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Why don't company execs take a paycut instead of lying off employees?
- Thread starter Youngfossil
- Start date
Different culture. Asian corps often have high levels of accountability as a matter of appearance/saving face, so CEOs and top exces involved in major scandals often resign, commit suicide , do a press conference where they apologize (anyone remember Kaz bowing and apologizing for the PSN hacking?) and take pay cuts if a company runs into trouble.
In the west, the view is that top execs are 'talent' that would otherwise be employed elsewhere if they aren't paid their 'market value' so the execs often feel entitled to their pay even as their company fails.
In the west, the view is that top execs are 'talent' that would otherwise be employed elsewhere if they aren't paid their 'market value' so the execs often feel entitled to their pay even as their company fails.
Yeah this is a lot of it. Obviously I'm not down with the corporate suicide thing because it goes up and down the corporate ladder but we need more of a culture of responsibility and culpability.
https://www.bloomberg.com/news/arti...ds-the-cheapest-happiest-company-in-the-world
Costco CEO Craig Jelinek Leads the Cheapest, Happiest Company in the World
Costco's CEO furnishes his boardroom with faux-wood tables, has no PR staff, and doesn't offer customers shopping bags—but he does pay employees a fair wage. Now that his formula is pleasing Wall Street, will other companies follow?
And because capitalism rewards it said executives do often just move to another company if they're not paid enough.
Good people at the top is seen as very important for the company's health so there's a lot of competition for those CEOs and they're able to write good deals that give them a nice parachute should they fail.
This. Most executives of these kinds of companies are paid primarily with stock options.
For the people who say "But they can sell the stock!". Yes they can, but a sell-off of stock by an executive can be an indicator of weakness, causing investors to get panicky and start selling their stock. Before you know it, the shares are taking more of a hit. You guys are quick to point the finger at executives but they are just following their bosses' orders (the stockholders). It isn't company greed that needs to get reigned in, it is investor expectations for never-ending growth.
To me, I think that there isn't a single strategy to combat the problems with how to reverse this culture. I would start by probably re-thinking the capital gains tax.
I don't think that's how it works. If they could get an exec they think could do the job just as well at half the pay they would. It's a job subject to market pressures like any other.
You really don't understand stocks and shareholders do you? I let it slide that you think an exec can just sell all their stock like you and I could, but this is really telling. Stock value has a lot of importance to how things operate beyond just share holders making money. It influences the direction of the company or even the existence of the company.
I'm not going to deny that in plenty of cases execs are compensated more than they should be, but there's no blanket statement to be made of all this. Some are, some aren't. Some deserve the high pay that they get but there's no one size fits all here.
Layoffs and the reasoning and how they help the company will differ from situation to situation and company to company. There's nuance to this but ignoring the nuance, the whole point is the money doesn't go as far as you think it does. You seem to look at a big number without realizing that things add up quickly and that money being used elsewhere doesn't go very far. But let's try your other angle.
How does this help with layoffs?
How does this help with layoffs?
How does this help with layoffs?
You're right, you don't know. You're ignoring the complexity and the nuance of how all this works.
Relative to what/who? CEOs of major corporations do not have 'tiny' salaries by any rational definition; their actual base salary might be small in comparison to their overall total compensation package, but their salary is still going to be a lot. For example, just the other day my son wanted to know how much the "president" of McDonald's makes per year. Their CEO makes about 15 million, with a 1.3 million dollar base salary and the rest being part of his larger package.
That 1.3 only looks 'tiny' in comparison to an obscene about of bonuses/options being paid to one fuckin' guy, especially when so many McD's employees make minimum wage or just above it.
Either way, whether it is the CEO him/herself or the actual board of directors, companies absolutely can elect pay their executives less in order to retain more people. Pointing out the meaningless distinction between their base salary and their overall compensation doesn't change that fact.
Is there any reason why you're being so condescending in your defense of the poor millionaire CEOs of the world?
Boards often push for CEO pay raises, they mainly do that so their interest more align with them than with their workforce, and it's obviously not true to every board in this country, but I really really don't think it's fair to say the it's common in American companies for the board to try to squeeze down CEO pay.
And I don't how you can claim that executive pay in the US represent the real value that they bring to their companies. Like, are we to believe that American CEOs are 100 times better than German CEOs?
Do we think that this country just can get enough people who are capable of doing that job?
I think it's silly, I think the managerial class in the US created a really fucked up and manipulated market for themselves so they can justify taking so much money out of those companies.
Boards often push for CEO pay raises, they mainly do that so their interest more align with them than with their workforce, and it's obviously not true to every board in this country, but I really really don't think it's fair to say the it's common in American companies for the board to try to squeeze down CEO pay.
And I don't how you can claim that executive pay in the US represent the real value that they bring to their companies. Like, are we to believe that American CEOs are 100 times better than German CEOs?
Do we think that this country just can get enough people who are capable of doing that job?
I think it's silly, I think the managerial class in the US created a really fucked up and manipulated market for themselves so they can justify taking so much money out of those companies.
