shares out, borrow against the rest, and count on a big stock grant from shareholders who are grateful for their windfall.

If the CEOs sit on tons of shares, the CEOs would receive a large dividend too. So the CEO would benefit from both dividends and stock buybacks. And "shareholders who are grateful for their windfall" would be grateful for both dividends and stock buybacks. And announcing a dividend tends to make the stock go up, as seen when Google announced a dividend earlier this year.

So the big distinction the article is trying to make between dividends and buybacks doesn't make sense to me.

Yes, CEOs are overpaid, but there is only one per company. There are 100s of useless overpaid directors, VPs, senior managers per F500. Essentially yes men whose job is to brew koolaid all day. They aren't talked about as much.

Well, in contrast to other situations, this appears to be a zero-sum game.

A company has a certain revenue, which is used to pay employees, invest back into the business, etc. If you pay the CEO an exorbitant amount of money, it means it takes up a larger part of the income, which means you have to pay employees less, invest less, etc.

Then these lowest-paid employees need to be supported by social programs, which means we - the taxpayers - are subsidizing the enormous paychecks CEOs are taking home. Corporate socialism.

Eat the rich.

How do you avoid a "pay peanuts, get monkeys" problem, making the company perform worse due to incompetent leadership? Under your zero sum framing, I'm sure the shareholders would love to be able to pay the ceo less as well, because that means more profits for them.

Is there actually any evidence that higher pay results in better performance from CEOs? I’m sure there’s some threshold below which you’re going to get an incompetent but I strongly suspect that threshold isn’t actually tens of millions a year and a company jet.

How much would you pay Steve Jobs vs the previous CEOs Apple had? Yes I know Jobs only took $1, but what if he demanded more - at what point would you say too much?

I don't know how to value a CEO, but it is clear that a good CEO makes a big difference.

No.

Somewhat ironically, if it was obvious what made for good CEO performance, they wouldn't be expensive.

This is straw man bullshit.

Were c-suite execs less competent before the 90s when executive pay regulations were repealed?

Also, your argument cuts exactly into your own fingers when considering employee pay.

>This is straw man bullshit.

That's not what strawman means. I mentioned an objection with paying CEOs less, but there's no implication that's the other side's argument. If that counts as strawmanning, what you're doing is arguably strawmanning as well.

>Were c-suite execs less competent before the 90s when executive pay regulations were repealed?

What regulations are you talking about?

Also, I'm not sure how you got the impression that high pay causes good performance. Clearly paying a monkey $10M isn't going to magically make him a competent CEO. However, there are good CEOs and bad CEOs out there. Microeconomics dictates that firms will bid up their salaries, causing the more competent CEOs to be paid more. If there are regulations on executive salaries, of course that's going to lower the price, by definition. The same would apply if government capped the salaries of software engineers. That doesn't mean there wouldn't be competition between firms, it'll just get shifted to non-financial compensation eg. company cars or whatever.

Probably the problem here is: pay gold and get Gorilla

Not agreeing with GP, but your point about paying the CEO less for more profits for the shareholders isn't always true, especially for growth companies like big tech.

Their valuation is based on the future growth of the company, so while profit today matters, what matters more is increases in revenue and hitting or exceeding your guidance. Look at amazon's recent 20% tumble, it was all driven by not increasing revenue. Amazon increased it's profits just fine through cost cutting, was more profitable than ever, but missed the expected growth in revenue by half a billion dollars and it cratered.

Ignore short term changes in stock value. What I care about is long term. Companies often do those 20% jumps (either way), but at the end of 5 years it all balances out.

"profits" isn't limited to next quarter's results. It includes future profits as well.

There's a theory that high executive pay isn't really meant to buy competent leadership. It's to inspire the people one rung below to work harder and try to be CEO one day.

Also: whatever happened to working for passion and love of the job? Or does that only apply to the lower ranks?

>Also: whatever happened to working for passion and love of the job? Or does that only apply to the lower ranks?

