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There is an important principle here which you all seem to be missing: firms and individuals have the right to spend their money how they want. If a company wants to hire Steve Jobs and pay him an insane salary, it's matter between the parties. I think it's outrageous to suggest that there should be kind of law preventing companies from offering really high salaries to top level managers.
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On March 10 2013 05:22 ziggurat wrote:
There is an important principle here which you all seem to be missing: firms and individuals have the right to spend their money how they want. If a company wants to hire Steve Jobs and pay him an insane salary, it's matter between the parties. I think it's outrageous to suggest that there should be kind of law preventing companies from offering really high salaries to top level managers.
The workers are under the directors, the directors are under the CEO, the CEO is under the board, the board is under the shareholders, the shareholders are under... Well whatever the company originally put in its statutes...
A certain danish company has A-, B- and C-stocks. The C-stocks give absolutely no say in election of the board, B-stocks give 1 vote for each stock and A-stocks give you 10 votes.
A publically owned company has most of the members of the board chosen by the parties in parliament (1 for each party no matter the size!).
A third company has 3 spots reserved for workers, 1 for the lowest workers, 4 cherrypicked from companies and the rest elected by the shareholders.
The Statutes are somewhat controlled by laws, but the laws are very lax. That is one of the most important parts to supervise and it is a very limited stop-gap on some of the insanity and corruption that exists in different boards in different companies.
Right now several of the boards in my country take insurances to avoid having economic responsibility when the company goes belly up. It takes an actual education in what they are doing to achieve that insurance. So many companies have had freeriders with no idea what they should do in their board and since the shareholders do not care a bit about the qualifications of the people on the board and especially not the specific members as long as they are making money, they keep voting in the same people. Some better oversight given to the shareholders apart from some overall numbers the board honestly have little to no say on is probably needed. That includes a possibility to scrutinize the individual members of the board.
There are some limitations on CEO bonuses to avoid US style tax abuses, but to be honest it has not stopped it yet. However, limiting bonuses to a certain percentage of the annual wage seems rather small to me. He can no longer get a 10.000.000 times the annual wage in bonuses like the 1 dollar annual wage bosses. It has to be distributed in a more transparent fashion than loading bonuses and using the 1 dollar annual wage for the IRS and the non-reseaching part of the press.
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On March 10 2013 04:51 JonnyBNoHo wrote:The CEO to average worker pay graph shows a secular decline. If you look at the cyclical aspect the high of the mid 2000's was lower than the high of the late 90's and the recent low was lower than the post dot-com low. Lower highs / lower lows - that's a decline. As to the BLS article please see page 61. From '79 to 2000 the bulk of the divergence between productivity and compensation was due to technical differences in how productivity and compensation are calculated over time. Show nested quote +•There are two components that account for the gap between real hourly compensation growth and productivity growth. The first is the difference between the price indexes used to account for inflation in the BLS productivity and hourly compensation measures. The second is the change in “labor share,” which, as explained earlier, is the share of output that is accounted for by workers’ wages, salaries, and benefits.
•Before 2000, the difference between the growth rates of the CPI and the IPD—that is, the difference in inflation rates—explained most of the gap
Err...you're misinterpreting the definitions. The difference between CPI and IPD is the difference between inflation rates of the average consumer product and the average industrial output price.
BLS hourly compensation and productivity measures. The Consumer Price Index and the implicit price deflator comprise different baskets of goods and services; if consumer prices rise more quickly than output prices, purchasing power falls and the compensation–productivity gap grows.
(Paragraph 3)
There's nothing technical about it. If the cost of living grows faster relative to the cost of the stuff you make, you are making less money even if your productivity is unchanged. Which is a very real decrease in compensation to productivity.
...actually, looking through the BLS site...
http://www.bls.gov/opub/ted/2011/ted_20110224.htm
That looks like part of the definition of the productivity:compensation ratio...after all, purchasing power is completely relative to the amount of money you make and the cost of stuff you get.
That means the data from the 2000s makes perfect sense. Difference in inflation between outputs and consumer products is low, labor's share in output plummets. It basically signifies an jobless recovery with little to no inflation.
Concerning the data from the Economist: yes, that's how you calculate this, using business cycle peaks. But two data points does NOT make an argument, especially when they're connected by a rather...weird..."recovery". If I'm not mistaken, adding additional data points from business cycle peaks in the US does, in fact, show an increase in CEO:worker compensation ratio.
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Look at the poll, everyone is left. Shows why politicians aren't popular (the vast majority are right wing, and the remainder are center wing; only the insignificant are left).
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On March 10 2013 04:51 JonnyBNoHo wrote:Show nested quote +On March 10 2013 04:05 acker wrote:On March 09 2013 02:45 JonnyBNoHo wrote:CEO to average worker pay has been declining in the US, though you can still argue that it is still excessively high. It's also a somewhat misleading stat - generally it's computed by looking at CEO pay at the largest companies where the ratio would naturally be higher. In those cases it's possible that the CEO really does do more for the company that 300 workers (or the reverse, a bad CEO could cause more damage than 300 bad workers though he'll still get a nice paycheck). As for the productivity / compensation gap, I'd recommend reading this from the BLS. A good chunk of the gap is explained by technical differences in the way that wages and productivity are calculated in the indexes. Post 2000 is where labor really took a hit though I'm not sure that there's a quick and easy explanation for that. The first graph doesn't show that CEO pay is declining overall, it shows that CEO pay falls during recessions...which makes sense for obvious reasons. Note the recovery in CEO:worker compensation, which is the point of the article. The graph in page 59 of the linked article is log-adjusted, and shows a divergence in productivity to compensation starting in...1979, from page 60. Not the 2000s. 1979-1990 was even more divergent in productivity:compensation than the 2000s... One big disclaimer should be put on this; this is all data from the United States, not international data. The CEO to average worker pay graph shows a secular decline. If you look at the cyclical aspect the high of the mid 2000's was lower than the high of the late 90's and the recent low was lower than the post dot-com low. Lower highs / lower lows - that's a decline. As to the BLS article please see page 61. From '79 to 2000 the bulk of the divergence between productivity and compensation was due to technical differences in how productivity and compensation are calculated over time. Show nested quote +•There are two components that account for the gap between real hourly compensation growth and productivity growth. The first is the difference between the price indexes used to account for inflation in the BLS productivity and hourly compensation measures. The second is the change in “labor share,” which, as explained earlier, is the share of output that is accounted for by workers’ wages, salaries, and benefits.
