Just to point out a demonstrated, viable, successful reality achieved under different values and assumptions, the Mondragon Corporation/cooperative produces car parts, among many other things, and has pre-agreed ratios for wages for executives relative to the lowest wages paid to workers, and this tops out at 9:1. Studies have found that worker-owned coops have a greater survival rate than conventional businesses, and that they have higher productivity.
Mondragon is not a worker cooperative. They have a three-tiered worked system with clear hierarchical structures and differences in voting power. The temporary worker tier (largest) having no voting power whatsoever.
The paradox of worker-coops is that workers capable of successfully running businesses together are also capable of running businesses independently, so why create more failure points?
How is equity comp factored in?
Good episode of Bloomberg's Odd Lots podcast from a little while ago on the topic:
> On September 14, the contract between the United Auto Workers and the Big Three carmakers (GM, Ford and Stellantis) is expiring — and the possibility of a strike is real. This comes at a delicate time for multiple reasons. The labor market is tight, which means workers have other options. Inflation is high. And the auto industry is undergoing a major shift to the electric vehicle market, which may change the composition and pay of the labor force. The stakes are high. So what does the union want and how does it fit into the goals of the broader labor market? To understand more, we speak with Dan Vicente, the director of UAW Region 9, as well as Alex Press, a labor reporter at Jacobin magazine.
There were some items that the unions conceded in 2008 when the US automakers were going bankrupt that have still have not been restored.
Alex Press also appeared on last week's episode of the podcast Why Is This Happening, hosted by Chris Hayes. https://www.msnbc.com/msnbc-podcast/why-is-this-happening/un...
Glad to see such a range of views, all the way from labor unions to communist magazines!
40% over 4 years isn't as crazy (especially when you consider that they had some concessions back in '08). typical clickbait when you consider this is a high value for negotiation and they're likely looking for anywhere between 20-30% over 4 years when it's all said and done. barely above inflation YoY.
It’s not entirely on the media for using these headline numbers. The Unions like these numbers being used. It sounds better to their members that they’re getting a 40% pay rise.
> they're likely looking for anywhere between 20-30% over 4 years when it's all said and done.
TFA conveniently points out to you that 20% has been offered to them and was rejected.
Shawn Fain (UAW President) has outright rejected a 20% offer. Not to say they won't agree to 30% but for context - UAW workers gave up a LOT of pay and rights in the 2010 auto bailout - the workers essentially helped to bail out management in that case along with the USG.
40% is table stakes.
40% over 4 years is PREPOSTEROUS.
> From 1978 to 2021, CEO pay grew by 1,460%, adjusted for inflation, versus just 18.1% for the typical worker.
Why has the supply of CEOs not kept up with the demand for them? Surely, with the improvement in education and in increase in MBA programs, there must be far more CEOs today than in 1978. Why has the ratio of CEOs to Companies fallen by 14x for their wages to rise this much? /s
As many argue, wages are only set by supply and demand. And if workers are underpaid, then it is because they are replaceable. Use the same framework to explain CEO pay.
> As many argue, wages are only set by supply and demand.
Most of the time that I see people invoke "Econ 101" concepts, they are wrong. Supply and demand does not account for the power imbalance between workers and leadership, which unions specifically attempt to address. It does not account for the class differences between workers trying to make ends meet and the board of directors who believe they deserve much higher pay than workers. We are free to change the perceived value of workers through the power of worker solidarity - ensuring that individual workers are not so easily replaced to keep wages suppressed. You can simply say "it's supply and demand" and do nothing to support the workers whose labor is so clearly needed for our economy to function, or we can support collective bargaining rights to make sure that individual workers are not crushed under the power of company leadership. How you view this is up to you, and not a simple fact of natural laws of economics.
It depends how they're counting.
There was an example in Money Stuff this week where a CEO got a pay package "worth $110 million". It's actually made of stock options that vest if the share price went above $150, but the expected value was $110 million so that's what was reported.
…But the share price only reached $66. So in fact he was paid zero, and he quit. (Well, $1.5 million in cash.)
