Why don't company execs take a paycut instead of lying off employees?

Oct 27, 2017
1,308
I don't really think execs should take a pay cut rather than laying off employees. I think they should just be paid less in general.

Especially when you see a pattern of terrible CEOs coming in, laying everyone off and selling everything to meet an arbitrary target for the next year and get their bonus, then fuck off on their golden parachute to the next company that will hire them even though they've ran the last seven companies into the ground.
Is this actually whats happening? We read about golden parachutes a lot because its news when it happens, but from all the countless companies that have a CEO I cant imagine someone who really messed up time and time again getting work again (firing, selling shit often can be exactly what shareholders wanted to happen...so job done in that case).
 
Oct 27, 2017
4,052
Our police chief got approved for a decent raise one year, and all the officers did not even get a COLA increase. He refused the raise and told our council to split the raise between the eight road officers.
 
Oct 25, 2017
2,156
San Francisco
I don't think many posters in this thread understand how Executives are compensated.
Yeah, there are a lot not trying to understand even. Many don't even realize that they themselves are owners of many of these companies they don't like through retirement funds. To be fair though, it is the exec's job to take public heat...
 
Oct 27, 2017
1,928
Always wondered this. They can actually afford to take a paycut or just don't get a 5 mil bonus that year to keep the company going and live pretty well. Why layoff people who need the money much more? Greed, Comfort of life, evil, apathy of life?
Very few companies give "5 mil bonuses". Those mainly things like huge corporation CEO's. And even those usually aren't compensated in cash, but in stock options, which wouldn't help a single employee. Also, these employees that are being laid off because their project was canceled and there are no more projects for them, what are they going to do if you keep them?
 

Chikor

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Oct 26, 2017
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I don't think many posters in this thread understand how Executives are compensated.
What do you mean?
You're being kinda vague here.
I mean, boards usually push executives to get paid and usually paid more, and a lot of them build their compensation package in such way that it will go up without them doing anything so they can claim their hands are clean.
But a CEO can take a paycut, they can even not get paid at all if they wanted to.
 
Oct 27, 2017
1,265
I'll give you a real answer, from a real executive t9 whom I asked this:

"Making hard decisions like this is why they pay me the big bucks".

So it's more fucked up than you may realize. They believe it's their job. They're proud of doing it. And they believe, probably correctly, that they may be removed if they don't do it. It's worth noting that stock prices generally rise when layoffs happen. Despite plenty of research that shows how harmful it actually is to companies.
 
Oct 28, 2017
173
Everyone pointing to "greed" or them being terrible people are only understanding (at most) half of the story here.

There is no pressure on them to take a pay cut. With the weakening of Unions and a general shift in attitudes in America in general, there is no countervailing power to prod an executive to take a pay cut. There's simply no reason to do so, other than altruism.

I have a good job and make pretty good money. Not executive money but... I'm doing alright. Should *I* be obligated to take a pay cut, too? Where is the cutoff? C-level executives only? Or just the CEO? Why not the CFO?

Who controls those pay cuts? Who controls how those cuts are redistributed to the workers? Who controls when a company really DOES have too many employees and needs to shed some to be healthy?

This post makes it sound like I'm on the CEO's side. I'm not. They're extremely overpaid. Income inequality is the problem of our age. But to not acknowledge that it is massively fucking complicated does everyone a big disservice.
 
Oct 25, 2017
564
Short answer: Because they don't have to.

Longer answer: Because market forces make that a really strange thing to do.

Even longer answer: Company execs jobs are to make the company efficient, which includes, unfortunately, locating where jobs may not be necessary and cutting them so that there can be more profit. That's literally their job. If they take a pay cut the inefficiency still exists and either someone else at the company or shareholders will see it and force that to happen anyway. If they consider a pay cut then they may as well look for a different job where they could make the same or similar amount instead of staying. And then the company is forced to get someone else and that new person's job is literally to locate those places where they can cut.

Companies aren't charities. Jobs exist because they're needed. If one exec doesn't cut them then another might. Or somewhere down the road they might. Or they'll get undercut by another business that does. That's probably the biggest thing. If your company doesn't get efficient someone else will and if they can undercut you by even a few percentage points you're fucked. Then everyone loses their job.

