Nonprofit hospitals skimp on charity while CEOs reap millions, report finds(arstechnica.com)
arstechnica.com
Nonprofit hospitals skimp on charity while CEOs reap millions, report finds
https://arstechnica.com/health/2023/10/nonprofit-hospitals-skimp-on-charity-while-ceos-reap-millions-report-finds/
148 comments
Non-profits don't have to avoid profit. The difference is what they do with any profits; they can't distribute it as dividends to owners/shareholders.
I think the point is the same, and somewhat interesting.
Do most hopspital non-profits channel their profit into growth or price discounts.
In my opinion, it is fairly common for non-profits to adopt growth as a goal in of itself, and try to extract as much value as possible from customers to further it
Do most hopspital non-profits channel their profit into growth or price discounts.
In my opinion, it is fairly common for non-profits to adopt growth as a goal in of itself, and try to extract as much value as possible from customers to further it
It's an important distinction.
Non-profits are not obligated to hide/spend their profits. They're allowed to accumulate fabulous wealth if they want (see, for example, Harvard's $50B endowment).
Non-profits, in theory, serve a societal/community purpose rather than existing to make a profit for their shareholders. You're not wrong that some of these lose sight of these purposes in favor of a bunch of MBAs telling them "growth! growth! growth!" (and the CEO salaries that come from such growth), but it's not because the IRS requires them to.
The problem isn't tax law; it's the "everything must always grow or it's a failure" economy we've set up.
Non-profits are not obligated to hide/spend their profits. They're allowed to accumulate fabulous wealth if they want (see, for example, Harvard's $50B endowment).
Non-profits, in theory, serve a societal/community purpose rather than existing to make a profit for their shareholders. You're not wrong that some of these lose sight of these purposes in favor of a bunch of MBAs telling them "growth! growth! growth!" (and the CEO salaries that come from such growth), but it's not because the IRS requires them to.
The problem isn't tax law; it's the "everything must always grow or it's a failure" economy we've set up.
> Non-profits, in theory, serve a societal/community purpose
True of charities and certain other classes of non-profits, not true of other non-profits unless “societal/community purpose” is reduced to a meaningless phrase covering every possible purpose besides returning profits, including enabling a group of sppnsoring firms to earn bigger profits.
True of charities and certain other classes of non-profits, not true of other non-profits unless “societal/community purpose” is reduced to a meaningless phrase covering every possible purpose besides returning profits, including enabling a group of sppnsoring firms to earn bigger profits.
The list of "Exempt Organization Types" on https://www.irs.gov/charities-and-nonprofits is pretty heavily societal/community style purposes. (Political organizations is the most debatable on there.)
That there are all sorts of loopholes and tax fiddles possible doesn't change the underlying theoretical motivation.
That there are all sorts of loopholes and tax fiddles possible doesn't change the underlying theoretical motivation.
Sounds like someone hasn't really clicked through the multiple levels to find out what is wrapped up under “other nonprofits” (which is most of the categories of non-profits), and so is only considering political orgs and the three different subsets of 501(c)3 charities listed at the top level on that page.
Because otherwise I think that 501(c)6 Business Leagues would be a lot higher than Political Organizations on a list of things whose purpose is a lot less social/community than enabling private profit.
Because otherwise I think that 501(c)6 Business Leagues would be a lot higher than Political Organizations on a list of things whose purpose is a lot less social/community than enabling private profit.
The rules for business leagues look entirely reasonable (https://www.irs.gov/charities-non-profits/other-non-profits/...). I don't doubt there are questionable ones, but claiming they can't have a valid societal/community benefit is tough.
Certain types non-profits cannot "show profit" even if it's just to build their rainy-day fund, or they're limited in how big that can be.
which types would that be?
operating foundations have a stricter regulation that could fit that, based on where their money comes from that year
operating foundations have a stricter regulation that could fit that, based on where their money comes from that year
I believe https://en.wikipedia.org/wiki/501(c)_organization#501(c)(6) are an example, but the "maximum on held-over funds" may be a state-level requirement.
> In order to avoid profit but still maintain growth, they shovel all their profits into network expansion. New hospitals, clinics, outpatient centers, wellness centers, all that in order to avoid lowering costs for patients.
Expanding operations reduces scarcity.
More clinics reduces wait times and puts downward pressure on prices. Supply and demand.
I don't even understand what you're arguing for. Do you want them to limit the number of clinics and take profits instead of expanding?
Expanding operations reduces scarcity.
More clinics reduces wait times and puts downward pressure on prices. Supply and demand.
I don't even understand what you're arguing for. Do you want them to limit the number of clinics and take profits instead of expanding?
> I don't even understand what you're arguing for.
I don't really think they were arguing for anything, but there's a clue what they'd argue for right there in the bit you quoted
"lowering costs for patients"
I don't really think they were arguing for anything, but there's a clue what they'd argue for right there in the bit you quoted
"lowering costs for patients"
There could be an argument that it is not expanding supply, or that competition is not putting downward pressure on price.
A simple example of this could be to hospitals engaged in a marketing battle for a fixed pool of customers.
A counter or example could be that over expansion in services leads to lower efficiency and higher prices. This could be the case when the service selector is a different party than the payer, so the pricing feedback is broken. A tragedy of the commons essentially.
A simple example of this could be to hospitals engaged in a marketing battle for a fixed pool of customers.
A counter or example could be that over expansion in services leads to lower efficiency and higher prices. This could be the case when the service selector is a different party than the payer, so the pricing feedback is broken. A tragedy of the commons essentially.
> Hospitals are all non-profit so they can reap tax benefits. In order to avoid profit but still maintain growth, they shovel all their profits into network expansion.
That doesn't make any sense; it seems to be based on the premise that “non-profit” means the firm can't make surplus income, but it just means they are structured so as not to return profits to investors or some other party.
That doesn't make any sense; it seems to be based on the premise that “non-profit” means the firm can't make surplus income, but it just means they are structured so as not to return profits to investors or some other party.
How does that not make sense. That’s what it is. Non profit has no charity requirements
> How does that not make sense. That’s what it is.
No, its not.
Nonprofits can retain unlimited surplus income. They are called nonprofit or not-for-profit because they don't return profits (either directly or through a claim on assets) to some set lf stakeholders.
The upthread post invented a false rule based on a wrong (if popular) interpretation of a name, and then invented a conspiracy theory about people gaming that rule which doesn't exist in the first place.
No, its not.
Nonprofits can retain unlimited surplus income. They are called nonprofit or not-for-profit because they don't return profits (either directly or through a claim on assets) to some set lf stakeholders.
The upthread post invented a false rule based on a wrong (if popular) interpretation of a name, and then invented a conspiracy theory about people gaming that rule which doesn't exist in the first place.
Most people think of non-profits as charities but there are various types, some more common than others, such as "mutual-benefit nonprofit corporation".
the non profit world uses those terms ambiguously
it took me a while to parse when I was learning and setting up my own
I paid estate and non profit lawyers to give me relevant case law and journals to understand. Really powerful stuff to learn before you need it.
it took me a while to parse when I was learning and setting up my own
I paid estate and non profit lawyers to give me relevant case law and journals to understand. Really powerful stuff to learn before you need it.
HCA operates 168 hospitals and is ranked #66 on the Fortune 500. Tenet operates 65 hospitals. These are the 2 largest for profit hospital operators in the US. There are others.
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Think of nonprofit not as another term for benevolent or charitable organization (which is what people instinctively think), but as an alternative tax accounting scheme. Excess revenue gets funneled to the insiders at the top so that at tax year end there is no profit. Presumably these insiders are paying income tax.
