The Hypocrisy of the 1%

The AFL-CIO has launched its annual PayWatch data, revealing that the ratio of the average S&P 500 CEO pay package to that of the typical worker has once again risen; it's now an eye-popping 380-to-1. This ratio was just 42-to-1 in 1980.

The average annual CEO pay of companies in the index was $12.94 million in 2011, rising by 13.9% and following a 22.8% increase in CEO pay in 2010.

While chief executive pay has become more lucrative, regular Joes' and Josephines' incomes haven't seen similar results. Last year, average worker wages grew by a paltry 2.8% to an average $34,053.

The AFL-CIO was wise to point out that many American investors haven't necessarily experienced a great windfall either. The S&P index ended 2011 flat.

Living the dream is a fiscal nightmare
I know a lot of investors -- not to mention one-percenters -- likely dismiss the AFL-CIO's complaints out of hand or, let's face it, even become immediately apoplectic. I'll grant that many union demands don't always reflect a sustainable view of economics or fiscal responsibility for the organizations they target. Pensions and benefits into infinity, guaranteed pay levels regardless of performance, and making it difficult if not nearly impossible to fire employees for underperformance (or because a company or entity is in legitimate or even dire financial trouble) are all pretty untenable for long-haul financial health.

Still, most people who ignore or dislike the AFL-CIO's points about worker rights and economic discrepancies fail to acknowledge that for the most part, American CEO pay plans often follow similarly economically disconnected philosophies.

These packages frequently feature handsome pay that's often not linked to real long-term performance measures, lifetime pensions and benefits, and exceedingly rare firings even for cause. And that's a big part of the reason why that outrageous CEO-pay-to-worker-pay ratio keeps right on skyrocketing.

United One-Percenters of America
Before General Motors' (NYSE: GM  ) bailout, then-CEO Rick Wagoner was raking in plenty of dough, so management's financial expectations of their own salaries could certainly be held up to the same scrutiny as union demands for workers.

Wagoner even received a pay raise in 2008 even though the company had been losing money since 2005. After his ousting, Wagoner was entitled to $8.2 million over the five years starting with his retirement on Aug. 1, 2009. He was also entitled to an annual payment of $74,030 for his lifetime, as well as benefits like a life insurance policy.

Believe it or not, though, this deal had a lower financial value than what Wagoner would have been entitled to if the bailout hadn't happened. Poor guy.

Many people idolize General Electric's (NYSE: GE  ) Jack Welch, but that man's retirement benefits package goes down on the books as one of the most mind-blowing ever. Ironically, a divorce settlement blew the lid off the outrageous goodbye handouts.

Welch's perquisites were valued at $2.5 million per year, and he received goodies such as the use of the company's $80,000-per-month Manhattan apartment, primo seats for sporting events like New York Knicks, Red Sox, and Yankees games, security services, and even restaurant reimbursement. Given the fact that Welch's golden parachute was valued at an insane $420 million, such luxuries seem, well, ridiculous.

Home Depot's (NYSE: HD  ) performance under former CEO Bob Nardelli's tenure quite frankly stunk. He left the company in 2007 due to the conflict between him and the company's board and shareholders over his compensation, which had reached $131 million in 2006 even as the stock floundered. Still, he left Home Depot with a severance package worth $100 million, including a $35 million pension.

Citigroup: Not too big to fail
Citigroup's (NYSE: C  ) recent say-on-pay defeat is a good sign that shareholders are fed up with pay that doesn't measure up to performance, and they're finally willing to start voting against such outrageous packages.

Meanwhile, let's not forget that in a free market, corporate managers and boards are free to make the right decisions.

In 2007, Whole Foods Market's (Nasdaq: WFM  ) John Mackey announced he would relinquish pay, stating, "I no longer want to work for money." He went on to say, "The tremendous success of Whole Foods Market has provided me with far more money than I ever dreamed I'd have and far more than is necessary for either my financial security or personal happiness. ... I am now 53 years old and I have reached a place in my life where I no longer want to work for money, but simply for the joy of the work itself and to better answer the call to service that I feel so clearly in my own heart."

Even prior to that decision, Mackey's compensation was reasonable in a world where many CEOs made millions every year. Whole Foods Market currently has a pay cap on executive compensation; executives can't exceed 19 times the average worker's total pay at the grocer.

Bottom line: Let's rock the vote
Unionization isn't necessary when corporate managements challenge themselves to do the right thing, not just for themselves but for their employees, business success, and other stakeholders. The kind of "shared fate" espoused by folks like Mackey shouldn't be the exception, but rather the rule.

Sadly, most American corporate managements and boards simply haven't proven themselves up to this kind of personal and philosophical challenge. Their own bank accounts seem to be the bottom line they're most concerned about.

So when the AFL-CIO points out the current reality disconnect in CEO pay, reasonable people should listen. If we investors want to fight back against the utter hypocrisy of some members of the 1%, it's time to vote against the pay packages that reward and reinforce the behavior.

Check back at Fool.com every Wednesday and Friday for Alyce Lomax's columns on environmental, social, and governance issues.

Alyce Lomax owns shares of Whole Foods. The Motley Fool owns shares of Citigroup and Whole Foods. Motley Fool newsletter services have recommended buying shares of Whole Foods, Home Depot, and General Motors. The Motley Fool has a disclosure policy.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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  • Report this Comment On April 20, 2012, at 3:50 PM, rayhin wrote:

    As a G.E. retiree I'm glad someome finally outted jack welch and his robbery of G.E. company and leaving such a mess for the man who took his place.

  • Report this Comment On April 20, 2012, at 5:29 PM, XMFDRadovsky wrote:

    Another superb piece.

  • Report this Comment On April 20, 2012, at 6:17 PM, Corporality wrote:

    Isn't it the American dream to become an overcompensated CEO that rips off their employees and shareholders? ;)

    Hear hear, Ms. Lomax!

  • Report this Comment On April 20, 2012, at 8:07 PM, DaveKATL wrote:

    And unlike the rest of us, when a CEO gets fired, the board gives him millions to leave. I wish I could make millions by being incompetent.

    And then the boards have the nerve to say that they need to pay so much money and give these wonderful perks in order to get the "best" people only to fire them a year or so later for doing a rotten job.

  • Report this Comment On April 20, 2012, at 8:29 PM, Risky88 wrote:

    I think the CEO or the top people in the company cannot make more money than X of the overall employees. For instance A CEO could only make 100x the average paid employee. If the CEO wants bigger pay they need to increase the wages of their employees.

    If you ask me minimum wage would no longer be a debate because people would automatically be paid more.

    In my opinion this brings the USA to the race to the top instead of the race to the bottom like we have been for so long.

    If consumers get paid more, it means they can spend more, if they spend more, business Makes more.

    Criticism and applauds are always greeted, its called moving forward.

  • Report this Comment On April 20, 2012, at 8:47 PM, xferjenx wrote:

    The headline is garbage, but the premise of the article was okay. I regularly vote against all pay packages.

  • Report this Comment On April 20, 2012, at 8:48 PM, xetn wrote:

    I see socialism is alive and well on TMF.

    If you don't like what CEOs make, don't invest. CEO pay is not something demanded by him/her, it is voluntarily offered by the company who wishes to employ him/her. You fools seem to believe that the CEO just demands a certain pay and gets it. You have a CEO confused with the government.

    As for the CIO/AFL monopoly, they do demand and get and have a no-holds-barred approach. They are never even arrested for damage to private property or assult against so-called scabs during strikes. And the main reason we have a minimum wage law is due to union lobbying to keep wages higher than market rates and reduce competition.

    It is too bad so many "investors" know so little about history or economics.

  • Report this Comment On April 20, 2012, at 9:13 PM, modeltim wrote:

    Unions, as imperfect as they may be, exist because historically management cannot be trusted to do the right thing. That is what the American Labor struggles in the first half of the 20th Century were all about. Today's corporate execs want to finish off unions so they can have all the rewards for themselves. Capitalism has cancer and it may be terminal.

  • Report this Comment On April 20, 2012, at 10:10 PM, rd80 wrote:

    I'm a Citigroup shareholder and voted for the pay package.

    Yes, I'd like to see the bank doing better. But, remember where it was when Dr. Pandit stepped in to the CEO position - in danger of failing and in need of gov't help to survive.

    There's still a ways to go, but the bank has gone from near failure to complete payback of TARP funds to one of the strongest capital ratios in the business under Pandit's leadership.

    Maybe no one deserves the monster pay packages some of these folks get, but compare Citi today to where it was four years ago and it's tough to argue against some serious bonuses for the people who led the turnaround.

  • Report this Comment On April 21, 2012, at 1:22 AM, ovy71 wrote:

    Scenario: A business owner employs 5 consultants. Each consultant is paid $40,000/yr but is billed to clients at a rate of $80,000/yr. The employees' average pay is $40k and the owner's is $200k (assuming no other costs for simplicity). If the owner invests his money and decides to expand his business by adding 5 more consultants, the average consultant salary stays at $40k, but his pay doubles. Does that make him a hypocrite or a job-creator?

