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Why don't company execs take a paycut instead of lying off employees?
- Thread starter Youngfossil
- Start date
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).
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...
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?
Iwata is one of the rare exceptions because he was a generally good person.
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.
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.
"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.
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.
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
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.
Honestly should be illegal. One of the most blatant and harmful transfers of wealth that is even possible.
^
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
Why does the fact that get more compensation in stock than cash matter for this question?
I'm not sure I follow.
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.
^
Stock options are not salary. You can't just cut your stock options to save budget. It doesn't work like that.
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?
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.
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.
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
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.
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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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!
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!
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.
Its not their responsibility to use their money to fund a company. That's different money. Corporate budgets are more complex than a lot of people assume.
Those would be "pensions", which have nearly disappeared in America.
Why any of that matter?
Also, you know that once you awarded stock to an exec they can sell them, right?
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.
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.
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.
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.
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
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.
Laid-off Sears workers left with nothing – and they say wealthy bosses are to blame
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.
Holy shit, this. Just another example of EtcetEra being nuanced and well-read. /s
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.
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.
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.
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.
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.
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.