SEC adopts rules mandating disclosure of CEO-worker pay ratios(reuters.com)
reuters.com
SEC adopts rules mandating disclosure of CEO-worker pay ratios
http://www.reuters.com/article/2015/08/05/sec-rule-ceopay-idUSL1N10G1IY20150805
85 comments
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 controlling for other factors (size, industry, etc.), CEOs are paid less at private companies and companies with concentrated ownership, than at companies with diffuse ownership—suggesting that when the owner is in charge and paying attention, they prefer to rein in executive pay.
I wonder why non voting stock is not more commonly used.
"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.
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.
> 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.
And the SEC is responsible for improving company/shareholder relationships, so this falls under their directorate.
And the SEC is responsible for improving company/shareholder relationships, so this falls under their directorate.
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 the same time many people are growing concerned about a wealth gap in the US - that the rich are getting subtantially richer, while the middle class haven't seen meaningful gains in a long time. That absolutely has an impact on society as a whole.
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 the same time many people are growing concerned about a wealth gap in the US - that the rich are getting subtantially richer, while the middle class haven't seen meaningful gains in a long time. That absolutely has an impact on society as a whole.
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.
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.
I don't know about, and probably can't defend the idea that CEOs can produce outsized benefits compared to rank-and-file employees.
However a poor CEO can easily waste more money than 300 salaries just by choosing the wrong product direction, or keeping a strategy going long after its not beneficial.
So perhaps pay is so high just to find a CEO whom isn't a bad hire.
However a poor CEO can easily waste more money than 300 salaries just by choosing the wrong product direction, or keeping a strategy going long after its not beneficial.
So perhaps pay is so high just to find a CEO whom isn't a bad hire.
> So perhaps pay is so high just to find a CEO whom isn't a bad hire.
There's some theories that posit that high CEO pay isn't to reward the CEO for their work directly but to motivate everyone under the CEO to work their ass off in hopes of one day becoming the CEO. Motivating the workforce in this manner makes the company sufficiently more productive as to make it worth paying those high salaries; even if the CEO doesn't actually produce anything themselves. I believe it's called a tournament-style system or something.
It's pretty bleak-sounding.
There's some theories that posit that high CEO pay isn't to reward the CEO for their work directly but to motivate everyone under the CEO to work their ass off in hopes of one day becoming the CEO. Motivating the workforce in this manner makes the company sufficiently more productive as to make it worth paying those high salaries; even if the CEO doesn't actually produce anything themselves. I believe it's called a tournament-style system or something.
It's pretty bleak-sounding.
"Do you think CEOs are 10x more effective than they were in the 60s?"
Why is that for you to decide? The world has become globally competitive since the 1960s, which means it takes a lot more work for a CEO to run a company successfully.
"but at the same time many people are growing concerned about a wealth gap in the US - that the rich are getting subtantially richer, while the middle class haven't seen meaningful gains in a long time. That absolutely has an impact on society as a whole."
This will continue to happen when we put more and more restrictions on owning and starting a business, which is ironic, because this is what many of the politicians that claim to be helping the middle class, are proposing.
Why is that for you to decide? The world has become globally competitive since the 1960s, which means it takes a lot more work for a CEO to run a company successfully.
"but at the same time many people are growing concerned about a wealth gap in the US - that the rich are getting subtantially richer, while the middle class haven't seen meaningful gains in a long time. That absolutely has an impact on society as a whole."
This will continue to happen when we put more and more restrictions on owning and starting a business, which is ironic, because this is what many of the politicians that claim to be helping the middle class, are proposing.
Why is that for you to decide?
It's for society to decide. I know the libertarian perspective is that society/government have no role in deciding how businesses operate, but that isn't actually the reality today. You might just as well ask what gives anyone the right to make companies pay tax.
This will continue to happen when we put more and more restrictions on owning and starting a business
I'm curious as to why you think economic prosperity can only be reached by starting your own business. What's the ideal end game here - every citizen of the US operates their own one-person business?
It's for society to decide. I know the libertarian perspective is that society/government have no role in deciding how businesses operate, but that isn't actually the reality today. You might just as well ask what gives anyone the right to make companies pay tax.
This will continue to happen when we put more and more restrictions on owning and starting a business
I'm curious as to why you think economic prosperity can only be reached by starting your own business. What's the ideal end game here - every citizen of the US operates their own one-person business?