  • Report this Comment On April 21, 2012, at 1:22 AM, vidar712 wrote:

    How much money is enough?

  • Report this Comment On April 21, 2012, at 5:20 AM, Clint35 wrote:

    So Jack Welch is a Yankees fan and a Red Sox fan? That's just wrong.

  • Report this Comment On April 21, 2012, at 5:23 AM, devoish wrote:

    Nice post Alyce.

    You know you cut to the truth of the matter when the lapdogs come out calling you a socialist liberal union loving rapist.

    ovy71

    And there you cut to the heart of the matter. Why do the consultants want to share so much of the fruit of their labor and expertise with the business owner?

    Or the investors?

    Fear of missing a debt payment?

    And no, he did not "create" a job. The paying customer he billed created the job.

    Best wishes,

    Steven

  • Report this Comment On April 21, 2012, at 9:20 AM, 2lazy2loaf wrote:

    I see no evidence of socialist sympathies or union loving here. Great piece. The return of a moral compass and a sense of obligation to our country as a whole in boardrooms and our federal government is long overdue. Thanks, Martin

  • Report this Comment On April 21, 2012, at 3:14 PM, chop701 wrote:

    I agree that CEO compensation should be tied to the compensation of the employees. I also think it should be a resonable salary with bonuses tied to performance, current and sustainable.

    On the other hand, I also think Unions should be held accountable for the company's performance. If the Union is unwilling to cull non-performers from the company's ranks or to demand worker quality reviews, they should shut up. You give nothing, you have no right to demand anything.

    One other item. What do workers pay to the Union that is paid to Union officials (yeah, what is THEIR pay) and what is spent on things like political campaigns, Union benefits (for the officials) like yachts, etc.

    Both sides of each argument should be examined and held up for scrutiny. Everyone in this argument should be more moderate in what they take.

  • Report this Comment On April 21, 2012, at 9:57 PM, wolfman225 wrote:

    I'm just curious as to what, exactly, the proper multiple is that CEO's should be "allowed"? This also includes the usual ancillary questions (Who determines the proper rate, what criteria is used, who sets the criteria, avenues for appeal if the multiple isn't deemed to be fair by the CEO, etc.)

    While we're at it, can you tell me the breakdown multiple's of the Union leadership compared to the average wage of union membership? At least the union workers contribute something to the business. The leadership? Nada.

    I'm of a mind with the other posters who have said that if you don't like how a CEO is paid, don't invest or give thecompany your money.

    However, I do have a solution to offer: Create regulation that requires truly independent Boards of Directors (ie, CEO's can't serve on the boards of each others' companies and aren't allowed to appoint members of their own boards), providing for severe penalties for collusion; allow for shareholder approval of ANY CEO exit package (especially when the company has underperformed).

    If I'm not a customer or shareholder, I have no dog in the fight. What someone else makes is none of my affair nor, excepting the above, is it any of yours. Jealousy and envy notwithstanding.

  • Report this Comment On April 21, 2012, at 11:39 PM, NotJesseL wrote:

    I am a shareholder in many companies and I try to vote against pay packages when they come up. Problem is that until very recently, the brokerage that holds your shares could vote unvoted shares any way they pleased. This creates a direct conflict of interest because guess who hires the brokerage firms (investment banks) to do mergers and stuff? The CEO's. Its all much too cozy and interlocked at the top. For example, one year, at Waste management, the total corporate profit was 22 million. Guess what the compensation of Dean Buntrock was that year? 20 something million. This is not the free market at work or supply and demand, its more like a power elite that guard their own interests and draft in new members who will play the game. The reason why these people get such high salaries is often just because they can. There is nobody interested who can stop them.

    Shareholders need to stand up for their rights and get rid of management which does not work in their interests. They also need to claw back the compensation of managers that screw up. You can't argue a guy is worth 100's of millions of dollars because he makes the company billions with his decisions (and I suppose no one else had anything to do with it), and then let him keep the same money if he loses 100's of millions of dollars.

    I am much more incensed about corporate CEO's getting overpaid than sports stars or entertainers, because at least they provide entertainment which when amortized against the millions of fans is pretty reasonable on a per fan basis.

    Heads you win, tails I lose no more.

    Next up - Google - by making the founders share have all the voting rights, the founders have made the rest of us Google shareholders a second class citizen of that corporation. Now, presumably, there is nothing to prevent them from giving themselves lavish compensation or other shareholder detrimental things at the rest of our expense. They have disenfranchised us. Long term, I am not sure this is a good company to invest in, in spite of all the things it has going for it.

  • Report this Comment On April 22, 2012, at 1:18 AM, Acesnyper wrote:

    Investing website....

    People who make more than you are bad.

    People who make less, are dumb or oppressed.

    Got it.

  • Report this Comment On April 22, 2012, at 11:07 AM, 100percenter wrote:

    So the point of this article is that people who do a good job should make more, people who do a bad job should make less, overpay hurts the business itself and therefore everyone, afl-cios and unions are guilty of hypocrisy toward the business and the workers, and shareholders have the power and access to knowledge to help correct this which helps the business and themselves.

    ovy71, he's a job creator because he made the business sales increase, he increased his pay by making the business make more money...so you agree with the article on that. Pay based solely on performance.

    I think that everyones pay from top to bottom should be based on profits. Runaway pay for anyone is just bad business.

  • Report this Comment On April 22, 2012, at 5:57 PM, lowmaple wrote:

    Even in the big banks there could have been managers and execs that helped the profits even if the company as a whole lost money. They would deserve pay increases. However when you see the complete disregard some CEOs and boards show for shareholders no wonder you have a backlash. So I should sell my shares instead of trying to fix the problem?

  • Report this Comment On April 22, 2012, at 8:22 PM, wolfman225 wrote:

    <<<" So I should sell my shares instead of trying to fix the problem?">>>

    It depends on your level of outrage and commitment.

    Unless you hold or control a significant portion of the voting shares there's nothing you, as an individual, can do about CEO pay. The only option you have is to try to build a group of like-minded minor shareholders into such a voting block.

  • Report this Comment On April 23, 2012, at 2:41 AM, isshy88 wrote:

    oh, it's just not fair. sounds like a certain world leader i know who said raising the capital gains tax was the fair thing to do even if it had an inverse relationship on tax revenue collected. CEO's ARE grossly over compensated. If you don't like it don't own stock in that company. also, aren't we really talking about the 1% of the 1% or probably even fewer than that? Let's tax all CEO's who make more than 10 million at 100% for anything over 10 million. Wouldn't change a single workers pay or make a dent in this countries looming debt crisis but it sure would be more "fair". Capitalism isn't fair, I think that's the whole point.

  • Report this Comment On April 23, 2012, at 3:42 AM, stef333 wrote:

    @ xetn

    Yes they make that because they are offered that, but they are offered that by the board of directors, which is composed by folks that are the CEO, CFO, COO, CIO, president, or senior VP of another company.

    Basically you have a restricted group of people ensuring each other's unreasonably high salary, and also guaranteeing each other the possibility of getting another CEO job after they have blown their latest severance package.

    If you don't see why company workers and investors alike should worry about this, maybe you start thinking for yourself instead of listening to propaganda that constantly spits out accusations of communism and nazism.

  • Report this Comment On April 23, 2012, at 9:46 AM, JimmyZangwow wrote:

    The trend in CEO compensation will continue until there's a real economic crash (I mean REAL CRASH). Then it'll start over again.

    To me the question is: Why would these people stop going for easy money? Everybody likes money. CEOs are only slightly more greedy than the average person, just much more successful at getting down in the money trough.

  • Report this Comment On April 23, 2012, at 11:11 AM, 2670nirvana wrote:

    the roman empire fell apart due to greed, gluttony lack of moral and ethical consideration for their own people, Our government is in the pockets of these CEO 's and big corporations, The stockmarket is manuplated left and right. The amercian people have grown very apathetic and entrusted everything to corrupt government officials and large corporations. Things started going wrong back in the 80,s. Deregulation on banks - everything . We the people allowed this to happen . Unless there is a complete social/economical revolution, things will never change. Thank god for the 99% movement. I grew up in the 60,s. I am 60 years old now and am ashamed of the total lack of concern the government has for the middle class. The buffett rule should have passed. Most of congress should be replaced with a working class person . We'd get more done. These ceo,s need to get fired and congress replaced.We're all a bunch of damn fools to put up with all of this crap for so long. Our country is great because of the middle class, and we have been taken advantage of. Its, time for our country to be run by the people for the people.

  • Report this Comment On April 23, 2012, at 12:03 PM, DJDynamicNC wrote:

    "Let's tax all CEO's who make more than 10 million at 100% for anything over 10 million"

    Not a bad idea!

    ---> "Create regulation that requires truly independent Boards of Directors (ie, CEO's can't serve on the boards of each others' companies and aren't allowed to appoint members of their own boards), providing for severe penalties for collusion; allow for shareholder approval of ANY CEO exit package (especially when the company has underperformed)." <---

    That's a reasonable set of reforms, and actually, the CFBP might already have the regulatory chops to enact such a measure without any additional regulation.