Not all jobs have quantitative measures for impact. The more a job is decoupled from a measurable value, the more likely that job is to be bid up to "as much as the company can afford."
I've seen this in my career, the closer I get to "SRE" or "platform engineer" the more decoupled my salary has become from my actual measurable value.
I'd articulate the thinking as, roughly:
We know this role is important. We know that having a bad SRE team (or CEO or platform team) is expensive, it could cost us the 100% of the business. And we don't know how to measure the value a good one provides. Therefore we are willing to spend as much as we can afford to make sure we get a good one.
To paint the above in starker terms:
Worker pay is set by the leadership, leadership pay is set by the leadership.
I support the workers' decision and negotiating on labor rates is the basis of our economic system. Get what you deserve.
That said, the CEO pay is easily explainable:
> Profits at the struck auto companies increased 92% from 2013 to 2022, totaling $250 billion, according to EPI
> CEO pay at the Big Three has grown 40% in the last decade, according to EPI
If you're the CEO of a company and you increased profits by 92%, I don't know seems pretty fair to me. There's a lot of other businesses that suck and haven't raised their profits in the meanwhile.
I think talking about the CEO pay is the wrong path (though I do admit it's marketable in the mainstream news). Just ask for what you think you deserve and don't work if you don't get it. It's as simple as that.
Absolute lukewarm take here. Wages are not only set by supply and demand. Institutional power, regulatory concerns, etc... are huge factors in compensation, too. You can argue they're abstracted over by the market anyway, but you're not saying anything interesting until you dive into the tensions between those concerns.
And that's not even touching the fact that the workers are clearly valuable and irreplaceable enough that they can halt production like this.
the supply of prospective management people definitely has kept up. there are literally tens of thousands of MBAs graduating every year, to say nothing of managers at existing F500 companies. there are only so many large companies, and thus so many CEOs.
look at tiny barely profitable companies, the gap between median wage and CEO is sometimes less than 2X.
all these takes on CEO pay when the reality is simple - CEOs are paid a lot because they the cost of being wrong is more than their pay. this results in companies that have a lot of money competing, driving up the price. the end. it's the same reason lebron james is paid 10X more than NBA average.
Stellantis has 270,000+ employees across 16 brands. I'm not saying their CEO does or doesn't deserve $20m in compensation but at some point you're going to run into a problem where... nobody wants to do that job for $1m/yr and they wouldn't be qualified or very good at it.
The fact that terrible CEOs obviously exist is what drives up the prices for the ones that are not obviously terrible. It is an extremely high leverage role (see also: Microsoft).
What separates the good CEOs from the poor CEOs isn't something you can readily teach. Some of the best ones have a preternatural ability for the role in the same sense that Lionel Messi has a preternatural ability at his sport, and are equally rare. The majority of CEOs are journeymen with the skills to do the job but not to be great at it. This doesn't mean that average employees are fit to be CEOs; you don't have to look further than startup CEOs, which are pulled from an above average pool of semi-random people, to discredit that notion. It is a highly specialized skill set that is difficult to acquire and most people aren't mentally cut out for what is required to be good at it. The experiment of promoting rando employees to CEO has been tried on occasion across industry with almost universally poor results.
This is true of most professions that command a high wage. Thinking that anyone could be a CEO is like thinking any dev can be Fabrice Bellard. Even if that turned out to be the case in a specific instance, no one should expect it to generalize.
That's almost a x100 increase.
If you ignore Pelé, the top soccer player had a similar increase in the same period. https://www.expensivity.com/soccer-salary-inflation/ Compared with the median income, they went from 10x in 1979 to 1300x in 2020. Why has the supply of Messis not kept up with the demand for them?
Alternatively, as many argue, wages are not only set by supply and demand.
More like the CEO pay is a cushy symbiotic relationship with the board, which sets their pay. This is not a line worker job when there's competition.
