> Why not pay them 300k/year? 500k?
That's a great idea! We could take the difference from the CEO's pay.
That's a great idea! We could take the difference from the CEO's pay.
This is California going after golf courses to solve its water problem.
Ford spends about $3bn a year on dividends [1]. That's a quarter of their entire SG&A.
[1] https://www.sec.gov/ix?doc=/Archives/edgar/data/37996/000003...
Propping up the good old boys network by overpaying for executive talent is of negative utility to the shareholders.
We don't really have evidence executives are overpaid. The fact that even cheapskate private company owners wind up paying their executives well should communicate something about what's going on.
Most of it shows that there is a small but real link between CEO pay and stock performance. This works best when CEO pay is tied directly to performance, and it isn't tied to the specific dollar value just the percentage of increase. IE - The $40m CEO doesn't actually outperform the $20m CEO, but a CEO who oversees a big jump in profits will see a big raise regardless of the reason.
CEO pay DOES correlate strongly with luck. IE - They get rewarded with big bonuses when the larger market does well or taxes go down, and they don't tend to get smaller pay when the market does poorly.
This is the line the executive compensation industry peddles. It has elements of truth. But it's not from an unbiased source.
Again, there are lots of companies and lots of CEOs. That nobody has unlocked this arbitrage strongly suggests the simple story isn't the whole one.
It 2023 it was 312:1.
Ok, but $500 000/year isnt a median salary. But Ford's CEO is $26.4 million, so 53:1.
Gather up the rest of the C-suit at Ford and you got a couple hundred mechanics.
Do that to Stellantis and GM and you're at about 500 mechanics. 10 per state is not an insignificant number of high paid mechanics.
Add Boeing, Raytheon, Lockheed, GE, and all the other once great industrial American jewels run by idiots and you have financed the training of a large portion of the American workforce.
Why haven't we seen a bunch of successful companies without any management if management is so useless/harmful? Just ICs self-organizing to run the whole business. Without any execs to pay they'd have a cost advantage running that way.
I suspect I can find a few willing to do it for a few paltry million, or maybe less.
Run an automotive giant? We're still in the thread where the argument for acquiring talent is to pay more, right?
Talent here is very often having friends on the board, through common investments and co-ownership of those private jet/ luxury yacht/luxury hostel rentals that operates 'at a loss' (you only pay consumption taxes on your direct spending, if the company rent you the plane for the cost of kerosene, and you pay yearly through your holdings for fixed costs, you avoid a lot of taxes. Tips from a friend who works at one of those places).
And the customers' boards and management teams. And the suppliers'. And the regulators' and electeds'.
That network of insiders colluding behind the scenes are NOT providing optimal results for the shareholders, or for the market in general. They are instead optimizing their own short term gains at the expense of everyone else.
A bunch of good old boys making handshake deals with their buddies aren't actually choosing the best products and services for the best price, and the companies they helm will eventually suffer for it as the entire market does each time it happens.
The problem with evaluating leadership is we almost always talk in terms of impact ("this decision saved/made/lost the company $X million/billion per year") as opposed to performance over replacement ("compared to an average person we could have hired to fulfill this role, how'd you do?"). The nature of a capitalist system is that large piles of money tend to get bigger, and companies are giant piles of money. If you are in a position of power, on average you're going to make the company more money. That doesn't make you exceptionally valuable, as pretty much anyone we could have put in that slot was going to make money.
Im just calling to modify and reduce c-suite compensation.
Editing to add a reminder of how many times the US government has had to bail out the entire US auto industry.
Pay the mechanic 70k cash, 500k in stock and the mechanic gets real compensation and, slowly, Ford becomes an employee owned company.
The stock price of Ford might even go up if you could improve the repair situation.
Who in this situation should decide to pay the CEO less? Is it regulators? The board? Shareholders?
I’m trying to understand your model for how executive compensation should be set.
I propose that if the money for mechanics is needed, it can be gotten by redirecting capital from other parts of the system to invest in mechanics, funny that math is the subject here because this redirecting of capital could even be thought of a mathematical process, although really more a number of related processes together, I shall call these processes that control how money will be moved to handle problems in the systems that exist to generate more money "Capitalism".
In the rest of my work I shall discuss how the processes that control circulation of money will lead to its accumulation and conversion to power among a subset of power, allowing them to over time amass more and more power, I will note the problems this will imply but not really offer a solution as my primary interest is in describing the ways that need for a thing will cause the investment in that thing to rise over time, and decrease thereby investment in other things, as though the whole were an impartial and, as noted, nearly mathematical process in its elegance.
Most/many CEO's don't get the gig thanks to an efficient market or being the best. There are others equally or better qualified who would do the job for much less.
The typical justification for their high salaries is that it encourages the rest of the executives to buck harder for the role. In practice, far less pay could achieve that goal.