Even as a libertarian myself, I can't justify the virtual nepotism that is happening on Wall Street. To me, the free market is so suppose to make every company to work hard for the dollars it earns. If companies have enough cash to throw at CEOs than working towards capturing market share or wooing investors with dividends then they're just being as lazy and apathetic as governments or worse. So, I believe it's the role of the people to take companies to task whether it's through the government or through the market place when they get this way (corrupt and slothful). Otherwise, we'll wind up with a situation similar to how the USSR ended with millions starving and an economic wasteland.
"It's for society to decide. "
If that's the case, then I should decide how my tax money is used, no? If we had universal healthcare, would I get to decide what you do with your body, since I, as a tax payer, would be paying for your risky behavior?
"I'm curious as to why you think economic prosperity can only be reached by starting your own business."
How do you propose economic prosperity if not through a business?
A job? Who pays the wages of the workers?? That's right, a business
The government? Where does the government get the money to pay someone? Taxes. Citizens pay taxes, but they get it through either 1) working for a business or 2) starting a business.
An alternative is that the government essentially runs all businesses, but a centrally planned government monopoly is not very efficient and certainly isn't associated with prosperity.
"What's the ideal end game here - every citizen of the US operates their own one-person business?"
No. But if we change the economic climate which makes it very difficult to start a company, the only things that will be left will be big business and government monopolies.
If that's the case, then I should decide how my tax money is used, no? If we had universal healthcare, would I get to decide what you do with your body, since I, as a tax payer, would be paying for your risky behavior?
"I'm curious as to why you think economic prosperity can only be reached by starting your own business."
How do you propose economic prosperity if not through a business?
A job? Who pays the wages of the workers?? That's right, a business
The government? Where does the government get the money to pay someone? Taxes. Citizens pay taxes, but they get it through either 1) working for a business or 2) starting a business.
An alternative is that the government essentially runs all businesses, but a centrally planned government monopoly is not very efficient and certainly isn't associated with prosperity.
"What's the ideal end game here - every citizen of the US operates their own one-person business?"
No. But if we change the economic climate which makes it very difficult to start a company, the only things that will be left will be big business and government monopolies.
- More work? Do they work longer hours?
- Don't the employees also do more work, and spend more money on their own training (college, vocational education, conferences) to remain competitive employees?
- Supply side economics really works! Make the stuff, and people will buy it with the extra money they get from... not sure.
- Don't the employees also do more work, and spend more money on their own training (college, vocational education, conferences) to remain competitive employees?
- Supply side economics really works! Make the stuff, and people will buy it with the extra money they get from... not sure.
[deleted]
Not outraged about CEOs making lots of money compared to their workers, necessarily.
I think this is a good idea for shareholders and as a shareholder I support it. Why would giving shareholders more insight into such a major expense (compensation) be a bad idea? I'd want to know if a company I was a shareholder in was over/underpaying its CEO, because there's some efficiencies to be gained there.
I think this is a good idea for shareholders and as a shareholder I support it. Why would giving shareholders more insight into such a major expense (compensation) be a bad idea? I'd want to know if a company I was a shareholder in was over/underpaying its CEO, because there's some efficiencies to be gained there.
IMO it's actually the wrong way to look at it.
The position as a CEO is potentially adding value if managed properly, but many CEOs get insane salaries, bonuses and golden handshakes even when they perform poorly.
The actual groundwork that made most companies valuable were laid much earlier in the organizations life.
The position as a CEO is potentially adding value if managed properly, but many CEOs get insane salaries, bonuses and golden handshakes even when they perform poorly.
The actual groundwork that made most companies valuable were laid much earlier in the organizations life.
You shouldn't be outraged, but your justification for their pay is a little simplified.
People aren't paid based on the value they create, strictly speaking. They're paid whatever is necessary to get them to work.
The value of a good executive is, I'd argue, far higher than their pay reflects. A truly bad executive can put a company on the path to ruin, and a decent executive making bad choices can do the same. What companies are paying for in good/great executives isn't some N times multiplier on that salary in new income, they're paying for reduced chances of catastrophe.
The supply of good/great executives is small, and the potential loss from putting a dunce in charge of AAPL/GOOG is obscene, so is it any wonder the price lands where it does?
People aren't paid based on the value they create, strictly speaking. They're paid whatever is necessary to get them to work.