CEO pay is adjusted based on another CEOs in the market. Since every board members has already markup their CEO pays higher and then higher, the increases are what you see today for CEO pay. Not every CEO skills at Steve/Tim/Jensen but they all delude themselves by paying high, hoping they will eventually get Elon-quality CEO into their company and make their stock the next Tesla-NVIDIA-Netflix. Most of the time, they get Stephen Elop type of CEO, unconsciously destroying company in the name of strategic stakeholder value maximization (MBA lingo). Now what about workers? The good one will just hop away. They then will tell everyone "no one is replaceable" and then go on to mis-hire even more incompetent or noob staff in. Or they will outsource it just like Dell and others during Bush Jr time.
What they need to do is to publicly disclose the performance of their CEO. Have CEOs rated by staff and publicly distribute this info worldwide. They also need to implement clawback dating as far as a decade depending whatever products they in charge during their tenure. And lastly, always put full jail offenses directly on CEO without any plea bargain. Not doable? Then workers need to get retrenched as they rightly deserve it when they didnt bother to hop away.
CEOs are an illiquid market, and demand for CEOs is pretty inelastic (companies need but one CEO after all). It's not a market which can reach price equilibrium.
If you expand your horizon somewhat to C-suite in general, it seems that demand for C-suite has tended to increase over time. If you also consider that C-suite is to some degree a Veblen good (demand increases as price goes up) , that makes sense under economic laws. Worker pay, unlike executive pay, is going to be considered a significant cost center, and business will higher fewer workers if individual pay is growing too quickly, making worker pay act like regular goods and not Veblen goods.
 The framework for setting CEO salaries tends to be "take the median CEO pay, add a little extra because our CEO's clearly better than average..."
> Use the same framework to explain CEO pay.
Sure. It's the same framework that explains the pay of Lebron James. The NBA became a massively popular global game during the era of fast growth globalization, in which billions of consumers entered into the active global economy.
Now you've got like 50 players earning $30m or more per year in the NBA. To play a game in just the US market.
~450 active players earning around $5 billion per year in just league salary (not counting endorsements).
Now do it for global football, NFL football, Nascar, Major League Baseball, Hockey, F1, and so on.
Who knows the insane total compensation figure. $30 billion?
The economic force producing that comically massive figure, is the exact same reason Tim Cook is worth every dollar he's getting paid to operate the juggernaut that is Apple. The same goes for Nadella at Microsoft.
The top 450 NBA players earn more in salary every year than the CEOs of the S&P 500. Why shouldn't a CEO get paid extraordinarily well, as well as an NBA all-star, for operating a $10 or $20 billion market cap corporation? Obviously they should.
The only time I see arguments against high CEO pay (speaking generally), it's from people that know absolutely nothing about what a CEO does or how exceptionally difficult it is to operate a very big company.
And should mediocre CEOs that fail or otherwise perform poorly get golden parachutes? No, of course not. Exceptional CEOs should get properly exceptional pay. They deserve to earn drastically more than the average worker.
The common Redditor railing against CEO pay, looks at a Tim Cook and thinks they can maybe do what Cook does (he just sits in his chair in a big office while other people do all the work, dur dur dur), or what Nadella does, or a random S&P 500 CEO does. In reality they can barely do their own basic job, much less one ten tiers above them. The average Redditor is further away from being able to do Tim Cook's job than they are being able to do the job of Lebron James. The issue is the average person doesn't know anything about what a CEO does at all, they're entirely ignorant of it. However they can watch Lebron James play basketball and immediately understand they can't do anything like what James can do, because they get the physical visual display immediately, meanwhile they know zip about the job of a CEO at a big company. As usual the issue is extreme ignorance and mediocre education.
What we choose to value as society is entirely subjective. While supply and demand influence the change in the mid point of the bid/ask spread - it doesn’t set the absolute clearing price.
Yes. But now take CEOs and their pay and map it to company performance and stock performance. Are they skilled at bringing out the best in their company, or squeezing staff wages more and more?