I didn't say that. I said they are subject to market forces. Market forces don't represent "real value" at all. They represent the culmination of a lot of things, but the basic thing is that if a board could get a CEO at half the rate that they thought could do the job just as well they would. Why the fuck wouldn't they?
Market forces in Germany and the United States are different. I've stated here before that we need stronger unions (or fucking any unions at all at this point!). That would give a market force in the other direction. I also said we can change the rulebook (laws) in order to curb compensation across the board.
Part of it is because of the market for CEOs in the US. Given the concentraiton of MNCs a top exec have a lot more options than a German CEO.
A recent example is ActivBlizz CFO going to Netflix and the company hiring a new CFO replacement at an exhorbitant salary despite employees being told to cut costs.
I'm not excusing it, but that's the internal logic of the people demanding these kinds of salaries, and yes they can say 'So and so will pay me $10 million for the same position" and they probably would be right because there is almost like a parallel market for top level executives right now where it's just a revolving door of talent getting paid in the millions.
Considering just the last page you thought stocks are not a liquid assets, you sure you want to take such condescending tone?
Also, I don't know why you're being so reductive here instead of engaging with what I'm saying, but if we must, fine, we'll do it on this level.
You don't think that liabilities has any impact on layoffs?
I mean, not even execs think that, they just tend to focus on other people's salaries rather than theirs.
Because after a couple of exchanges, it's clear the poster is lacking an understand in the nuance and complexity of the situation and has strayed off into adding shuttles for employees.
The point I'm trying to make is that there is a lot of nuance and complexity as well as costs that aren't on the surface that aren't being factored in here. You bring up the McDonald's CEO's salary. Do you realize if you took the 90,000 employees making minimum wage in the US and just gave them a 5 cent raise, and assume they only work part time at 20 hours a week, that has a cost of nearly $4.7 million a year? Just a 5 cent raise. If you raise it a whole dollar, it would cost way more multiple times over what the CEO is compensated. We need to stop looking at big numbers and thinking wow that's a big number and start looking at how things add up to realize those things add up to a lot too.
They aren't liquid. You can't just mass dump stocks in exchange for their valuation. How you and I can buy and sell stock isn't the same as an exec. The rules are different.
Of course the liabilities have an impact, it's part of looking at the whole picture but it's not the only factor.
It's not market forces, it's rich people helping each other.
But yeah, I agree, I think all this shit goes away with a 90% tax bracket.
Yes, they don't "hire someone cheaper" because they want an excuse to give themselves bonuses as well. If they give large bonuses to company execs as a group, then they themselves profit from it. This is the problem of people at the top deciding how much they get to pay themselves.
Of course ultimately this just comes back to "greed", the system is set up so layoffs are incentivized and compensation at the top is also incentivized. That the system now operates independent of "greed" does not actually mean the system itself is not a product of "greed".
I mean, rich people are indeed a part of the market forces. So.... yes?
Not really unless you start taxing capital gains like actual income.
What don't you google "are stocks a liquid asset" and tell me what you found out.
It's not a big deal to not know that, it's all just dumb "business people" terminology, but it is a bit shitty to come into this thread and talk down to everyone like you're a super expert if you don't.
I mean, it's shit to do it even if you are an expert, but when you aren't you can at least get dunked on.
HEY!
Only I'm allowed to be that pedantic!
(you are right, though I think you understood what I meant, I can)
You are 100% correct and that's a very good point.
Capital gains wouldn't hit stock bonuses because capital gains tax kicks in only when the stock is sold at a profit, which you all repeatedly remind us "they can't be sold that quickly".
We need a straight up wealth tax above a certain percentage.
Oh but a lot of wealth is tied up in stocks and god forbid someone have to dump their stocks on the market in order to pay the tax. This might set off a devaluation! My retirement fund!
And round and round we go.
¯\_(ツ)_/¯
You could lowball your execs. Like just offer a quarter of what similar companies are offering when you find your next CEO. Sure there will be savings and someone is going to take the job. But I guarantee you your stock is going to take a tumble just from your bargain basement search alone.
You can do the same with your upper level managers, your engineers, etc., and give back to the people making median. Lowball all their offers. Let's use an example from this forum, say everyone making over 100 grand, they're rich, just cut their pay.
I'm not saying CEOs are worth that money, I'm saying it's not as worthless or as easy a job as people think where you can just get anyone to guide the company and have the board or whoever's confidence in their decisions.
I'll also add that if that scenario happened where everyone over a certain level had to take a paycut to fund other employees, the only people that wouldn't be gone in a flash are those who were lazy in updating their resumes, though you can be sure that update is happening on company time now.
You can do the same with your upper level managers, your engineers, etc., and give back to the people making median. Lowball all their offers. Let's use an example from this forum, say everyone making over 100 grand, they're rich, just cut their pay.
I'm not saying CEOs are worth that money, I'm saying it's not as worthless or as easy a job as people think where you can just get anyone to guide the company and have the board or whoever's confidence in their decisions.
I'll also add that if that scenario happened where everyone over a certain level had to take a paycut to fund other employees, the only people that wouldn't be gone in a flash are those who were lazy in updating their resumes, though you can be sure that update is happening on company time now.