"gotcha" arguments like these only work if you assume the other side is some sort of monolith that both believe CEO should be highly paid and that employees should be driven by passion. Both might vaguely be pro-business, but by no means does one imply the other, and therefore makes for a strawman.

I believe one side talks out both sides of their mouth, by saying employees need to be passionate but also CEOs and other execs have to highly paid in order to motivate them. I don't think that's a strawman.

This is the same argument that says high tax rates will deter them from working.

Driven people will work hard regardless, and in leadership, the right kind of leaders will work mainly for the reputation, fulfillment from a job well done, people elevated, legacy, etc - and a respectful level of comp. The narcissists, grifters and mercenaries maybe need the $$$$$.

Edit: I should clarify I mean high tax rates on the wealthy.

I mean yeah, they either work or they starve. Same with groceries, if you tax the crap out of them, people will still buy it out of necessity, right?

My argument isn't that all workers should be driven.

The argument is that good leaders are usually driven by things other than a huge salary, and so long as the salary isn't an insult, will do what they do.

So why offer huge salaries to CEOs? It just attracts the kind of leaders that only care for the money.

I agree with you.

> Driven people will work hard regardless

Not everybody is driven by work. Many people are driving by the things they can get from work. The mythical rational man would eventually see that hard work isn't worth the toys anymore and so will start finding something cheaper to spend money on. You need to eat, but you can eat "beef and caviar", or "rice and beans" - at very different prices.

>Driven people will work hard regardless, and in leadership, the right kind of leaders will work mainly for the reputation, fulfillment from a job well done, people elevated, legacy, etc - and a respectful level of comp. The narcissists, grifters and mercenaries maybe need the $$$$$.

They might be still CEOs even if they get paid $1, but all things being equal, they'll still go for the higher paying job. What happens if you have a competent CEO and your competitor decides to poach him? This happens all the time. Starbucks recently poached Chipotle's CEO. Given the different trajectories in stock price between chipotle and starbucks, the incoming CEO is arguably more competent. The market seems to agree[1]. If you pay your CEOs $1, it's only a matter of time before your competitor poaches him and you're left with a worse CEO.

[1] https://www.economist.com/cdn-cgi/image/width=1424,quality=8...

It's a good argument for very high taxes on excessive salaries.

Free markets run rampant when they are not properly harnessed to the common good, and this is surely a case where they should be harnessed.

> Driven people will work hard regardless

This is empirically not true.

Source?

> In 2022, CEOs were paid 344 times as much as a typical worker in contrast to 1965 when they were paid 21 times as much as a typical worker.

https://www.epi.org/publication/ceo-pay-in-2022/

I thought the almighty "invisible hand of the market" would fix this? Or maybe all those theories for trickle down economics and how capitalism helps everyone are absolute bs intended to keep people docile while they are getting exploited?

Let's remove some more regulation and let's bail out some more 2-big-2-fail company, that oughta fix things /s

In all fairness, it's hard to act surprised at news like this. This is the system working exactly as intended. I don't think tweaking it here and there will change things much, only a fundamental change of how we see work, government and society can enact the change we need.

> I thought the almighty "invisible hand of the market" would fix this?

Why did you think that?

That's the argument given to justify hyper-capitalist policies. The money will trickle down and everyone will be better off. We are now seeing that the money often does not trickle down enough to maintain the lifestyle of previous generations and the inequality has negative effects on society (e.g. a two tier justice system, campaign finance issues, regular people being unable to compete for housing, etc.).

> the money will trickle down and everyone will be better off

that's off-base and superficial understanding of "trickle-down" economics, the idea is that the general well-being of society is based in its ability to create wealth which has a very general definition, the ability to create things that people need & therefore value

and yes by pretty much any metric capitalism has raised absolutely enormous amounts of people out of crushing poverty, there's no dispute there based on the numbers

housing is unaffordable due to government intervention, plain and simple, since government debased the money housing became a store of wealth

> housing is unaffordable due to government intervention, plain and simple, since government debased the money housing became a store of wealth

Actually, big amount of people think it's due to collusion of the big real estate firms + using pricing software + monopolization of the housing market by a handful of firms.

https://www.theguardian.com/business/article/2024/aug/23/doj...