We should remember that CEO pay is often equity linked, and thus can vary. Not sure if workers want large portions of pay equity linked. I remember I was once in discussion with a hedge fund for a job and they offerred a sliding scale of pay that was cash vs equity. The more equity I opted for, the greater the pay, since of course there was risk involved.
There are two determinants of your pay. One is supply and demand, and the other is how much could your potential replacement screw things up. For most workers the supply/demand is the only part that matters because if you are a line worker, you don't really have the potential to do much damage if you screw up. So if Ford needs to replace a competent line worker, their potential bad replacement won't be able to cost the company much even in the worst case, so this does not grant the worker any leverage.
CEOs are much different. A bad CEO can cost a large company 10s of billions in stock valuation. If you have a decent CEO, and you fire and replace him with a poor replacement, the damage to the company will be tremendous, so the board won't want to risk it. This gives good CEOs the leverage to demand massive compensation. A CEO can basically hold the company hostage by saying "I want a $10 million raise this year, and if I don't get it I'll quit. Have fun rolling the dice with my replacement!" (Though they would never actually say it that way) And the company will basically have to choose to pay an extra $10 million or roll the dice on potentially losing billions. This is why they almost always pay CEOs a massive amount.
Because the board and the investors don't want just any MBA to be their CEO: they want a person with a record of success in leading organizations (or at least collaborating closely with such a leader).
“Supply and demand” is a very limited special case of a broader principal, which is that pay reflects power. CEO’s power and control over their own pay has increased, and the power of regular workers has decreased. There are a myriad of reasons for this but it’s certainly deliberate.
During the same time, the US automakers worldwide market share shrunk from 30% to about 10%.
Because the number 1 quality that you want in a CEO is that he has experience being CEO, and there aren't that many openings for you to get in on it, and the ones that are are given to people who's been CEO before.
There is no academic training to be a good CEO. They are not easily replaceable. If they were, board members wouldn’t bother offering such high pay. Shareholders don’t appreciate wasting money.
Is that an apples to apples comparison? Is the mean inflation-adjusted market cap of all the companies in both their 1978 dataset and 2021 dataset the same?
It's actually hard to find people who will reliably break unions, and generally do whatever it takes to de-prioritize line workers and eliminate "cost centers" - while also showing pure allegiance to the board without defecting.
That's the entire process of creating the professional corporate managerial class - you have reliably shown that you care more about the financial success of the company, and yourself, than you care for your employees and coworkers.
I mean how many movies and characters have we made that are precisely calling out this exact behavior:
Mr "Coffee is for closers" Blake
Richard Chesler (Fight Club boss)
Like...we've been roasting this precise kind of corporate myopic psychopathic forever as what precisely not to be yet it's like an entire generation used them as pathfinders
Are you being rhetorical, or are you actually positing that CEO pay is driven purely by supply and demand?
> Why has the supply of CEOs not kept up with the demand for them?
Why would it?
What if CEOs were underpaid in 1978?
"Obviously, CEOs should be the highest-paid person in an enterprise"
Hold on there chap! How is this obvious?
It's obviously wrong. NBA teams are a good counter-example. Nobody talks about the team's president/CEO/etc when prognosticating which team will be the best.
For a fun thought experiment:
If the CEO go on strike and don't come to work for a month, how many cars will not be built, and how money will the company lose?
If the union factory workers go on strike and don't come to work for a month, how many cars will not be built, and how much money will the company lose?
Therefore, who is actually more important to the earnings and success of the company?
They have the highest accountability.
I would have thought the owner would be the highest paid person in an enterprise.
So much for that whole capitalism thing.
they are at the top of the hierarchy and the top dog eats first
There is an equation with an equilibrium:
CEO's pay rate = (some multiplier) * median salaried worker's pay rate
CEO's pay rate = (some multiplier) * minimum salaried worker's pay rate
We've been conditioned to think it's not fair somehow, but the discrepancy is just....engorgingly terrible. I'm not arguing for how this metric would be enforced, only that it would be a good one to have. Especially in a time when greed is the lowest common denominator in the race to the bottom for some of these large corporations.