I once knew a guy who worked in the field of providing services to non-profits, and he described to me the lavish retreats provided to people in the industry, the first-class air travel and five-star hotels provided for travel. He called it the charitable industrial complex.
Take a hard look at the tooth to tail ratio of the organization the next time you make a charitable contribution.
I once knew a guy who worked in the field of providing services to non-profits, and he described to me the lavish retreats provided to people in the industry, the first-class air travel and five-star hotels provided for travel. He called it the charitable industrial complex.
Take a hard look at the tooth to tail ratio of the organization the next time you make a charitable contribution.
It's quite likely that if you have two organizations - one setup as a for-profit company, one setup as a non-profit, that the government gets more taxes from the non-profit because the for-profit company can "reinvest profits" into whatever, driving the share prices up, which is (if done right) is a non-taxable event for everyone, as long as the shareholders don't sell.
Whereas the non-profit that funnels excess into income for the insiders has that income taxed at income-tax levels.
Whereas the non-profit that funnels excess into income for the insiders has that income taxed at income-tax levels.
The insider class gets its lifestyle boosted to aristocracy tax free because it is all for business, or rather operating expenses.
Can non-profits not reinvest income just as any other business?
They can - what (at least some) cannot do is stockpile cash at more than a certain amount (which I don't know what it is, but something like 1x yearly run-rate or something).
So buying equipment or spending it on marketing, OK.
Saving millions in the bank or investing - not OK.
So buying equipment or spending it on marketing, OK.
Saving millions in the bank or investing - not OK.
Thanks for the explanation! So that means they can reinvest and grow their business just as much as for-profit businesses, then? If a for-profit saves millions in the banks, that will be taxed, as it is a profit at that stage.
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FWIW.. my mother's childhood friend is a nun who (successfully) ran a hospital in the Buffalo NY area for years up until the late 90s/early 2000s. She was replaced by a series of "civilian" CEOs after that. AFAIK, the quality of care OR the finances of the place didn't improve one iota.
This is exactly it. Many charity hospitals were started by religious orders sworn to poverty. Things change the moment the laity step in. Lay ceos want to make money. Nuns cannot.
IIRC there was a phase in between with a hierarchy based on salaries. Surgeons were in charge. They created a salary scale above filled with people who know nothing about healthcare. Not to forget about investors in stead of public funds and donations.
So CEO compensation there is excessive for sure. That said, charity care is probably better measured vs a hospital’s net income absent any such care. My understanding is these hospitals are squeezed on both sides of the healthcare system by insurance and health equipment and drug providers, so they don’t have a lot of net income to spare for charity care.
How do you calculate net income when they can just increase costs (CEO pay amongst infinite other things) to decrease it?
You could somehow come up with a "standard accepted income" for given professions (these are totally from the arse, of course, but the idea holds) like CEO, 1 million, surgeon, 500k, general practitioner, 250k, nurse 60k, whatever. How you come to those numbers is left to the reader. You'd also generate 'baseline' for other expenses.
Then you compare given hospitals to those numbers and where they exceed them, that is counted as "income" - if they're paying the CEO 2m vs the 1m expected, that's 1m of income.
Then you compare given hospitals to those numbers and where they exceed them, that is counted as "income" - if they're paying the CEO 2m vs the 1m expected, that's 1m of income.
I imagine there is an enormous amount of charity care (in dollar terms at least) from people going to the ER and never paying.
The article is a bit misleading in that it uses revenue. Typical margins in a health-system is slim. 3-6%. So, actual 1-2% charity care of revenue is quite significant.
The thesis is correct that a health-system CEO shouldn’t make $17m/yr. It’s a non-profit largely funded by tax payers and maintains its market share by government regulations. Just the charity care component is a bit misleading.
The thesis is correct that a health-system CEO shouldn’t make $17m/yr. It’s a non-profit largely funded by tax payers and maintains its market share by government regulations. Just the charity care component is a bit misleading.
Disclaimer at the start: I'm asking this because I want to understand more about the situation that you are presenting, not as an indirect way to "um actually" you.
How would margins be defining in this case? When I hear that the margins at gas at a gas station are x%, I understand that they are basically talking about how much I pay per gallon minus how much the gas station paid per gallon. However, it feels like defining margins in a health system would be much more complex. Is it just lookin at the raw materials (e.g. how much do medications, bandages, and scalpels cost the hospital)? Depreciation on expensive equipment like MRIs? Does pay factor in and if so is it just the salaries of people who actually do the work like managers, nurses, and doctors or also the compensation for people like CEOs?
How would margins be defining in this case? When I hear that the margins at gas at a gas station are x%, I understand that they are basically talking about how much I pay per gallon minus how much the gas station paid per gallon. However, it feels like defining margins in a health system would be much more complex. Is it just lookin at the raw materials (e.g. how much do medications, bandages, and scalpels cost the hospital)? Depreciation on expensive equipment like MRIs? Does pay factor in and if so is it just the salaries of people who actually do the work like managers, nurses, and doctors or also the compensation for people like CEOs?
Here are 2 relevant scenarios.
A homeless alcoholic withdraws and gets seizures, spending a week in the ICU. He is not on Medicaid, but qualifies. After paying for all his care and applying for Medicaid on his behalf. The hospital might get 50 cents back for every dollar they spent. (They spent on doctors; nurses, medications; EMR bill, case management, etc.).
This guy will essentially come back 5-6 times per year. With negative margins every time because that’s how Medicaid is designed.
2nd scenario is a 70 year old with a knee replacement surgery and great insurance Medicare + supplemental. He spend a day and half in the hospital and the money that his insurance paid, would be ~130-150% cost of care.
Average everything out; and you end up with 3-6% margins.
Obviously, salaries are big part of the cost. So, perhaps the margins will be better if the CEO is paid less. But, overall its a low-margin business because the biggest payers are Medicaid and Medicare and they more or less pay whatever they want via legislative means.
A homeless alcoholic withdraws and gets seizures, spending a week in the ICU. He is not on Medicaid, but qualifies. After paying for all his care and applying for Medicaid on his behalf. The hospital might get 50 cents back for every dollar they spent. (They spent on doctors; nurses, medications; EMR bill, case management, etc.).
This guy will essentially come back 5-6 times per year. With negative margins every time because that’s how Medicaid is designed.
2nd scenario is a 70 year old with a knee replacement surgery and great insurance Medicare + supplemental. He spend a day and half in the hospital and the money that his insurance paid, would be ~130-150% cost of care.
Average everything out; and you end up with 3-6% margins.
Obviously, salaries are big part of the cost. So, perhaps the margins will be better if the CEO is paid less. But, overall its a low-margin business because the biggest payers are Medicaid and Medicare and they more or less pay whatever they want via legislative means.
Are you saying medicare/medicaide are net-negative? Is so, what prevents hospitals from refusing to accept them?
I suspect they don't because it's not financially solvent to do so, given the number of patients who use those services. That on it's face seems to bring into question the claim that they are net-negative (whether that's due to legislation or other means).
I suspect they don't because it's not financially solvent to do so, given the number of patients who use those services. That on it's face seems to bring into question the claim that they are net-negative (whether that's due to legislation or other means).
At least on paper they are net-negative. If you look at a Schedule H of IRS Form 990 they report huge shortfalls from Medicare/Medicaid. This I think helps them claim "community benefit expense".