•Before 2000, the difference between the growth rates of the CPI and the IPD—that is, the difference in inflation rates—explained most of the gap Edit: Show nested quote +On March 10 2013 04:20 aksfjh wrote:On March 09 2013 02:45 JonnyBNoHo wrote:On March 09 2013 01:24 Roe wrote:On March 08 2013 14:37 yandere991 wrote:On March 08 2013 14:20 aksfjh wrote:On March 08 2013 12:44 Tewks44 wrote:On March 08 2013 12:38 aksfjh wrote:On March 08 2013 12:26 Tewks44 wrote:On March 08 2013 12:23 aksfjh wrote:
[quote]
How do they have anything to lose by overpaying the CEO? Aren't most boards partially or entirely appointed by the CEO? It's a symbiotic system if I'm not mistaken. Boards are elected by the shareholders, who's interest is maximizing profit. Therefore if the board is overpaying the CEO, the board is going to have some angry members to deal with, and they gain nothing. EDIT: by members I mean shareholders From the wikipedia article: http://en.wikipedia.org/wiki/Board_of_directors#GovernanceIn practice for publicly traded companies, the managers (inside directors) who are purportedly accountable to the board of directors have historically played a major role in selecting and nominating the directors who are voted on by the shareholders, in which case more "gray outsider directors" (independent directors with conflicts of interest) are nominated and elected.[16] So, those that are voted to the board are generally nominated by those they are to oversee. Seems like a symbiotic system to me, even if it's not intended to be so. you bring up a good point in the difference between the nice, orderly picture I've described and the de facto nature of the situation. I admit, it's not a perfect system simply because people are the way they are. However, I would argue that it is a good system, and a state mandated overhaul to corporate structure would not only be highly disruptive, but a step backwards in corporate governance. I don't really want a state mandated overhaul, just more oversight of the entire thing. It's one of those instances where you see blatant problems, like CEO compensation being 300x+ more than average worker pay, and you KNOW it's wrong for it to be that way. There should be something that is actively and strongly looking to correct those problems that have societal consequences and not sitting back with a "the markets will fix it themselves!" attitude. I really don't see anything wrong with it. If cash flows are strong and the company is growing at a healthy rate then who cares if they are earning 300x the average worker. Most companies that I have seen (basically the top half of the ASX 500) have a MAJOR component of their exec pay in equity which vests in tranches, usually 3 year vest with 5 year lock period. Most of the time half the tranches has relative TSR (50th percentile min 75th percentile stretch) as the KPI and the other half has absolute EPS as the KPI. STI has a whole set of different KPIs which usually involve EBIT, safety, and discretionary. Generally when times are good bonuses are big and when times are bad multiple years of bonuses have their current tranches nullified. you forget the popular graph, which shows corporate pay at 300x, productivity going up, but employee pay actually decreasing slightly if not just stagnating. Now, you're going to have a hell of a case trying to prove CEOs are working 300x as much as their workers. This is the problem with corporate style business. The money isn't proportional to who worked for the revenue. CEO to average worker pay has been declining in the US, though you can still argue that it is still excessively high. It's also a somewhat misleading stat - generally it's computed by looking at CEO pay at the largest companies where the ratio would naturally be higher. In those cases it's possible that the CEO really does do more for the company that 300 workers (or the reverse, a bad CEO could cause more damage than 300 bad workers though he'll still get a nice paycheck). As for the productivity / compensation gap, I'd recommend reading this from the BLS. A good chunk of the gap is explained by technical differences in the way that wages and productivity are calculated in the indexes. Post 2000 is where labor really took a hit though I'm not sure that there's a quick and easy explanation for that. On March 09 2013 02:31 aksfjh wrote:On March 08 2013 14:37 yandere991 wrote:On March 08 2013 14:20 aksfjh wrote:On March 08 2013 12:44 Tewks44 wrote:On March 08 2013 12:38 aksfjh wrote:On March 08 2013 12:26 Tewks44 wrote:On March 08 2013 12:23 aksfjh wrote:
[quote]
How do they have anything to lose by overpaying the CEO? Aren't most boards partially or entirely appointed by the CEO? It's a symbiotic system if I'm not mistaken. Boards are elected by the shareholders, who's interest is maximizing profit. Therefore if the board is overpaying the CEO, the board is going to have some angry members to deal with, and they gain nothing. EDIT: by members I mean shareholders From the wikipedia article: http://en.wikipedia.org/wiki/Board_of_directors#GovernanceIn practice for publicly traded companies, the managers (inside directors) who are purportedly accountable to the board of directors have historically played a major role in selecting and nominating the directors who are voted on by the shareholders, in which case more "gray outsider directors" (independent directors with conflicts of interest) are nominated and elected.[16] So, those that are voted to the board are generally nominated by those they are to oversee. Seems like a symbiotic system to me, even if it's not intended to be so. you bring up a good point in the difference between the nice, orderly picture I've described and the de facto nature of the situation. I admit, it's not a perfect system simply because people are the way they are. However, I would argue that it is a good system, and a state mandated overhaul to corporate structure would not only be highly disruptive, but a step backwards in corporate governance. I don't really want a state mandated overhaul, just more oversight of the entire thing. It's one of those instances where you see blatant problems, like CEO compensation being 300x+ more than average worker pay, and you KNOW it's wrong for it to be that way. There should be something that is actively and strongly looking to correct those problems that have societal consequences and not sitting back with a "the markets will fix it themselves!" attitude. I really don't see anything wrong with it. If cash flows are strong and the company is growing at a healthy rate then who cares if they are earning 300x the average worker. Most companies that I have seen (basically the top half of the ASX 500) have a MAJOR component of their exec pay in equity which vests in tranches, usually 3 year vest with 5 year lock period. Most of the time half the tranches has relative TSR (50th percentile min 75th percentile stretch) as the KPI and the other half has absolute EPS as the KPI. STI has a whole set of different KPIs which usually involve EBIT, safety, and discretionary. Generally when times are good bonuses are big and when times are bad multiple years of bonuses have their current tranches nullified. It doesn't really matter how you calculate a number when the result doesn't sensibly line up. We have mountains of statistics that tell us the same thing: workers have gotten much more productive and yet are paid roughly the same real wages as 30 years ago. Hell, right now we have figures that show full-time workers working longer hours for smaller raises, more people that are unemployed/underemployed, and company profits and cash reserves at all time highs. You don't need to through around a bunch of bullshit analysis to see that the average worker is being swindled while the top executives line their pockets. Worker's are not getting paid the same as 30 years ago. On March 09 2013 01:50 Rassy wrote:
So how do these bund holders unload their huge stock of bunds without crashing the market? Hold to maturity :p I apologize again for rounding and you not understanding what I mean by "roughly." A real increase of 10% of income (about $45k to $50k in 30 years) and a productive output increase of 200-250%. That's just a finer detail, though, but still paints the same picture. Where are you getting the $45K to $50K figure from?
http://www.davemanuel.com/median-household-income.php
That's referenced to the Census Bureau.
1981: $45,260
2011: $50,054
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On March 10 2013 14:53 aksfjh wrote:Show nested quote +On March 10 2013 04:51 JonnyBNoHo wrote:On March 10 2013 04:05 acker wrote:On March 09 2013 02:45 JonnyBNoHo wrote:CEO to average worker pay has been declining in the US, though you can still argue that it is still excessively high. It's also a somewhat misleading stat - generally it's computed by looking at CEO pay at the largest companies where the ratio would naturally be higher. In those cases it's possible that the CEO really does do more for the company that 300 workers (or the reverse, a bad CEO could cause more damage than 300 bad workers though he'll still get a nice paycheck). As for the productivity / compensation gap, I'd recommend reading this from the BLS. A good chunk of the gap is explained by technical differences in the way that wages and productivity are calculated in the indexes. Post 2000 is where labor really took a hit though I'm not sure that there's a quick and easy explanation for that. The first graph doesn't show that CEO pay is declining overall, it shows that CEO pay falls during recessions...which makes sense for obvious reasons. Note the recovery in CEO:worker compensation, which is the point of the article. The graph in page 59 of the linked article is log-adjusted, and shows a divergence in productivity to compensation starting in...1979, from page 60. Not the 2000s. 1979-1990 was even more divergent in productivity:compensation than the 2000s... One big disclaimer should be put on this; this is all data from the United States, not international data. The CEO to average worker pay graph shows a secular decline. If you look at the cyclical aspect the high of the mid 2000's was lower than the high of the late 90's and the recent low was lower than the post dot-com low. Lower highs / lower lows - that's a decline. As to the BLS article please see page 61. From '79 to 2000 the bulk of the divergence between productivity and compensation was due to technical differences in how productivity and compensation are calculated over time. •There are two components that account for the gap between real hourly compensation growth and productivity growth. The first is the difference between the price indexes used to account for inflation in the BLS productivity and hourly compensation measures. The second is the change in “labor share,” which, as explained earlier, is the share of output that is accounted for by workers’ wages, salaries, and benefits.
•Before 2000, the difference between the growth rates of the CPI and the IPD—that is, the difference in inflation rates—explained most of the gap Edit: On March 10 2013 04:20 aksfjh wrote:On March 09 2013 02:45 JonnyBNoHo wrote:On March 09 2013 01:24 Roe wrote:On March 08 2013 14:37 yandere991 wrote:On March 08 2013 14:20 aksfjh wrote:On March 08 2013 12:44 Tewks44 wrote:On March 08 2013 12:38 aksfjh wrote:On March 08 2013 12:26 Tewks44 wrote:
[quote]
Boards are elected by the shareholders, who's interest is maximizing profit. Therefore if the board is overpaying the CEO, the board is going to have some angry members to deal with, and they gain nothing.