Luckily, the government (DoJ) will intervene and hopefully will break down the monopolies and sue them, which, plain and simple, are the reason for the housing crisis.

> which, plain and simple, are the reason for the housing crisis

It's plain and simple, but not necessarily true. There are multiple factors. We build housing at a far, far lower rate than we import people, never mind organic population growth. That alone doesn't require any conspiracy theories to explain the reason housing is more expensive and subdivided into smaller units: demand is massively outstripping supply, and it's not a luxury. People just have to pay more for it.

> plain and simple, are the reason for the housing crisis

we have decades of evidence that policy artificially raised housing prices into unaffordability, and of course everything else worth having that's also been involved with heavy government regulation has risen beyond the reach of lower and middle classes: health care, education, food. the obvious answer is that money has been debased which means that EVERY that's purchased with money will be harder to afford.

Capitalism certainly was an improvement over the previous system of feudalism; even socialists and communists acknowledge that. However, it's less clear that our current system (what people often call "corporate capitalism" or "late stage capitalism") is superior to other systems such as the "welfare capitalism"/"social democracy" seen in many European countries or the highly unionized capitalism America had in previous decades.

What trickles down isn't green.

> Why did you think that?

If you were to believe current establishment economists, the invisible hand of the market fixes everything, from workers salaries, to societal problems like healthcare, public transport, and education. If it doesn't, then it's probably too much involvement by the evil government. Like, when in 2008, the evil government bailed the good banks, using taxpayer money, showing that in capitalism, the most important members of society: the banks and wall street, are totally safe. /s

In reality, I think the "invisible hand of the market" is a bs metaphor serving as an excuse to neocapitalists to pillage our world without regulation. I'd personally love to see a progressive wealth tax on the 1% (85% on gains > 1million seems reasonable to me), and de-privatization of social services like healthcare, education and transport.

Imo our societies must aim towards the "Private Sufficiency, Public Luxury" model: https://commongood.cc/reader/private-sufficiency-public-luxu... and articles like that showing discrepancy between CEO and worker pay, show me I am on the right track.

> If you were to believe current establishment economists, the invisible hand of the market fixes everything

This is far too simplistic. No one thinks it fixes everything. They might say that "CEO salaries aren't broken; you're just engaging in the politics of envy". But they would never claim that it would do things to reduce said "envy".

> Well, in contrast to other situations, this appears to be a zero-sum game.

> A company has a certain revenue, which is used to pay employees, invest back into the business, etc. If you pay the CEO an exorbitant amount of money, it means it takes up a larger part of the income, which means you have to pay employees less, invest less, etc.

This appears to be missing the crucial point of the article. The problem is not the amount the company spends on the CEO's compensation but rather the amount the company spends on financial schemes in order for the CEO to extract their compensation:

"Divide Ellison's $18m among those workers and each of them would net a paltry $126/year. But if you were to share out the $43 billion Ellison had to piss up against a wall on stock buybacks among those workers, you'd be able to give every worker a $30,000 bonus, every year"

Compensation - executive compensation and worker compensation - is a cost.

Buybacks return profits to shareholders. They are not the same.

There's an argument to be made that buybacks benefit bigger shareholders disproportionately. To solve that problem, tax them differently.

> There's an argument to be made that buybacks benefit bigger shareholders disproportionately.

That's not the issue. Non-founder CEOs are usually not among the biggest shareholders. The issue is a kind of conflict of interest: CEOs with stock-based compensation can directly increase their own compensation by directing the company to do stock buybacks. The CEO is the one who makes the decision about whether the company does buybacks or not.

The board of directors authorizes buybacks and dividends, not the CEO.

Boards of directors are rubber stamps. Corporate governance is a joke. Guess who sits on boards of directors? Other CEOs! CEOs get together (that is, conspire) to set their own compensation, which is exactly why, for example, they all get massive golden parachutes for failure.

Even the largest institutional investor of a publicly owned corporation has less than 10% of the stock. Ownership is very diffuse, which is why management has so much power despite so little stock.