The value of a good executive is, I'd argue, far higher than their pay reflects. A truly bad executive can put a company on the path to ruin, and a decent executive making bad choices can do the same. What companies are paying for in good/great executives isn't some N times multiplier on that salary in new income, they're paying for reduced chances of catastrophe.
The supply of good/great executives is small, and the potential loss from putting a dunce in charge of AAPL/GOOG is obscene, so is it any wonder the price lands where it does?
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 pay over 80% of the income taxes. That's low?
Yawn, what percentage of total income in the US is earned by the top 20%?
The top 25% earn 67% of the income and pay 86% of the taxes. How many of the taxes do you think they should be paying?
> The top 25% earn 67% of the income and pay 86% of the taxes.
That may be about right if you mean "the top 25% of people in terms of income subject to income tax" and "of the taxes" you mean "of income taxes", which aren't even the only tax on labor income (or even the most significant tax on labor income for a large proportion of the workforce.)
OTOH, the top 25% of income-subject-to-income-tax earners aren't even approximately what most people mean when they say "the rich", and the issues raised with the fairness of the tax system aren't limited to income tax, but to the structure of the tax system and what taxes things are subject to at all.
That may be about right if you mean "the top 25% of people in terms of income subject to income tax" and "of the taxes" you mean "of income taxes", which aren't even the only tax on labor income (or even the most significant tax on labor income for a large proportion of the workforce.)
OTOH, the top 25% of income-subject-to-income-tax earners aren't even approximately what most people mean when they say "the rich", and the issues raised with the fairness of the tax system aren't limited to income tax, but to the structure of the tax system and what taxes things are subject to at all.
Top 25% =/= "the rich"
But to answer your question, I think income after $1m/yr should be taxed at close to 90% and that capital gains should also be considered part of that income. We can start there.
But to answer your question, I think income after $1m/yr should be taxed at close to 90% and that capital gains should also be considered part of that income. We can start there.
That particular statistic is useless without further context, and thus is a favorite of Fox News and other right wing ideologues. If 80% of earners earn one dollar a year then obviously it's low. If 80% of earners earn 1% less than the other 20% then it isn't.
A better statistic is to actually look at the tax rate paid by the top earners compared to lower earners. Top marginal rates on employment income including state tax is often over 50%, which is probably plenty.
A better statistic is to actually look at the tax rate paid by the top earners compared to lower earners. Top marginal rates on employment income including state tax is often over 50%, which is probably plenty.
Did you know that people who earn less than $10k per year pay no taxes at all? How is that fair? We should see that beggars get taxed on all the loose change they get from people on the street.
http://www.efile.com/tax/do-i-need-to-file-a-tax-return/#inc...
http://www.efile.com/tax/do-i-need-to-file-a-tax-return/#inc...
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...
As long as there are rich people there will be folks complaining that the rich don't pay enough taxes.
Not really. You don't read news and magazine articles from the 50s 60s and 70s decrying the contribution of the wealthy to the common good. You see people complaining about the taxation of the wealthy during periods of high income inequality. You see the same thing in other countries as well. Presently we tax wages heavily for middle income levels and tax capital gains at a much much lower rate.
People are pissed that the wealthy, wielding their outsized political influence have pulled up the ladder of opportunity behind themselves.
People are pissed that the wealthy, wielding their outsized political influence have pulled up the ladder of opportunity behind themselves.
Well honestly the concentration of wealth that we see today is a new thing in society. Pretty sure the only time you're going to find the type of inequality you see today is going back to feudal times. And honestly, I doubt it would even be as bad as it is today.
> > 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 wealthy aren't so because of earnings (wages subject to income and payroll taxes), so its not so much low or high as a non-sequitur.
> The top 20% of earners pay over 80% of the income taxes. That's low?
The wealthy aren't so because of earnings (wages subject to income and payroll taxes), so its not so much low or high as a non-sequitur.
How much of the income they get?
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
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
2000 people earn over $10M a year.
Let's say you take $100M from each of them. That's $200B. The Federal budget is $3.8T. So you increased the budget by just 5%.
It seems that the desire to tax the rich is simply to bleed them down to a normal level, not because we really need their money.
I get that it's a desire to get back to 1950s level income equality, but that time seems to be an historical accident due to the US economy being the only one left standing after WW2. Sure, white guys in the United States were all earning at relative parity, but global poverty was far, far worse than it is today, women here weren't allowed to work, etc.