Then on top of that there's just really nothing pushing in the other direction. Humans are the same as anything else in the company. They're the same as cutting any other cost. If there were more unions this would be different, but there aren't really anymore.

Then there's the calculus that the math may not really mean anything. An exec makes a fuckton, but divided out by however many people's jobs may be inefficient and you might not get everyone anyway. You may save a quarter of them. Maybe less. Who knows.

Personally I don't think Execs are evil. I don't think companies are evil. They're just following the rules of the game we put forward. You want to change the game? Change the rules. Support unions. Support labor laws. And I say this as a business manager who literally right now is taking a massive cut in hours along with my owner so we can keep the lights on and not lay people off. Our company's a bit different though. And tiny.
Everyone pointing to "greed" or them being terrible people are only understanding (at most) half of the story here.

There is no pressure on them to take a pay cut. With the weakening of Unions and a general shift in attitudes in America in general, there is no countervailing power to prod an executive to take a pay cut. There's simply no reason to do so, other than altruism.

I have a good job and make pretty good money. Not executive money but... I'm doing alright. Should *I* be obligated to take a pay cut, too? Where is the cutoff? C-level executives only? Or just the CEO? Why not the CFO?

Who controls those pay cuts? Who controls how those cuts are redistributed to the workers? Who controls when a company really DOES have too many employees and needs to shed some to be healthy?

This post makes it sound like I'm on the CEO's side. I'm not. They're extremely overpaid. Income inequality is the problem of our age. But to not acknowledge that it is massively fucking complicated does everyone a big disservice.
These are good answers if you're actually looking for a dialogue, OP
 
Oct 26, 2017
1,798
I work at a hospital and when we hit hard times around 6 years ago, all of our admin staff took a 20% pay cut and middle management was annihilated. Rank and file had zero impact. When things got better, admin were the first to get their pay back and middle management was filled by promoting the rank and file where applicable. It seems to have worked out well.
 
Oct 27, 2017
444
Wall Street loves a company with lesser employees, getting rid of employees and getting a bonus is a win-win for the company heads.
 
Oct 27, 2017
13,022
What do you mean?
You're being kinda vague here.
I mean, boards usually push executives to get paid and usually paid more, and a lot of them build their compensation package in such way that it will go up without them doing anything so they can claim their hands are clean.
But a CEO can take a paycut, they can even not get paid at all if they wanted to.

This.

Most executives have a relatively tiny salary. They're big payouts come in the form of stocks, options, other assets, ect.
^

Take a look at the Highest Earning CEOs, you'll see that their base salaries are "tiny," even their performance based cash bonuses aren't that much. The bulk of their compensation comes from stock rewards/options.

https://www.equilar.com/reports/18-2-200-highest-paid-CEO-rankings-2015.html
 

Chikor

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Oct 29, 2017
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The primary goal of most bosses is to extract the surplus value of the labour of their employees, not keep people employed or keep the company afloat. Taking a pay cut to keep people employed or help the company defeats the purpose.
 
Oct 26, 2017
3,961
ask yourself and be honest if you would cut your own salary in half to save your Colleagues .
If it's the difference between 2 yachts instead of 4, yeah probably.

Generally I consider human livelihood more important than the amount of yachts I own but I know this is actually atypical for an American.
 
Oct 25, 2017
4,506
If it's the difference between 2 yachts instead of 4, yeah probably.

Generally I consider human livelihood more important than the amount of yachts I own but I know this is actually atypical for an American.
The issues is what if it's the difference between the company lasting another 10-20 years with jobs for a decent amount of people or not cutting and dying off within 5? That plus the stock takes a hit and hurts people's retirement and investments? And what if you could easily grab a different job for the same pay you've got now or even slightly less with almost no hassle instead of dealing with it?
 

Chikor

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Stock isn't liquid where as payroll is.
Top execs routinely make north 10mil in cash compensation, that's a lot of money that can do a whole lot regardless of how much they get paid on top of it in stock.

p.s.
Publicly traded stocks are generally considered liquid assets, though I'm not sure if that is really relevant to this question.
 

Chikor

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Oct 26, 2017
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^

Stock options are not salary. You can't just cut your stock options to save budget. It doesn't work like that.
Most execs are moving to stock awards from stock options, though again, I'm not really sure why you're insisting on this point because
a. Execs still get paid a ton of cash
b. You can sell stock for money, that's like the whole point of stocks.
 