    --->"If I'm not a customer or shareholder, I have no dog in the fight. What someone else makes is none of my affair nor, excepting the above, is it any of yours. Jealousy and envy notwithstanding."<---

    I disagree. We are all shared participants in this society. If a company is mistreating its workers or overpaying its CEO, I have a dog in that fight if its happening in my country. These social norms are at least as important as codified laws, and I am within my rights and indeed my duties to express disgust for what I consider disgusting behaviour, and respect for behaviour like John Mackay's decision to tie executive compensation to no more than 19 times the lowest paid worker. It may be second, third, or fourth hand, but those actions still impact me for so long as I have chosen to participate in the shared fate of this nation.

  • Report this Comment On April 23, 2012, at 12:21 PM, jmbring wrote:

    nice article, Alyce.

    @devoish: "You know you cut to the truth of the matter when..." :^)

    mark

  • Report this Comment On April 23, 2012, at 2:21 PM, Zinj wrote:

    well, that's it. Now neither political party will have Alyce.

    I suppose that's one of the dangers of the job when you use your own intellect rather than than simply recite the self-contradictory and willfully blind platforms of either party.

    (P.S. please keep it up!!!)

  • Report this Comment On April 23, 2012, at 4:04 PM, damilkman66 wrote:

    Greetings. If CEO pay is so evil how come the equal increase in pay of sports stars, entertainers, football coaches, university administrators, and even union bosses going up is not evil?

    The market determines the value of any employee including a CEO. If a CEO like a highly paid football coach does not perform, he is gone. The board be it a university or a company is paying big money because they have reason to hope the individual will bring big money and/or big wins. Ditto when the company fronting 300 million for a summer block buster pays several million for a superstar entertaine to be the lead.

    I will echo what others have said but be more generic. If a highly paid entertainer stinks, don't buy their wares. if a team is badly coached, don't watch their games. If a CEO is running a company into the ground, do not buy their stock.

  • Report this Comment On April 23, 2012, at 4:28 PM, DJDynamicNC wrote:

    If you really think that university administrators and "union bosses" are receiving equal pay increases, I'd be very interested in comprehensive statistics backing up that claim.

    If CEO wages continued to climb while their employees also saw wages climb and companies saw profits increase, then it would be less of an issue. But that's not what we're seeing. Real wages for employees are stagnant or falling, and CEOs are getting rewarded even when company profits are collapsing.

    Further, this is a call to action that makes complete sense and is completely reasonable. Nobody is suggesting burning CEOs at the stake. The call to force CEO pay to reflect performance through the exercise of voting is as moderate, rational, and intelligent a call as can be made.

    I'm not certain when we enshrined the notion that seeking unlimited profit was not only a good thing but some sort of human right, but when I was growing up we used to call that "greed" - and it was a deadly sin.

  • Report this Comment On April 23, 2012, at 4:47 PM, ScottmFool wrote:

    > Create regulation that requires truly

    > independent Boards of Directors (ie, CEO's

    > can't serve on the boards of each others'

    > companies and aren't allowed to appoint

    > members of their own boards)

    Ding ding ding...we have a winner. IMHO a big factor as to why CEO packages have grow to such extravagant levels is that boards don't function the way they were intended, which is to represent the OWNERS of the company, and hold the employees (in this case, the CEO and sr management) accountable. Board seats are instead treated as low-effort, highish-income perks for the "Bourgeoisie". As a result, they have incentives to supply high-perks since they themselves may ask for a high CEO salary at another company.

    That said, part of the reason it doesn't function properly is that shareholders don't exercise their voting power; so in that respect the problem is fixable by the very group that's most adversely affected: shareholders.

    I cringe when I see someone with the title "chairman and CEO", especially when it's a CEO with a very small minority interest. The fox is guarding the henhouse.

  • Report this Comment On April 23, 2012, at 4:55 PM, Darwood11 wrote:

    I've always held Jack Welch, aka "Neutron Jack" with contempt. Yes, he did some good things for the company but his compensation was outsize; way, way outsize!

    On the other hand, the AFL-CIO likes to stack the deck, also. Ditto for the UAW.

    Before the melt-down, I had an associate, who was a union employee, and had reasonable pay and benefits (200% of average family income with basic skills and a high school diploma) who complained about his son in the UAW. It seems, his son, a 23 year old high school graduate, was making >$95K a year assembling engine components at a GM factory. His son had free medical, dental and legal, etc. His son got more vacation, better insurance, a reduction in the cost of new purchase price of any GM vehicle, and was actually "paid" to go to any appointment with the lawyer who was paid by GM to be available and on the factory site to provide that advice during normal working hours.

    Sorry, most Americans earn less that $50K a year, get 2 weeks maximum vacation, 5-6 paid holidays and don't get the perks that many in the AFL-CIO or the UAW or the CEOs get.

    So in my book, the unions (who comprise about 11.8% of American workers according to the BLS of the US. Dept of Labor). Meanwhile, the CEOs number about 7,000 if we go by listed companies). The CEOs seem to comprise less than 0.5% of 155 million workers.

    So I have a problem with both ends.

    However, if we look at government workers, and that includes municipal, state and federal, that is a large component of the workers in the U.S. Add the 547,000 postal workers, and we have quite an army of well paid workers who are in some way directly linked to the taxes paid by the other "workers" in the U.S.

  • Report this Comment On April 23, 2012, at 5:35 PM, Darwood11 wrote:

    Alyce, here's my suggestion for the next piece. Call it "the hypocrisy of the 99%."

    Subject matter can include the 50% SS perk for spouses, the push for the forgiveness of $1trillion in education loans, the 22% of the federal budget to deal with Medicare and Medicaid obligations (Medicaid must be met by the states, so the obligation is really much, much larger).

    Let's move on to the expectations for exemplary public education while the masses press for reduction of real estate taxes which fund most public education. Let's not forget the State's obligation to fund public employee pensions, but the politicians prefer to fund Medicaid obligations and "Earned Income Credits" rather than do that.

    The poster child for all of this is the State of Illinois, which for 60 years has diverted funds to what most would call "earmarks" and just raised the income tax on individuals by 66.67% and immediately put about $300 million into earned income credits for "poor" families while attempting to manipulate the pension funding system and avoid such obligations.

    Yes, things are really messed up, and far, far more than I think you realize.

  • Report this Comment On April 23, 2012, at 6:18 PM, TMFLomax wrote:

    Thanks for all the comments, everyone. I've been reading them with great interest -- I have to say I especially appreciate those who are willing to accept the points I was trying to make with this piece instead of automatically reacting according to a specific "side." Please keep the thoughts coming... I'm glad to see the discussion, since this really matters to shareholders who understand investing as having an ownership stake (which is why I don't like the "like it or sell it" mentality about issues like this one, which has been prevalent for a while; I view that as a form of indoctrination that has taken place in our marketplace, and even a twisted way of condoning extremely ill and utterly economically irrational behavior -- maybe that's a different article for a different day).

    Best,

    Alyce

  • Report this Comment On April 23, 2012, at 6:24 PM, wolves83 wrote:

    There is a grand difference between being the CEO of a company and the owner. An owner has to go through the work of creating the company and growing it to a place of profitability. A CEO is hired to run a company. An owner takes on risk when creating the company. A CEO is hired with a salary to do a job.

    There is a difference between socialism and social responsibility. Socially responsible companies understand that the guy at the bottom of the line has a part in the success of the company just like the CEO. The CEO makes decisions that steer the company, but to say the CEO is worth 380X the average worker is ludicrous. Especially when the CEO receives huge sums of money for doing a poor job. Want to pay CEOs a ton of cash? Make the majority of their pay in the form of stock options or something that take effect AFTER the CEO leaves. His pay is directly tied to the success of the company in future years. No more of this Countrywide Financial type short term success.

  • Report this Comment On April 23, 2012, at 6:55 PM, Darwood11 wrote:

    Alyce;

    I appreciate your comment that "investing is taking an ownership stake" and I would like to expand that to include the country in which most of the businesses operate that you directed your article. GE, for example, is a US based company.

    However, I do think you were sucked into the void. I'd suggest your read Morgan Housel's article "A Bias of Titanic Proportions. I think it also applies to the current and recent debates about CEO compensation.

    I am of the opinion that the vices of millions can easily overpower the vices of a few thousand. Ir's why the Medicare, Medicaid and SS systems currently absorb about 41% of the entire federal budget. Other safety net programs comprise about 13%. That's about 53% of the total budget.

    It's why, among other things, we have a space program that's trivial.

    I'm sure you and the other readers have this link:

    http://www.fool.com/investing/general/2012/04/18/a-bias-of-t...

    My point in this is that the "outcry" about CEO pay is, I think, for the most part misplaced. I'm using simple numbers here. About 66% of the entire federal budget far exceeds the issues of CEO compensation.

    Some of this is akin to worrying about small leaks

    in a dingy while waves are washing over the gunnels each second.

    Frankly,I think it's time to get our collective bearings and stop dealing with trivia, or populist BS.

    Yes, it isn't fair that some CEOs make $millions. It isn't fair that the Kardashians get $millions each year for being idiots. But so what? Have you ever stopped to figure out how much in this country is spent each and every year on pets. make-up and entertainment?