And are the rich getting richer while the poor get poorer? Doesn't seem so. Rockefeller's net worth was $400-$600 billion in today's dollars, while our current richest person, Bill Gates, is worth a paltry $80B. Globally, the poor are earning more than ever.
Correct me if I'm wrong, but when people talk about restoring income equality, at least in this country, they're unintentionally pining for the days when the United States middle class earned more, at the expense of the rest of the working world.
> Cute statistic though, spoken like a true facebook comment
Was this comment facebook-ey enough for you?
Let's say you take $100M from each of them. That's $200B. The Federal budget is $3.8T. So you increased the budget by just 5%.
It seems that the desire to tax the rich is simply to bleed them down to a normal level, not because we really need their money.
I get that it's a desire to get back to 1950s level income equality, but that time seems to be an historical accident due to the US economy being the only one left standing after WW2. Sure, white guys in the United States were all earning at relative parity, but global poverty was far, far worse than it is today, women here weren't allowed to work, etc.
And are the rich getting richer while the poor get poorer? Doesn't seem so. Rockefeller's net worth was $400-$600 billion in today's dollars, while our current richest person, Bill Gates, is worth a paltry $80B. Globally, the poor are earning more than ever.
Correct me if I'm wrong, but when people talk about restoring income equality, at least in this country, they're unintentionally pining for the days when the United States middle class earned more, at the expense of the rest of the working world.
> Cute statistic though, spoken like a true facebook comment
Was this comment facebook-ey enough for you?
2000 people earn over $10m a year because capital gains aren't considered income. If you consider capital gains income, that number changes significantly. Also, why would you use $100m per person? It should be 90% of earnings over $1m and 95% of earnings over $4m.
Your comments are typical drivel that go on top of a meme. You should consider applying to work in Fox News' statistic department
> Correct me if I'm wrong, but when people talk about restoring income equality, at least in this country, they're unintentionally pining for the days when the United States middle class earned more, at the expense of the rest of the working world.
You are wrong. I'm not talking about restoring anything back to the 1950s. I'm talking about real solutions to the problems we face today, like ensuring education is affordable and available to everyone. Ensuring that every citizen has the right to have access to our healthcare system. etc. etc.
It's not about having the middle class earn more, it's about the poor not being treated like complete shit in the US. The proper measure for a society is how we treat those who cannot provide for themselves. We're failing bigtime in America.
Your comments are typical drivel that go on top of a meme. You should consider applying to work in Fox News' statistic department
> Correct me if I'm wrong, but when people talk about restoring income equality, at least in this country, they're unintentionally pining for the days when the United States middle class earned more, at the expense of the rest of the working world.
You are wrong. I'm not talking about restoring anything back to the 1950s. I'm talking about real solutions to the problems we face today, like ensuring education is affordable and available to everyone. Ensuring that every citizen has the right to have access to our healthcare system. etc. etc.
It's not about having the middle class earn more, it's about the poor not being treated like complete shit in the US. The proper measure for a society is how we treat those who cannot provide for themselves. We're failing bigtime in America.
> it's about the poor not being treated like complete shit in the US
We actually agree on this.
I just think we can do it by modifying the way we spend and distribute what we already collect, not necessarily by collecting more.
We actually agree on this.
I just think we can do it by modifying the way we spend and distribute what we already collect, not necessarily by collecting more.
[deleted]
I can see a case for capital gains and estate taxes but the top marginal income tax rates in NY and California (where I'd guess most CEOs reside) are over 50%. Not sure how that would be called "absurdly low."
Who decides that and is it true or fair? If the CEO earns 25x the average employee salary would it be clear that they add 25x more value to the company than any other employee?
I'd say no. Salary is more a function of negotiating ability than value added. Consider this, does your salary fluctuate regularly as your performance waxes and wanes? Or does it stay relatively constant with occasional steps up?
The owners of the company? i.e. Shareholders. It's not anyone else's business. Workers are free to renegotiate their contract, resign, buy shares, or start their own company. Who else other than the owners should decide?
Let me show you how close to feudalism this idea is:
Serfs are free to renegotiate their constitution, move, buy land from their king, or start their own kingdom.
Now all these options sound a little more silly... Because we accept the power structure of feudalism.
But many doubt there is any power structure in capitalism.
Landless wage labourers? Yes. Debt based economies? Yes. Taxes given as handouts to the owners? Yes.
The differences between the structure of two are far more subtle than most people like to believe.
We are at a point on political democracy, that's great - but economically we are still kinda stuck in the 1700s ... We could try to democratize that too.