Looks like you've arrived at the actual problem. And it's not buybacks themselves.

This is a dumb response and a false dilemma. They're both problems.

>"Divide Ellison's $18m among those workers and each of them would net a paltry $126/year. But if you were to share out the $43 billion Ellison had to piss up against a wall on stock buybacks among those workers, you'd be able to give every worker a $30,000 bonus, every year"

There's no plausible circumstance in which the $43B he spent on buybacks would have made it back to workers. Pretending that "paying $43B profit share bonus to workers" was even an option on the table is laughable.

> Pretending that "paying $43B profit share bonus to workers" was even an option on the table is laughable.

I don't think the author is pretending that. The author is just trying to accurately measure the cost of a CEO to a company compared to the cost of workers to a company.

But some of that $43B could go pay the workers more. And some of it could go toward investment in the future of the company. Some could even go to dividends, which reward stock ownership and long-term investing. Whereas stock buybacks only reward dumping the stock. The article discusses why CEOs prefer buybacks to dividends: it's a lot harder for a CEO to get a massive payday from dividends, because they'd have to sit on their stock for many decades rather than selling after it vests.

>I don't think the author is pretending that. The author is just trying to accurately measure the cost of a CEO to a company compared to the cost of workers to a company.

The $43B for all intents and purposes, is profits waiting to be paid out to shareholders. Attributing it to being a "cost" associated with a CEO, makes as much sense as attributing the company's expenses as being a "cost" associated with the purchasing manager.

>But some of that $43B could go pay the workers more. And some of it could go toward investment in the future of the company.

Even if you take this handwavy argument at face value, it's stretch to imply that if it weren't for the CEO, every worker is going to get a $30k bonus. Moreover, by your own admission, paying it out as a dividend is an option, so that's the reasonable counterfactual to compare against.

>Some could even go to dividends, which reward stock ownership and long-term investing. Whereas stock buybacks only reward dumping the stock. The article discusses why CEOs prefer buybacks to dividends: it's a lot harder for a CEO to get a massive payday from dividends, because they'd have to sit on their stock for many decades rather than selling after it vests.

Buybacks are the same as dividends for all intents and purposes, except for some tax advantages. If you're a long term shareholder, you should be reinvesting any dividend you receive, not using it to fund this year's vacation or whatever.

> it's stretch to imply that if it weren't for the CEO, every worker is going to get a $30k bonus.

That was just an illustration of how far the money could go, as compared to the direct compensation of the CEO, which wouldn't go very far.

> Moreover, by your own admission, paying it out as a dividend is an option, so that's the reasonable counterfactual to compare against.

It's one option, but I'm not sure why you're ignoring the reinvestment option.

The whole issue is that stock buybacks provide no long-term benefit to the company. They're a short-term pump and dump. In a real, measurable sense, stock buybacks shrink the company, by reducing the number of outstanding shares.

> Buybacks are the same as dividends for all intents and purposes, except for some tax advantages.

That's not true at all. Dividends benefit all stockholders, whereas buybacks benefit only the stockholders who sell. The buybacks may temporarily bump the stock price, but again, that's of no immediate benefit to long-term investors who hold onto their stock.

>That was just an illustration of how far the money could go, as compared to the direct compensation of the CEO, which wouldn't go very far.

No, the direct compensation of the CEO is still only a hundred bucks or so. Claiming $30k per employee as the "direct compensation of the CEO" makes no sense for the reasons I explained in my prior comment.

>The buybacks may temporarily bump the stock price, but again, that's of no immediate benefit to long-term investors who hold onto their stock.

No, it provides a permanent bump to the price because there's less investors to split future profits amongst, which means each share gets more profits and is therefore worth more.

> No, the direct compensation of the CEO is still only a hundred bucks or so.

That's what I said: "as compared to the direct compensation of the CEO, which wouldn't go very far." You appear to be confused.

> No, it provides a permanent bump to the price

A permanent bump LOL. There's no such thing in the stock market. If the company maximizes short-term results while screwing itself in the future, that so-called "permanent" bump isn't going to last.