    If you take the time to see how much of the economy is based on that, it's not a shock that a few of thousands of CEOs are attempting to clean up each year.

    Millions of Americans apparently game the tax system each year, also.

    This doesn't make any of that right, or better, or worse.

    I come to the Motley Fool to get information for self-motivated, empowered individuals. For all of the rest I'll go to MSNBC for the latest hot idea, to MoveOn.org for the latesthot idea about giving money away (such as forgiving $1trillion in education debt) or any where else, including the hundreds of poor pet sites on the internet.

  • Report this Comment On April 23, 2012, at 9:07 PM, devoish wrote:

    "Sorry, most Americans earn less that $50K a year, get 2 weeks maximum vacation, 5-6 paid holidays and don't get the perks that many in the AFL-CIO or the UAW or the CEOs get". - Darwood11

    And if that's OK for the rest of us its OK for the CEO's too. After all, we are all just trying to reward investors.

    Best wishes,

    Steven

  • Report this Comment On April 24, 2012, at 4:47 PM, DJDynamicNC wrote:

    @Wolves83: Good post. You said:

    "There is a difference between socialism and social responsibility."

    However, you went on to describe, essentially, socialism. I don't think they are all that different. Socialism is just a method of applying social responsibility.

    Socialism can be boiled down to a recognition that we are all in this together, we each have a role to play, and we each deserve to share in the results of that effort - and to govern accordingly.

  • Report this Comment On April 25, 2012, at 10:22 AM, OnTheContrary wrote:

    Sure, top corporate executives are robber barons plundering their companies in return for mediocre minus performance, but the problem in this country is not the 1%, it's the 10% - the upper echelons of not only business and finance, but government, the academy, the media, unions, and lawyers - whose inflation-adjusted incomes have actually gone up over the last 15 years, while the inflation-adjusted incomes of the rest of us have stagnated or declined. These parasites are the ones who have latched on directly or indirectly to the government gravy train financed by the monopoly money that the Fed keeps pumping out, adding to our crushing debt.

    The notorious 1%ers are just the chosen scapegoats of the nefarious 10%ers.

  • Report this Comment On April 25, 2012, at 8:53 PM, ibuildthings wrote:

    Shareholders should oust the CEO's that aren't earning their pay. I am not defending bad ones, but guys like Paul Otellini seem to be navigating some tough waters, and doing it honorably.

    My fear of unionization is the same as I have for protected CEO's. Good CEO or bad CEO, the pay is the same. Good union worker bad union worker, the pay is the same. But there are a lot more workers. Think of how close to collapse the car companies came. Do you really think that was only because of CEO pay? A worker who shows up drunk at 8AM can't be fired. The company must put him on disability, at full pay, and pay for a dry-out clinic.

    Mediocrity is the true enemy, not high pay.

  • Report this Comment On April 25, 2012, at 8:57 PM, ibuildthings wrote:

    BTW, referring to my last post, I am not anti-union. I have been a dues-paying union member in two jobs, one in particular where membership was optional. It is a useful function, but just like any other weapon, it can be used for protection, or used for robbery. Protecting deadbeat workers, or bad teachers, or crooked cops is just as much a case of robbery as a crooked CEO or a bank robber.

  • Report this Comment On April 25, 2012, at 9:05 PM, CaptainWidget wrote:

    <<Socialism can be boiled down to a recognition that we are all in this together, we each have a role to play, and we each deserve to share in the results of that effort - and to govern accordingly.>>

    According to whom? Socialism as history the dictionary define it, is state controlled means and ownership of production.

  • Report this Comment On April 25, 2012, at 9:16 PM, ibuildthings wrote:

    <<Socialism can be boiled down to a recognition that we are all in this together, we each have a role to play, and we each deserve to share in the results of that effort - and to govern accordingly.>>

    This can also become mob rule, where the less productive make unreasonable demands of a rapidly diminishing group of productive. Then you need more and more soldiers, some of whom are bribeable, and now you have the soviet union part 2

  • Report this Comment On April 25, 2012, at 9:20 PM, ibuildthings wrote:

    Mediocrity is the enemy, not high pay.

  • Report this Comment On April 26, 2012, at 7:55 AM, devoish wrote:

    <<Last year, average worker wages grew by a paltry 2.8% to an average $34,053.>> - OP

    "A new report by the US Social administration suggest that the median per-capita income, for the year 2010, as reported by employers is $26,363.55. Yes that is not a misprint- 50% of wage earners (75.2 million individuals) in the USA make less than 507 $/week before taxes!" - http://dissention.wordpress.com/2011/10/22/declining-median-...

    If median income is declining and mean income is increasing, then that would pretty well describe an economy where a smaller group of "rich" people are extracting their wealth from a larger group of "poorer" people.

    It certainly is not "mob rule, where the less productive make demands of a rapidly diminishing group of productive".

    It is an "ownership society" where the less productive owners make increasing demands on the lives of the more productive workers.

    Best wishes,

    Steven

  • Report this Comment On April 26, 2012, at 11:22 AM, DJDynamicNC wrote:

    "According to whom? Socialism as history the dictionary define it, is state controlled means and ownership of production. "

    And who is the state?

    In the case of the Soviet Union, the state was a hugely autocratic fuedal organ which translated poorly to socialism (just as it has translated poorly to capitalism).

    In the case of Sweden, the state is a representative democracy that has handily defeated the Great Recession and built an enviable nation.

    In both cases, socialism has been accepted to a large degree.

    In the United States, socialism has also been accepted, simply to a lesser degree.

    When the people own the state, and the state owns the means of production, then the people own the means of production. Idealistic? Sure, though no more so than An-Cap or any other principle-based ideology.

    The path, then, lies in a middle ground of accepting the areas in which your system may not work well and working to apply your system where it can do the most good. In a lot of states, you need a license in order to be a barber - that's stupid. The state has no need to be involved in who cuts people's hair. Heck, you need a license to practice psychic readings in Massachussetts (read this article for hiliarious adventures in psychic rent-seeking: http://www.foxnews.com/us/2011/03/26/psychics-witch-city/ ).

    On the other hand, there are other places where the state can do a lot of good by getting involved. The trade offs in efficiency and individual freedom are sometimes worth it. If you think posting debt collectors in hospital rooms is more efficient than a socialized health care system, well, maybe so (and maybe not; it's hard to analyze systemically), provided you're talking about efficiency in fee-based cost collection (efficiency in treating patients is a metric that probably suffers). But I don't think anybody can argue that it's a more humane system except through the most abstract ideological obfuscations.

  • Report this Comment On April 26, 2012, at 11:32 AM, DJDynamicNC wrote:

    "This can also become mob rule, where the less productive make unreasonable demands of a rapidly diminishing group of productive. Then you need more and more soldiers, some of whom are bribeable, and now you have the soviet union part 2"

    Sure, and capitalism could lead to all sorts of terrible end results as well. For example, it could develop into a crony corporatism which is unaccountable to the people at large, able to externalize costs of pollution and environmental destruction, develop systemic flaws on a catastrophic level which decimate the world economy, and create an entire class of people who thrive off of producing nothing and simply extracting rents from people who are essentially forced to use a corrupt banking system. Purely hypothetically, of course.

    Every system can (and likely will) be abused, and can eventually collapse. Ongoing vigilance is necessary, which is a role that active people like those who post at the Fool fill. Communities like this are the hope of society. We're paying attention. That's 75% of the battle right there.

    Who defines productivity? I'm a writer and a DJ. These are not exactly vital services, but I do quite well with them which means they have value to society, but I did both long before anybody paid me for them, I've simply found a way to monetize them.

    Meanwhile, people who work hard at serving our food or keeping our buildings clean are given bare subsistence wages. By any account, I'd consider them more productive than me, but the market doesn't. And now we're running out of jobs for those people, while bankers who move figures from one column to another are ever more richly rewarded with tax cuts (while services provided to those who work minimum wage jobs, or would if they could, continue to be slashed).

    Why, you might even say that a less productive group is making unreasonable demands of an ever diminishing group of more productive people.

  • Report this Comment On April 26, 2012, at 11:34 AM, DJDynamicNC wrote:

    "It is an "ownership society" where the less productive owners make increasing demands on the lives of the more productive workers."

    I didn't notice this before making my post, but Steven made the exact same point I was trying to make.

  • Report this Comment On April 26, 2012, at 11:58 AM, TopAustrianFool wrote:

    DJDynamicNC,

    I think you make good logical points about the benefits of socialism in only those sectors of the economy where it can lead to better results.

    The problem is that you logic is folly. Simply because under a socialist administration of a sector there is no means of economic calculation.

    By economic calculation I mean, that you cannot allocate resources according to need or expense because the price system is broken down by coercion. Therefore, there is no way for producers to figure how much more gasoline is needed and how much is enough, because you adulterated the prices system in order to make it available to all.

    So frankly, I know that most people feel passionate about socialism either emotionally against it or for it. The reallity is that technically there ae no means of economic calculations, therefore it will fail. It will fail even if the managers are not corrupted by the system. It will fail for technical reasons.