EDIT: by members I mean shareholders From the wikipedia article: http://en.wikipedia.org/wiki/Board_of_directors#GovernanceIn practice for publicly traded companies, the managers (inside directors) who are purportedly accountable to the board of directors have historically played a major role in selecting and nominating the directors who are voted on by the shareholders, in which case more "gray outsider directors" (independent directors with conflicts of interest) are nominated and elected.[16] So, those that are voted to the board are generally nominated by those they are to oversee. Seems like a symbiotic system to me, even if it's not intended to be so. you bring up a good point in the difference between the nice, orderly picture I've described and the de facto nature of the situation. I admit, it's not a perfect system simply because people are the way they are. However, I would argue that it is a good system, and a state mandated overhaul to corporate structure would not only be highly disruptive, but a step backwards in corporate governance. I don't really want a state mandated overhaul, just more oversight of the entire thing. It's one of those instances where you see blatant problems, like CEO compensation being 300x+ more than average worker pay, and you KNOW it's wrong for it to be that way. There should be something that is actively and strongly looking to correct those problems that have societal consequences and not sitting back with a "the markets will fix it themselves!" attitude. I really don't see anything wrong with it. If cash flows are strong and the company is growing at a healthy rate then who cares if they are earning 300x the average worker. Most companies that I have seen (basically the top half of the ASX 500) have a MAJOR component of their exec pay in equity which vests in tranches, usually 3 year vest with 5 year lock period. Most of the time half the tranches has relative TSR (50th percentile min 75th percentile stretch) as the KPI and the other half has absolute EPS as the KPI. STI has a whole set of different KPIs which usually involve EBIT, safety, and discretionary. Generally when times are good bonuses are big and when times are bad multiple years of bonuses have their current tranches nullified. you forget the popular graph, which shows corporate pay at 300x, productivity going up, but employee pay actually decreasing slightly if not just stagnating. Now, you're going to have a hell of a case trying to prove CEOs are working 300x as much as their workers. This is the problem with corporate style business. The money isn't proportional to who worked for the revenue. CEO to average worker pay has been declining in the US, though you can still argue that it is still excessively high. It's also a somewhat misleading stat - generally it's computed by looking at CEO pay at the largest companies where the ratio would naturally be higher. In those cases it's possible that the CEO really does do more for the company that 300 workers (or the reverse, a bad CEO could cause more damage than 300 bad workers though he'll still get a nice paycheck). As for the productivity / compensation gap, I'd recommend reading this from the BLS. A good chunk of the gap is explained by technical differences in the way that wages and productivity are calculated in the indexes. Post 2000 is where labor really took a hit though I'm not sure that there's a quick and easy explanation for that. On March 09 2013 02:31 aksfjh wrote:On March 08 2013 14:37 yandere991 wrote:On March 08 2013 14:20 aksfjh wrote:On March 08 2013 12:44 Tewks44 wrote:On March 08 2013 12:38 aksfjh wrote:On March 08 2013 12:26 Tewks44 wrote:
[quote]
Boards are elected by the shareholders, who's interest is maximizing profit. Therefore if the board is overpaying the CEO, the board is going to have some angry members to deal with, and they gain nothing.
EDIT: by members I mean shareholders From the wikipedia article: http://en.wikipedia.org/wiki/Board_of_directors#GovernanceIn practice for publicly traded companies, the managers (inside directors) who are purportedly accountable to the board of directors have historically played a major role in selecting and nominating the directors who are voted on by the shareholders, in which case more "gray outsider directors" (independent directors with conflicts of interest) are nominated and elected.[16] So, those that are voted to the board are generally nominated by those they are to oversee. Seems like a symbiotic system to me, even if it's not intended to be so. you bring up a good point in the difference between the nice, orderly picture I've described and the de facto nature of the situation. I admit, it's not a perfect system simply because people are the way they are. However, I would argue that it is a good system, and a state mandated overhaul to corporate structure would not only be highly disruptive, but a step backwards in corporate governance. I don't really want a state mandated overhaul, just more oversight of the entire thing. It's one of those instances where you see blatant problems, like CEO compensation being 300x+ more than average worker pay, and you KNOW it's wrong for it to be that way. There should be something that is actively and strongly looking to correct those problems that have societal consequences and not sitting back with a "the markets will fix it themselves!" attitude. I really don't see anything wrong with it. If cash flows are strong and the company is growing at a healthy rate then who cares if they are earning 300x the average worker. Most companies that I have seen (basically the top half of the ASX 500) have a MAJOR component of their exec pay in equity which vests in tranches, usually 3 year vest with 5 year lock period. Most of the time half the tranches has relative TSR (50th percentile min 75th percentile stretch) as the KPI and the other half has absolute EPS as the KPI. STI has a whole set of different KPIs which usually involve EBIT, safety, and discretionary. Generally when times are good bonuses are big and when times are bad multiple years of bonuses have their current tranches nullified. It doesn't really matter how you calculate a number when the result doesn't sensibly line up. We have mountains of statistics that tell us the same thing: workers have gotten much more productive and yet are paid roughly the same real wages as 30 years ago. Hell, right now we have figures that show full-time workers working longer hours for smaller raises, more people that are unemployed/underemployed, and company profits and cash reserves at all time highs. You don't need to through around a bunch of bullshit analysis to see that the average worker is being swindled while the top executives line their pockets. Worker's are not getting paid the same as 30 years ago. On March 09 2013 01:50 Rassy wrote:
So how do these bund holders unload their huge stock of bunds without crashing the market? Hold to maturity :p I apologize again for rounding and you not understanding what I mean by "roughly." A real increase of 10% of income (about $45k to $50k in 30 years) and a productive output increase of 200-250%. That's just a finer detail, though, but still paints the same picture. Where are you getting the $45K to $50K figure from? http://www.davemanuel.com/median-household-income.phpThat's referenced to the Census Bureau. 1981: $45,260 2011: $50,054
You are aware that according to Bureau of Labor Statistics Data, productivity hasn't increased 200 - 250% since 1981 but almost in line with inflation? The average productivity increase has been about 1 - 2% per year and that's not accounting for inflation like you've done with household income.
http://data.bls.gov/pdq/SurveyOutputServlet
A lot of it is over the fact that there are more employees working in the U.S. in 2013 than in 1981 with better and sophisticated technology and infrastructure. That said, the overall increase in productivity from 1981 to 2013 is generally proportional to the inflation, maybe a little over, but definitely not high as you claim.
Also, household income, even inflation adjusted, is a terrible statistic to use to measure individual income.
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United States6277 Posts
On March 10 2013 07:30 acker wrote:Show nested quote +On March 10 2013 04:51 JonnyBNoHo wrote:The CEO to average worker pay graph shows a secular decline. If you look at the cyclical aspect the high of the mid 2000's was lower than the high of the late 90's and the recent low was lower than the post dot-com low. Lower highs / lower lows - that's a decline. As to the BLS article please see page 61. From '79 to 2000 the bulk of the divergence between productivity and compensation was due to technical differences in how productivity and compensation are calculated over time. •There are two components that account for the gap between real hourly compensation growth and productivity growth. The first is the difference between the price indexes used to account for inflation in the BLS productivity and hourly compensation measures. The second is the change in “labor share,” which, as explained earlier, is the share of output that is accounted for by workers’ wages, salaries, and benefits.
•Before 2000, the difference between the growth rates of the CPI and the IPD—that is, the difference in inflation rates—explained most of the gap Err...you're misinterpreting the definitions. The difference between CPI and IPD is the difference between inflation rates of the average consumer product and the average industrial output price. Show nested quote +
BLS hourly compensation and productivity measures. The Consumer Price Index and the implicit price deflator comprise different baskets of goods and services; if consumer prices rise more quickly than output prices, purchasing power falls and the compensation–productivity gap grows.
(Paragraph 3) There's nothing technical about it. If the cost of living grows faster relative to the cost of the stuff you make, you are making less money even if your productivity is unchanged. Which is a very real decrease in compensation to productivity. ...actually, looking through the BLS site... http://www.bls.gov/opub/ted/2011/ted_20110224.htmThat looks like part of the definition of the productivity:compensation ratio...after all, purchasing power is completely relative to the amount of money you make and the cost of stuff you get. That means the data from the 2000s makes perfect sense. Difference in inflation between outputs and consumer products is low, labor's share in output plummets. It basically signifies an jobless recovery with little to no inflation. Concerning the data from the Economist: yes, that's how you calculate this, using business cycle peaks. But two data points does NOT make an argument, especially when they're connected by a rather...weird..."recovery". If I'm not mistaken, adding additional data points from business cycle peaks in the US does, in fact, show an increase in CEO:worker compensation ratio.
It is a technical difference. Both productivity and compensation are adjusted for inflation and yet they use different indexes to make the adjustment.
What we really care about here is if workers are getting their fair share of production. For that we look here:
![[image loading]](https://dl.dropbox.com/u/72070179/Labor%20share.PNG)
Labor's share was pretty consistent until post 2000. We can see hints of change in the late 80's when labor's share didn't hit its usual cyclical high. We can also see changes in the mid 90's when labor's share went abnormally low before recovering strongly. Then in 2000 labor's share took a dive and hasn't recovered.
A plausible explanation would be that labor lost some bargaining power along with globalization. Though I'm open to other explanations.