Oct 26, 2017
3,961
The issues is what if it's the difference between the company lasting another 10-20 years with jobs for a decent amount of people or not cutting and dying off within 5?
https://www.cnn.com/2018/11/16/business/sears-executive-bonuses/index.html
Bankrupt Sears wants to give executives up to $25 million in bonuses

That plus the stock takes a hit and hurts people's retirement and investments?
This is actually a good point and one of the problems with our economy where our retirements are tied to the stock market so it's in the civilians' best interests to see other civilians laid off in order to protect their 401(k). I have no answer to this except that it needs to stop because it pits common people against other common people.

And what if you could easily grab a different job for the same pay you've got now or even slightly less with almost no hassle instead of dealing with it?
https://www.forbes.com/sites/steves...magic-charm-for-a-toys-r-us-ipo/#5994a8f5748b
Toys 'R' Us Hires New CEO With A Rich IPO Resume In David Brandon

I mean you described the executives here. They have financial security, job security, as well as ease of transference in the case they do need to fall on the sword. The workers are not the ones who have these luxuries. During the shutdown, we learned the majority of American workers are a paycheck away from financial disaster.

It's telling that a lot of the "actually they derive their wealth from stocks" posts ignore the fact that stocks can be sold. The idea that the stock market must be protected from movement at all costs regardless of human welfare is deep seated.
 
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DavidDesu

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Renumeration for jobs should be codified into law or something. We have a runaway greed culture and obviously the ones deciding the pay are the ones getting paid. I think anyone with free reign to decide their pay bracket would inevitably edge it ever upwards while they could, hence my idea of making renumeration for a job based on set limits.

I think someone like a bin man (garbage man) or a plumber has just as much value to society as a lot of these managers who often just float in, fuck the business up, then float off to another company while taking a massive bonus package. No other employee further down the chain EVER has a setup like that.

If the rich and powerful control the world and laws, as they pretty much do, then greed is the end result. Always. Change the rules and you might make a dent into this unfair and unjust system.

Here in the UK I'm sure the bosses of the failed company Carillon all walked off with bonuses or massive salaries, meanwhile the company had debts and requires the taxpayer bailing them out. WHAT THE FUCK!
 
Oct 25, 2017
4,347
Most execs are moving to stock awards from stock options, though again, I'm not really sure why you're insisting on this point because a
a. Execs still get paid a ton of cash
b. You can sell stock for money, that's like the whole point of stocks.
But the stock value fluctuates. If you liquidate stock to gain money to pay employees, that could trigger a lowering value of the stock. Keeping excessive amount of employees when it's known that the company is bleeding money can also trigger a lowering value of the stock. These things don't help or do much good by trying to keep people on and compensate with stock in any way. Plus stock compensation tends to be limited and would only counter one year of salary for employees.

So let's ignore the stock and use your 10 million dollar compensation figure. How people does that save? If you're at Google, it saves maybe 50 people? To get higher compensation tends to be that you're working for a bigger company which in many cases tend to have higher salary compensation for their employees. Not always like in the cases of Walmart, but that 10 million doesn't go very far when you factor in what the real cost per employee is and it doesn't even solve the problem that the company might be facing. It's a bandaid to a big wound that doesn't fix the problems the company might be facing and it doesn't go as far as people think it would. It's going to be highly dependent on the situation.
 
Oct 26, 2017
3,961
Renumeration for jobs should be codified into law or something. We have a runaway greed culture and obviously the ones deciding the pay are the ones getting paid. I think anyone with free reign to decide their pay bracket would inevitably edge it ever upwards while they could, hence my idea of making renumeration for a job based on set limits.
Those would be "pensions", which have nearly disappeared in America.
 

Chikor

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But the stock value fluctuates. If you liquidate stock to gain money to pay employees, that could trigger a lowering value of the stock. Keeping excessive amount of employees when it's known that the company is bleeding money can also trigger a lowering value of the stock. These things don't help or do much good by trying to keep people on and compensate with stock in any way. Plus stock compensation tends to be limited and would only counter one year of salary for employees.
Why any of that matter?
Also, you know that once you awarded stock to an exec they can sell them, right?