  • Report this Comment On April 26, 2012, at 12:03 PM, TopAustrianFool wrote:

    DJDynamicNC,

    You say: "Sure, and capitalism could lead to all sorts of terrible end results as well. For example, it could develop into a crony corporatism"

    This is not capitalism, this is fascism which is nothing more than a water-down version of socialism. Basically instead of the govt owning the means of production, they make regulations in order to provide a monopoly to a private group. The result is the same except tipically there are a couple of groups so it ends up being better than pure socialism but not better than unregulated Free Market.

    Lomax doesn't realize that the poor of a nation are produced by the govt. The govt excessive laws, regulations and welfare produce unemployment and the poor.

  • Report this Comment On April 26, 2012, at 12:13 PM, TopAustrianFool wrote:

    DJDynamicNC,

    "On the other hand, there are other places where the state can do a lot of good by getting involved. The trade offs in efficiency and individual freedom are sometimes worth it. "

    It is indeed when the state gets involved, by writting laws and regulations that result in only a few providers of the service (monopolies) by raising the startup costs that hinder competition, that you get the "crony capitalism" or fascist system that causes the problems we have today.

    Think of the safety, health, environmental and other regulations that Big Auto, Big Oil, and Big Utilities have to comply with. And they comply happily and sometimes lobby for them, since they know that keeps you and me from starting an Auto, Oil or Utility company that will compete with them.

  • Report this Comment On April 26, 2012, at 12:26 PM, DJDynamicNC wrote:

    "Simply because under a socialist administration of a sector there is no means of economic calculation. "

    Government impact is far from the only means of price signal distortion. There will ALWAYS be signal distortion, misinformation, flawed reasoning, misreading, and so on. That is because we are human beings, imperfect and limited in so many ways.

    What socialism does is establish a baseline. That does distort the market. That is a sacrifice I am willing to make in exchange for protecting human beings from the worst excesses of the market.

    Before social security, seniors suffered debilitating poverty and mass starvation. We've addressed that to a large extent. That's worth the price distortion (which is limited, at any rate, because it is a simple reallocation of accounting units from society at large to individuals in need, rather than an attempt to target specific commodities).

    I would also have a hard time being convinced that the distortion in price signals that are generated by socialized health care have destroyed health care around the globe, given that practically every nation that utilizes pure socialized health care gets better results for less money, and our own system has survived quite well with the advent of Medicare. You can say that economic calculation is impossible, but obviously people are doing it, and lives are being saved. If there are tradeoffs in efficiency (and there is some debate even about this) then I'd be willing to accept them in exchange for improved quality of life for human beings.

  • Report this Comment On April 26, 2012, at 12:28 PM, DJDynamicNC wrote:

    "This is not capitalism, this is fascism which is nothing more than a water-down version of socialism"

    No true scotsman fallacy.

    As soon as capitalism results in anything you don't like, you stop calling it capitalism.

    If capitalism is a pure, pristine flower that cannot survive the harsh light of reality, then it has very little value. There is no doubt that capitalism DOES result in these situations regularly, and if it contains flaws which lead it to become that sort of psuedo-fascist state on a regular basis, I'd be eager to hear your proposals for addressing them.

  • Report this Comment On April 26, 2012, at 12:34 PM, TopAustrianFool wrote:

    "There will ALWAYS be signal distortion, misinformation, flawed reasoning, misreading, and so on"

    Actually, all of these are included in risks and knowledge-time relations. Also their impact is reduced greatly by competion.

  • Report this Comment On April 26, 2012, at 12:35 PM, DJDynamicNC wrote:

    "It is indeed when the state gets involved, by writting laws and regulations that result in only a few providers of the service (monopolies) by raising the startup costs that hinder competition, that you get the "crony capitalism" or fascist system that causes the problems we have today."

    1) You accept the need for government in some form. If you do not, at least recognize that other people do and will seek to form such an entity.

    2) Given the above, there will always be the opportunity for rent-seeking by incumbant parties and that opportunity will always be pursued.

    3) When this occurs, the solution is to fight for deregulation, and indeed, that is what happens - even die-hard socialists like myself would like to see certain areas of life deregulated.

    4) However, you also accept that government is, by definition, an imposition of certain regulations. The imposition of those regulations can occur by the state, but it can also occur by corporation - for example, a corporation which dumps toxic waste in my backyard is imposing its regulation on me, and I can respond by fighting back (very difficult if I have no legal recourse) or by moving or by blowing up the factory or any number of different ways. The way we as a society have largely chosen is state-based regulation, and as you don't have toxic waste in your backyard, I submit that it has been largely successful.

    5) You should differentiate between "imposing additional costs" and "internalizing costs that had been previously been externalized."

    ---> "Think of the safety, health, environmental and other regulations that Big Auto, Big Oil, and Big Utilities have to comply with. And they comply happily and sometimes lobby for them, since they know that keeps you and me from starting an Auto, Oil or Utility company that will compete with them" <---

    Think of the safety, health, and environmental regulations that businesses have to comply with that have drastically reduced our rate of workplace death and accident, that have ended acid rain, that have drastically reduced disparities in pay between men and women for the same work, that have greatly improved safety on the road, and so on. Yes, it has raised the cost of doing business for the individual actors - but it has greatly reduced the costs borne by society as a whole. That is valuable, both economically and from the perspective of "I don't like people suffering and dying."

  • Report this Comment On April 26, 2012, at 12:38 PM, TopAustrianFool wrote:

    "As soon as capitalism results in anything you don't like, you stop calling it capitalism.

    If capitalism is a pure, pristine flower that cannot survive the harsh light of reality, then it has very little value."

    Nope, I defined it above. If govt regulates to create monopolies and cartels that is not a Free Market.

    I am assuming that by capitalism, you are refering to Free Market. Capitalism is the misnomer Marx gave the Free Market when he was making his Strawman Argument.

    I think your characterization of what I said as a fallacy is quite wrong. I defined it clearly. It has nothing to do with my liking or lack thereof.

  • Report this Comment On April 26, 2012, at 12:39 PM, DJDynamicNC wrote:

    "Actually, all of these are included in risks and knowledge-time relations."

    That's an awfully optimistic view of human knowledge and decision making that you hold there. I'm impressed.

  • Report this Comment On April 26, 2012, at 12:40 PM, DJDynamicNC wrote:

    "Nope, I defined it above. If govt regulates to create monopolies and cartels that is not a Free Market."

    Government regulates, by definition. What degree of regulation does it take before a free market is no longer a free market?

  • Report this Comment On April 26, 2012, at 12:46 PM, TopAustrianFool wrote:

    "for example, a corporation which dumps toxic waste in my backyard is imposing its regulation on me, and I can respond by fighting back"

    Take it to court.

    During the 1800's people would take corporations to court in class action suits in order to get them to stop polluting the air and water. The govt by using the argument of "eminent domain" that the common good of the industry was more important, made laws prohibiting such class action lawsuits. Therefore, your socialist idea of the common good is indeed the culprit of many of the ills you want to resolve.

    This protection by laws that govt gave corporations during the industrial revolution is conviniently ignored by socialists and facists. But it is in the historical record. Let me know if you want the references.

  • Report this Comment On April 26, 2012, at 12:49 PM, TopAustrianFool wrote:

    "Government regulates, by definition. What degree of regulation does it take before a free market is no longer a free market?"

    Of course we do need a basic govt, but it is amazing that you need to ask. The Constitution of the US is all the limitations govt have. Read it.

    Basically, most of your arguments are solved in the court or arbitration system.

  • Report this Comment On April 26, 2012, at 12:53 PM, TopAustrianFool wrote:

    ""Actually, all of these are included in risks and knowledge-time relations."

    That's an awfully optimistic view of human knowledge and decision making that you hold there. I'm impressed."

    I am more optimistic about human, or individual knowledge than of govt or beaurocratic knowledge.

    People make their own decisions daily based on their subjective value system, and the market responds almost instantly in a million different ways. So please, don't be so pessimistic.

    I say that with all due respect. As I believe you are a reasonable individual.

  • Report this Comment On April 26, 2012, at 1:05 PM, TopAustrianFool wrote:

    "Think of the safety, health, and environmental regulations that businesses have to comply with that have drastically reduced our rate of workplace death and accident,"

    You say that is the result of regulations, but if you look at the trends of accident in the workplace and when the laws that OSHA administers were created you see that the reduction was already underway. Similarly, with the clean air act. The reason is that it is competition, choice for workers, and technology, not regulation what made this possible.

    Obviously, you and I are way too far apart since we don't even agree in the validity of the evidence.

    I nevertheless, thank you for a good argument.

  • Report this Comment On April 26, 2012, at 1:56 PM, chaztx wrote:

    Good Article. Without a doubt most CEO's are in for their own benefit.

    Only a real naive fool would believe Jack Welch was the reason GE turned around. It was a combination of their strong engineers, new products, and worldwide economic recovery that allowed GE to turnaround. Seeing Mr. Welch on CNBC every week is sickening as he never gives any credit to his former employees that made him look good. He is the ultimate egomaniac.