On March 10 2013 14:53 aksfjh wrote:Show nested quote +On March 10 2013 04:51 JonnyBNoHo wrote:On March 10 2013 04:05 acker wrote:On March 09 2013 02:45 JonnyBNoHo wrote:CEO to average worker pay has been declining in the US, though you can still argue that it is still excessively high. It's also a somewhat misleading stat - generally it's computed by looking at CEO pay at the largest companies where the ratio would naturally be higher. In those cases it's possible that the CEO really does do more for the company that 300 workers (or the reverse, a bad CEO could cause more damage than 300 bad workers though he'll still get a nice paycheck). As for the productivity / compensation gap, I'd recommend reading this from the BLS. A good chunk of the gap is explained by technical differences in the way that wages and productivity are calculated in the indexes. Post 2000 is where labor really took a hit though I'm not sure that there's a quick and easy explanation for that. The first graph doesn't show that CEO pay is declining overall, it shows that CEO pay falls during recessions...which makes sense for obvious reasons. Note the recovery in CEO:worker compensation, which is the point of the article. The graph in page 59 of the linked article is log-adjusted, and shows a divergence in productivity to compensation starting in...1979, from page 60. Not the 2000s. 1979-1990 was even more divergent in productivity:compensation than the 2000s... One big disclaimer should be put on this; this is all data from the United States, not international data. The CEO to average worker pay graph shows a secular decline. If you look at the cyclical aspect the high of the mid 2000's was lower than the high of the late 90's and the recent low was lower than the post dot-com low. Lower highs / lower lows - that's a decline. As to the BLS article please see page 61. From '79 to 2000 the bulk of the divergence between productivity and compensation was due to technical differences in how productivity and compensation are calculated over time. •There are two components that account for the gap between real hourly compensation growth and productivity growth. The first is the difference between the price indexes used to account for inflation in the BLS productivity and hourly compensation measures. The second is the change in “labor share,” which, as explained earlier, is the share of output that is accounted for by workers’ wages, salaries, and benefits.
•Before 2000, the difference between the growth rates of the CPI and the IPD—that is, the difference in inflation rates—explained most of the gap Edit: On March 10 2013 04:20 aksfjh wrote:On March 09 2013 02:45 JonnyBNoHo wrote:On March 09 2013 01:24 Roe wrote:On March 08 2013 14:37 yandere991 wrote:On March 08 2013 14:20 aksfjh wrote:On March 08 2013 12:44 Tewks44 wrote:On March 08 2013 12:38 aksfjh wrote:On March 08 2013 12:26 Tewks44 wrote:
[quote]
Boards are elected by the shareholders, who's interest is maximizing profit. Therefore if the board is overpaying the CEO, the board is going to have some angry members to deal with, and they gain nothing.
EDIT: by members I mean shareholders From the wikipedia article: http://en.wikipedia.org/wiki/Board_of_directors#GovernanceIn practice for publicly traded companies, the managers (inside directors) who are purportedly accountable to the board of directors have historically played a major role in selecting and nominating the directors who are voted on by the shareholders, in which case more "gray outsider directors" (independent directors with conflicts of interest) are nominated and elected.[16] So, those that are voted to the board are generally nominated by those they are to oversee. Seems like a symbiotic system to me, even if it's not intended to be so. you bring up a good point in the difference between the nice, orderly picture I've described and the de facto nature of the situation. I admit, it's not a perfect system simply because people are the way they are. However, I would argue that it is a good system, and a state mandated overhaul to corporate structure would not only be highly disruptive, but a step backwards in corporate governance. I don't really want a state mandated overhaul, just more oversight of the entire thing. It's one of those instances where you see blatant problems, like CEO compensation being 300x+ more than average worker pay, and you KNOW it's wrong for it to be that way. There should be something that is actively and strongly looking to correct those problems that have societal consequences and not sitting back with a "the markets will fix it themselves!" attitude. I really don't see anything wrong with it. If cash flows are strong and the company is growing at a healthy rate then who cares if they are earning 300x the average worker. Most companies that I have seen (basically the top half of the ASX 500) have a MAJOR component of their exec pay in equity which vests in tranches, usually 3 year vest with 5 year lock period. Most of the time half the tranches has relative TSR (50th percentile min 75th percentile stretch) as the KPI and the other half has absolute EPS as the KPI. STI has a whole set of different KPIs which usually involve EBIT, safety, and discretionary. Generally when times are good bonuses are big and when times are bad multiple years of bonuses have their current tranches nullified. you forget the popular graph, which shows corporate pay at 300x, productivity going up, but employee pay actually decreasing slightly if not just stagnating. Now, you're going to have a hell of a case trying to prove CEOs are working 300x as much as their workers. This is the problem with corporate style business. The money isn't proportional to who worked for the revenue. CEO to average worker pay has been declining in the US, though you can still argue that it is still excessively high. It's also a somewhat misleading stat - generally it's computed by looking at CEO pay at the largest companies where the ratio would naturally be higher. In those cases it's possible that the CEO really does do more for the company that 300 workers (or the reverse, a bad CEO could cause more damage than 300 bad workers though he'll still get a nice paycheck). As for the productivity / compensation gap, I'd recommend reading this from the BLS. A good chunk of the gap is explained by technical differences in the way that wages and productivity are calculated in the indexes. Post 2000 is where labor really took a hit though I'm not sure that there's a quick and easy explanation for that. On March 09 2013 02:31 aksfjh wrote:On March 08 2013 14:37 yandere991 wrote:On March 08 2013 14:20 aksfjh wrote:On March 08 2013 12:44 Tewks44 wrote:On March 08 2013 12:38 aksfjh wrote:On March 08 2013 12:26 Tewks44 wrote:
[quote]
Boards are elected by the shareholders, who's interest is maximizing profit. Therefore if the board is overpaying the CEO, the board is going to have some angry members to deal with, and they gain nothing.
EDIT: by members I mean shareholders From the wikipedia article: http://en.wikipedia.org/wiki/Board_of_directors#GovernanceIn practice for publicly traded companies, the managers (inside directors) who are purportedly accountable to the board of directors have historically played a major role in selecting and nominating the directors who are voted on by the shareholders, in which case more "gray outsider directors" (independent directors with conflicts of interest) are nominated and elected.[16] So, those that are voted to the board are generally nominated by those they are to oversee. Seems like a symbiotic system to me, even if it's not intended to be so. you bring up a good point in the difference between the nice, orderly picture I've described and the de facto nature of the situation. I admit, it's not a perfect system simply because people are the way they are. However, I would argue that it is a good system, and a state mandated overhaul to corporate structure would not only be highly disruptive, but a step backwards in corporate governance. I don't really want a state mandated overhaul, just more oversight of the entire thing. It's one of those instances where you see blatant problems, like CEO compensation being 300x+ more than average worker pay, and you KNOW it's wrong for it to be that way. There should be something that is actively and strongly looking to correct those problems that have societal consequences and not sitting back with a "the markets will fix it themselves!" attitude. I really don't see anything wrong with it. If cash flows are strong and the company is growing at a healthy rate then who cares if they are earning 300x the average worker. Most companies that I have seen (basically the top half of the ASX 500) have a MAJOR component of their exec pay in equity which vests in tranches, usually 3 year vest with 5 year lock period. Most of the time half the tranches has relative TSR (50th percentile min 75th percentile stretch) as the KPI and the other half has absolute EPS as the KPI. STI has a whole set of different KPIs which usually involve EBIT, safety, and discretionary. Generally when times are good bonuses are big and when times are bad multiple years of bonuses have their current tranches nullified. It doesn't really matter how you calculate a number when the result doesn't sensibly line up. We have mountains of statistics that tell us the same thing: workers have gotten much more productive and yet are paid roughly the same real wages as 30 years ago. Hell, right now we have figures that show full-time workers working longer hours for smaller raises, more people that are unemployed/underemployed, and company profits and cash reserves at all time highs. You don't need to through around a bunch of bullshit analysis to see that the average worker is being swindled while the top executives line their pockets. Worker's are not getting paid the same as 30 years ago. On March 09 2013 01:50 Rassy wrote:
So how do these bund holders unload their huge stock of bunds without crashing the market? Hold to maturity :p I apologize again for rounding and you not understanding what I mean by "roughly." A real increase of 10% of income (about $45k to $50k in 30 years) and a productive output increase of 200-250%. That's just a finer detail, though, but still paints the same picture. Where are you getting the $45K to $50K figure from? http://www.davemanuel.com/median-household-income.phpThat's referenced to the Census Bureau. 1981: $45,260 2011: $50,054
OK, you're going to get some added differences if you compare median household income to average productivity.