This argument fails basic math. Take a company with 10,000 employees (small), If we take away 10 million from the CEOs salary (extremely large) that works out $1000 extra per employee. Nice money, not enough to make a major lifestyle improvement. To get that much per employee I had to use unreasonable numbers all around.

Not that CEOs aren't being paid too much, but it won't make much difference to lower their pay.

> Nice money, not enough to make a major lifestyle improvement.

It most certainly is enough to make a major lifestyle improvement when someone is living paycheck to paycheck. That could be the difference between just barely scraping by to being able to comfortably buy necessities and maybe even grow a savings.

> It most certainly is enough to make a major lifestyle improvement when someone is living paycheck to paycheck

This is not what the recent universal basic income study showed.

> the recent universal basic income study

If you're talking about the OpenResearch study that Sam Altman is funding then yes it did [1]. Granted this study was a little bit more money but the results imply that any amount of extra money helps people living paycheck to paycheck in terms of financial flexibility and safety.

[1] https://www.openresearchlab.org/findings/nber-working-paper-...

Looking at the utility value for the ceo and the employees. 10M for the ceo may make much difference to his lifestyle (slightly better yacht) but the $1000 for the lowest paid could make a big difference.

They just inhabit totally different financial landscapes.

How many CEOs make 10M? Even in the fortune 100 level you will find they make less than that.

Obviously, you didn't read the article yet.

"you'd be able to give every worker a $30,000 bonus, every year"

Not the first time a journalist wrote something that is wrong. Wanting to support a bias is often more important than the truth. (always has been)

> Not that CEOs aren't being paid too much, but it won't make much difference to lower their pay.

I disagree. There are multiple benefits of reallocating CEO pay beyond increasing worker pay. The obvious one is morale. I work for a billionaire. I have no incentive to go above the minimum, because I know he is the only one meaningfully collecting from my labor. If my pay included a larger bonus and stock grant portion, at least there would be some connection between my work and my reward. Instead, I've had the opposite trend in my career, with the percentage of my income delivered as base salary increasing but contingent income decreasing, especially as a relative proportion when compared to my C-suite.

Two, I'd argue, it's a negative for society as a whole to create a class of ultra-rich. I'd rather see my CEO's excess compensation set on fire and delivered to no one rather than enrich him further. Class inequality will continue to be a problem even if average worker pay increases. We need to increase worker pay, but we also need to end class inequality, even if the latter does not deliver on the former.

>I'd rather see my CEO's excess compensation set on fire and delivered to no one rather than enrich him further.

Isn't this just crab-bucket attitude? It's one thing to argue "profits should be redistributed more fairly". It's a whole different thing to argue "excess compensation set on fire".

Only if you don't believe that extreme wealth causes harm.

If the crabs work together, they may be able to get out of the bucket, but they're never climbing to the moon. I believe a few billionaires are in fact planning a visit to the moon shortly though.

The article argues that stock buybacks are used to inflate ceo compensation and the value of those buybacks could be used to meaningfully increase worker wages.

It's not zero-sum because companies can grow.

People love to complain about CEO compensation but does anyone doubt that having the right person in charge is important? Think about the US presidency: how much money should the US citizenry be willing to pay to get the best candidate into office? A lot!

> Think about the US presidency: how much money should the US citizenry be willing to pay to get the best candidate into office?

And yet...

> §102. Compensation of the President

> The President shall receive in full for his services during the term for which he shall have been elected compensation in the aggregate amount of $400,000 a year

https://uscode.house.gov/view.xhtml?req=(title:3%20section:1...

If the mightiest person on the planet can live off a $400'000 wage, CEOs can, too.

>If the mightiest person on the planet can live off a $400'000 wage, CEOs can, too.

literally no one is arguing that CEOs need $50M (or whatever) compensation salaries to survive, just like software engineers don't need $500k total comp packages to survive. The argument is that companies need to pay those salaries to attract CEOs (and software engineers), otherwise your competitor will pay 10% more and poach them instead. The same arguably exists for the presidency, except "competition" is literally any other job that a competent leader could be doing, like being a CEO rather than a president.

