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CEO pay skyrocketed 1,460% since 1978: CEOs paid 399 times as much vs. worker

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Re: CEO pay skyrocketed 1,460% since 1978: CEOs paid 399 times as much vs. worker

#121

Post by ozmodiar »

soperj wrote: post #107
jandrese wrote: post #71

Earlier quoted context omitted.

Ultimately the more centralized the power the less efficient the system is. Markets are great because they push decision making down to the fringes, closer to where the ground truth is. With highly centralized systems there is a bottleneck both in getting information to the decision makers, but also in overwhelming those decision makers with too much detail and losing fidelity. The flipside is that markets are only e…

> Ultimately the more centralized the power the less efficient the system is. Markets are great because they push decision making down to the fringes, closer to where the ground truth is. With highly centralized systems there is a bottleneck both in getting information to the decision makers, but also in overwhelming those decision makers with too much detail and losing fidelity. Wouldn't this point to CEOs not being…

I think it's a careful balance. You need the ability to take decisive action, but at the same time the decisive action might just kill the company. I think the solution is supposed to be that you have multiple companies and when one dies off due to stupid missteps another is there to take its place. Unfortunately it appears that companies keep consolidating and gobbling each other up, which I don't think is healthy for society.

Re: CEO pay skyrocketed 1,460% since 1978: CEOs paid 399 times as much vs. worker

#122

Post by cbsmith »

paulgb wrote: post #87
arcturus17 wrote: post #66

Like most people I think that this is ludicrous, but could someone give a shot at playing devil's advocate and justifying this? Are competent CEOs so much harder to get, do they really produce a 1,460% more value compared to '78, etc.?

I’m partial to the Lake Wobegon explanation, which gets a mention in the article: > Alluding to the fictional town in the radio program A Prairie Home Companion, Clifford (2017) describes the Lake Wobegon world of setting CEO compensation that fuels its growth: Every firm wants to believe its CEO is above average and therefore needs to be correspondingly remunerated. In other words, CEO pay isn’t just a way of attrac…

As opposed to employees, where companies think their employees are average or below average?

Re: CEO pay skyrocketed 1,460% since 1978: CEOs paid 399 times as much vs. worker

#123

Post by naasking »

lm28469 wrote: post #2

It's just a matter of time before people revolt, we went from something like 1:6 employee:employer comp ratio to 1:400 (and much more for a lot of companies, up to 1:5000+) If we could harvest energy from the hardcore early capitalist theorists rolling in their graves we'd have infinite energy at that point

> It's just a matter of time before people revolt

Trump was the first warning sign IMO, and some are still not taking it seriously, blaming the voters themselves for being so dissatisfied with the status quo that they would take a chance on someone like that.

Re: CEO pay skyrocketed 1,460% since 1978: CEOs paid 399 times as much vs. worker

#124

Post by nell »

brian-armstrong wrote: post #98
nell wrote: post #69

Capital allocators are always paid top dollar. CEOs are only a small part of it. Wall street bankers are paid top dollar too? They find investment opportunities that can generate returns. Traders make a lot of money too. What value do they add to society? They help in the price discovery of assets. Are they paid fairly, who knows? From a job complexity standpoint, CEO jobs are more challenging than bankers since they…

Thanks for the whataboutism argument. It really opened my eyes to workers deserve less money.

If you want to really understand why it is that way, you have to dig deeper, and you'll find they are much more deep-rooted and has tentacles everywhere. It's simplistic to point to one job function and call it out as unfair as the system is set up so some key positions accrue value.

Re: CEO pay skyrocketed 1,460% since 1978: CEOs paid 399 times as much vs. worker

#125

Post by paulgb »

cbsmith wrote: post #122
paulgb wrote: post #87

Earlier quoted context omitted.

I’m partial to the Lake Wobegon explanation, which gets a mention in the article: > Alluding to the fictional town in the radio program A Prairie Home Companion, Clifford (2017) describes the Lake Wobegon world of setting CEO compensation that fuels its growth: Every firm wants to believe its CEO is above average and therefore needs to be correspondingly remunerated. In other words, CEO pay isn’t just a way of attrac…

As opposed to employees, where companies think their employees are average or below average?

Employee pay is also a signal, but a much more expensive one, because total payroll at a large company is usually orders of magnitude larger than the CEO’s compensation.

Re: CEO pay skyrocketed 1,460% since 1978: CEOs paid 399 times as much vs. worker

#126

Post by cbsmith »

paulgb wrote: post #125
cbsmith wrote: post #122

Earlier quoted context omitted.

As opposed to employees, where companies think their employees are average or below average?

Employee pay is also a signal, but a much more expensive one, because total payroll at a large company is usually orders of magnitude larger than the CEO’s compensation.