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On March 08 2013 05:07 sam!zdat wrote:
I think we're just talking past each other. I'm pretty much exclusively interested in "Marxism" meaning "post-Frankfurt School," so also post-Weber and post-Freud. "Orthodox Marxism" is a bit silly and I don't have much use for it outside of historical interest. I'm interested in reappropriating Marxism for the 21st century more than anything else - I'm more of a bricoleur who accepts Marx than a "Marxist," really. But idk. Maybe I'm just a Hegelian.
edit: so when I make claims of the type "Marxism means X", what I really mean is that "For us, here and now in the 21st century, Marxism can and should mean X!", and not "For historical Marxists in previous epochs, Marxism meant X".
edit: if you can't turn your own tradition on its head when the situation demands, then what's the point, after all, of being a Hegelian??
That's because you have a certain way of thinking what is marxism. In my country (France) the Frankfurt school had no impact at all on the evolution of marxism. They are a very german centered school - in France Foucault did the same work in his own way, and he was not really affiliated to Marxism. Marxism in France was deeply connected to URSS and what it represented for a long time, so they kept the orthodoxe line until like the fall of the german wall.
You cited Althusser (who was french) at some point, he was for exemple well known for the importance of his notes at the end of pages, because he could not really criticise (or improve) orthodoxe marxism in the text. Altho there was some discussion in marxism, those discussion were pretty much restricted to philosopher, the main body of the communist party sticking to Marx and the orthodoxe vision of marxism.
When you say that you are interested in reappropriating the Marxism for the 21st century, I completly understand in the perspective of "ideas", but marxism is not really ideas, it is a set of institutions (in France the communist Party and the syndicat CGT, Confederation General of Labor), structured around a set of rules and point of interest (mainly the work and the distribution of profit). In this regard, when I say "orthodoxe marxism" I'm not really talking about old marxism, like 19th century marxism, but the current dominant way of defining marxism.
You'd better build your own philosophy of life and political conflict, and take idea whereever you wants. You don't really needs to affiliate yourself with "marxism" for that.
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Cayman Islands24199 Posts
in my own time ive tried to engage with some orthodox marxists but it was a pretty frustrating experience. a lot of dogmatic adherence to doctrine, and enormous personalities. whitedog's advice is sound.
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On March 10 2013 05:25 sam!zdat wrote:
what is money?
"teehee. self reference meets money"
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On March 10 2013 17:17 BirdKiller wrote:Show nested quote +On March 10 2013 14:53 aksfjh wrote:On March 10 2013 04:51 JonnyBNoHo wrote:On March 10 2013 04:05 acker wrote:On March 09 2013 02:45 JonnyBNoHo wrote:CEO to average worker pay has been declining in the US, though you can still argue that it is still excessively high. It's also a somewhat misleading stat - generally it's computed by looking at CEO pay at the largest companies where the ratio would naturally be higher. In those cases it's possible that the CEO really does do more for the company that 300 workers (or the reverse, a bad CEO could cause more damage than 300 bad workers though he'll still get a nice paycheck). As for the productivity / compensation gap, I'd recommend reading this from the BLS. A good chunk of the gap is explained by technical differences in the way that wages and productivity are calculated in the indexes. Post 2000 is where labor really took a hit though I'm not sure that there's a quick and easy explanation for that. The first graph doesn't show that CEO pay is declining overall, it shows that CEO pay falls during recessions...which makes sense for obvious reasons. Note the recovery in CEO:worker compensation, which is the point of the article. The graph in page 59 of the linked article is log-adjusted, and shows a divergence in productivity to compensation starting in...1979, from page 60. Not the 2000s. 1979-1990 was even more divergent in productivity:compensation than the 2000s... One big disclaimer should be put on this; this is all data from the United States, not international data. The CEO to average worker pay graph shows a secular decline. If you look at the cyclical aspect the high of the mid 2000's was lower than the high of the late 90's and the recent low was lower than the post dot-com low. Lower highs / lower lows - that's a decline. As to the BLS article please see page 61. From '79 to 2000 the bulk of the divergence between productivity and compensation was due to technical differences in how productivity and compensation are calculated over time. •There are two components that account for the gap between real hourly compensation growth and productivity growth. The first is the difference between the price indexes used to account for inflation in the BLS productivity and hourly compensation measures. The second is the change in “labor share,” which, as explained earlier, is the share of output that is accounted for by workers’ wages, salaries, and benefits.
•Before 2000, the difference between the growth rates of the CPI and the IPD—that is, the difference in inflation rates—explained most of the gap Edit: On March 10 2013 04:20 aksfjh wrote:On March 09 2013 02:45 JonnyBNoHo wrote:On March 09 2013 01:24 Roe wrote:On March 08 2013 14:37 yandere991 wrote:On March 08 2013 14:20 aksfjh wrote:On March 08 2013 12:44 Tewks44 wrote:On March 08 2013 12:38 aksfjh wrote:[quote] From the wikipedia article: http://en.wikipedia.org/wiki/Board_of_directors#Governance[quote] So, those that are voted to the board are generally nominated by those they are to oversee. Seems like a symbiotic system to me, even if it's not intended to be so. you bring up a good point in the difference between the nice, orderly picture I've described and the de facto nature of the situation. I admit, it's not a perfect system simply because people are the way they are. However, I would argue that it is a good system, and a state mandated overhaul to corporate structure would not only be highly disruptive, but a step backwards in corporate governance. I don't really want a state mandated overhaul, just more oversight of the entire thing. It's one of those instances where you see blatant problems, like CEO compensation being 300x+ more than average worker pay, and you KNOW it's wrong for it to be that way. There should be something that is actively and strongly looking to correct those problems that have societal consequences and not sitting back with a "the markets will fix it themselves!" attitude. I really don't see anything wrong with it. If cash flows are strong and the company is growing at a healthy rate then who cares if they are earning 300x the average worker. Most companies that I have seen (basically the top half of the ASX 500) have a MAJOR component of their exec pay in equity which vests in tranches, usually 3 year vest with 5 year lock period. Most of the time half the tranches has relative TSR (50th percentile min 75th percentile stretch) as the KPI and the other half has absolute EPS as the KPI. STI has a whole set of different KPIs which usually involve EBIT, safety, and discretionary. Generally when times are good bonuses are big and when times are bad multiple years of bonuses have their current tranches nullified. you forget the popular graph, which shows corporate pay at 300x, productivity going up, but employee pay actually decreasing slightly if not just stagnating. Now, you're going to have a hell of a case trying to prove CEOs are working 300x as much as their workers. This is the problem with corporate style business. The money isn't proportional to who worked for the revenue. CEO to average worker pay has been declining in the US, though you can still argue that it is still excessively high. It's also a somewhat misleading stat - generally it's computed by looking at CEO pay at the largest companies where the ratio would naturally be higher. In those cases it's possible that the CEO really does do more for the company that 300 workers (or the reverse, a bad CEO could cause more damage than 300 bad workers though he'll still get a nice paycheck). As for the productivity / compensation gap, I'd recommend reading this from the BLS. A good chunk of the gap is explained by technical differences in the way that wages and productivity are calculated in the indexes. Post 2000 is where labor really took a hit though I'm not sure that there's a quick and easy explanation for that. On March 09 2013 02:31 aksfjh wrote:On March 08 2013 14:37 yandere991 wrote:On March 08 2013 14:20 aksfjh wrote:On March 08 2013 12:44 Tewks44 wrote:On March 08 2013 12:38 aksfjh wrote:[quote] From the wikipedia article: http://en.wikipedia.org/wiki/Board_of_directors#Governance[quote] So, those that are voted to the board are generally nominated by those they are to oversee. Seems like a symbiotic system to me, even if it's not intended to be so. you bring up a good point in the difference between the nice, orderly picture I've described and the de facto nature of the situation. I admit, it's not a perfect system simply because people are the way they are. However, I would argue that it is a good system, and a state mandated overhaul to corporate structure would not only be highly disruptive, but a step backwards in corporate governance. I don't really want a state mandated overhaul, just more oversight of the entire thing. It's one of those instances where you see blatant problems, like CEO compensation being 300x+ more than average worker pay, and you KNOW it's wrong for it to be that way. There should be something that is actively and strongly looking to correct those problems that have societal consequences and not sitting back with a "the markets will fix it themselves!" attitude. I really don't see anything wrong with it. If cash flows are strong and the company is growing at a healthy rate then who cares if they are earning 300x the average worker. Most companies that I have seen (basically the top half of the ASX 500) have a MAJOR component of their exec pay in equity which vests in tranches, usually 3 year vest with 5 year lock period. Most of the time half the tranches has relative TSR (50th percentile min 75th percentile stretch) as the KPI and the other half has absolute EPS as the KPI. STI has a whole set of different KPIs which usually involve EBIT, safety, and discretionary. Generally when times are good bonuses are big and when times are bad multiple years of bonuses have their current tranches nullified. It doesn't really matter how you calculate a number when the result doesn't sensibly line up. We have mountains of statistics that tell us the same thing: workers have gotten much more productive and yet are paid roughly the same real wages as 30 years ago. Hell, right now we have figures that show full-time workers working longer hours for smaller raises, more people that are unemployed/underemployed, and company profits and cash reserves at all time highs. You don't need to through around a bunch of bullshit analysis to see that the average worker is being swindled while the top executives line their pockets. Worker's are not getting paid the same as 30 years ago. On March 09 2013 01:50 Rassy wrote:
So how do these bund holders unload their huge stock of bunds without crashing the market? Hold to maturity :p I apologize again for rounding and you not understanding what I mean by "roughly." A real increase of 10% of income (about $45k to $50k in 30 years) and a productive output increase of 200-250%. That's just a finer detail, though, but still paints the same picture. Where are you getting the $45K to $50K figure from? http://www.davemanuel.com/median-household-income.phpThat's referenced to the Census Bureau. 1981: $45,260 2011: $50,054 You are aware that according to Bureau of Labor Statistics Data, productivity hasn't increased 200 - 250% since 1981 but almost in line with inflation? The average productivity increase has been about 1 - 2% per year and that's not accounting for inflation like you've done with household income. http://data.bls.gov/pdq/SurveyOutputServletA lot of it is over the fact that there are more employees working in the U.S. in 2013 than in 1981 with better and sophisticated technology and infrastructure. That said, the overall increase in productivity from 1981 to 2013 is generally proportional to the inflation, maybe a little over, but definitely not high as you claim. Also, household income, even inflation adjusted, is a terrible statistic to use to measure individual income.
