SEC adopts rules mandating disclosure of CEO-worker pay ratios • Hacker News Board

Re: SEC adopts rules mandating disclosure of CEO-worker pay ratios

#41

Post by jogjayr » Wed, Aug 05, 2015, 6:58 PM UTC

pvnick wrote: post #18

mod wrote: post #4

Can someone explain to me why we're outraged that CEOs make lots of money? I truly don't understand it. My presumption is that CEOs are adding enough value to be worth their pay, just like every other worker (should be).

The populist (read: uninformed/envious) belief is that high-paid CEOs are simply entitled ladder climbers that don't provide any more value than the mail room clerk, and yet soak up zillions in bonus dollars that should instead go towards paying said mail room clerk.

> paying said mail room clerk.

Or paying dividends/buybacks to shareholders? This isn't just an issue for the "99%"

Re: SEC adopts rules mandating disclosure of CEO-worker pay ratios

#42

Post by dbcfd » Wed, Aug 05, 2015, 6:59 PM UTC

drauh wrote: post #28

From the WSJ: CEO Pay vs. Performance Executive compensation is increasingly geared toward results, but some CEOs still got big paydays even when their investors didn’t do so well. http://graphics.wsj.com/ceopay-2015/

This is total pay, not salary based compensation.

Total pay includes equity grants, which will increase if the company does well, thus will correlate with stock performance.

The total pay can also be manipulated by CEO's targeting short term stock gains over long term growth, which is why more companies are looking at longer vests or clawbacks for equity compensation.

Re: SEC adopts rules mandating disclosure of CEO-worker pay ratios

#43

Post by _delirium » Wed, Aug 05, 2015, 6:59 PM UTC

thrill wrote: post #17

What on earth does this have to do with the SEC's charge of fighting fraud any other illegalities?

Besides fighting fraud, the SEC's other main purpose is to mediate the shareholder/company relationship, ensuring that people who own a share of a company have their ownership rights respected, and setting procedures for what information they're entitled to, and what mechanisms they can use to control the company's decision-making.

One long-running dispute has been over what mechanisms shareholders should have to exert oversight over the pay structure of the companies they own. There are bunch of proposals, from tweaks to the mandatory reporting rules (what this seems to be), all the way to allowing shareholders a direct vote on executive pay (the so-called "say on pay" [1]). Though you could certainly argue that this particular rule isn't a very effective means for shareholders to get control over executive pay; at best it seems like it will give them an occasionally-useful PR tool to pressure boards into restraining executive pay.

[1] https://en.wikipedia.org/wiki/Say_on_pay

Re: SEC adopts rules mandating disclosure of CEO-worker pay ratios

#44

Post by [deleted] » Wed, Aug 05, 2015, 6:59 PM UTC

drauh wrote: post #28

From the WSJ: CEO Pay vs. Performance Executive compensation is increasingly geared toward results, but some CEOs still got big paydays even when their investors didn’t do so well. http://graphics.wsj.com/ceopay-2015/

[deleted]

Re: SEC adopts rules mandating disclosure of CEO-worker pay ratios

#45

Post by drauh » Wed, Aug 05, 2015, 6:59 PM UTC

untog wrote: post #23

mod wrote: post #4

Can someone explain to me why we're outraged that CEOs make lots of money? I truly don't understand it. My presumption is that CEOs are adding enough value to be worth their pay, just like every other worker (should be).

Because the level of CEO pay compared to average employee pay is at all time highs. It's gone from 20x the average employee in 1965 to 295x in 2013. Do you think CEOs are 10x more effective than they were in the 60s? http://www.epi.org/publication/ceo-pay-continues-to-rise/ And yes, you can easily counter saying that private companies are allowed to pay their CEOs whatever they want, which is absolutely true, but at…

Even without referring to wealth inequality, "capitalism" is supposed to be a sort of "economic meritocracy", i.e. those who get a lot of money did so by their abilities. (I hesitate to use the word "work".) Or, at least, that's what I understand modern capitalists to say.

The crucial thing here is the stagnation of the middle class. There is no way 1 CEO can produce the output of 300 employees. Is it socialist to expect that the people who actually make the stuff to share in the gains? Or maybe that's communist.

