US millionaire CEOs saw 29% pay raise while workers’ pay fell (opens in new tab)

(theguardian.com)

72 pointsbabycake5y ago38 comments

38 comments

19 comments · 6 top-level

29athrowaway5y ago· 7 in thread

Now take a look at the market capitalization of the companies mentioned in the article: Hilton ($33.8 billions), Yum Brands ($36.08 billions), etc.

It makes sense to have a well paid CEO in those cases, they have a huge responsibility.

soco5y ago

Hilton earnings are crashing, is this a responsibility of the CEO? Did the CEO responsibility increase lately? Don't the workers have any responsibility there as well? Or do they have declining responsibilities?

29athrowaway5y ago

I would say Hilton is weathering the pandemic quite well. The share price right now is almost at its highest point ever.

1 more reply

happytoexplain5y ago

Where "well paid" is synonymous with being "commensurately paid", yes, of course. Clearly many people do not believe they are being commensurately paid. The only defense I ever see is pointing at these many people and claiming they simply do not understand how hard being a CEO is, or how much value rests on their decisions. In the face of the overwhelmingly enormous incomes, which continue to become more overwhelmingly enormous, while worker pay growth continues to trickle, halt, or even reverse, the finger-pointing argument seems weak, to put it lightly.

fairity5y ago

Yes, the primary argument is that without such high CEO pay, companies would perform materially worse due to the consequences of poorer CEO decision making. You seem to be pointing out that the gap between CEO and average employee pay is increasing, which while true, doesn't seem to address the primary argument. In fact, it may be true that, on average, employee pay will decrease by lowering CEO pay (if, in fact, it's true that overall company performance suffers as a result).

It's hard to find supporting evidence for or against the primary argument because you can't split test a CEO, but there are definitely examples of almost identical businesses, where one succeeded and the other failed purely due to execution. And, one can make an argument that the difference in execution is largely due to the CEO. One such example is Blue Apron vs Hello Fresh.

danaris5y ago

"Well paid CEO" and "CEO making hundreds of times more than their employees, and increasing their compensation at a time when workers are being laid off, seeing pay freezes and drops, and just straight-up dying of COVID" are....not, shall we say, quite equivalent.

LatteLazy5y ago

If you're a ceo and have 10k employees, and you get them to accept 1k a year less each in wages, you made the shareholders 10m. So it makes sense you get 1m extra. (1k a year for a full time employee is 50c/h roughly, less if you factor in pay linked benefits and other costs).

Hilton has 173k employees. So a ceo who can get minimal amounts more out of them or cut the cost of them even slightly is worth a fortune.

I think this is the real driving force behind the ceo pay numbers we've seen: more big companies where a single ceo or a small top-team have huge leverage.

I'm not making a moral arguement. Just a practical/Economic one. I think "leverage" is a better concept here than "responsibility" (which carries moral implications...)

2 more replies

29athrowaway5y ago

Another interpretation is that they managed to keep their companies afloat despite all the adversities affecting their sectors.

It could have been much worse.

3 more replies

mouzogu5y ago· 3 in thread

I wonder how big of a difference in revenue these companies would have if they operated without any CEO, just an empty chair.

ajmadesc5y ago

"We find evidence that industry and size adjusted CEO pay is negatively related to future shareholder wealth changes for periods up to five years after sorting on pay. For example, firms that pay their CEOs in the top ten percent of pay earn negative abnormal returns over the next five years of approximately -13%. The effect is stronger for CEOs who receive higher incentive pay relative to their peers. Our results are consistent with high-pay induced CEO overconfidence and investor overreaction towards firms with high paid CEOs."

https://online.wsj.com/public/resources/documents/CEOperform...

idrios5y ago

I'd speculate that without a CEO at all, it would become Lord of the Flies for any of the other executives and the effects of this would ripple into the rest of the company culture, making the company an incredibly toxic place to work.

Not saying that's worse than a CEO who takes enormous profits for his or herself, AND is toxic. Just that there's value in good leadership

xtiansimon5y ago

I agree with you about the leadership role of CEOs in a firm.

I’m curious about this, “.. CEO who takes enormous profits..”