We live in a system that resists reform because everyone's livelihoods are increasingly dependent on the system continuing uninterrupted.
The system, in this case, is the economic churn that siphons wealth from the bottom and moves it to the top. The more our common wellbeing is tied to the performance of the stock market, the more we demand that the system continues unabated, the more it threatens our wellbeing, the more we rely on the system to continue.
Welcome to American capitalism™.
The system, in this case, is the economic churn that siphons wealth from the bottom and moves it to the top. The more our common wellbeing is tied to the performance of the stock market, the more we demand that the system continues unabated, the more it threatens our wellbeing, the more we rely on the system to continue.
Welcome to American capitalism™.
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Because they ain't got to explain shit. Once you fall high enough up the ladder, you make the rules and nobody will bat an eye at it because everyone else is busy making their own.
Yeah you know I should do this more except if I do people go "oh so everyone who disagrees with you is a Nazi now??? what happened to NUANCE".
I'm ignored if I post real articles and I'm dismissed if I call people nazis/capitalist-pigs to get their attention. Can't win.
This is an interesting conversation but I'm not going to make any arguments... my knowledge on the subject is limited.
However...
There's no way in hell the McDonalds CEO is putting in $15mil worth of work. Nobody can put in that amount of work. It's obscene, especially when you consider a lot of CEOs get paid to get fired.
However...
There's no way in hell the McDonalds CEO is putting in $15mil worth of work. Nobody can put in that amount of work. It's obscene, especially when you consider a lot of CEOs get paid to get fired.
I always ask people, do you think that if you put a job posting for the CEO of McDonalnds for $14mil you would get no applicants?
I really don't think there any reasonable way you can argue this is the market putting a dollar figure on their value. It's literally how much they can think they can get away with without people bringing out the guillotine.
Any time a poor person defend that shit, they know they still have ways to go.
Look up the concepts of treasury stock and rule 10b5-1 to understand that the liquidity isn't the same as you and I going to hit sell on our stock portfolio when it comes to companies and execs owning stock shares.
Have you heard the reasoning behind why pro athletes won't take paycuts?
Because money is respect.
OP
OP
Good exec makes my portfolio go up, bad exec makes my portfolio go down.
What's a worker? Do they have good ROI?
(Agreed by the way in cause I was being too caustic)
So you didn't google it?
Bing fan?
Also, rule 10b5-1 is about what people do after they got the stock, what does it has to do with the question of whether or not a stock that a company holds is a liquid asset?
It's liquid because they can sell it for cash, or they can give it to their CEO, who will sell it through their 10b5-1 plan.
Yeah, selling stocks is going to have some impact on your company, but like, setting all you money on fire will also have an impact on your company, it's still doesn't mean that cash it's not a liquid asset.
I'm not sure why you're insisting on this point so much, no one talks about stocks like that.
I mean the answer is obviously greed, power, and a "I got mine" mentality, but there is a fiscal argument they can try to make... cutting CEO pay isn't as effective at cutting costs as a large layoff. It's a brutal and inhumane mentality, but think of it this way, a $5 million cut only pays for 50-100 people (remember, the cost of FTE's are far more than just the base salary.) That's a drop in the bucket if the company is looking at cutting 1,000+ jobs
Athletes aren't at the top of the food chain though. CEOs are, and it can be argued that taking a pay cut to benefit workers is better for the company in the long run.
Also athletes take pay cuts all the time.
It's exactly the fuck you got mine mentality. Many don't ever meet these employees who'd get laid off or think of them as just numbers ultimately. With no personal connection, someone telling them "we must lay off 1% of our work force" means just that to them, a number. And the number in their pocket book is more appealing and bigger than a number of who they have to lay off.
Funny enough so many of them are gathering so much wealth they can't spend it realistically in a life time yet they'd never part with their money. Greed is 100% a thing
Funny enough so many of them are gathering so much wealth they can't spend it realistically in a life time yet they'd never part with their money. Greed is 100% a thing
I'm not sure I understand this. Take a pay cut so... what? So their team owners can get more money?
Pro athletes in sports are basically the 'employees' in their scenario and they have really strong players unions to make sure they get compensated what they're worth in the grand scheme of things.
Quarterly reporting to shareholders in the US means that regardless of effort - he or she can justify that salary instantly by GROWING the company x%.
Improved morale, long term investment, overall profits etc, can take second or third place to growth regardless of how sustainable it is. In the eyes of some shareholder investors one quarter of obviously unsustainable and dangerous growth might be more desirable than a decade of steady sustainable growth because the company stock is a temporary bet.
There are few individual or institutional incentives for CEOs to consider anything that isn't growth or cost cutting related and indeed a CEO committed to the long term health of the company and its employees might be removed or fired by the board /shareholders. That's a pretty broad simplification but of a very real issue with some of the structural problems with current regulatory compliance - some of which was originally implemented to achieve the opposite intent and behaviors by companies.
If I wave a magic wand and eliminate two laws - quarterly compliance and Citizens United without question.