It wouldn't fix the stockholder "value" chase, but at least it would shore up one part of the system weak to corruption.
It's also been suggested that Congressional salaries be a fixed multiple of minimum wage, and for similar reasons.
Honestly I think that would probably fix things a lot faster.
IMO an equation like that would be fine as long as you made it possible for CEOs of larger companies to make more money than CEOs of small and medium sized companies.
There’s a job market for C-Suite employees (whether we care to admit it or not). At a certain point you won’t get qualified candidates if you can’t reward them enough, same as engineers or any other role.
The answer for how much CEOs should be paid is the amount of money you would need to pay to employ the most optimal person to run the company. Figuring out what that number is is difficult.
The problem with this is that the CEO of Walmart is a much more important job than the CEO of McKinsey but under this formula they would get paid a fraction of the amount, no matter how well they did for Walmart workers.
The end result of this situation would probably be a mad dash to automate away any blue collar work, which may not be such a great thing.
It’s a tough problem.
I would love it if my brokerage would show me that multiplier for the companies I invest in.
What about CEO pay * Widgets shipped?
I always think "I can clock out at 5pm" or "If I screw up it'll only cost me my job and not 1,000 people their jobs"
C levels deal with stuff I am not interested in and the while the pay is appealing the added life complexity is not. Thus I W2 while seeing my kids 90+ hours a week.
> “Obviously, CEOs should be the highest-paid person in an enterprise, but then the question is exactly just how much higher than everyone else,” Josh Bivens, chief economist at EPI, told NPR.
Are there any examples where this isn’t true?
I know someone who works as an engineer cleaning up nuclear waste. The workers who do the job he engineers are paid more than him. He is ok with that but did pass the comment that it’s an unusual situation.
The football coach is often the highest paid employee at the university. I wouldn’t be surprised if many rockstar doctors made more than some of their hospital CEOs.
I’d imagine Linus Sebastian (of YouTube Linus Tech Tips fame) is taking home more money than the recently appointed CEO of the Linus Media Group. But that’s also a weird situation because he basically hired the CEO to free himself up to do the parts of the job he likes.
He said someone offered to buy the company for $60M cash I think it was? Which is astounding.
"Of course they should be paid more, cause they are."
I think NPR does a lot of damage not questioning assumptions like this. Or, often times, putting them out there themselves.
In banks and financial companies it's relatively common that some rock star trader or quant that has an exceptionally good year might make more than the CEO.
People get really fixated on CEO pay. Its only of symbolic importance.
Google says: 167,000 GM employees
Mary Barra salary: $29M
Distribute that salary across the whole workforce: $174 per employee
They should really be talking about it in terms of inflation or profit margin. GM profit for 2022 was $21B
I always see people show this equation and it never made sense to me.
No one is saying the CEO is taking money the employees would have otherwise earned. When you divide it out like that of course its a pittance per employee.
The statement is about the relative scale of the CEO pay to one employee. I don't care about the difference applied to all employees.
An absurd parody I always imagine: John is 7ft tall. His group of 6 other other friends are only 6ft tall. Wow John is really tall! Nah, if you distribute his tallness between his friends they would only gain 2 inches! That has nothing to do with John being 12inches taller than any one of them.
> Mary Barra salary: $29M
$2 million, actually. The $29 million is total compensation; mostly stock awards.
This is a super bizarre argument.
I suppose I should be paid 167,000 more per year as a software engineer at GM because it's only 1 dollar per employee?
I'm surprised unions don't throw their weight around more via equity ownership in the company. Controlling the company directly is really the endgame move, once they control a majority stake, they're literally just negotiating with themselves for their labor contracts.
Even better, if they're managing their pensions via investment houses, why not just build their own investment house and leverage their negotiating position that way?
I always thought the same. Bargaining for some minimum amount of cash is important (food on the table, gas in the car, etc.).
But beyond that, meaningful equity in the hands of labor should surely be the goal — it aligns interest in a way that cash can’t.
