How can we/should we control CEO salaries?

[Stinky The Clown]

In another thread, a few wannabe economists saw fit to call me out on a suggestion that we ought to be capping CEO and top exec salaries as part of a much larger concept of establishing a 'Minimum Standard of Living' in lieu of the largely pathetic Minimum Wage.

In this thread, I'd like to discuss the specific notion of capping CEO and other high level executive salaries.

The most cited notion is the disincentive to perform that might come from such a cap. While cited, and while somewhat intuitive from its very phrasing, why is a cap a disincentive?

No one cited the public interest aspects of this. Companies are owned by shareholders. While fair compensation to executives is a good thing for shareholders, excessive and obscene salaries surely are not. Why, for example, is it good for a CEO of a company that loses money and has to cut jobs to get not only a high salary, but also a bonus? Why, for example, is it good for the shareholders when the retiring CEO of ExxonMobil gets a half billion (with a big, fat 'B') in retirement?

I am a die hard capitalist. But I am also a die hard supporter of reasonable regulation for the greater good of the nation's citizens and good corporate citizenship.

What's right and what's wrong with the notion of capping compensation in publicly held companies?

[ayeshahaqqiqa]

1. I always thought CEO salaries should be tied to the

salary of the lowest paid worker--for example, it should be 25 times of the lowest paid worker, or something like that. By doing that, the CEO knows the only way he/she can get more money is to raise salaries to everyone in the company.

[Frank Cannon]

4. Yes. Absolutely 100% agree.

And I, for one, see no problem with this. The sky's the limit on compensation, just make sure the tide raises all the boats.

[Vincardog]

2. Before you try to cap CEO compensation, why not make sure it is REPORTED?

Make sure that the shareholders know exactly how much they are receiving. That might spark some discussion at the meeting.

[Warpy]

3. Confiscatory taxation via a progressive income tax

managed to do just that for decades. Execs who knew they'd only get ten cents of every dollar once they were in that top tax bracket found it a great disincentive to the naked greed we're seeing now. Yes, they figured out other ways to prosper, from the corporate jet to the corporate Manhattan apartments to the corporate yachts, ad nauseum, but the theft was petty compared to what it is now.

I remember hearing execs my pop worked with discussing refusing salary hikes because the hikes would push them into a higher tax bracket and actually cost them money. Little pitchers had big ears, and little pitchers learned how that progressive income tax WORKED.

I'm sure there are other methods, but short of massive shareholder revolts (even more difficult than organizing Democrats from the top down), there is no other real life mechanism that would work without incredibly intrusive and ultimately self destructing government interference.

[Nicholas D Wolfwood]

5. You don't have to be a shareholder.

My advice is to only invest in companies that have modest salaries for their CEOs. I really wouldn't support putting a cap in place legislatively, and otherwise, there's nothing that can be done.

I'm more interested in raising the minimum wage and labor protections. Those are the battles that can and should be fought.

[mike_c]

6. I believe in REGULATED CAPITALISM and think CEO compensation...

...should be capped in most cases to a multiple of the average worker salary at that company. If a corporation is doing well enough to pay it's lowest level employees six figure salaries then I have no complaints about paying the top executive tens of millions. However, I oppose the use of unregulated capitalism as a mechanism for concentrating wealth and LOWERING the standard of living for the many in order to make life exceptionally good for the few.

As for the disincentive issue, so be it if personal success at the expense of others is the only motivator capable of producing corporate success. If unbridled indulgence of the personal ambition and greed of top executives is the only engine that drives corporate performance, then the world will be a better place if those individuals are identified early and pithed before they can do any damage. Thankfully, I don't think that's true-- I think the indulgence we're seeing today is an aberation and that as the standards of success change top executives will follow new incentives to insure the success of their companies.

[Stinky The Clown]

8. mike (and others who suggested this), that seems a very reasonable ......

... position - tie the comp to worker average salaries.

In another thread on part of this whole capitalism thing, I suggested we also regulate corporate size to some allowable percentage of the marketplace in which they trade ... and then break 'em up. Use the Balls as an example. The Baby Bells were each the result of such a breakup. Now some of them are so huge *they* need to be broken up. The idea is to constantly spur true competition and allow for a fairer playing field for newcomers. And, frankly, to protect little guy companies (Moe's Cheap Crap from China Emporium) from the predatiousness of the big guy companies (WalMart).

[The Deacon]

7. Shareholder Democracy Ain't Gonna Work

The majority of outstanding shares are owned by mutual funds - which don't care what CEOs are paid as long as the share price goes up. Long ago the check on naked abuse by CEOs was voided by the INVENTION of CEOs - Chief Executive Officer (the joining of the jobs of Chairman of the Board of Directors to the President's office.) The corporate boards of directors are now run by the very people the boards of directors were intended to police. My prediction? Corporate greed, not Republican thuggery, will turn this country into a Third World banana republic as they continue to export jobs & import the goods we used to make here. Long ago we lost the dream typified by the Ford Motor Company - the worker who could afford to buy the products he made.

edited for spelling & clarity

[OffWithTheirHeads]

9. I say, how about a guillotine?

Worked pretty well for the French.