Example Form 990 (search inside for Schedule H): https://my.clevelandclinic.org/-/scassets/files/org/about/fi...
See also page 8 of this pdf: https://www.aha.org/system/files/media/file/2023/10/Results-...
Example Form 990 (search inside for Schedule H): https://my.clevelandclinic.org/-/scassets/files/org/about/fi...
See also page 8 of this pdf: https://www.aha.org/system/files/media/file/2023/10/Results-...
Thanks for sharing that. Do you happen to know how they calculate the "community benefit expense" that creates the shortfall?
My understanding is that medical billing is inflated so they can anchor a high value to help in their negotiations with medical insurance. I'm wondering if this is the medicare adjusted value (i.e., what medicare says the procedures are worth) or the artificially inflated value?
My understanding is that medical billing is inflated so they can anchor a high value to help in their negotiations with medical insurance. I'm wondering if this is the medicare adjusted value (i.e., what medicare says the procedures are worth) or the artificially inflated value?
Hospitals are required by EMTALA[1] to treat all emergencu patients to the point of stabilization. So it only makes sense to charge whatever insurance is available because there is no turning them away. Im not sure if there are regulations applicable to hospitals that prevent them from refusing to accept medicaid patients for elective procedures. Certaibly there are lots of surgery centers that do refuse medicaid. Also lots of doctors dont take medicaid/medicare. Its within their right to do so.
[1]: https://en.m.wikipedia.org/wiki/Emergency_Medical_Treatment_...
[1]: https://en.m.wikipedia.org/wiki/Emergency_Medical_Treatment_...
You're right with regard to emergency treatment; so in the case of the withdrawal patient that holds. But hospitals are not required to accept any insurance, including medicare/aide (they are termed "non-participating"). So I don't think the premise holds in the knee-replacement scenario.
So, to be generous, maybe there's a case that if a hospital gets a bulk of its revenue from the ER, it's a better business case to accept Medicare. But I don't believe that's the case for most hospitals, so it still leads me to question the premise that medicare is a net negative (or else we'd see a lot more 'non-participating' hospitals).
So, to be generous, maybe there's a case that if a hospital gets a bulk of its revenue from the ER, it's a better business case to accept Medicare. But I don't believe that's the case for most hospitals, so it still leads me to question the premise that medicare is a net negative (or else we'd see a lot more 'non-participating' hospitals).
So you are suggesting that costs are primarily set by how much the government is willing to pay, and are completely independent of medical production?
I think you are right to be suspicious. For example, back when I lived in the US and went for a checkup at a big hospital in NY: first there were greeters at the entrance of the building, then a greeter on the right floor, then a small army of receptionists, then a nurse, then a PA, then the doctor. All these are expenses. Are they necessary? Here in France there is, maybe, a receptionist that sends me to the office where the doctor does everything, including billing. (Frankly, both ways seem a bit extreme.)
> Here in France there is, maybe, a receptionist that sends me to the office where the doctor does everything, including billing.
If the doctor is making an order of magnitude more for their time than the receptionist, it's far more effective to have more receptionists for the work either of them could do.
If the doctor is making an order of magnitude more for their time than the receptionist, it's far more effective to have more receptionists for the work either of them could do.
In principle yes, but the overhead of having an extra person is big. The extra effort done by the doctor is small, especially since a lot of stuff is automated and works well (like appointments and integration with the state insurance). Yes, I was surprised too.
The trick is to pay doctors less, a country can easily lower doctor salaries by educating more doctors, there is no lack of people who want to be doctors.
As I understand it, "educating more doctors" in the US is a lot more complicated than it sounds. There's a number of different organizations involved, each setting their own limits for their "step" of the process; and there's motivation to not increase the throughput.
The supply of MDs & DOs has been kept very low compared to our population growth. The US ends up poaching Drs from around the world. But the actual biggest cost in our medical system is the excessive high administration costs, above the Medicare admin level of 3% it's about 27-29% extra with private insurance and the medical billing side. We have about 27% uninsured. The money is there and going single payer would create savings by delaying lag to care, it would increase preventive care and have a lot of second order savings like with liability insurance. The estimates are at least 3/4 of Americans would save money the first year.
I believe it is common for the greeters to be vounteers
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>It’s a non-profit largely funded by tax payers.
Is it actually government funded, or does it sell services which the government pays for?
I dont know if it is Baader–Meinhof phenomenon, but it seems like I increasingly see funded used to describe revenue for services rendered.
It seems like a bit of a bait and switch, because the word funded often carries come connotation of ownership, obligation, or charity.
Is it actually government funded, or does it sell services which the government pays for?
I dont know if it is Baader–Meinhof phenomenon, but it seems like I increasingly see funded used to describe revenue for services rendered.
It seems like a bit of a bait and switch, because the word funded often carries come connotation of ownership, obligation, or charity.
Both. The govt gives them a break on taxes. They also pay the hospital thru Medicare and Medicaid.
I wouldn't call either of those funding in the sense I described.
I'm not sure the latter holds. That's like saying grocery stores are "government funded" because they take food stamps - or for that matter, that private retirement homes are "government funded" because the retirees get their income from Social Security.
And for that matter, the former definitely doesn't hold, because nearly every entity gets some tax break. Every homeowner is "government funded".
And for that matter, the former definitely doesn't hold, because nearly every entity gets some tax break. Every homeowner is "government funded".
Isn't the Medicare payment less than the hospital gets giving the same treatment to somebody with private health insurance?
>>Is it actually government funded,
Maybe indirectly. As a charity they get lots of benefits that allows them to save money.
Maybe indirectly. As a charity they get lots of benefits that allows them to save money.
Not taxing money =/= giving money.
Some of the impacts are identical, but they have other fundamental differences.
I pay less than 100% tax, but I wouldn't say that the government is funding my lifestyle
Some of the impacts are identical, but they have other fundamental differences.
I pay less than 100% tax, but I wouldn't say that the government is funding my lifestyle
If you see cranes outside of a non-profit hospital you know they are not hurting.
Aren’t hospitals being nonprofit just in name only? They do it for tax purpose, not for charity.
501.3(c) exemptions for Hospitals require charity is why it comes up.
Non-profits are required to provide community benefits to preserve their tax free status.
Community benefits for hospitals are about promoting community health.
https://www.irs.gov/charities-non-profits/charitable-hospita...
Non-profits are required to provide community benefits to preserve their tax free status.
Community benefits for hospitals are about promoting community health.
https://www.irs.gov/charities-non-profits/charitable-hospita...
There is a not-for-profit designation as well, which has different requirements, and hospitals can be either of those or for-profit (and probably more)
Do people believe that "nonprofit" is a category related to benevolence? It's just an accounting and corporate structure difference.
Yes. And we should eliminate nonprofits entirely:
1. Churches, hospitals et al should all pay taxes just as do other corporations. They are built on the same social structure as other entities, have the same protection of government and benefit from the social system. I pay; so should they.
2. Campaign Finance Reform:
Secondly, laws should be changed so that corporations are no longer "persons". That is Citizens_United_v._FEC should be revoked.:
https://en.wikipedia.org/wiki/Citizens_United_v._FEC
Then only real people and not corporations could put money into campaigns/politics. Otherwise, in the near future (if not already) people will cease to be true participants.
1. Churches, hospitals et al should all pay taxes just as do other corporations. They are built on the same social structure as other entities, have the same protection of government and benefit from the social system. I pay; so should they.