So let's ignore the stock and use your 10 million dollar compensation figure. How people does that save? If you're at Google, it saves maybe 50 people? To get higher compensation tends to be that you're working for a bigger company which in many cases tend to have higher salary compensation for their employees. Not always like in the cases of Walmart, but that 10 million doesn't go very far when you factor in what the real cost per employee is and it doesn't even solve the problem that the company might be facing. It's a bandaid to a big wound that doesn't fix the problems the company might be facing and it doesn't go as far as people think it would. It's going to be highly dependent on the situation.
No, let's not ignore the 10 million dollars compensation package because that's the fucking point.
Also, if that person take a 5 mil pay cut (which would still leave them with enough money to do anything anyone could ever dream about) you would save enough money to keep 125 people who make the median income on your payroll. Or you know, just give a nice compensation package to the people that you really really really think you cannot keep.

I understand why an exec would think that's a great use of the company money, I'm just not sure why you do.
 
Dec 13, 2017
3,898
Always wondered this. They can actually afford to take a paycut or just don't get a 5 mil bonus that year to keep the company going and live pretty well. Why layoff people who need the money much more? Greed, Comfort of life, evil, apathy of life?
When much of that compensation is in stock, you can't just dump the stock for cash.

Flooding the market with large numbers of shares will devalue all the shares.

For some (this is more startup oriented than others), a lot of the value is the result of a bet (taking lower salary for more shares). We always hear about execs that "win" the share bet, but rarely hear about those who "lose" the share bet.

Think of executive pay like sports pay. Why do NBA and NFL stars command millions? Because if one team doesn't pay it, another will.
 
Oct 25, 2017
4,347
Why any of that matter?
Also, you know that once you awarded stock to an exec they can sell them, right?
The stock valuation of a company is important to the company. Lowering the value of the stock goes against the interest of the company. The company isn't at an obligation to lose money to employ people. The exec also can't just sell all their stock the same way any of us can either.

No, let's not ignore the 10 million dollars compensation package because that's the fucking point.
Also, if that person take a 5 mil pay cut (which would still leave them with enough money to do anything anyone could ever dream about) you would save enough money to keep 125 people who make the median income on your payroll. Or you know, just give a nice compensation package to the people that you really really really think you cannot keep.

I understand why an exec would think that's a great use of the company money, I'm just not sure why you do.
I didn't ignore the $10 million compensation, I said let's forget about the stock and look at the $10 million in compensation. Did you not read what I said? Someone getting $10 million compensation is likely working at a larger company where if they're laying off people, 125 isn't going to be enough. Plus you're low balling it. $5 million for 125 people means you're calculating a salary of $40k a person. That doesn't factor in there's more overhead costs per employee than their flat salary. So you're going to be saving even less people than you think and that's the point I'm getting at. The amount it saves isn't anywhere what it needs to be anyway so you cannot simply avoid layoffs by taking it out of the CEO compensation. There's more to it than that.
 
Oct 26, 2017
3,961
https://www.theguardian.com/business/2018/dec/01/sears-workers-kmart-retail-eddie-lampert
Laid-off Sears workers left with nothing – and they say wealthy bosses are to blame

Patrick said: “I am a mother who has four biological children and one stepson, and my income is all we have. When you take away our only income, you leave us with nothing – and we don’t deserve nothing. Mentally and physically it drags on you. It’s like saying you’re not good enough. And we’re all good enough.”

Sheila Brewer worked at the same Kmart in Rockford for 17 years as a full-time employee. Four weeks into receiving severance pay, a bankruptcy court stopped the rest of the payments. In the meantime, Sears executives have petitioned to receive up to $25m in bonuses.

Brewer said: “It was a big toll emotionally and financially. It’s a big slap in the face, them telling me I can’t get the rest of my severance because of bankruptcy.

“Yet they’re petitioning in court to get bonuses for the executives when that money could go into a plan or some kind of package deal for full and part-time employees to receive some sort of package. [It would help] to pay bills to help us get back on our feet.”
We can argue hypotheticals until we're blue in the face but in practice, in the real world, it often just comes down to greed.
 

Chikor

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When much of that compensation is in stock, you can't just dump the stock for cash.