There's no way to have a functional labor market for world leader positions.

That probably says something about the labor market for corporate leadership positions too.

And they also probably end up paying a lower effective tax rate.

Yes. But I believe since most of the compensation is stock and is unrealized gains - they just put it in a trust. That way it builds what is called “generational wealth”.

Yeah, didn't mean it's illegal or anything, but just another aspect leading to higher inequality.

As I understand it, with low (<1%) interest rates... Take a low-interest loan against a % of your wealth. If you can get the loan, then it seems like you get to have your cake (unrealized appreciation gains) and eat it too (non-income money now.)

Not riskless, but there's a lot of upside.

The argument he makes about buybacks just doesn't work. If the money didn't go to buybacks it'd go out in dividends. If there were no way to extract profits from a company and return them to shareholders then the whole investment model doesn't work. At the end of the day the owners of the company have the first claim on the profits. If the profits don't get paid out in dividends or used in buybacks they don't suddenly become the property of the employees. Having said that, yes stock based compensation works to align CEO incentives with share holder incentives and yes share holder short term incentives are to drive down employee wages.

Fundamentally I think the bigger issue is the taxation system not only preferencing unearned income, but then also being full of loopholes to mask income entirely. I think you'd be much better off proposing new rules around what it means to "realize" a capital gain (for example, if your asset is used as collateral, you are realizing it's value and it should be taxable). Rather than creating more byzantine rules around who can earn what.

The article provides almost no hard data to back the headline up. They link a report on buy backs, but at least the abstract/summary does not provide support for the claim either.

Written in a very partisan way, although the description of how stock buy backs create bad incentives for CEOs sounds convincing to me.

It's almost as if for the last 35 years, we compensated C-suites using massive stock grants and then plowed all of the value created by labor into equities instead of, you know, paying the people who did the actual work.

The good news is, there's no precedent for populations at large deciding this is a reason to use violence to displace the ruling classes in drawn-out, society-devastating wars that radically alter global geopolitics. Nope, none at all.

By the way, I've just learned about these two countries, Russia and France. You guys heard of these before? Can't wait to read more.

Nice to see someone sore about the content flagging this perfectly valid article.

"The billions that Boeing spent on buybacks are billions that Boeing didn't spend on airworthiness"

and the article suggests that CEOs only do dumb buybacks because they personally profit from the raising stock price.

Compensating CEOs with stock grants has the side-effect that they aren't motivated to look too far beyond their time in the role. Short-term bumps in the stock price are good for them.

Maybe locking up a portion of their stock grants for longer - say 5 years after they leave - is the solution. I don't know how many CEOs would sign up for that deal though. It means part of their compensation is effectively hostage to the next CEO.

That's cause and effect right there.

There is an enourmous amount of economic value in simplying a complicated task so that it can be completed by an unskilled ie low paid worker.

The author seems to have just realized that fast food workers don't make much compared to the CEO of the fast food company.

I mean it would be great to see Chipotle's restaurant employees grow their wages and benefits in a sustainable way but am I supposed to be surprised they dont have a 401k?

Starbucks has a 401k with 5% match, as well as medical, dental, and vision insurance for its baristas. It's not an impossibility, it's just not something we expect from fast food companies.

1. https://careers.starbucks.com/benefits/

That's great.

> It's not an impossibility, it's just not something we expect from fast food companies.

This is my point exactly.

> am I supposed to be surprised they dont have a 401k?

No, you're supposed to be angry that a company that made $1.23 billion in profit has no program in place for its employees to financially contribute towards the time when they either can't or don't want to work anymore, because that means they're going to be more reliant upon the taxpayer to keep them off the streets when they're old.

Well if we're talking about what "should" be I think you're setting the bar way too low.

The reality is 95% of fast food chains dont offer any of that.

And our society is worse off for it.

The ideal company has no CEO and no employees, only shareholders and customers. Real companies should be approximations of this ideal.