Re: SEC adopts rules mandating disclosure of CEO-worker pay ratios

#46

Post by paulhauggis » Wed, Aug 05, 2015, 6:59 PM UTC

_delirium wrote: post #14

mod wrote: post #4

Can someone explain to me why we're outraged that CEOs make lots of money? I truly don't understand it. My presumption is that CEOs are adding enough value to be worth their pay, just like every other worker (should be).

There's a lot of suspicion that your presumption isn't accurate. It's a fairly big area of research, though. One alternate hypothesis is a form of "executive capture", that companies nominally owned by shareholders are actually run by more of a clique of executives, who serve on each others' boards and pay each other large salaries. Some mild but inconclusive correlational evidence for that view is that when controll…

"There's a lot of suspicion that your presumption isn't accurate"

If this is the case, the only people that should be worried about it are the shareholders and the other people that own the company.

If I was running a company and I had more money to spare (because I couldn't pay the CEO past a certain amount of money), I'm not just going to pay a worker because it sounds nice. Workers should be paid based on market value and the value they bring to the company.

Re: SEC adopts rules mandating disclosure of CEO-worker pay ratios

#47

Post by syncopatience » Wed, Aug 05, 2015, 7:00 PM UTC

brandonmenc wrote: post #27

zajd wrote: post #12

Earlier quoted context omitted.

Honestly CEO's getting paid a ton isn't really much of a problem as opposed to the US's absurdly low income tax rates for the wealthy. Not to mention capital gains... estate taxes... etc

> US's absurdly low income tax rates for the wealthy The top 20% of earners pay over 80% of the income taxes. That's low?

Not as high as it sounds when you consider that the top 20% of earners collect 50% of the income: https://en.wikipedia.org/wiki/Household_income_in_the_United...

Re: SEC adopts rules mandating disclosure of CEO-worker pay ratios

#48

Post by sandworm101 » Wed, Aug 05, 2015, 7:01 PM UTC

More accurate headline: "SEC Adopts CEO Pay Ratio Rule, Five Years After It Became Law"

"Today's vote comes five years after Congress approved the Dodd-Frank Wall Street Reform and Consumer Protection Act, which includes the pay ratio rule. The vote also comes nearly two years after the SEC formally proposed the requirement."

http://www.npr.org/sections/thetwo-way/2015/08/05/429628037/...

Re: SEC adopts rules mandating disclosure of CEO-worker pay ratios

#49

Post by saalweachter » Wed, Aug 05, 2015, 7:01 PM UTC

toephu2 wrote: post #16

mod wrote: post #4

Can someone explain to me why we're outraged that CEOs make lots of money? I truly don't understand it. My presumption is that CEOs are adding enough value to be worth their pay, just like every other worker (should be).

That is a very naive presumption..although if the CEO is the founder of the company, then I don't have any qualms about it.

Aesthetically, I'd prefer to see a founder-rewards paid out through stock (eg, dividends) rather than through salary. That maintains the distinction between "rewards for early investment" and "wages for on-going labors".

Re: SEC adopts rules mandating disclosure of CEO-worker pay ratios

#50

Post by zajd » Wed, Aug 05, 2015, 7:01 PM UTC

brandonmenc wrote: post #27

zajd wrote: post #12

Earlier quoted context omitted.

Honestly CEO's getting paid a ton isn't really much of a problem as opposed to the US's absurdly low income tax rates for the wealthy. Not to mention capital gains... estate taxes... etc

> US's absurdly low income tax rates for the wealthy The top 20% of earners pay over 80% of the income taxes. That's low?

The top 20% of earners tax rates isn't the problem, it's the tax rates on the .01%, which starts at around 1.9mm/yr

Even better, the .001%, which starts at around 10.2mm/yr

Not that people making $150k couldn't afford to pay more taxes (I'm one of them), but the issue really isn't with the top 20%.

Even worse, the fact that capital gains aren't treated as income and the fact that we let parents pass billions on to their children (for no societal benefit) is a much larger problem.

Cute statistic though, spoken like a true facebook comment