Part of the problem is that neoliberalism suggests that everyone should act like an entrepreneur, a CEO if you will. This is actually as silly as implying that if everyone acted like a prince or princess in feudalism, it would have been a fair system.
But you point to the "self made man". Statistically speaking, those are about as rare as someone marrying into royalty in classical feudalism. Pointing to that fact of course, didn't make feudalism fair either.
There's a real, leaky (they all are), power structure imposed by the system that can't be undone by the power of magical thinking.
Serfs are free to renegotiate their constitution, move, buy land from their king, or start their own kingdom.
Now all these options sound a little more silly... Because we accept the power structure of feudalism.
But many doubt there is any power structure in capitalism.
Landless wage labourers? Yes. Debt based economies? Yes. Taxes given as handouts to the owners? Yes.
The differences between the structure of two are far more subtle than most people like to believe.
We are at a point on political democracy, that's great - but economically we are still kinda stuck in the 1700s ... We could try to democratize that too.
Part of the problem is that neoliberalism suggests that everyone should act like an entrepreneur, a CEO if you will. This is actually as silly as implying that if everyone acted like a prince or princess in feudalism, it would have been a fair system.
But you point to the "self made man". Statistically speaking, those are about as rare as someone marrying into royalty in classical feudalism. Pointing to that fact of course, didn't make feudalism fair either.
There's a real, leaky (they all are), power structure imposed by the system that can't be undone by the power of magical thinking.
The United States is an illegal country. It seceded from the United Kingdom, so it was owned by the King of England at the time. Property rights are paramount, so property cannot be seized by the state (or anyone else).
We need to hurry up and restore all the monarchies of the world because we are living on stolen property.
</sarcasm>
We need to hurry up and restore all the monarchies of the world because we are living on stolen property.
</sarcasm>
That would be true if they success of the company was 100% depending on the companies ability alone, however it's not. There are many factors external to the company itself that are involved in creating successful companies.
That isn't relevant. The company has owners, and owners get to decide what to do with their property. If they decide most of the success was due to external factors then they can change their compensation appropriately. Evidently they do not agree with you on average.
It's relevant in a bigger context which is the one I am raising. Feel free to isolate it to a more narrow one if you would rather debate that. Personally I find that trivial but each to their own of course.
Property rights if you really want to go there is not a natural right but something that is guaranteed by the state.
Property rights if you really want to go there is not a natural right but something that is guaranteed by the state.
[deleted]
[deleted]
This is not always the case (some CEOs don't understand the company they're on-boarding with). However I'm never outraged by it, if a company wants to provide a massive salary, have a massive failure, then send off the CEO with a golden parachute more power to them.
However I may want to re-evaluate my future relationships with a company who is not very careful with their large investments.
As for the rules, it seems to be somewhere between class-warfare and fairness. Not sure we really need to know, but it might be useful information for some investors. It doesn't affect me so I have a hard time forming a strong opinion on this.
However I may want to re-evaluate my future relationships with a company who is not very careful with their large investments.
As for the rules, it seems to be somewhere between class-warfare and fairness. Not sure we really need to know, but it might be useful information for some investors. It doesn't affect me so I have a hard time forming a strong opinion on this.
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".
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.
Except for studies that indicate otherwise. And that their salary is determined by a board of their peers, whose salaries are determined by boards that may include that executive.
There is no downside to increasing CEO compensation for these boards.
There is no downside to increasing CEO compensation for these boards.
> paying said mail room clerk.
Or paying dividends/buybacks to shareholders? This isn't just an issue for the "99%"
Or paying dividends/buybacks to shareholders? This isn't just an issue for the "99%"
Also, how do we define worth their pay?
Because someone told us we should be outraged at income inequality.
I'm not really sure what this is going to accomplish.
CEO pay is already public. And this is going to end up on page 37 of a companies 68 page annual report.
And then there is this....
> Under the Securities and Exchange Commission's final rules, companies will get some flexibility in how they find the median. For instance, they can exclude 5 percent of their overseas workers when arriving at the number and use statistical sampling.
Companies can also use sampling to estimate median pay and they only have to recalculate this once every three years.
It looks like a company can cherry pick who they deem to be workers and what they consider pay.
This just seems like Elizabeth Warren trying to make political gains.