2. Campaign Finance Reform:
Secondly, laws should be changed so that corporations are no longer "persons". That is Citizens_United_v._FEC should be revoked.:
https://en.wikipedia.org/wiki/Citizens_United_v._FEC
Then only real people and not corporations could put money into campaigns/politics. Otherwise, in the near future (if not already) people will cease to be true participants.
> I pay; so should they.
I feel like that's oversimplifying the distinction between a non-profit and us?
If we donate all of our income to charity, we don't pay taxes. That's because taxes are used to incentivize and disincentivize specific behaviors. We, as a society, want cheaper healthcare for people -- especially those who can't afford it. That means incentivizing hospitals (via tax) to help those people.
I'm up for a removing non-profit status from hospitals if we otherwise pay for people's healthcare, but nobody really seems to be making progress there.
(I'm not addressing your comments on campaign finance because I agree with you that it's broken and I think it's off-topic for this thread.)
I feel like that's oversimplifying the distinction between a non-profit and us?
If we donate all of our income to charity, we don't pay taxes. That's because taxes are used to incentivize and disincentivize specific behaviors. We, as a society, want cheaper healthcare for people -- especially those who can't afford it. That means incentivizing hospitals (via tax) to help those people.
I'm up for a removing non-profit status from hospitals if we otherwise pay for people's healthcare, but nobody really seems to be making progress there.
(I'm not addressing your comments on campaign finance because I agree with you that it's broken and I think it's off-topic for this thread.)
> I pay; so should they.
They don't pay and neither should you.
Why is it that when people are oppressed, their biggest desire is never to be free, but to see others suffer the same as them?
They don't pay and neither should you.
Why is it that when people are oppressed, their biggest desire is never to be free, but to see others suffer the same as them?
b/c taxation of citizens by a government has, in most cases, proven to be necessary. I don't view that as necessarily oppressive. I'm just saying "everyone should pay".
And given a choice between no government and government I would usually prefer a government.
And given a choice between no government and government I would usually prefer a government.
Likewise with philanthropic foundations
There is some kind of cartel in the health care industry. They are absolutely not going to pay nurses more, and they are absolutely going to keep staffing at the minimum level. There is some kind of gentleman's agreement to not compete for labor. If everyone is paying 'market rate' and they all seem to know exactly what that rate is, there is collusion.
Maybe cartel is a strong word, but there are many states in the US where, in order to operate a medical facility or provide a service, you must get permission from all of the existing facilities in the locality: https://en.wikipedia.org/wiki/Certificate_of_need
This extends to even purchasing medical equipment.
This extends to even purchasing medical equipment.
Labor's finally waking up to this; the nurses at my area's second-largest hospital just unionized last year and won a hard-fought contract this week.
https://nurse.org/articles/nurse-strikes-list/ (Nurse Strike Updates 2023, Full List)
https://medcitynews.com/2023/07/pandemic-nurse-labor-union-w... ("Nurse unions and labor experts agree that the pandemic was a turning point that catalyzed nurses to fight for improved working conditions and overall better treatment from their employers. By negotiating new contracts with their employers, unions are working hard to both uphold patient safety and mitigate the nursing field’s debilitating workforce shortage.")
https://www.incrediblehealth.com/blog/state-nurses-unions/ ("A Comprehensive Guide of State-by-State Nursing Unions")
https://medcitynews.com/2023/07/pandemic-nurse-labor-union-w... ("Nurse unions and labor experts agree that the pandemic was a turning point that catalyzed nurses to fight for improved working conditions and overall better treatment from their employers. By negotiating new contracts with their employers, unions are working hard to both uphold patient safety and mitigate the nursing field’s debilitating workforce shortage.")
https://www.incrediblehealth.com/blog/state-nurses-unions/ ("A Comprehensive Guide of State-by-State Nursing Unions")
It would be nice if medical residents would unionize and force hospitals to stop using long hours (sometimes 24 hour or longer shifts) to haze them with sleep deprivation. This sleep deprivation results in medical errors that injure/kill patients, and also mades medical residents more likely to have car crashes when driving home after their shift.
That's great news. I know quite a few nurses where I live, and they are being fed the anti-union propaganda from their employers. The hospital industry around here is getting nervous, they have been quite comfortable for a while. Unfortunately, the nurses don't seem to want the union, even though it will practically double their wages overnight.
Oh yeah, the hospital's anti-union posters were quite something; just transparently bullshit/misleading. Stuff like "your union can't promise you a raise!" - well, neither is the hospital.
Isn’t Mozilla a non-profit?
The CEO also reaps millions.
And I bet it is much harder running a health care system than it is running Mozilla.
The CEO also reaps millions.
And I bet it is much harder running a health care system than it is running Mozilla.
The Mozilla Foundation[0] is a non-profit, the Mozilla Corporation[1] is not.
[0]https://en.wikipedia.org/wiki/Mozilla_Foundation
[1]https://en.wikipedia.org/wiki/Mozilla_Corporation
[0]https://en.wikipedia.org/wiki/Mozilla_Foundation
[1]https://en.wikipedia.org/wiki/Mozilla_Corporation
And? Do you mean to imply it's OK for Mozilla and thus there is a double standard?
But who said it was OK for Mozilla?
And even if someone does want to say it's OK for Mozilla, you could argue that Mozilla doesn't put anyone in the position of choosing destitution or death, and Mozilla's millions come from Google who gets it from advertisers, while the hospitals millions are practically blood diamonds.
But who said it was OK for Mozilla?
And even if someone does want to say it's OK for Mozilla, you could argue that Mozilla doesn't put anyone in the position of choosing destitution or death, and Mozilla's millions come from Google who gets it from advertisers, while the hospitals millions are practically blood diamonds.
This is true for Blue Shield also. They're all non profits and many, like Blue Shield if California are complete disasters. Blue shield of California has a lower review on Yelp than the San Francisco DMV
I don't understand at all why people donate money or volunteer at hospitals like it's a charity or charity work. It really doesn't seem like a charity to me.
It makes them feel good and (if you're a big enough donor) you can get your name on a plaque or building.
And I daresay if you're a big enough donor you're going to get pretty darn good treatment.
And I daresay if you're a big enough donor you're going to get pretty darn good treatment.
CEO salaries should be understood in relationship to the resources that they control. For example, this CEO chose to spend $85M on travel nurses to counter the union strike happening at a hospital in their network. Presumably the CEO thinks that this gamble is worth it in forcing the union’s hand.
That may be a terrible decision, but it shows the extent of resources a CEO of a $6bn organization commands. This is one choice out of tens to hundreds of 8-figure choices that this “super manager” will make in a year.
If you’re on the board of an organization like that, settling for a second-best CEO to save a 7-figure sum just doesn’t make sense.
I raise this for two reasons:
1) I find that people have no concept of how to consider whether or not executive pay is reasonable. One of my neighbors was outraged that our Mayor makes $450k. “Could she really be working 6x harder than me?” But our mayor oversees thousands of employees and makes decisions that influence hundreds of millions of dollars of spending. I’d consider her quite underpaid in proportion to what she manages.
2) Shaming organizations into lowering exec comp probably won’t work: there’s a strong economic incentive to pay competitively. Just bend the income tax contribution curve so that individuals who make more continue to pay more.
That may be a terrible decision, but it shows the extent of resources a CEO of a $6bn organization commands. This is one choice out of tens to hundreds of 8-figure choices that this “super manager” will make in a year.
If you’re on the board of an organization like that, settling for a second-best CEO to save a 7-figure sum just doesn’t make sense.
