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Originally Posted by njbchbum
Ed - Am so glad to see that someone highlighted this topic. Every time it is brought up I have to ask some questions:
1.] What SHOULD that ratio of CEO to worker be?
2.] Why should it be as suggested?
3.] What basis did you use to determine what that ratio should be?
To date, no one has been able to come up with logical, factual, non-emotional information to answer to those questions.
As this author pointed out, "EPI’s data measure CEO compensation at the 350 biggest American public companies in a given year..." I have to ask - 'Why' and 'Why not use a sampling of CEO compensation from a variety of economic levels all the way down to the lowest paid?
I feel the questions to be appropriate, especially when the worker salary statistic is derived from "...the annual pay for workers in a given industry,..." Well. how screwy is that? Certainly not comparing apples and apples there? Why are such surveys not measuring compensation levels in a variety of industries? Such surveys suffer from a serious credibility problem.
Does anyone know that since CEO compensation analysis is coming from the biggest companies that the employee compensation analysis is coming from employees in the same industries that the CEOs manage?
And then there is the statement, "...executives are rigging pay in their favor." It fails to take into account those CEO salaries that are established by corporate boards and approved at annual stockholder meetings. I spent the first half of my career working in the field of corporate compensation and cannot recall ANY CEO who set their own salary! Of course, back in those dark ages, both employee and executive compensation was established using salary survey information that was both conducted by the corp and was published by leading compensation authorities.
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I am certainly not as expert as you on matters of executive compensation, and could not answer your questions. I provided the link as to provide some context for the topic. It is clear that ceo comp as measured in this study has gone up pretty dramatically as compared to the average worker. According to the chart the ratio was 20 times in the mid 60s climbing to Almost 90 Times in the mid nineties before zooming upward to almost 300 times that of the average worker today. Do they earn that - are they overpaid? That is not a question I can answer. What I do know is the average worker has regressed in average earning power over the last twenty years, and that seems not to make sense in a time when CEO comp has risen so dramatically, and company valuations have risen overall. I don't begrudge anyone making as much money as they can if their efforts are honest, lawful, and ethical. At the same time there have been several cases of CEOs, such as the recent head of JC Penny, who nearly ran their company into the ground, while receiving otherworldly comp packages including huge buy-outs. I am far more interested in seeing average workers benefiting fairly for their contributions to their company's success, as the middle class is the biggest segment of our society and the driver of economic growth. As far as boards awarding the CEO comp packages there have been reports that many boards are staffed with cronies of the CEOs. I don't know if that is true, as I am still awaiting my invitation to sit on the board of an S &P 500 company.