Please tell me this is satire

Not at all. Rather, it is evidently true. Your savings account represents the ideal company. The only issue is the returns are abysmal. Therefore real companies must necessarily diverge from this ideal.

I suppose if the only purpose of a company to exist is shareholder returns this is true.

This entire diatribe about stock buybacks makes 0 sense. It's just another way of returning money to shareholders, it's exactly the same thing as dividends but gives the shareholder the option to realize their gain. A business only exists for the benefit of its owners, if businesses negatively impacted owners, they would not own shares in the company. If employees want to enjoy the benefit of being owners of companies they can start their own companies or themselves use their income to buy shares in companies. They will quickly realize that starting a business is really fucking hard.

Before you mention monopolies, yes I agree and I think what Lina Khan is doing is great and she should be doing more.

Also, just because you don't understand or disagree with the logic economists use doesn't mean they are wrong. Stick to writing bad fiction please.

> This entire diatribe about stock buybacks makes 0 sense. It's just another way of returning money to shareholders, it's exactly the same thing as dividends but gives the shareholder the option to realize their gain. A business only exists for the benefit of its owners, if businesses negatively impacted owners, they would not own shares in the company.

I agree with you, but it all makes sense if you just change this:

> A business only exists for the benefit of its owners

to this

> A business only exists for the benefit of society

"Society" doesn't create businesses, individuals do.

And what supports those individuals? Society, with its shared costs for necessary infrastructure, education, EMS…

To your point, though, that’s also incorrect. Worker cooperatives exist, the best-known examples in the U.S. perhaps being Rural Electric Membership Cooperatives. The name is a bit of a misnomer these days, as even large suburbs are often on an REMC’s grid. REMCs were created because individuals didn’t see profit in running infrastructure to rural areas with low population density, so society decided to do so.

> And what supports those individuals? Society

You are missing my point which is that you will not get individuals to act against their own self interest. So all this talk about what businesses "should" do is beside the point.

The classic example of this is price controls, the government mandates that food can only be sold for $X but it costs $X+1 to produce it and get it on shelves. People stop producing food because it's stupid to work for negative money and then you get food shortages and starvation.

Here's another funny one, I'm starting a business and when I was in the ideation phase I decided against building an education or healthcare related business despite having some pretty interesting ideas in those spaces and I'm instead building a company in the entertainment space. Why? Because people ironically are more happy to spend money on entertainment than healthcare or education and there are fewer regulations in place.

The GP is rather implying, > A business only exists for the benefit of Wall St and traders

Not long term holder like myself, which is what I would define as "owners".

Yeah, don't put words in my mouth and create a strawman please.

I know that that's not what you wanted to say and didn't intend to imply that you intended to say that. I was just making a distinctions between the various owners of a share and how each would benefit differently from stock buy backs.

I am a shareholder (of Airbus, I'd never hold Boeing). As a shareholder, I don't want to be dubed by a pump and dump orchastrated by a CEO to appear like a genius, get a nice payout and jump ship before the stock tanks, and I am left holding a now vastly depreciated share. Unless you are friends with the top execs you won't ever know when to buy and sell and in any case I am not into trading.

I think shareholders need more rights. A lot of the bullshit that is currently happening only makes sense because shareholders aren't actually in control of the companies they own.

Think about this, as a shareholder in Airbus, how were you involved in the selection of the current CEO?

We agree on that one. It goes along my top comment where I call for more democratic oversight of corporations. I think they are internally too corrupt and the top execs run wild doing whatever they want.

> A business only exists for the benefit of its owners

And a business only exists because of its workers. Is every worker contributing equally to the business’ success? Of course not. Would the business exist if not for the founder? Again, of course not – and I am fully in favor of founders taking as much of their profits as they’d like, with the understanding that they may have to explain their actions to their employees.

I am not in favor of non-founder executives getting absurd multipliers on TCO. You’re just an employee, like everyone else. Why should you have a 200% bonus target, when the team building the product might have 1/10th of that?

Buybacks are incredibly stupid, and should not be allowed in nearly all circumstances. They exist because Wall St. focuses entirely on short-term profits.

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