  • Report this Comment On April 26, 2012, at 2:13 PM, DJDynamicNC wrote:

    "I nevertheless, thank you for a good argument. "

    Likewise. You made valid points and I recognize the cohesion and consistency of your viewpoint even while I disagree with your preferred solutions.

    Regards. Fool on!

  • Report this Comment On April 27, 2012, at 3:45 AM, shahaw wrote:

    The article is informative but did not suggest any solution . American tax payers are losing money while CEOs are getting multimillion bonuses. Could you give any info how the stock holders and the tax payers can push them out of job so that money goes to the employees who ultimately work for the growth of the company. Good idea will be to publish the name of top 200 company who are paying this kind of money to CEOs and the public just stop buying their shares for few months to teach them a lesson.

  • Report this Comment On April 27, 2012, at 4:04 AM, shahaw wrote:

    It is not issue of capitalist/socialist philosophy.

    I believe in free market. Yet the kind of pay these CEOS are getting is completely insane. Share holders must do some thing about it.

  • Report this Comment On April 27, 2012, at 11:37 AM, sheltonclan wrote:

    The free market is both the problem AND the solution. That is the brilliant thing about a free market! We get to have a say, influence policy with our comments and votes.

    Personally, I vote against pay packages that are outlandish - and ALL bonus packages for any but the cleanest balance sheeted-companies.

    But, what I would love to see every investor do, is just look up the 10 worst companies in terms of outlandish CEO to average worker renumeration. Then, don't invest in those companies. Don't buy ETFs or any instrument that contains them at all. You see, true conservatives understand that in a free market, the power really IS with the people. We don't have to buy anything, we don't have to support any company. We just have to use the power the free market gives us.

  • Report this Comment On April 27, 2012, at 11:45 AM, nancydog wrote:

    The point is that a person who works at a certain job today, should expect to be at the same standard of living, and tax bracket as one who worked in the same job 20 years ago. If the trickle down theory works, this should be the case. It is not the case. That is why the middle and working classes are hurting today. Capitalism and Communism, and Socialism, outside of the the philosophic are, are really of no concern to people who work for a living. All they want is to see that their families have an equal opportunity to do better in the future. The current bent of discussion, indicates that a vast majority of the citizens are losing faith in this belief. The monstrosity of immense wealth, in days of unemployment and poverty, is in indicator that they wealthy are doing nothing in the are of Liberty and Justice for All, in both the social and economic areas. I am part of the 2 percent and can see this. I wish to protect my grandchildren and would be willing for the upper tax rates to be raised. The American people were good to my generation and I wish we were all good to this generation and the future. Does our House really have to be dragged like mules to extend current student lone interest for even 1 year? What is wrong with these people? Enough. It is time for the very wealthy to stop buying governments just to protect their car elevators.

  • Report this Comment On April 27, 2012, at 11:52 AM, DJDynamicNC wrote:

    "You see, true conservatives understand that in a free market, the power really IS with the people."

    Provided you have the money to participate.

  • Report this Comment On April 27, 2012, at 12:03 PM, Lytingale wrote:

    Henry Ford priced his cars so his workers could afford them... he understood the basic idea that a company can only thrive if there are people able to buy what you are selling... Even "trickle-down" proponents should realize that the stream must be large enough to keep the populace from dying of thirst!

    This ever-increasing economic disparity is ruining our country. There is a vast difference between rewarding people for their job and the kind of obscene excess now practiced.

    If you own stocks, your puny vote against CEO compensation has no effect.... and of course, you have no real choice of who's on the Board.

    The stockholders are being ripped off because the CEO is pocketing the bulk of profits while you get tiny or no dividends from your investments. And if you're not getting dividends, then Wall Street is just a form of legalized gambling.

  • Report this Comment On April 27, 2012, at 12:34 PM, railnut1947 wrote:

    The article is not only relevant but something the Wall Street Journal has been writing about for years. It's time investors demand the pay package fit the job the CEO is doing. Let us not forget that the workers are the key to the industry. You can take the jobs out of the country but you can't take stupid decisions away from the CEO's .Classic example is Weldon of JNJ. His lack of oversight has almost destroyed the reputation of a magnificent company. I'm glad he retired before completely ruining a great company.

  • Report this Comment On April 27, 2012, at 12:43 PM, Andrejia wrote:

    What I'm seeing here in spades is the "if you don't like it, change the channel" mode of thought. This denies our social imperative to give a crap about what's going on outside our individual tribes. The one percent, & those who support it, might be better off left to their own tiny island so they are free to screw each other over, while the rest of us attempt peaceful living by offering a hand to help each other up; noticing when someone is down; & fixing a situation wherein someone naughty is taking advantage of a situation for personal gain --- at the expense of others. I know I sound like a naive child wishing for a perfect utopia... but really ... what's wrong with that? I teach my child not to be greedy, rude, or cruel. Should I not expect the same from my fellow citizens? Guess not. But my voice won't be silenced when the one percent gets ticked at someone calling B.S. A greedy jerk is a greedy jerk, whatever other euphemism you use.

    Andi-Roo /// @theworld4realz

    http://www.theworld4realz.com/

    theworldforrealz@gmail.com

  • Report this Comment On April 27, 2012, at 3:58 PM, ecm3131 wrote:

    Forgetting for the moment the social implications of pay scales and looking at this strictly for what the article encourages ("Time to vote against ridiculous pay packages"):

    As investors, we are getting fleeced when the CEO is paid a ridiculous sum, sometimes to leave after doing a crappy job. Selling my stock at a loss changes nothing. Its my company too ... why should I leave?

    Who is to blame? Blame the compensation committees of these corporations that are loaded to the gills with folks who would like to keep the water line elevated because they are drawing water from the other end of the pond.

  • Report this Comment On April 27, 2012, at 4:06 PM, DJDynamicNC wrote:

    These comments are great, and exactly right. The notion of selling the shares because we don't agree with the CEO pay is just another way of throwing in the towel. As ecm3131 said up above, when you own shares, it's your company, too - why should you be the one that has to leave?

    Great stuff. I'm enjoying voting my shares, and my conscience.

  • Report this Comment On April 27, 2012, at 4:18 PM, Eriemaster wrote:

    Let's be real. What if you were a director with a lot of money in the company and needed to attract a new CEO. What would you do? A bad CEO will loose a lot of money. You do not want them to take the next CEO job that pays twice as much if they are successful. If you go cheap on a CEO and you fail, you violated your responsibility.

    That said, I think CEO pay is outrageous.

    The question is can you reliably get a great CEO for less and would they willingly take pay for performance with claw back?

    My suspicion is usually yes. Their egos may be so big they do not consider themselves capable of failing.

  • Report this Comment On April 27, 2012, at 4:54 PM, xetn wrote:

    What about the hypocrisy of the 99%? You know the ones; they expect the government to take care of them from cradle to grave. Get paid for not working, get paid for food credit cards, get paid for medical, etc.

    And now, Obama wants their vote and is willing to buy it by allowing bankruptcy for student debt, paid by the productive minority.

  • Report this Comment On April 27, 2012, at 5:12 PM, DJDynamicNC wrote:

    I do expect a nation of people to take care of one another, and I do recognize a democratically elected government as one means of doing so.

    I reject your framing that people taking care of each other is somehow morally inferior to a Hobbesian wonderland of contracts and lawsuits.

    But you knew that. ;)

  • Report this Comment On April 27, 2012, at 5:51 PM, j2012 wrote:

    The productive 1% yeah right... and the pharoahs were gods, and the Englsih kings had a divine right to lead. There have always been fools who buy into the powerful's propaganda. The facts is the ratio was 42-1 in 1980!! Were we so unproductive back then? What was the ratio in the 60s I wonder. The 15 has been re-distributing wealth to themselves for decades all the while creating a fear of re-distribution to the poor. Need proof? Follow the money and listen to right wing radio!

  • Report this Comment On April 27, 2012, at 9:51 PM, donvesco100 wrote:

    If the arguments put by the anti capitalists are taken seriously, one must wonder what they expect to happen to their comrades when government regulation defines and distributes ownership and wealth. Will their cloth cap wearing brothers and sisters fare as well as the Cambodian, the Chinese, the Russian during the worlds last spate of "peoples revolutionary" countries. Will their electioneering campaign slogans save them?

  • Report this Comment On April 27, 2012, at 9:58 PM, DuncanCairncross wrote:

    The problem with excessive executive pay is that it "filters out" the sane reasonable people.

    Once sufficient money has been "earned" that you and your family can live your lives out in luxury a rational person would give up a stressful job and concentrate on doing something meaningful - probably with his/her friends and family

    Those who continue are - insatiable - a mental disease

    So by paying too much the rational people leave and you are left with the insatiable ones

    Pay peanuts - get monkeys

    Pay millions - get loonies

  • Report this Comment On April 27, 2012, at 10:01 PM, donvesco100 wrote:

    And I await an article sketching the portrait of the hypocrisy of those who pay no federal taxes, and actually recieve a check which they apply to those taxes which they actually do pay- their cigarettes, their scratchies and their gasolene road tax...yet hate the ones who give their earnings to a government so dedicated to reelection that they will starve the milk cow, and cook the goose who lays the golden eggs.