Are you implying CEOs are orchestrating their own compensation? Or, are you casually referring to CEO compensation packages?

mrlonglong5y ago· 2 in thread

This is exactly what annoys me the most. Every person is entitled to good healthcare, good education and should be paid a good wage to live well. Happy people don't riot. Happy people don't commit crimes. Happy people don't start wars.

gher-shyu3i5y ago

You're assuming good wages and good education make people always happy.

hamstergene5y ago

Let’s remove the word “happy” for being too vague, and say directly:

* People with good wages and education commit crimes less

* People with good wages and education riot less

* People with good wages and education less likely to approve war

Are those assumptions wrong too?

lbotos5y ago· 1 in thread

Lyn Alden's latest post on Inflation talks about the idea of the cyclic effect of Capital vs. Labor and has a great chart:

https://www.lynalden.com/inflation/#benefit

(which is based on Ray Dalio's Changing World Order): https://www.principles.com/the-changing-world-order/

I personally expect in the next 5-10 years to see more pressure from Labor on Capital on the backs of news like this (whether true or spin) and the monetary env we are in.

Tarsul5y ago

I read an article in the Guardian today that had a little stat in it that said that the richest 1% in the US own 43% whilst the richest 1% of Greeks only own 9%.[1] I wouldn't have thought that the contrast is SO big between countries. I agree however that the real stats are not as important as how they are spun and represented regarding the influence on public opinion. I also agree that something's (and with that I mean the rich) gotta give sooner rather than later unless growth alone will help everyone up sufficiently (which I don't think it will, especially with climate crisis looming). [1]https://www.theguardian.com/business/2021/may/11/oecd-higher...

loceng5y ago

I believe CEO pay is the wrong tree to bark up, instead providing a UBI to everyone so they don't need to work, and if people do decide to work then companies will have to compensate everyone competitively vs. other company compensation - and some CEOs may emerge where instead of taking $100million a year, redistribute more of that back into the workforce; this metric can be gamed of course in that compensation can instead be gained in stock.

beej715y ago

Show a little sympathy; those $500 million yachts aren't going to buy themselves. ;)

j / k navigate · click thread line to collapse

38 comments

19 comments · 6 top-level

29athrowaway5y ago· 7 in thread

Now take a look at the market capitalization of the companies mentioned in the article: Hilton ($33.8 billions), Yum Brands ($36.08 billions), etc.

It makes sense to have a well paid CEO in those cases, they have a huge responsibility.

soco5y ago

29athrowaway5y ago

I would say Hilton is weathering the pandemic quite well. The share price right now is almost at its highest point ever.

1 more reply

happytoexplain5y ago

fairity5y ago

danaris5y ago

LatteLazy5y ago

Hilton has 173k employees. So a ceo who can get minimal amounts more out of them or cut the cost of them even slightly is worth a fortune.

I think this is the real driving force behind the ceo pay numbers we've seen: more big companies where a single ceo or a small top-team have huge leverage.

I'm not making a moral arguement. Just a practical/Economic one. I think "leverage" is a better concept here than "responsibility" (which carries moral implications...)

2 more replies

29athrowaway5y ago

Another interpretation is that they managed to keep their companies afloat despite all the adversities affecting their sectors.

It could have been much worse.

3 more replies

mouzogu5y ago· 3 in thread

I wonder how big of a difference in revenue these companies would have if they operated without any CEO, just an empty chair.

ajmadesc5y ago

https://online.wsj.com/public/resources/documents/CEOperform...

idrios5y ago

Not saying that's worse than a CEO who takes enormous profits for his or herself, AND is toxic. Just that there's value in good leadership

xtiansimon5y ago

I agree with you about the leadership role of CEOs in a firm.

I’m curious about this, “.. CEO who takes enormous profits..”

Are you implying CEOs are orchestrating their own compensation? Or, are you casually referring to CEO compensation packages?

mrlonglong5y ago· 2 in thread

gher-shyu3i5y ago

You're assuming good wages and good education make people always happy.

hamstergene5y ago

Let’s remove the word “happy” for being too vague, and say directly:

* People with good wages and education commit crimes less

* People with good wages and education riot less

* People with good wages and education less likely to approve war

Are those assumptions wrong too?

lbotos5y ago· 1 in thread

Lyn Alden's latest post on Inflation talks about the idea of the cyclic effect of Capital vs. Labor and has a great chart:

https://www.lynalden.com/inflation/#benefit

(which is based on Ray Dalio's Changing World Order): https://www.principles.com/the-changing-world-order/

I personally expect in the next 5-10 years to see more pressure from Labor on Capital on the backs of news like this (whether true or spin) and the monetary env we are in.

Tarsul5y ago

loceng5y ago

beej715y ago

Show a little sympathy; those $500 million yachts aren't going to buy themselves. ;)

j / k navigate · click thread line to collapse