Flooding the market with large numbers of shares will devalue all the shares.
So first of all, of course you can sell stock for cash, that's like the whole purpose of stocks.
And when you're giving stocks to an exec they are "in the market" just as much as they would have been had you sold them for money.
 
Oct 25, 2017
4,506
I didn't ignore the $10 million compensation, I said let's forget about the stock and look at the $10 million in compensation. Did you not read what I said? Someone getting $10 million compensation is likely working at a larger company where if they're laying off people, 125 isn't going to be enough. Plus you're low balling it. $5 million for 125 people means you're calculating a salary of $40k a person. That doesn't factor in there's more overhead costs per employee than their flat salary. So you're going to be saving even less people than you think and that's the point I'm getting at. The amount it saves isn't anywhere what it needs to be anyway so you cannot simply avoid layoffs by taking it out of the CEO compensation. There's more to it than that.
Yeah people are just thinking that they can simply transfer things over. Usually when there's huge layoffs that means they're possibly getting rid of some real estate, too. Maybe they're downsizing offices or cutting some stores that lose out. So it's not $40k per person maybe it's more like $80-100k. So let's say you can even save some number of them, what if that's not enough to run the thing they were running previously? If you cut a department or consolidated a wing of the business but now you've said ok we can save 100 jobs but really that wing took 800 jobs to run you've now got to figure out what the fuck these people are doing.
 
Dec 13, 2017
3,898
So first of all, of course you can sell stock for cash, that's like the whole purpose of stocks.
And when you're giving stocks to an exec they are "in the market" just as much as they would have been had you sold them for money.
Executive stock always comes with sale restrictions.

They cannot just buy/sell on the market like you or I can.

Any volume of stock that is market moving will impact a large number of pension funds, individual investors, etc.
 
Nov 3, 2017
824
C-suite compensation is a shell game. These guys all serve on the boards of each others companies, they all set the comp of their colleagues and "rivals", and they all have a vested interested in artificially inflating that compensation. You think one of these guys is going to disrupt the con by admitting comp is in no way tied to performance, that is just goes up and up and up no matter what? Failure doesn't mean taking a comp hit, it means moving onto the next c-suite job.
 
Oct 27, 2017
13,022
So first of all, of course you can sell stock for cash, that's like the whole purpose of stocks.
And when you're giving stocks to an exec they are "in the market" just as much as they would have been had you sold them for money.
That's not how it works.

Executive stock always comes with sale restrictions.

They cannot just buy/sell on the market like you or I can.

Any volume of stock that is market moving will impact a large number of pension funds, individual investors, etc.
^
 

Chikor

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Oct 26, 2017
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The stock valuation of a company is important to the company. Lowering the value of the stock goes against the interest of the company. The company isn't at an obligation to lose money to employ people. The exec also can't just sell all their stock the same way any of us can either.
Stock value mostly matter for shareholders, fluctuation in the stock price has very little influence on the ability of most companies to do their business.
And that's the issue at the base of all of this - that companies prioritize stock price over their workers.
I didn't ignore the $10 million compensation, I said let's forget about the stock and look at the $10 million in compensation. Did you not read what I said? Someone getting $10 million compensation is likely working at a larger company where if they're laying off people, 125 isn't going to be enough. Plus you're low balling it. $5 million for 125 people means you're calculating a salary of $40k a person. That doesn't factor in there's more overhead costs per employee than their flat salary. So you're going to be saving even less people than you think and that's the point I'm getting at. The amount it saves isn't anywhere what it needs to be anyway so you cannot simply avoid layoffs by taking it out of the CEO compensation. There's more to it than that.
It's funny how companies are always trying to squeeze every cent from their workers and their costumers, but somehow when it comes to exec pay it's like 10mil, who cares, what are numbers really?
I see I don't get to you, let me see if I can approach it from a different angle.
I mean, firing can be a bit tricky because we don't have all the information about that theoretical scenario, I mean, maybe they just had to close the spyrograph division, like, not even me gonna blame capitalism for that.
So let's look at this like this - what if we cut the CEO cash pay in half (again, they still make way more money than they would be able to spend) and instead we find the 100 most deserving entry level workers in the company and give them 50k bonus?
What if we built a gym for the workers with that money?
What if we gave them free shuttles from work and back?
I don't know, this shit just seem indefensibly obscene in my mind.