  • Report this Comment On April 28, 2012, at 12:10 AM, srwm4 wrote:

    This article is, quite frankly, a lot of you know what. What's wrong with CEOs earning money? Bob Nardelli increased HD's earnings by $3.26 billion/year in 5 years - even after taking a 9-figure salary. He got fired because the stock was over-valued when he took his job, and the Board threw him under the bus to appease the news media's activism.

  • Report this Comment On April 28, 2012, at 2:33 AM, PerryDawg wrote:

    I haven't been on this site for awhile.. since when did we get political? What's up with the Liberal rant? she writes about environmental stuff too? What does she teach me about funding my ROTH in a better way? The Left has nothing to say.... whah!!! but complain about how screwed this country is. Be more positive. Be PERSONALLY responsible for your own actions we don't need the left to force their views on us. Sicking Socialist crap anyway. Good Lord leave this site to investor learning. Go to Occupy whatever they are whining about today.. who cares. Geez.

  • Report this Comment On April 28, 2012, at 2:52 AM, PerryDawg wrote:

    All know is I have been buying $100 a month of Altria... Phillip Morris through Sharebuilder for about 13 years. Unreal how much I have made. I look at investing as I am just piggybacking on profitable companies. They do the work... make billions and I make a bunch in my ROTH tax free. I don't lose sleep worrying about how much the other guy makes... who cares? Jealous? Getting ulcers? Can't sleep? I am so glad my dad taught my the basics in life. One was to worry about myself. Don't be a burden to other people.. like taxpayers I work everyday. I deliver pizza and work on a private golf course don't make a ton but I have made the most of it. Anybody can make it here in this great country. Free markets rock !!Two to learn the basics of investing in stocks for the long run. The Fool is a good site for this. I truly enjoy when stocks go down I get to buy more for my 100 bucks a month and my dividends which are free stocks for me every 3 months. I feel for you people who worry about things that are not important. I will retire in 12 more years and I look forward to buying a new Corvette and adding on to my house I bought 30 years ago at age 25. paid for and I will and do enjoy watching my stocks go up, up ,up. I love free markets, my country. Don't like Obama or Liberalism much it cramps my style as well as millions of other people but hey I am happy!!

  • Report this Comment On April 28, 2012, at 6:27 AM, MatsalehFool wrote:

    Leaving the politics aside, I think the interesting question to ask is why does the market apparently value CEOs by six or seven times more than it did in 1980 (taking the author's relativities at face value)? Were they really undervalued before; if not, what's changed? It seems unlikely that it is a question of special knowledge; after all, access to pretty much any type of information has become exponentially easier over the period. Is 'leadership' that much more important a driver of company performance than it was before? I can't really think why that would be. In fact, you could reasonably argue that company performance has become more dependent on teamwork in a more complex world. Ideas?

    Perversely, I think one factor is that the disclosure of CEO pay has made the situation worse. Let's say the average CEO pay for a company of a certain dimension is $3m. In today's world, everybody knows that. Now, whether the company is doing well or badly, what remuneration committee is going to say to itself 'let's get someone cheap'? And what self-respecting candidate (or half decent incumbent), whether he/she needs the money or not, is going to argue that they aren't at least a teensy bit better than average and hence deserve to be paid accordingly. So they're going to settle on $3.5m or whatever...and thus the average creeps up. None of that requires cronyism or corruption, just human nature.

    So, come on all you free marketeers out there (and I am broadly with you), can you offer any other explanations as to why the cost of 'CEO' has gone up?

  • Report this Comment On April 28, 2012, at 10:50 AM, ilovesumm wrote:

    The 20:1 ratio for highest to lowest makes sense.

    If the lowest makes 50k per year , HOPEFULLY the CEO can survive on 1 million per year.

    After all without the little guy , there would be no need for the big guy.

    The banks pay their tellers $10 per hour and CEO's get millions . The tellers are probably working longer and harder as well.

    The problem is that these compensation packages are akin to looking over the urinal and

    one upping the next guy .

    If I get fired I don't get a lofty parachute . Fired should mean you get 2 weeks of pay , thanks see you later chum.

  • Report this Comment On April 28, 2012, at 2:56 PM, Billybobjoebubba wrote:

    The 1%? This is a bunch of malarkey, a load of bunkum, and a bucket full of toomfoolery.

    Am I to apologise for having worked hard for over seventy years with a result of making more money than most others?

    There is nothing wrong with making money. The only question worth asking is "how did a person make it?" Before casting aspersions, it is essential to question what we once called "integrity." That, I feel, is worthy of a look-see. A valid question should be allowed: "was the money made in an honest way?" I do not claim to be a "saint" or even close. I tell you, one and all, I have sinned. I know this about myself; I have been honest towards all others in my business transactions. I have never knowingly taken advantage of any man, or woman in order to make a single dollar. Before you "Hate" on me, I conceed this to be a valid and legit question. The assumption is; "Liar, Liar, Nose On Fire." That is really not fair.

    A short look back does give people a very good reason to question. A look at many famous foundations and their national and world-wide annual awards does give reason to wonder. Are these "prizes and awards and the fat check that goes with many of them a legacy of perpetual compensation for a one way ticket to heaven? Are they a form of compensation for a life of transgressions? Personally, I do not think it works that way.

    In recent months there have been some people who have opened their tax records to the public. The public, in turn, has responded. " My goodness, he made a lot of money last year!" However there is now the added caveat; "look how much he gave to charity." This is where, I feel, the fools rush in. That donation to most charities is a tax-write off. I know men who have informed their lawyers to work their tax forms backwards. They have instructed their paper pushers to "work backwards." with the demand of "how much do I have to donate in a tax-deductable and legal manner in order to reduce my taxable burden?" To the public eye, when they see the massive sums given to the "non-profits," they assume "what a good man he must be, he gave millons of dollars away to worthy causes and fed the hungry, he tithed over 25% of his total income..." Malarkey I say! There is an obvious solution to this, but that will never happen in America. It should be considered, serious thought should be given to this tax dynamic, as it is a two way street where in reality the 99% are the ones who really "foot-the bill."

    This bill, by the way, for all of you 99 percenters runs in the trillions of dollars annually. Even greater cause for concern is how these tax-deductable donations to charity organizations gets spent or, more alarming, not spent at all. That is another issue, an issue so geat that it requires more space than is allowed here. To all 99 percenters and to the 1percenters; do you know where the money that you gave for Katrina, for Tornado victims, for the one in four hungry American child, went? Speak of "Hypocrisy." Yes, please speak of it. Before you do, let me suggest that you ask the right questions and do the essential research. More and more, as the years go by, I have grown to appreciate the smaller groups in our country who work to help American children. Many of them do not register as a non-profit, a 501(c)3. My research over the years shows that many of them carry a heavy burden and do the most with very little. Every day I am asked to " gimme-some-money." In turn, I am allowed to ask, "how do you intend to spend it?" I have located six groups, in America, who do good with a dollar. Donations to them are gifts as the money is not tax-deductable. One that comes to mind is www.Focusas.com/ They work to save the lives of children in America. There are more groups who can and do squeeze a nickel; ask me, ask me a legitimate question and I will give you an honest answer. Please don't hate on me for having made my money without getting to know me first.

  • Report this Comment On April 28, 2012, at 8:17 PM, ziq wrote:

    @xetn:

    "If you don't like what CEOs make, don't invest."

    Yes, that's exactly what this article is suggesting.

  • Report this Comment On April 28, 2012, at 11:59 PM, guest2 wrote:

    Its worst than 380 times the average employee because of outsourcing to India and China and the lower paid employees like food service and janitorial have been outsourced and aren't included in the average employee's wage calculation. That leaves only the upper middle class employees left, and the CEO is getting paid 380 times what the upper middle class employee is getting paid.

  • Report this Comment On April 29, 2012, at 3:05 AM, NYCDOG wrote:

    It's bad enough when you can't duck the talking heads' ceaseless distorting and demonizing Capitalism as a "running dog" genuflection to the Obamessiah's non-stop class warfare but when I take a break to try to offset DC's constant lowering of the worth of the USD via the printing press by seeking investment information, and find more of the same villification, it's pathetic. Any faux balancing of the story that doesn't investigate the terms of the GM taxpayer bailout-which will NEVER reach break-even, or at least acknowledge the attempts by Big Labor to destroy the secret balllot of union/open shop voting, ornthe most egregious labor hack appointments to the NLRB is nonsense. Even on the narrow topic of CEO pay/perks, no attempt here is made to give stats showing the link or lack thereof of stock performance and CEO compensation. No one needs the AFL-CIO or AFT to selflessly "point out" when huge executive pay isn't matched by bottom line success-it's public knowledge that's part of Due Diligenge. When massive growth of a company DOES match or exceed parachutes/perks/options..then it was well-earned, no matter how distasteful the sums to the author

  • Report this Comment On April 30, 2012, at 12:40 PM, TwinMount wrote:

    I don't have a problem with people who create wealth obtaining wealth. I have a problem with a system that promotes greed over doing the right thing, a system that obscenely rewards people who only risk "other peoples money", a system that rewards the Bernies, Kenny-boys, Jefferys and other scam artists and a system that encourages execs to take enormous risks that put the company in danger just so they can get huge bonuses. (see "rogue traders" who were encouraged to act recklessly)

    Salaries should be a maximum of $1 Million, full recourse loans should be available to the senior execs to purchase shares aligning themselves with shareholders, and options issued should never exceed 10% of the shares that the executive already owns.