I raise this for two reasons:
1) I find that people have no concept of how to consider whether or not executive pay is reasonable. One of my neighbors was outraged that our Mayor makes $450k. “Could she really be working 6x harder than me?” But our mayor oversees thousands of employees and makes decisions that influence hundreds of millions of dollars of spending. I’d consider her quite underpaid in proportion to what she manages.
2) Shaming organizations into lowering exec comp probably won’t work: there’s a strong economic incentive to pay competitively. Just bend the income tax contribution curve so that individuals who make more continue to pay more.
We don’t adjust salary for what proportions people manage or are responsible for in a lot of other fields, at least not to the same extend. And especially if we would go by responsibility. I earn about 3 times as much as the average school teacher in my home town and about 4 times as much as the people driving the buses there while I sit in front of my screen and fix irrelevant css bugs or spin up the next semi-useful microservice for a cross financed project that nobody really cares about except and that doesn’t really help anybody.
Their responsibility and utility is much greater than mine. If they fuck up it has much larger and potentially grave consequences. If I fuck up there will be a Jira ticket and a semi-interested PM who will assign it to me 3 weeks down the line.
Furthermore this relation does not automatically imply fairness. And on the outside it also appears very asymmetric in personal risk. A megacorp CEO might tank the entire company and can often still walk away with millions.
So if we wanted a “fairness” optimized solution then maybe it should take into account the public utility, difficulty of the job, amount of work required and personal risk. And maybe, (just maybe) we don’t need anyone being arbitrarily wealthy and having more assets than some developing countries.
I think it is a misunderstanding that the job market is optimizing for fairness: it is not.
Executive pay is supply and demand. The mayor is being paid $450k because a person with the necessary skills was willing to take that salary (after fighting off opponents) to become mayor. Mayor comes with prestige, so more people want to be mayor, and $450k is not a terrible incentive to go after. If the government paid $80k a year, no one would become mayor. If they paid $1m a year, too many qualified people might be interested, or – the right people might become interested.
Imagine you’re a CEO who successfully ran and sold a business for $250m. You now have at least $25m. Why would you ever want to work an intense job again? Being CEO is exhausting.
Executives are paid a lot of money because they’ve already made a lot of money: if you want to incentivize them there has to actually be something at stake.
That said, these decisions are usually made by a board, which is small and has limited knowledge.
There is plenty of room for them to miscalibrate, too, but paying too much for an executive is bad business. Paying too little is, too.
Executive pay is supply and demand. The mayor is being paid $450k because a person with the necessary skills was willing to take that salary (after fighting off opponents) to become mayor. Mayor comes with prestige, so more people want to be mayor, and $450k is not a terrible incentive to go after. If the government paid $80k a year, no one would become mayor. If they paid $1m a year, too many qualified people might be interested, or – the right people might become interested.
Imagine you’re a CEO who successfully ran and sold a business for $250m. You now have at least $25m. Why would you ever want to work an intense job again? Being CEO is exhausting.
Executives are paid a lot of money because they’ve already made a lot of money: if you want to incentivize them there has to actually be something at stake.
That said, these decisions are usually made by a board, which is small and has limited knowledge.
There is plenty of room for them to miscalibrate, too, but paying too much for an executive is bad business. Paying too little is, too.
I should have been more clear on what I mean: I am well aware that the job market is not optimizing for fairness but that is what people often judge situations on.
I do understand how it came to all of this and how the situation is justified but just posed that if we turned our back to completely free markets and imagined a structure based on "fairness" then things should probably be different.
Furthermore I disagree with the argument that nobody would want to work an intense job while being "underpaid". Plenty of labor is really intense and pays minimum wage or barely over.
I do understand how it came to all of this and how the situation is justified but just posed that if we turned our back to completely free markets and imagined a structure based on "fairness" then things should probably be different.
Furthermore I disagree with the argument that nobody would want to work an intense job while being "underpaid". Plenty of labor is really intense and pays minimum wage or barely over.
> If the government paid $80k a year, no one would become mayor.
I very much doubt this. New Hampshire legislators get $100/year, since 1889. Still plenty interested in the job.
I very much doubt this. New Hampshire legislators get $100/year, since 1889. Still plenty interested in the job.
Yeah, I would do public service for free, personally, but I have the means to.
It’s an interesting filter to pay nothing, for sure! At that point, it is filtering for people who can afford their own lifestyles without a job
It’s an interesting filter to pay nothing, for sure! At that point, it is filtering for people who can afford their own lifestyles without a job
> That said, these decisions are usually made by a board, which is small and has limited knowledge.
The board is usually made up of other executives or former executives. This group sets each others salaries unlike all other professional categories.
The board is usually made up of other executives or former executives. This group sets each others salaries unlike all other professional categories.
As far as I can tell, CEO remunerations are determined by "the going rate"; and the directors on the remuneration committee are fine with that, because they're also CEOs for some other firm, or hope to be. So the going rate goes up, up, up.
Now, here in the UK, the remuneration of University heads (Principal, Master, Dean, or whatever title) are having their pay determined by the going rate for CEOs. These are people who do the job for a couple of days a week; they aren't exactly struggling to get on top of the workload. Same for the bosses of the jungle of pseudo-companies that make up the modern NHS; they're all basically employed by the taxpayer. They've employed so many managers that their organizations are hopelessly top-heavy, and yet they need huge remuneration.
Can they not delegate? I thought the ability to delegate was an essential skill for any manager.
Now, here in the UK, the remuneration of University heads (Principal, Master, Dean, or whatever title) are having their pay determined by the going rate for CEOs. These are people who do the job for a couple of days a week; they aren't exactly struggling to get on top of the workload. Same for the bosses of the jungle of pseudo-companies that make up the modern NHS; they're all basically employed by the taxpayer. They've employed so many managers that their organizations are hopelessly top-heavy, and yet they need huge remuneration.
Can they not delegate? I thought the ability to delegate was an essential skill for any manager.
If executive pay is supply and demand, and has risen stratospherically over the past 40 years, why has the supply of executives failed to meet demand for them? Are we not sending enough people to MBA school? Is there a funnel problem in our educational system? Do we need to open up more opportunities for skilled immigrants to work here in executive roles?
The US has terrible cost disease in a lot of industries, and I would lump executive compensation in with those industries.
I don’t think I’ve seen a good coherent theory for this specifically
I don’t think I’ve seen a good coherent theory for this specifically
> CEO salaries should be understood in relationship to the resources that they control.
Why? In every other case we’re told wages are set by how much it takes to get someone who can do the job to accept the position. What the company gets out of that person’s work sets a cap on potential compensation, but doesn’t set the actual amount paid.
Why? In every other case we’re told wages are set by how much it takes to get someone who can do the job to accept the position. What the company gets out of that person’s work sets a cap on potential compensation, but doesn’t set the actual amount paid.
Because understanding CEO pay as a product of organization incentives shows just how futile shaming companies into lower CEO pay is. Just tax the CEOs more and let companies pay what they want.
> If you’re on the board of an organization like that, settling for a second-best CEO to save a 7-figure sum just doesn’t make sense.
The idea that boards can effectively determine between first-best and second-best just doesn't make sense to me. Ranking job candidates is hard enough in much simpler circumstances.
The idea that boards can effectively determine between first-best and second-best just doesn't make sense to me. Ranking job candidates is hard enough in much simpler circumstances.
I have no illusions that they succeed, I can just tell you that they have a strong incentive to not price discriminate.
>But our mayor oversees thousands of employees
Chances are they engage with much less and obviously don't have interactions with thousands of people and are keeping all of that straight in their head, so this is not a good reason.