Using household income is a good way to make the point that CEO compensation has become unbound in an economy that produces at least 2x what it used to. Meanwhile, consumers aren't able to buy 10% more without credit. Population doesn't come close to explaining it all away.
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On March 10 2013 17:47 JonnyBNoHo wrote:
It is a technical difference. Both productivity and compensation are adjusted for inflation and yet they use different indexes to make the adjustment.
It's not a comparison of productivity and compensation, that's the overall comparison. The section you're referring to is a comparison of the rate of cost of living increases the to rate of output price increases, which is part of the productivity:compensation ratio.
This is not technical at all. They use different indices because the stuff we produce are not the same things as the stuff we consume. Inflation and real rates of increase can be different if the goods being compared are different. And differential rates of increase mean growing or shrinking effective wages to productivity.
Why is this so difficult to understand? If the cost of computers increases by 10% every year but the cost of living increases by 10000000% every year, people making computers will effectively make less money, even if they make the same number of computers every year.
"Workers getting a fair share of production" is completely based on the cost of capital compared to the cost of labor or something like that. I have no idea if it's a concern or not.
No, seriously, read the paragraph you're referring to again.
The first is the difference between the price indexes used to adjust for inflation in the BLS hourly compensation and productivity measures. The Consumer Price Index and the implicit price deflator comprise different baskets of goods and services; if consumer prices rise more quickly than output prices, purchasing power falls and the compensation–productivity gap grows.
There's a difference in the price indexes because US output price inflation is NOT the same thing as US consumption price inflation; they would only be same if we lived in a completely closed economy.
You seem to be under the impression that overall inflation should, in a perfect world, be equal if the IPD and CPI were perfect measures. This is not the case. IPD is NOT a measure of inflation for the economy as a whole, it's a measure of inflation solely within industry (rather, US outputs). CPI is a measure of total inflation of stuff we buy. There's absolutely no reason why the two should be the same.
The other thing you could be assuming is that they use IPD for BLS hourly compensation, and CPI for productivity....which is a completely inaccurate reading of the paragraph.
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United States6277 Posts
On March 11 2013 02:49 aksfjh wrote:Show nested quote +On March 10 2013 17:17 BirdKiller wrote:On March 10 2013 14:53 aksfjh wrote:On March 10 2013 04:51 JonnyBNoHo wrote:On March 10 2013 04:05 acker wrote:On March 09 2013 02:45 JonnyBNoHo wrote:CEO to average worker pay has been declining in the US, though you can still argue that it is still excessively high. It's also a somewhat misleading stat - generally it's computed by looking at CEO pay at the largest companies where the ratio would naturally be higher. In those cases it's possible that the CEO really does do more for the company that 300 workers (or the reverse, a bad CEO could cause more damage than 300 bad workers though he'll still get a nice paycheck). As for the productivity / compensation gap, I'd recommend reading this from the BLS. A good chunk of the gap is explained by technical differences in the way that wages and productivity are calculated in the indexes. Post 2000 is where labor really took a hit though I'm not sure that there's a quick and easy explanation for that. The first graph doesn't show that CEO pay is declining overall, it shows that CEO pay falls during recessions...which makes sense for obvious reasons. Note the recovery in CEO:worker compensation, which is the point of the article. The graph in page 59 of the linked article is log-adjusted, and shows a divergence in productivity to compensation starting in...1979, from page 60. Not the 2000s. 1979-1990 was even more divergent in productivity:compensation than the 2000s... One big disclaimer should be put on this; this is all data from the United States, not international data. The CEO to average worker pay graph shows a secular decline. If you look at the cyclical aspect the high of the mid 2000's was lower than the high of the late 90's and the recent low was lower than the post dot-com low. Lower highs / lower lows - that's a decline. As to the BLS article please see page 61. From '79 to 2000 the bulk of the divergence between productivity and compensation was due to technical differences in how productivity and compensation are calculated over time. •There are two components that account for the gap between real hourly compensation growth and productivity growth. The first is the difference between the price indexes used to account for inflation in the BLS productivity and hourly compensation measures. The second is the change in “labor share,” which, as explained earlier, is the share of output that is accounted for by workers’ wages, salaries, and benefits.