    I hope that Obama reads this and enacts the appropriate legislation because no-one is going to voluntarily jump off the gravy train. How are you going to attract the best and the brightest into public service, health care or other critical areas necessary to maintain our culture unless they perceive that they are rewarded fairly.

  • Report this Comment On April 30, 2012, at 4:01 PM, Kc737 wrote:

    At the risk of being hypocritical myself, I really am distressed about the disparity in pay between the CEO and other "upper stratosphere" executives, and the employees in the trenches. Why can't they forgo a few million (not all of it) to allow for a few more people to be hired?

    I don't mind someone with tremendous skill and talent being paid a bunch of money. I don't even mind an executive making 50-100 times what I do. But I do think that someone who is making the equivalent of a million dollars a day is overpaid, no matter what they are doing. Especially if they are laying people off because there is not enough money to keep going.

    As a former employee of Citigroup, I saw the value of my stock go from $20,000 to $350.00, and with no dividend, while management was being paid bonuses. Same thing happened with Bank of America. This confuses me. it isn't that the value of the stock dropped, because it think that was because people lost confidence in the companies; it is that bailout money was used to pay executive bonuses. i think that made the perception worse.

    how can a person with just a few hundred shares stop (what i might perceive to be) outrageous executive pay packages?

    any advice?

    thanks

  • Report this Comment On April 30, 2012, at 10:29 PM, donvesco100 wrote:

    Alyce: one thing an investor should always consider, amnd that is the source of the information. AFL-CIO "research" might go into the lies, damn lies stack.

    How about a study of union corruption and negotiated murder charges?

    You might have guilt issues, or envy, or resentments toward those who have done well, but profiling is best left to the present POTUS and House minority leader. True hypocrites, producers of nothing but chaos. Chaos from which they profit.

  • Report this Comment On May 01, 2012, at 1:02 PM, TMFGortok wrote:

    I take issue with your choice of words here:

    "Still, most people who ignore or dislike the AFL-CIO's points about worker rights and economic discrepancies fail to acknowledge that for the most part, American CEO pay plans often follow similarly economically disconnected philosophies."

    Well, no.

    Unions that exist by force (where employees are not allowed to chose the conditions of their employment -- the non-'Right-to-work' states) exist in a non-voluntary system. That is, I can't opt out of union membership (in the cases where I can, the best I can expect is hostile treatment from my coworkers).

    What about CEO pay? He is paid for his vision, his leadership, and most of all, to make the company money.

    If he doesn't do well, he gets ousted. This happens quite a bit, and I can only imagine the stress a CEO must go through. I've never actually thought about it before, but now that I'm giving it thought -- who am I to say how much he 'deserves'? Why is my opinion (or in the case of this article, your opinion), the right opinion?

    But let's get down to the philosophies that you bring up.

    There's no force of law that says, "You must pay a CEO this much." It's all up to the company that hires the CEO. If people feel like the CEO is making too much money, they can always choose to

    1) Not buy that company's products.

    2) Raise public awareness and hope for people to have the 'if I'm not doing well, you can't do well either' response.

    3) Write letters to the board and express your displeasure.

    4) a myriad of other things that do not force the company to take the tack you want them to.

    But what if a union wants more money in a non-right to work state? They get to strike. The company doesn't get to fire them for not working. They get to hold out in negotiation for (as you said) wages and benefits that they do not deserve.

    That's an entirely different philosophy; one predicated on force.

    You can complain about unions and about CEO pay, but it's fundamentally wrong to say that they are cut from the same cloth. They are not; they use two entirely different mechanisms to get what they want. For CEOs, it's performance, vision, and results. For the union, it's the threat of strike if their members don't get 'more'.

  • Report this Comment On May 01, 2012, at 1:46 PM, devoish wrote:

    <<Unions that exist by force (where employees are not allowed to chose the conditions of their employment -- the non-'Right-to-work' states) exist in a non-voluntary system>>

    You cannot quit if a union shop is not to your liking? What kind of a free marketeer are you?

    Liberals understand that opportunity comes from rules that balance the power of wealth and finance, not set it loose to impoverish employees to the benefit of shareholders and executives.

    Its just the way it is. Thirty years of union busting rules have broken the middle class and restored kings to America. The wealth of any company is built by the employees including the CEO. Retirement and top quality healthcare is the least they should get. Clean water and air, safe housing, and freedom and good roads to travel can be thrown in.

    Failure to pay a living wage to the person who picks your tomatoes will come back to haunt you, because ultimately he doesn't need his job any less than you need him to do it so you can get out of the sun and type.

    The rules before 'right to work' existed created a balance of power that built a strong middle class, with the freedom to choose from 60% non union : 40% union employment opportunities.

    As long as there is selfishness and greed and the sense of capitals entitlement your reply conveys, strong unions are needed to balance strong Government.

    Best wishes,

    Steven - Not the part of the 1% that wants to impoverish employment for personal benefit.

  • Report this Comment On May 01, 2012, at 2:12 PM, awallejr wrote:

    Late to the party but compelled to respond to TMFGortok.

    "If he doesn't do well, he gets ousted. This happens quite a bit, and I can only imagine the stress a CEO must go through"

    Oh please with the stress. If you are paying me $12 million a year throw all the "stress" at me that you want. Try the stress of someone earning $40k a year trying to raise a family and enduring the stress of putting food on the table, clothes on his family's back and roof over their heads.

    Ask Carl Icahn what he thinks of CEOs. CEOs more often arise from being a "good ole boy" than being any visionary. Now start up companies are different, there the CEO actually is the business.

    I was glad to finally see shareholders fighting CEO pay. Let's see what did Pandit do? The stock is still selling for less than back in 2009. Yeah great job for a company that was guaranteed not to fail by the FED.

    I always vote against pay packages and wish the institutions would start doing it more often. Remember the guys on the Board of Directors can be CEOs and officers of other companies. A real "club."

  • Report this Comment On May 02, 2012, at 6:19 PM, SolarInvestor wrote:

    You can't legislate executive pay. However, right now our system is so corrupt that government bailouts pay for executive bonuses. How is that NOT against the law. THAT we can legislate.

  • Report this Comment On May 03, 2012, at 12:11 PM, setht23 wrote:

    @awallejr

    If you (or fictional example) are having problems putting food on the table while making 40k a year I have to think there are some other issues going on. Either you live in a high cost of living area (NY, LA) or are terrible with your money (buying an iphone instead of groceries). I understand if you can't buy a new car every few years, but not being able to afford food. . . .really?

  • Report this Comment On May 04, 2012, at 12:39 AM, awallejr wrote:

    Try NYC. You aren't doing it.

  • Report this Comment On May 04, 2012, at 12:48 AM, awallejr wrote:

    And I will break it down for you:

    40k x 15.9 (payroll tax the thing Republicans keep ignoring to mention when discussing income tax payments) of 6,300. Minus average rent of 1,500 a month. Minus aprox $500 total utilities. Leaves you with about $800 to pretty much pay for everything else like food, commuting expenses, clothes, school supplies, etc.. THAT is stress, not like some CEO being paid $12 million dollars and then given millions more after the Board eventually decides to fire him.

  • Report this Comment On May 04, 2012, at 7:08 AM, damilkman66 wrote:

    Greetings. Late to the comments. Here is another way to look at CEO pay. In the last 30 years we see that entertainment stars be it sports, movie, or music have also seen huge rises in pay. Ditto coaches and university administrators. It is not just CEO's who get the big packages.

    The market has priced these invididuals for the same reason because the potential for success is worth it. For every CEO who fails a company yet has a big payout, there are an equal number of sports stars who bomb, coaches who flame out, and entertainers who are not worth the bill of goods. Yet only CEO's are reviled.

    CEO's get the package for the same reason the Knicks pay the big bucks to Anthony. They are hoping he is the next Jordan or something closer to it. If you have a problem with CEO's making big money, try capping the pay of entertainment stars. It is not going to happen because the market says that is what they are worth.

  • Report this Comment On May 04, 2012, at 7:15 AM, devoish wrote:

    Well then, "the market" is an idiot.

    Either that or "the market" is an excuse for rising inequality and the rest of America is the idiot for having tolerated it this long.

    Best wishes,

    Steven

  • Report this Comment On May 04, 2012, at 6:32 PM, awallejr wrote:

    Damil I agree we pay our entertainers ridiculous sums, but the difference is THEY are the product. But I find it obscene that a CEO would get a 20% raise while the employees get none. Pandit for C wanted more and yet shareholders are no better off than back in 2009. Here's my favorite link go through the charts, says it all:

    http://caps.fool.com/Blogs/no-matter-how-conservative-you/65...

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