You don't get credit because you oversaw a public worker whom you've never engaged with.
>makes decisions that influence hundreds of millions of dollars of spending
They also have access to (sometimes) smart people to filter through information and distill it down for them which is honestly the hardest part, not the decision making. It is unlikely they are compensated compared to the work they put in.
I'm not saying the job is easy, but they aren't doing it all themselves and the core problem is that the people underneath them are probably making no where near $450k. Salary just doesn't correlate to actual effort these days.
That said, $450k for a mayor is fine. Someone who can become a mayor can easily be a corporate executive making millions.
Chances are they engage with much less and obviously don't have interactions with thousands of people and are keeping all of that straight in their head, so this is not a good reason.
You don't get credit because you oversaw a public worker whom you've never engaged with.
>makes decisions that influence hundreds of millions of dollars of spending
They also have access to (sometimes) smart people to filter through information and distill it down for them which is honestly the hardest part, not the decision making. It is unlikely they are compensated compared to the work they put in.
I'm not saying the job is easy, but they aren't doing it all themselves and the core problem is that the people underneath them are probably making no where near $450k. Salary just doesn't correlate to actual effort these days.
That said, $450k for a mayor is fine. Someone who can become a mayor can easily be a corporate executive making millions.
Curious to know, what threshold would not be fine and how did you get there? My point is that you’re implicitly using the same method most exec comp committees use to set CEO salaries.
Frankly, I think this sort of thinking is wrong almost all of the time. I understand why hiring boards feel they have no choice, but the reality is, outside of maybe 15 people from the past century, there are no clear number ones and number twos. Talent ranking just isn't that accurate. Pro sports has exactly the same problem. If you happen to actually get a LeBron James or Shohei Ohtani, then yeah, they absolutely deserve probably 50 times what they'll ever actually get paid. They're worth more than the rest of the team combined.
But if you don't have them, you're locking yourself into a supermax contract for Russell Westbrook or John Wall and scuttled your franchises hopes of winning for at least the next decade until you get the balls to suck it up and blow up the entire organization and admit you were wrong.
A tiny number of elite individuals are legitimately worth all the damn money in the world, but they're nearly impossible to identify in advance. But that promise sucks in the money men to pay these ridiculous salaries out of sheer hope that maybe they'll strike gold even though they almost never do. Hell, it's even worse in business because someone can just get lucky for a really long time. Market conditions you didn't even see coming might nonetheless make you look like a genius just for making a correct guess. At least in sports the winners are actually the best at what they do.
But if you don't have them, you're locking yourself into a supermax contract for Russell Westbrook or John Wall and scuttled your franchises hopes of winning for at least the next decade until you get the balls to suck it up and blow up the entire organization and admit you were wrong.
A tiny number of elite individuals are legitimately worth all the damn money in the world, but they're nearly impossible to identify in advance. But that promise sucks in the money men to pay these ridiculous salaries out of sheer hope that maybe they'll strike gold even though they almost never do. Hell, it's even worse in business because someone can just get lucky for a really long time. Market conditions you didn't even see coming might nonetheless make you look like a genius just for making a correct guess. At least in sports the winners are actually the best at what they do.
I completely agree that it’s a crap-shoot, but again from the perspective of a board they’d rather cover their bases and over pay. Especially when this compensation is a fractional percent of the company’s revenue.
The other factor is that when you’re on an exec search team, you just look at other executives in the same industry. There might only be 5-10 total that have similar qualifications and are in your comp range. The core issue is that power and relationships within a given industry are typically very concentrated so there’s a limited pool to draw from if you want an exec (and most boards do) who brings that.
The other factor is that when you’re on an exec search team, you just look at other executives in the same industry. There might only be 5-10 total that have similar qualifications and are in your comp range. The core issue is that power and relationships within a given industry are typically very concentrated so there’s a limited pool to draw from if you want an exec (and most boards do) who brings that.
I think in this context second-best CEO is euphemism for crook. Having those could be a multi-billion dollar liability.
This all may be true, but it doesn't change the fact that I have no interest in donating my money to an organization that is going to give a sizable chunk of it to some rich CEO rather than the people that I'm trying to donate to.
Even public money goes to such charities.
https://www.sfchronicle.com/sf/article/CEO-of-S-F-nonprofit-...
https://www.sfchronicle.com/sf/article/CEO-of-S-F-nonprofit-...
Sounds like some pretty solid market effects.
You’re donating to rwbj? Why? That’s dumb af. It’s like donating to IKEA because it’s owned by a non profit. It’s a business that has exploited a regulatory system.
The only reason you’d donate to this hospital or Harvard or any other such exploits is if you think it’ll get you something: earlier treatment, admissions for your kids and so on.
If you want that and you know the game and you want the CEO to be paid less I don’t know what to say.
The only reason you’d donate to this hospital or Harvard or any other such exploits is if you think it’ll get you something: earlier treatment, admissions for your kids and so on.
If you want that and you know the game and you want the CEO to be paid less I don’t know what to say.
The argument that this is simply the market rate required to attract a person with the required skills can be proven false in so many ways, for example:
1. It's not a market, there is no job advertisement for the CEO role that the general population can apply for. If there were, and if it were to offer a fraction of "market", there would still be thousands of applications, and the top 1% of those candidates would absolutely do the job as well or better than the typical hand-picked candidate.
2. There are several roles in society that place enormous responsibility on those professionals and that only a handful of people in the world can do well, yet those jobs still pay low 6figures max. For example, nuclear engineer, aerospace engineer, state leader, and yes, ironically, most public hospital directors.
The sad reality is that executive pay is simply a result of incentives and the fact that corporate hierarchy gets very thin at the top. It has no relation to the competence or direct value-added of the executive.
1. It's not a market, there is no job advertisement for the CEO role that the general population can apply for. If there were, and if it were to offer a fraction of "market", there would still be thousands of applications, and the top 1% of those candidates would absolutely do the job as well or better than the typical hand-picked candidate.
2. There are several roles in society that place enormous responsibility on those professionals and that only a handful of people in the world can do well, yet those jobs still pay low 6figures max. For example, nuclear engineer, aerospace engineer, state leader, and yes, ironically, most public hospital directors.
The sad reality is that executive pay is simply a result of incentives and the fact that corporate hierarchy gets very thin at the top. It has no relation to the competence or direct value-added of the executive.
I don’t agree on your first point. I do think power and talent is highly consolidated among a small number of executives. Especially when you look at (as most boards do) executives within a specific industry vertical.
That’s not to say those people guarantee success, but it is less of a risk than picking someone unknown and without the established network and direct relevant experience.
Again all this to say I don’t think shaming companies into paying less will work, we should just tax CEOs more and let companies pay what they want.
That’s not to say those people guarantee success, but it is less of a risk than picking someone unknown and without the established network and direct relevant experience.
Again all this to say I don’t think shaming companies into paying less will work, we should just tax CEOs more and let companies pay what they want.
> That may be a terrible decision, but it shows the extent of resources a CEO of a $6bn organization commands. This is one choice out of tens to hundreds of 8-figure choices that this “super manager” will make in a year.
This argument sounds a lot like it doesn't matter what decisions they make as long as they're in charge of a lot of capital.
> If you’re on the board of an organization like that, settling for a second-best CEO to save a 7-figure sum just doesn’t make sense.
If this is the only thing checking bad decisions, we have to consider that when there's a little oligarchy of buddies controlling an immense concentration of capital deciding each other's compensation, there are different market forces at work.