•Before 2000, the difference between the growth rates of the CPI and the IPD—that is, the difference in inflation rates—explained most of the gap Edit: On March 10 2013 04:20 aksfjh wrote:On March 09 2013 02:45 JonnyBNoHo wrote:On March 09 2013 01:24 Roe wrote:On March 08 2013 14:37 yandere991 wrote:On March 08 2013 14:20 aksfjh wrote:On March 08 2013 12:44 Tewks44 wrote:
[quote]
you bring up a good point in the difference between the nice, orderly picture I've described and the de facto nature of the situation. I admit, it's not a perfect system simply because people are the way they are. However, I would argue that it is a good system, and a state mandated overhaul to corporate structure would not only be highly disruptive, but a step backwards in corporate governance. I don't really want a state mandated overhaul, just more oversight of the entire thing. It's one of those instances where you see blatant problems, like CEO compensation being 300x+ more than average worker pay, and you KNOW it's wrong for it to be that way. There should be something that is actively and strongly looking to correct those problems that have societal consequences and not sitting back with a "the markets will fix it themselves!" attitude. I really don't see anything wrong with it. If cash flows are strong and the company is growing at a healthy rate then who cares if they are earning 300x the average worker. Most companies that I have seen (basically the top half of the ASX 500) have a MAJOR component of their exec pay in equity which vests in tranches, usually 3 year vest with 5 year lock period. Most of the time half the tranches has relative TSR (50th percentile min 75th percentile stretch) as the KPI and the other half has absolute EPS as the KPI. STI has a whole set of different KPIs which usually involve EBIT, safety, and discretionary. Generally when times are good bonuses are big and when times are bad multiple years of bonuses have their current tranches nullified. you forget the popular graph, which shows corporate pay at 300x, productivity going up, but employee pay actually decreasing slightly if not just stagnating. Now, you're going to have a hell of a case trying to prove CEOs are working 300x as much as their workers. This is the problem with corporate style business. The money isn't proportional to who worked for the revenue. CEO to average worker pay has been declining in the US, though you can still argue that it is still excessively high. It's also a somewhat misleading stat - generally it's computed by looking at CEO pay at the largest companies where the ratio would naturally be higher. In those cases it's possible that the CEO really does do more for the company that 300 workers (or the reverse, a bad CEO could cause more damage than 300 bad workers though he'll still get a nice paycheck). As for the productivity / compensation gap, I'd recommend reading this from the BLS. A good chunk of the gap is explained by technical differences in the way that wages and productivity are calculated in the indexes. Post 2000 is where labor really took a hit though I'm not sure that there's a quick and easy explanation for that. On March 09 2013 02:31 aksfjh wrote:On March 08 2013 14:37 yandere991 wrote:On March 08 2013 14:20 aksfjh wrote:On March 08 2013 12:44 Tewks44 wrote:
[quote]
you bring up a good point in the difference between the nice, orderly picture I've described and the de facto nature of the situation. I admit, it's not a perfect system simply because people are the way they are. However, I would argue that it is a good system, and a state mandated overhaul to corporate structure would not only be highly disruptive, but a step backwards in corporate governance. I don't really want a state mandated overhaul, just more oversight of the entire thing. It's one of those instances where you see blatant problems, like CEO compensation being 300x+ more than average worker pay, and you KNOW it's wrong for it to be that way. There should be something that is actively and strongly looking to correct those problems that have societal consequences and not sitting back with a "the markets will fix it themselves!" attitude. I really don't see anything wrong with it. If cash flows are strong and the company is growing at a healthy rate then who cares if they are earning 300x the average worker. Most companies that I have seen (basically the top half of the ASX 500) have a MAJOR component of their exec pay in equity which vests in tranches, usually 3 year vest with 5 year lock period. Most of the time half the tranches has relative TSR (50th percentile min 75th percentile stretch) as the KPI and the other half has absolute EPS as the KPI. STI has a whole set of different KPIs which usually involve EBIT, safety, and discretionary. Generally when times are good bonuses are big and when times are bad multiple years of bonuses have their current tranches nullified. It doesn't really matter how you calculate a number when the result doesn't sensibly line up. We have mountains of statistics that tell us the same thing: workers have gotten much more productive and yet are paid roughly the same real wages as 30 years ago. Hell, right now we have figures that show full-time workers working longer hours for smaller raises, more people that are unemployed/underemployed, and company profits and cash reserves at all time highs. You don't need to through around a bunch of bullshit analysis to see that the average worker is being swindled while the top executives line their pockets. Worker's are not getting paid the same as 30 years ago. On March 09 2013 01:50 Rassy wrote:
So how do these bund holders unload their huge stock of bunds without crashing the market? Hold to maturity :p I apologize again for rounding and you not understanding what I mean by "roughly." A real increase of 10% of income (about $45k to $50k in 30 years) and a productive output increase of 200-250%. That's just a finer detail, though, but still paints the same picture. Where are you getting the $45K to $50K figure from? http://www.davemanuel.com/median-household-income.phpThat's referenced to the Census Bureau. 1981: $45,260 2011: $50,054 You are aware that according to Bureau of Labor Statistics Data, productivity hasn't increased 200 - 250% since 1981 but almost in line with inflation? The average productivity increase has been about 1 - 2% per year and that's not accounting for inflation like you've done with household income. http://data.bls.gov/pdq/SurveyOutputServletA lot of it is over the fact that there are more employees working in the U.S. in 2013 than in 1981 with better and sophisticated technology and infrastructure. That said, the overall increase in productivity from 1981 to 2013 is generally proportional to the inflation, maybe a little over, but definitely not high as you claim. Also, household income, even inflation adjusted, is a terrible statistic to use to measure individual income. Using household income is a good way to make the point that CEO compensation has become unbound in an economy that produces at least 2x what it used to. Meanwhile, consumers aren't able to buy 10% more without credit. Population doesn't come close to explaining it all away.
The median household doesn't produce 200%+ more output. You are making apples to oranges comparisons.
If you want to look at CEO pay compare it to average worker pay. If you want to look at household buying power keep in mind the effect of government taxes and transfers, non-cash benefits and household size.
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On March 10 2013 21:12 WhiteDog wrote:
but marxism is not really ideas, it is a set of institutions
Maybe in France...
I'm not really sure what you're saying other than "In France, which wasn't very influenced by the Frankfurt School, Marxism is stultifyingly doctrinaire, so therefore Marxism is, in-itself, stultifyingly doctrinaire"...
In America, "Marxism" is pretty much synonymous with "Frankfurt School." (edit: that is, of course, when it isn't synonymous with "Stalinism")
edit: I think that any Marxism that is a set of "institutions, not ideas " isn't worthy of the name. I think the necessity of perpetual reinterpretation and "permanent revolution" is inextricable from the Marxist way of thinking about the world. It's not my fault if French Marxists have got the wrong idea about things. I think this is why Laclau and Mouffe talk about the strangling effects of Leninism on the Marxist tradition - am I right that your French orthodox Marxists are Leninists? I am not a Leninist.
edit: and I have to say, I think Foucault is more of a Marxist than he really wants to admit.
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United States6277 Posts
On March 11 2013 03:35 acker wrote:Show nested quote +On March 10 2013 17:47 JonnyBNoHo wrote:
It is a technical difference. Both productivity and compensation are adjusted for inflation and yet they use different indexes to make the adjustment. It's not a comparison of productivity and compensation, that's the overall comparison. The section you're referring to is a comparison of the rate of cost of living increases the to rate of output price increases, which is part of the productivity:compensation ratio. This is not technical at all. They use different indices because the stuff we produce are not the same things as the stuff we consume. Inflation and real rates of increase can be different if the goods being compared are different. And differential rates of increase mean growing or shrinking effective wages to productivity. Why is this so difficult to understand? If the cost of computers increases by 10% every year but the cost of living increases by 10000000% every year, people making computers will effectively make less money, even if they make the same number of computers every year. "Workers getting a fair share of production" is completely based on the cost of capital compared to the cost of labor or something like that. I have no idea if it's a concern or not. No, seriously, read the paragraph you're referring to again. Show nested quote +
The first is the difference between the price indexes used to adjust for inflation in the BLS hourly compensation and productivity measures. The Consumer Price Index and the implicit price deflator comprise different baskets of goods and services; if consumer prices rise more quickly than output prices, purchasing power falls and the compensation–productivity gap grows.
There's a difference in the price indexes because US output price inflation is NOT the same thing as US consumption price inflation; they would only be same if we lived in a completely closed economy. You seem to be under the impression that overall inflation should, in a perfect world, be equal if the IPD and CPI were perfect measures. This is not the case. IPD is NOT a measure of inflation for the economy as a whole, it's a measure of inflation solely within industry (rather, US outputs). CPI is a measure of total inflation of stuff we buy. There's absolutely no reason why the two should be the same. The other thing you could be assuming is that they use IPD for BLS hourly compensation, and CPI for productivity....which is a completely inaccurate reading of the paragraph.
Well what point are you trying to make by looking at the gap? Most people bring it up to demonstrate that workers haven't been getting a square deal - that while wages should follow productivity they haven't in recent years. If that's your point then the differences in the indexes is irrelevant. If your point is something different then please explain.
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On March 11 2013 04:38 JonnyBNoHo wrote:
Well what point are you trying to make by looking at the gap? Most people bring it up to demonstrate that workers haven't been getting a square deal - that while wages should follow productivity they haven't in recent years. If that's your point then the differences in the indexes is irrelevant. If your point is something different then please explain.
My point is that the difference in the wage : productivity gap due to the difference between CPI and IPD deflators is not a statistical artifact, as you seem to believe. The difference between CPI and IPD is a very real decrease or increase in purchasing power, given constant productivity.
To put it bluntly, the wage : productivity gap started sometime near 1979, not 2000.
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On March 11 2013 04:43 acker wrote:
To put it bluntly, the wage : productivity gap started sometime near 1979, not 2000.
David Harvey agrees with this, but I'll leave the technical argument to you guys
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United States6277 Posts
On March 11 2013 04:43 acker wrote:Show nested quote +On March 11 2013 04:38 JonnyBNoHo wrote:
Well what point are you trying to make by looking at the gap? Most people bring it up to demonstrate that workers haven't been getting a square deal - that while wages should follow productivity they haven't in recent years. If that's your point then the differences in the indexes is irrelevant. If your point is something different then please explain. My point is that the difference in the wage : productivity gap due to the difference between CPI and IPD deflators is not a statistical artifact, as you seem to believe. The difference between CPI and IPD is a very real decrease or increase in purchasing power, given constant productivity. To put it bluntly, the wage : productivity gap started sometime near 1979, not 2000.
