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Old 05-14-2021, 06:35 AM   #134
jeffk
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Quote:
Originally Posted by thinkxingu View Post
Full disclosure: I'm not an economics guy, but here goes:

Robert Reich, in his book The Common Good, delves into "Shareholder" capitalism and "Stockholder" capitalism. The former, he claims, exists when all three points of the capitalism triangle—consumer, worker, and owner—exist in a state that works equally for all. For example, workers get paid well, owners make a reasonable amount of money, and consumers are offered solid products at fair prices.

The latter, however, maximizes profit and pay for the owner/stockholders while adversely affecting product quality and price, worker pay, or both.

My basic question is this: why is it that worker pay and benefit questions always result in "costs of products will skyrocket" rather than "CEOs/stockholders/etc." might not make 320x what their employees make?

This is a serious question as, long before my father passed away, he watched this trend in his company and it always hurt him. In the 60's when he started, his bosses made five times what he made while in the '00s when he retired, they were making thirty times.

I looked this up not long ago, and though his numbers were probably off (low!), he wasn't wrong at all: https://www.epi.org/publication/ceo-...ypical-worker/

Thoughts? Why isn't this talked about more?

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I'm not an economics guy either but :

"why is it that worker pay and benefit questions always result in "costs of products will skyrocket"" is NOT true if the individual workers EARN their pay and benefit increases through higher productivity via education/learning and good work practices. Such a worker returns more in profit to a company than their wage increases cost. Good companies HAPPILY pay such employees what they are worth.

On the other hand, unions often bargain for wages that exceed what productivity will justify. Or, set in place rising compensation based on longevity rather than productivity. These increases DO increase production costs but are tolerated by companies due to union pressure and the limited and predictable nature of the increases. However, that's a trap. Any non productivity based increases eventually corrode a business, i.e. the American auto industry. Auto unions controlled wages in the US but couldn't control competing wages in foreign countries. Nor could they control the growth of robotics that eliminated overly expensive workers.

""CEOs/stockholders/etc." might not make 320x what their employees make?"
It is the classic "the buck stops here" which implies that the RESPONSIBILITY (and the pay) accrues to the top. The CEO (and the Board) make the major decisions that guide the growth of a company. It the company is smart, a significant portion of the CEO's compensation is tied to profitability. The CEO is not only making sure that products get built but also predicting future needs for products and actions of competitors. Further, no one else is above the CEO making sure he doesn't mess things up. As an employee or even a manager makes decisions and take actions, others are overseeing their work. No one oversees the CEO. They walk a tightrope without a net. Employee mistakes might cost $100s. A CEO's mistakes could cost $billions. The top level people EARN their money by growing profit.

Further, it is not how many times the salary is of a CEO compared to one worker that has meaning. It is how many times the salary of a CEO is compared to the cumulative salary of ALL the workers in a company BECAUSE the CEO is in charge of ALL of them and ALL of their efforts. For example, Microsoft's CEO makes $44 million vs $4 billion in overall employee payments, about 1.1%, i.e. for each employee dollar paid the CEO gets 1 cent. OR how much the CEO makes as compared to the revenue of the company. For example, the Microsoft CEO's $44 million against a company revenue of about $160 billion or about .1% of revenue. Another way to think about it is when you buy a $2000 computer, the CEO makes $2. Of course this is a simplified example because CEO's also get performance bonuses and other perks. (Numbers were pulled from various public Microsoft reports and are not meant to be precise but as an example only.)

Without a competent CEO, products wouldn't get made at all, no workers would earn anything, and you wouldn't have your computer to purchase.

I won't say that all companies are well managed or that many CEOs aren't overpaid but such companies usually struggle or fail eventually. Smart management KNOWS how it is supposed to work and keeps compensation for EVERYONE in line with their productivity. The process is VERY dynamic and challenging as markets, competition, and the overall economy is always changing.
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