Or put another way. Apple releases earnings and we find that Tim Cook has one of the largest wage gaps due to him being paid in stock that is soaring in price and AAPL having so many apple store employees that bring down their median pay.
Are people going to suddenly stop investing in AAPL or demand change because of this? Will anyone notice at all?
CEO pay is already public. And this is going to end up on page 37 of a companies 68 page annual report.
And then there is this....
> Under the Securities and Exchange Commission's final rules, companies will get some flexibility in how they find the median. For instance, they can exclude 5 percent of their overseas workers when arriving at the number and use statistical sampling.
Companies can also use sampling to estimate median pay and they only have to recalculate this once every three years.
It looks like a company can cherry pick who they deem to be workers and what they consider pay.
This just seems like Elizabeth Warren trying to make political gains.
Or put another way. Apple releases earnings and we find that Tim Cook has one of the largest wage gaps due to him being paid in stock that is soaring in price and AAPL having so many apple store employees that bring down their median pay.
Are people going to suddenly stop investing in AAPL or demand change because of this? Will anyone notice at all?
http://www.npr.org/sections/thetwo-way/2015/08/05/429628037/...
* It is an unimplemented part of a law that was passed 5 years ago. Why the 5 year delay? * In the past 2 years, there were 280,000 public comments supporting the pay ratio rule. * Why would the page of the annual report on which this figure appears matter? As far as I can see from AAPL's report, the first page is fluff: http://investor.apple.com/secfiling.cfm?filingid=1193125-11-... * Did I mention it is a requirement of a law passed 5 years ago?
* It is an unimplemented part of a law that was passed 5 years ago. Why the 5 year delay? * In the past 2 years, there were 280,000 public comments supporting the pay ratio rule. * Why would the page of the annual report on which this figure appears matter? As far as I can see from AAPL's report, the first page is fluff: http://investor.apple.com/secfiling.cfm?filingid=1193125-11-... * Did I mention it is a requirement of a law passed 5 years ago?
I am not sure what the big deal is with this. I vaguely understand why regulators want this to be public knowledge. I have no understanding of why effort is being spent in opposing this.
Because putting more items into filings costs money and creates the possibility of liability if anything is off. Think of your tax return. Rigorous legal and financial document preparation is expensive. Large corporations can afford the bloat of thousands of regulatory requirements, smaller companies not so much. These added costs are borne by society in the long run, similar to how airline security regulations sometimes cause tickets to cost nearly two times what the original fare would be. This regulation isn't vital for informing investors of the performance of a company (this kind of ratio can be done by anyone who cares to do so using already available information).
Pull the other one: it's got bells on it.
One additional number to be calculated, after the reams of numbers have already been calculated. If your accountant and lawyer cannot get that right, it's time to find new ones.
One additional number to be calculated, after the reams of numbers have already been calculated. If your accountant and lawyer cannot get that right, it's time to find new ones.
Because keeping the proles in the dark about how hard they're being screwed benefits the people doing the screwing?
I have thought once I establish a company, I might tie CEO salary to be limited to being a multiple of the least paid employee. Then what the good ratio is becomes an interesting question to me. Is 10x enough? Is 100x too much? Is a CEO's productivity worth 100x the lowest paid employee?
If we go with the lowest paid employee is making 30k a year, and the CEO is making 3mil? Is that too much, not enough, just right?
There isn't a right answer and it entirely depends on the purpose of the company and the model, but I do think it's an interesting way to keep a reality check on inequality voluntarily inside a company.
If we go with the lowest paid employee is making 30k a year, and the CEO is making 3mil? Is that too much, not enough, just right?
There isn't a right answer and it entirely depends on the purpose of the company and the model, but I do think it's an interesting way to keep a reality check on inequality voluntarily inside a company.
Whatever ratio you decide, it introduces a variety of problems. For example, it gives the CEO incentive to cut the lowest paying jobs so they are no longer factored into the ratio. Suddenly your customer service call center is outsourced to a contractor because it allows the CEO to give themselves a raise regardless of whether it is good for the customers or the company's long term business interests.
It also isn't factoring the problems that would arise if your max ratio prevents you from being competitive in the CEO hiring market.
It also isn't factoring the problems that would arise if your max ratio prevents you from being competitive in the CEO hiring market.
> Is a CEO's productivity worth 100x the lowest paid employee?
No. Not if you want to live in a peaceful society, but we're talking religions again... You are correct, there is no right answer. Views vary based on how much 'socialist' or 'liberal' someone is.