OK, it's not a statistical artifact. But it's not something that belongs in the original discussion.
Workers get paid relative to their production not relative to their consumption.
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On March 10 2013 17:17 BirdKiller wrote:Show nested quote +On March 10 2013 14:53 aksfjh wrote:On March 10 2013 04:51 JonnyBNoHo wrote:On March 10 2013 04:05 acker wrote:On March 09 2013 02:45 JonnyBNoHo wrote:CEO to average worker pay has been declining in the US, though you can still argue that it is still excessively high. It's also a somewhat misleading stat - generally it's computed by looking at CEO pay at the largest companies where the ratio would naturally be higher. In those cases it's possible that the CEO really does do more for the company that 300 workers (or the reverse, a bad CEO could cause more damage than 300 bad workers though he'll still get a nice paycheck). As for the productivity / compensation gap, I'd recommend reading this from the BLS. A good chunk of the gap is explained by technical differences in the way that wages and productivity are calculated in the indexes. Post 2000 is where labor really took a hit though I'm not sure that there's a quick and easy explanation for that. The first graph doesn't show that CEO pay is declining overall, it shows that CEO pay falls during recessions...which makes sense for obvious reasons. Note the recovery in CEO:worker compensation, which is the point of the article. The graph in page 59 of the linked article is log-adjusted, and shows a divergence in productivity to compensation starting in...1979, from page 60. Not the 2000s. 1979-1990 was even more divergent in productivity:compensation than the 2000s... One big disclaimer should be put on this; this is all data from the United States, not international data. The CEO to average worker pay graph shows a secular decline. If you look at the cyclical aspect the high of the mid 2000's was lower than the high of the late 90's and the recent low was lower than the post dot-com low. Lower highs / lower lows - that's a decline. As to the BLS article please see page 61. From '79 to 2000 the bulk of the divergence between productivity and compensation was due to technical differences in how productivity and compensation are calculated over time. •There are two components that account for the gap between real hourly compensation growth and productivity growth. The first is the difference between the price indexes used to account for inflation in the BLS productivity and hourly compensation measures. The second is the change in “labor share,” which, as explained earlier, is the share of output that is accounted for by workers’ wages, salaries, and benefits.
•Before 2000, the difference between the growth rates of the CPI and the IPD—that is, the difference in inflation rates—explained most of the gap Edit: On March 10 2013 04:20 aksfjh wrote:On March 09 2013 02:45 JonnyBNoHo wrote:On March 09 2013 01:24 Roe wrote:On March 08 2013 14:37 yandere991 wrote:On March 08 2013 14:20 aksfjh wrote:On March 08 2013 12:44 Tewks44 wrote:On March 08 2013 12:38 aksfjh wrote:[quote] From the wikipedia article: http://en.wikipedia.org/wiki/Board_of_directors#Governance[quote] So, those that are voted to the board are generally nominated by those they are to oversee. Seems like a symbiotic system to me, even if it's not intended to be so. you bring up a good point in the difference between the nice, orderly picture I've described and the de facto nature of the situation. I admit, it's not a perfect system simply because people are the way they are. However, I would argue that it is a good system, and a state mandated overhaul to corporate structure would not only be highly disruptive, but a step backwards in corporate governance. I don't really want a state mandated overhaul, just more oversight of the entire thing. It's one of those instances where you see blatant problems, like CEO compensation being 300x+ more than average worker pay, and you KNOW it's wrong for it to be that way. There should be something that is actively and strongly looking to correct those problems that have societal consequences and not sitting back with a "the markets will fix it themselves!" attitude. I really don't see anything wrong with it. If cash flows are strong and the company is growing at a healthy rate then who cares if they are earning 300x the average worker. Most companies that I have seen (basically the top half of the ASX 500) have a MAJOR component of their exec pay in equity which vests in tranches, usually 3 year vest with 5 year lock period. Most of the time half the tranches has relative TSR (50th percentile min 75th percentile stretch) as the KPI and the other half has absolute EPS as the KPI. STI has a whole set of different KPIs which usually involve EBIT, safety, and discretionary. Generally when times are good bonuses are big and when times are bad multiple years of bonuses have their current tranches nullified. you forget the popular graph, which shows corporate pay at 300x, productivity going up, but employee pay actually decreasing slightly if not just stagnating. Now, you're going to have a hell of a case trying to prove CEOs are working 300x as much as their workers. This is the problem with corporate style business. The money isn't proportional to who worked for the revenue. CEO to average worker pay has been declining in the US, though you can still argue that it is still excessively high. It's also a somewhat misleading stat - generally it's computed by looking at CEO pay at the largest companies where the ratio would naturally be higher. In those cases it's possible that the CEO really does do more for the company that 300 workers (or the reverse, a bad CEO could cause more damage than 300 bad workers though he'll still get a nice paycheck). As for the productivity / compensation gap, I'd recommend reading this from the BLS. A good chunk of the gap is explained by technical differences in the way that wages and productivity are calculated in the indexes. Post 2000 is where labor really took a hit though I'm not sure that there's a quick and easy explanation for that. On March 09 2013 02:31 aksfjh wrote:On March 08 2013 14:37 yandere991 wrote:On March 08 2013 14:20 aksfjh wrote:On March 08 2013 12:44 Tewks44 wrote:On March 08 2013 12:38 aksfjh wrote:[quote] From the wikipedia article: http://en.wikipedia.org/wiki/Board_of_directors#Governance[quote] So, those that are voted to the board are generally nominated by those they are to oversee. Seems like a symbiotic system to me, even if it's not intended to be so. you bring up a good point in the difference between the nice, orderly picture I've described and the de facto nature of the situation. I admit, it's not a perfect system simply because people are the way they are. However, I would argue that it is a good system, and a state mandated overhaul to corporate structure would not only be highly disruptive, but a step backwards in corporate governance. I don't really want a state mandated overhaul, just more oversight of the entire thing. It's one of those instances where you see blatant problems, like CEO compensation being 300x+ more than average worker pay, and you KNOW it's wrong for it to be that way. There should be something that is actively and strongly looking to correct those problems that have societal consequences and not sitting back with a "the markets will fix it themselves!" attitude. I really don't see anything wrong with it. If cash flows are strong and the company is growing at a healthy rate then who cares if they are earning 300x the average worker. Most companies that I have seen (basically the top half of the ASX 500) have a MAJOR component of their exec pay in equity which vests in tranches, usually 3 year vest with 5 year lock period. Most of the time half the tranches has relative TSR (50th percentile min 75th percentile stretch) as the KPI and the other half has absolute EPS as the KPI. STI has a whole set of different KPIs which usually involve EBIT, safety, and discretionary. Generally when times are good bonuses are big and when times are bad multiple years of bonuses have their current tranches nullified. It doesn't really matter how you calculate a number when the result doesn't sensibly line up. We have mountains of statistics that tell us the same thing: workers have gotten much more productive and yet are paid roughly the same real wages as 30 years ago. Hell, right now we have figures that show full-time workers working longer hours for smaller raises, more people that are unemployed/underemployed, and company profits and cash reserves at all time highs. You don't need to through around a bunch of bullshit analysis to see that the average worker is being swindled while the top executives line their pockets. Worker's are not getting paid the same as 30 years ago. On March 09 2013 01:50 Rassy wrote:
So how do these bund holders unload their huge stock of bunds without crashing the market? Hold to maturity :p I apologize again for rounding and you not understanding what I mean by "roughly." A real increase of 10% of income (about $45k to $50k in 30 years) and a productive output increase of 200-250%. That's just a finer detail, though, but still paints the same picture. Where are you getting the $45K to $50K figure from? http://www.davemanuel.com/median-household-income.phpThat's referenced to the Census Bureau. 1981: $45,260 2011: $50,054 You are aware that according to Bureau of Labor Statistics Data, productivity hasn't increased 200 - 250% since 1981 but almost in line with inflation? The average productivity increase has been about 1 - 2% per year and that's not accounting for inflation like you've done with household income. http://data.bls.gov/pdq/SurveyOutputServletA lot of it is over the fact that there are more employees working in the U.S. in 2013 than in 1981 with better and sophisticated technology and infrastructure. That said, the overall increase in productivity from 1981 to 2013 is generally proportional to the inflation, maybe a little over, but definitely not high as you claim. Also, household income, even inflation adjusted, is a terrible statistic to use to measure individual income.
2% per year for 32 years is almost 200%. Units are irrelevant even, that's just math.
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EPT