This argument sounds a lot like it doesn't matter what decisions they make as long as they're in charge of a lot of capital.
> If you’re on the board of an organization like that, settling for a second-best CEO to save a 7-figure sum just doesn’t make sense.
If this is the only thing checking bad decisions, we have to consider that when there's a little oligarchy of buddies controlling an immense concentration of capital deciding each other's compensation, there are different market forces at work.
If we measure a leader's potential value by their potential impact/damage radius, then it follows that their actual pay should be proportional to the actual impact/damage they cause. The problem here is that leaders seem to be compensated in proportion to their impact, but not penalised in proportion to their damage, even when their success is indistinguishable from chance.
I agree with you. I’m not sure what the enforcement mechanism would be though. Boards suing CEOs more frequently over negligence? CEOs buying a certain amount of equity in a company before they join?
CEOs are highly leveraged. One wrong bet could cost the company/employees/shareholders more than a CEO (even a multi-millionaire) could repay.
In reality this leaves the board with recouping maybe a few million from the CEO on a shortfall that may be orders of magnitude bigger. I think pragmatically most boards just move on, let the CEO take the reputations hit, and focus on trying to find someone better.
CEOs are highly leveraged. One wrong bet could cost the company/employees/shareholders more than a CEO (even a multi-millionaire) could repay.
In reality this leaves the board with recouping maybe a few million from the CEO on a shortfall that may be orders of magnitude bigger. I think pragmatically most boards just move on, let the CEO take the reputations hit, and focus on trying to find someone better.
>If you’re on the board of an organization like that, settling for a second-best CEO to save a 7-figure sum just doesn’t make sense.
You're falsely associating higher pay with performance, when oftentimes they can be inversely correlated.
https://www.wsj.com/public/resources/documents/CEOperformanc...
https://www.gsb.stanford.edu/insights/when-ceos-are-paid-bad...
https://www.epi.org/blog/ceo-pay-still-not-related-to-perfor...
You're falsely associating higher pay with performance, when oftentimes they can be inversely correlated.
https://www.wsj.com/public/resources/documents/CEOperformanc...
https://www.gsb.stanford.edu/insights/when-ceos-are-paid-bad...
https://www.epi.org/blog/ceo-pay-still-not-related-to-perfor...
I didn’t say anything about performance. What I said is that it’s untenable for a board to penny-pinch a few million dollars for someone managing orders of magnitude more in resources.
A board gains nothing from pointing to a 2005 Stanford GSB blog post if a CEO they hired runs the company into the ground.
Again, all this to say we should just tax CEOs more and let companies pay what they want.
A board gains nothing from pointing to a 2005 Stanford GSB blog post if a CEO they hired runs the company into the ground.
Again, all this to say we should just tax CEOs more and let companies pay what they want.
>second-best
Your performance comment is right there. What else is "second-best" other than a comment on performance?
Your performance comment is right there. What else is "second-best" other than a comment on performance?
settling for a second-best CEO [..] doesn’t make sense
Is there any indication that the CEO was premier tier other than the size of his compensation package?
Is there any indication that the CEO was premier tier other than the size of his compensation package?
Odd, when I complain that my salary should be higher because of the impact the work I do makes, they don't raise my salary.
> This is one choice out of tens to hundreds of 8-figure choices that this “super manager” will make in a year.
I had heard the opposite — from Steve Jobs no less. It was an interview I believe (sorry, no source) where he said executives at the top maybe made 6 decisions a year.
For Jobs, to be sure, these decisions are like, "Apple is going to start a chain of retail stores".
I had heard the opposite — from Steve Jobs no less. It was an interview I believe (sorry, no source) where he said executives at the top maybe made 6 decisions a year.
For Jobs, to be sure, these decisions are like, "Apple is going to start a chain of retail stores".
I like to consider CEO salaries by the amount they’re getting paid, per employee in the company.
There was a bunch of complaining recently about GM CEO Mary Barra, whose annual compensation is around $30M. GM has around 167,000 employees, so this corresponds to about $180 per employee.
The average employee compensation at GM is around $100,000 per year.
I wonder, did each employee get more than $180 of value from Mary Barra’s leadership?
There was a bunch of complaining recently about GM CEO Mary Barra, whose annual compensation is around $30M. GM has around 167,000 employees, so this corresponds to about $180 per employee.
The average employee compensation at GM is around $100,000 per year.
I wonder, did each employee get more than $180 of value from Mary Barra’s leadership?
I like this as a more precise back-of-the napkin method than what I articulated. I’m not up-to-date with GM and Barra’s tenure.
What I can say is that I’ve personally seen bad leadership teams cost employees much more than $180/year. As a board, it’s hard to look at that prospect and and go cheap on someone with the potential to destroy or create that much wealth.
What I can say is that I’ve personally seen bad leadership teams cost employees much more than $180/year. As a board, it’s hard to look at that prospect and and go cheap on someone with the potential to destroy or create that much wealth.
That's a great way to look at it as well.
We shouldn't have unelected individuals making choices that have such a high impact on society in the first place. You've detailed the mechanisms behind their high pay, but that is far from justifying it.
I think we should have withheld the theory of relativity because it eventually led to weapons of mass destruction. At least pending a vote of electing Einstein to be a scientist and a subsequent vote on publishing the theory.
The CEO is elected by the board and the board is elected by the shareholders.
> settling for a second-best CEO to save a 7-figure sum just doesn’t make sense.
Really? You expect the CEO to make all significant decisions, all on his own? No wonder you think the CEO of a billion-dollar company needs a 7-digit salary.
I think the main job of CEO is to appoint useful directors, and promote competent managers. That's certainly a challenging job; but it's a job you can learn, like any management job. I'd even agree that most people are unsuited to that work, as most people are unsuited to any kind of management.
But it doesn't call for some kind of superstar, a one-off snowflake "talent".
> But our mayor oversees thousands of employees and makes decisions that influence hundreds of millions of dollars of spending.
Right; arguably your Mayor might be worth $450K. I'd be upset about my representative being paid that much out of scarce public funds; but that's not even in the same ballpark as the going rate for the CEO of a billion-dollar company.
Really? You expect the CEO to make all significant decisions, all on his own? No wonder you think the CEO of a billion-dollar company needs a 7-digit salary.
I think the main job of CEO is to appoint useful directors, and promote competent managers. That's certainly a challenging job; but it's a job you can learn, like any management job. I'd even agree that most people are unsuited to that work, as most people are unsuited to any kind of management.
But it doesn't call for some kind of superstar, a one-off snowflake "talent".
> But our mayor oversees thousands of employees and makes decisions that influence hundreds of millions of dollars of spending.
Right; arguably your Mayor might be worth $450K. I'd be upset about my representative being paid that much out of scarce public funds; but that's not even in the same ballpark as the going rate for the CEO of a billion-dollar company.
I’m engaging in good faith, no need for ad-homonyms.
No, I do not expect a CEO to make those decisions on their own. They also usually bring a team (or make choices about who to keep/remove). So even if they’re not deciding directly, they’re only a step or two removed. Many of the multi-million dollar bets being placed might just be on who to hire to make a decision and execute.
Incidentally, those key hires are often why CEOs command such a price. Their price simply reflects that power in human networks is highly consolidated. CEOs absolutely leverage their position as gatekeepers here.
All this to say why I don’t think we’ll be successful in curbing CEO pay, and should instead just focus on taxation.