Yet oddly, it isn't seen as a much stronger signal...

Re: CEO pay skyrocketed 1,460% since 1978: CEOs paid 399 times as much vs. worker

#127

Post by nell »

cbsmith wrote: post #113
nell wrote: post #69

Capital allocators are always paid top dollar. CEOs are only a small part of it. Wall street bankers are paid top dollar too? They find investment opportunities that can generate returns. Traders make a lot of money too. What value do they add to society? They help in the price discovery of assets. Are they paid fairly, who knows? From a job complexity standpoint, CEO jobs are more challenging than bankers since they…

"Capital allocators are always paid top dollar." That seems to be unrelated to the subject matter. I could just as easily say, "senior employees are always paid top dollar over junior employees". Presumably, "capital allocators" were paid top dollar in 1978. Somehow though, their wages have grown 1460% relative to the people who actually put the capital to work.

In 1978 GE was the largest by revenue. They made 54B in revenues ~13B in a quarter.

In 2022 Apple is the largest. They made 124B in a quarter.

Revenues are up 1000%

The larger the capital you manage, the the higher the compensation.

Btw, I am not justifying, just trying to understand what could lead to this.

Re: CEO pay skyrocketed 1,460% since 1978: CEOs paid 399 times as much vs. worker

#128

Post by jltsiren »

opportune wrote: post #63
iLoveOncall wrote: post #3

> This escalation of CEO compensation and of executive compensation more generally has fueled the growth of top 1% and top 0.1% incomes, leaving fewer of the gains of economic growth for ordinary workers and widening the gap between very high earners and the bottom 90%. I ignore every article that separates the top 1% from ordinary workers. In the UK, to be in the top 1% of earners you need to earn 120K GBP gross a y…

I agree. In the US it’s really not hard to get into the top 1-2% as a salaried employee in the software industry. The difference in feasibility between top X% of income vs wealth is large. Last I checked it was like $600k gross household income to get into the top 1% of incomes, but like $10mm wealth. You’d need to make a top 1% income and invest a good portion of the after-tax income for quite a while to get there.…

Software engineers are the exception, not the norm. High-income people in the US are more likely to have high-income parents than in most Western countries. It's difficult to enter the upper class in one lifetime, because your peers who earn as much as you do already have intergenerational wealth.

Re: CEO pay skyrocketed 1,460% since 1978: CEOs paid 399 times as much vs. worker

#129

Post by hotpotamus »

wpasc wrote: post #82
arcturus17 wrote: post #66

Like most people I think that this is ludicrous, but could someone give a shot at playing devil's advocate and justifying this? Are competent CEOs so much harder to get, do they really produce a 1,460% more value compared to '78, etc.?

My devil's advocate take is that this is downstream of corporate consolidation. Corporate consolidation IMO has become easier with greater economies of scale achievable with far better communication, shipping networks, and generally global connectivity. If CEO's of today on average leading companies that are orders of magnitude larger than in the 70's (CEO has 100-1000 people in the company in 70's vs 1,000-100,000 t…

Corporate consolidation may be easier now, but monopolies are nothing new. Theodore Roosevelt was famous for being a "trust buster". Some part of the story has to be regulatory.

Re: CEO pay skyrocketed 1,460% since 1978: CEOs paid 399 times as much vs. worker

#130

Post by DietaryNonsense »

What about ones perception of being able to improve their life? What of opportunity? hope? These are human beings after-all, they perceive such concepts as integral to their reality.

In the post-war period prior to the 70s, it was (more) common and reasonable for a high school educated factory worker (in the US) to have optimism in their ability to work in that role and improve their state of affairs. Afford to buy a home, pay off the mortgage, buy a car, provide for a couple of kids, send one of them to college, drive to a national park for an annual vacation.

Nowadays, one can be both lucky in terms of their upbringing and be highly educated (post secondary or even advanced degrees), and yet very easily find themselves in a position where the above "life staples" (house, car, family without poverty) are meaningfully out of reach. And in many cases, not even conceivably within reach.

It's not merely that housing in major cities is objectively less affordable, it's that the stage upon which life is lived has changed in it's nature. It's a perpetual sunset rather than sunrise, optimism is either for suckers or for those who mischaracterize a certain degree of background luck as merit.

I'm in the lucky category. But I think when we boil down the collective subjective experience of hundreds of millions (billions?) to broad metrics and indicators, our models lose the fidelity they need for the subjects to feel they are being taken seriously. I understand why we have these models and tools for better navigating the civilizational state-space, but they're obviously imperfect, and they're of little comfort when serious concerns go unacknowledged (let alone unaddressed) for decades.

Now it's possible that CEO pay is orthogonal to all of this. Perhaps as a measure it's one of the metrics that loses too much descriptive power in it's generalization... but it certainly does reek of something.

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