No. Not if you want to live in a peaceful society, but we're talking religions again... You are correct, there is no right answer. Views vary based on how much 'socialist' or 'liberal' someone is.
[deleted]
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
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
A massive discrepancy between the highest paid and lowest paid individuals in an organization may point to: money laundering, embezzlement, kickbacks, fraud, abuse, negligence, etc.
Seems like the most worthless piece of data you could gather about a company.
It provides a proxy to whether the management is looking to increase worker morale and productivity for long term gains, or inflate stock prices for short term gains. It also provides a way to compare companies within an industry, to see which might be overpaying management, with stock returns varying accordingly.
By median pay of other employees?
OK, so McDonalds is 10,000:25,000,000
Now what?
OK, so McDonalds is 10,000:25,000,000
Now what?
So Burger King has a ratio of 10,000:30,000,000, but it has a lower profit margin. Shareholders can then push for a change to compensation, since their CEO is likely overpaid, or their workers are underpaid.
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/
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.
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.
[deleted]
First, here is the link to the actual release: http://www.sec.gov/News/PressRelease/Detail/PressRelease/137...
Because this was unclear to me initially, this DOES factor in complete CEO compensation (not just salary).
The interesting part is companies will now be required to disclose the mean salary of it's general employees (C-level salaries are already disclosed), it would be interesting to see Google, or any qualifying tech business, give an official statement on employee compensation amounts.
The part I find confusing, it includes seasonal and temporary workers. Target is expected to release the ratio of the CEO compared to the yearly compensation of the thousands of Holiday season workers it hires for 3 months?
Identification of Employees Covered by the Proposed Rule
“All employees of the registrant” would include:
1. All employees (including full-time, part-time, temporary, seasonal and non-U.S. employees)
2. Those employed by the company or any of its subsidiaries.
3. Those employed as of the last day of the company’s prior fiscal year.
Because this was unclear to me initially, this DOES factor in complete CEO compensation (not just salary).
The interesting part is companies will now be required to disclose the mean salary of it's general employees (C-level salaries are already disclosed), it would be interesting to see Google, or any qualifying tech business, give an official statement on employee compensation amounts.
The part I find confusing, it includes seasonal and temporary workers. Target is expected to release the ratio of the CEO compared to the yearly compensation of the thousands of Holiday season workers it hires for 3 months?
Identification of Employees Covered by the Proposed Rule
“All employees of the registrant” would include:
1. All employees (including full-time, part-time, temporary, seasonal and non-U.S. employees)
2. Those employed by the company or any of its subsidiaries.
3. Those employed as of the last day of the company’s prior fiscal year.
How does this political agenda relate to protecting investors? Is the SEC now the department of labor?
Investors have a right to know how the company they invest in is spending money. Lots of investors don't exactly like the absurd levels of C-level pay or golden parachutes for failed execs.
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/...
"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/...
Meaningless.
$1 salary with $100,000,000 worth of liquid securities will skew this ratios.
This may backfire.
Over the last 2 years we've been having a stock buyback craze, where corporations can issue unlimited amount of debt and use the proceeds to repurchase stock in an illiquid market pushing the stock to record highs.
Shaming CEOs into lowering their pay may work, but these same CEOs will only be rewarded more in options and stocks which do not have the SEC reporting treatment.
And this will only incentivice them to buy back even more stock, levering up companies even faster, transferring stakeholder value to shareholders while leaving bondholders footing the bill, and assuring of a promptly bankruptcy filing once interest rates rise.
Over the last 2 years we've been having a stock buyback craze, where corporations can issue unlimited amount of debt and use the proceeds to repurchase stock in an illiquid market pushing the stock to record highs.
Shaming CEOs into lowering their pay may work, but these same CEOs will only be rewarded more in options and stocks which do not have the SEC reporting treatment.
And this will only incentivice them to buy back even more stock, levering up companies even faster, transferring stakeholder value to shareholders while leaving bondholders footing the bill, and assuring of a promptly bankruptcy filing once interest rates rise.
I'm assuming this is a ratio of "pay" not compensation, where CEO pay is their salary, and worker pay is salary or total dollars earned. Essentially cash to cash.
If they plan on having equity included, that will complicate things, since you may have variation in vesting schedules.
If they plan on having equity included, that will complicate things, since you may have variation in vesting schedules.
My presumption is that CEOs are adding enough value to be worth their pay, just like every other worker (should be).