No, I do not expect a CEO to make those decisions on their own. They also usually bring a team (or make choices about who to keep/remove). So even if they’re not deciding directly, they’re only a step or two removed. Many of the multi-million dollar bets being placed might just be on who to hire to make a decision and execute.
Incidentally, those key hires are often why CEOs command such a price. Their price simply reflects that power in human networks is highly consolidated. CEOs absolutely leverage their position as gatekeepers here.
All this to say why I don’t think we’ll be successful in curbing CEO pay, and should instead just focus on taxation.
No "ad-homonym" (I like that version!) I didn't attack you, I critiqued your remarks (you can tell, because I cited them).
There is an ongoing scam that pushes C-suite pay ever higher, and it needs to stop.
It builds on exactly the reasoning you lay out, and goes something like this:
- "We need the best CEO we can find. We have to understand how to set compensation to attract them."
- So the board hires an executive compensation consultant.
- "If you want better than average, you have to pay above average." So they target something like 85th percentile compensation for their market.
- No board goes into an executive search saying "We want a mediocre CEO, so we'll pay below market." Over time, executive compensation ratchets upwards everywhere. <- YOU ARE HERE
It builds on exactly the reasoning you lay out, and goes something like this:
- "We need the best CEO we can find. We have to understand how to set compensation to attract them."
- So the board hires an executive compensation consultant.
- "If you want better than average, you have to pay above average." So they target something like 85th percentile compensation for their market.
- No board goes into an executive search saying "We want a mediocre CEO, so we'll pay below market." Over time, executive compensation ratchets upwards everywhere. <- YOU ARE HERE
Did you not see my point about taxation?
I did. That's ridiculous. A classic example of attempting to divert blame while saying, "don't like it? Make me stop."
But perhaps I'm wrong; if a similar confluence of policy and supply conspired to enable a similar scam that pushed programmer compensation ever upwards, would you say that the proper solution to that problem would also be tax policy?
But perhaps I'm wrong; if a similar confluence of policy and supply conspired to enable a similar scam that pushed programmer compensation ever upwards, would you say that the proper solution to that problem would also be tax policy?
> Shaming organizations into lowering exec comp probably won’t work: there’s a strong economic incentive to pay competitively.
Well I think you're right on the first half but I don't think you're correct on the second half.
Paying a CEO 5M vs 17M is a rounding error to a double-digit billion dollar company. Its like getting something on Amazon instead of Alibaba, sure Amazon is 3x the price but you obviously find the item cheap enough otherwise you'd be on Alibaba. Or perhaps you want the item now and don't want to spend months searching for a new CEO.
Well I think you're right on the first half but I don't think you're correct on the second half.
Paying a CEO 5M vs 17M is a rounding error to a double-digit billion dollar company. Its like getting something on Amazon instead of Alibaba, sure Amazon is 3x the price but you obviously find the item cheap enough otherwise you'd be on Alibaba. Or perhaps you want the item now and don't want to spend months searching for a new CEO.
I’m not sure I understand you, I believe we’re making the same point? I mean that there’s a strong incentive to offer competitive pay (as in pay more e.g. to poach from a competing company).
Yeah, I guess you're right. The CEO has the retention/switching costs amortized in their salary unlike probably the entire rest of the company.
A company might take a 30k hit letting a 50k/yr employee walk away but they won't raise their salary to 56k to keep them from walking. But w.r.t. a CEO they will raise their salary from of 5M to 17M so that investor confidence won't tumble by them quitting.
A company might take a 30k hit letting a 50k/yr employee walk away but they won't raise their salary to 56k to keep them from walking. But w.r.t. a CEO they will raise their salary from of 5M to 17M so that investor confidence won't tumble by them quitting.
I’m glad you used the travel nurse example because it shows why the comp is so high:
The board has to guarantee above all else that the CEO is aligned to serving the board and shareholders above all others ESPECIALLY their employees
So every CEO is just stating what their soul is worth.
I mean I guess it’s good that it’s so high because psychopaths that can perform at that level without fucking over their masters or being unpredictable are rare.
The board has to guarantee above all else that the CEO is aligned to serving the board and shareholders above all others ESPECIALLY their employees
So every CEO is just stating what their soul is worth.
I mean I guess it’s good that it’s so high because psychopaths that can perform at that level without fucking over their masters or being unpredictable are rare.
What shareholders? This article is about nonprofits.
Wasn't there analysis that company performance is inversely correlated to CEO compensation?
I remember seeing a chart, though I don't remember whether the analysis was well done & researched or not
I remember seeing a chart, though I don't remember whether the analysis was well done & researched or not
I have not seen it but, to me, it kind of makes sense if you put an average overall.
I think companies making a lot of money are in a world of trouble: sweet trouble, to be sure, but still trouble.
Sustaining the same percentage growth is incredibly difficult once you are big. So, what is there to do? Expand to new markets, create new products with the potential to destroy your existing ones, fire people you think are no longer needed? Decisions that will either make more money or destroy the company. And, no matter what anyone else would say, I think their decisions are worse than half chance.
In the end we praise the CEOs that made the "right" choice. But it was the right choice only in hindsight, it could easily have gone in the other direction, as many many examples of previously successful CEOs have shown.
Nobody stays on top forever and that's just how it is.
Now, as for the CEOs' salaries: they are the same regardless of their successful choices. So, when you average it out, it would look like it is inversely proportional, simply because more companies tank than stay on top.
I think companies making a lot of money are in a world of trouble: sweet trouble, to be sure, but still trouble.
Sustaining the same percentage growth is incredibly difficult once you are big. So, what is there to do? Expand to new markets, create new products with the potential to destroy your existing ones, fire people you think are no longer needed? Decisions that will either make more money or destroy the company. And, no matter what anyone else would say, I think their decisions are worse than half chance.
In the end we praise the CEOs that made the "right" choice. But it was the right choice only in hindsight, it could easily have gone in the other direction, as many many examples of previously successful CEOs have shown.
Nobody stays on top forever and that's just how it is.
Now, as for the CEOs' salaries: they are the same regardless of their successful choices. So, when you average it out, it would look like it is inversely proportional, simply because more companies tank than stay on top.
> CEO salaries should be understood in relationship to the resources that they control
Why?
Why?
Because it’s useful to understand the incentives driving higher exec pay. My point is that shaming organizations into reducing CEO pay is unlikely to work given the incentives, so we should just focus on individual progressive taxation and let companies pay what they want.
The purpose of non profits is to handle all the cost centers. Everything that is expensive is billed under the non profit. Then they have exclusive deals with their other for profit entities in all high margin areas.
Thus the whole non profit becomes a loss lead for other services to be pushed and offered. Its a good thing for them their cost center is not taxed.
Thus the whole non profit becomes a loss lead for other services to be pushed and offered. Its a good thing for them their cost center is not taxed.
Time to get rid of the certificate of need system
Attempting to analyze hospitals in particular, or healthcare in general, as if they were "normal" businesses is a fool's errand. "Who pays?" and "who benefits?" are hopelessly complicated. And corrupt.
As for the CEO salary: it's probably shaped by competition for those few slick operators who really understand how to milk the system.
As for the CEO salary: it's probably shaped by competition for those few slick operators who really understand how to milk the system.
This reminds me of an investigation by the Times from September 2022 into Providence health system’s training of employees, with the aid of McKinsey, to “[wring] money out of patients — even those who were supposed to receive free care because of their low income.” https://www.nytimes.com/2022/09/24/business/nonprofit-hospit...
This is why it seems each locale is packed with care all from one central hospital. They have to keep growing to maintain "non-profit" status.