If they could afford that they wouldn’t need jobs. They’d need to hire a bunch of new workers.
It would be interesting to see what happened when the shoe was on the other foot.
US unions are notoriously anticorporate, they generally despise the idea of stock based compensation.
I thought I read that at Japanese companies the CEO doesn't make 300 times what the workers make. Maybe the CEO made 10 times at most?
Why should the CEO be the highest paid person in an enterprise?
Why is that obvious? This foregone conclusion stuff is just notes cribbed from the aristocracy. You're not aristocrats, you're citizens.
...Akio Toyoda, was paid ¥999 million ($6.9 million) last fiscal year...
"Owing to culture or corporate structure, the salaries of American executives and foreign executives in Japan have historically been much higher,” a Toyota spokesperson said Friday. "We’re aware of the gap and we’re working to fix it.”
Nissan, which has just shuffled its leadership, also published salaries Friday, showing that former Chief Operation Officer Ashwani Gupta was paid ¥726 million last fiscal year. CEO Makoto Uchida made ¥673 million.
Honda said last week that its CEO Toshihiro Mibe was paid ¥348 million and Chairman Seiji Kuraishi got ¥138 million.
I'm not sure why it's obvious that the CEO should be the highest paid? Why should everybody's boss make more than them? I know that isn't the case for many line managers of highly-paid programmers, for example, and I assume the same is true of other similar professions, at least sometimes.
Wages are theoretically a market, and probably it's often easier to replace a skilled manager/business bro than it is a skilled engineer/artist/salesman, and often it's more important to your business.
This is true, but they also tend to get free use of things like homes and cars owned by their company.
I've heard a counter-argument to this before and I'm curious to get other's take on it.
Basically, the story goes that when an individual rises into a significant leadership position at a large enough company that the economic calculations become different. There's still an element of domain expertise, but, for the most part, leadership is leadership wherever you go. This implies that a leader could (potentially) move across sectors and still be effective which results in a wider pool of companies that are interested in competing for this person when contrasted to the ICs. Since some sectors are very profitable they end up "bidding up" quality leadership. The combination of this effect along with the fact there are objectively fewer CEOs than ICs results in a mismatch in salaries.
I think there's an element of truth to this, but probably not to the extent that it justifies the widening pay gaps everywhere?
Though this argument falls apart with evidence that CEOs of big firms do need to deeply understand their companies domain. It may work to a degree, but doesn’t seem to coincide with the most valuable companies.
It’s why when Intel was floundering a few years back they got rid of CEO and brought on a CEO with deep engineering expertise.
Tim Cook is a wizard of supply chain, and in many ways that’s a large part of Apples current success, IMHO. The list goes on.
I’d like to see one of these guys use their magic leadership mojo to lead a platoon of marines into battle. I think he’d find that domain knowledge does, in fact, matter.
To the extent that it truly doesn’t matter, the ceo is a glorified mascot.
"leadership is leadership wherever you go"
Not all CEOs are built the same. Only a minority are able to cross industries successfully, the majority fail miserably. This is because elements that drives success are different between industries. Most of the time, if the CEO is successful one way in one industry, he/she would pursue the same path in another industry, without acknowledging that the second industry is different. What's worse if when they bring their previously successful team. Now you've got a bunch of people doing more the wrong things at the same time.
It's more likely that it is the only role that tends to be in the room when the board is deciding salaries. Turns out it's great to be able to decide how much your own compensation should be.
HR people and accountants also have the same sort of domain independence. Their salary has not particularly risen faster than the average worker salary.
I think the whole thing falls apart when you get to the point of a CEO making so much money, regardless of their performance, that they can just retire after a single year.
So what if I don't get my contract renewed if I have $50 Million, that's more than most people make in their entire lives. See you at the beach!
I think the MBA mantra that specific product expertise is not important: a widget is a widget, died with Jack Welch and Carly Fiorina (her career). Its still around but not nearly as much as 15-20 years ago.
> leadership is leadership
what is leadership other than being stern, following up, driving projects to completion or up/down the org chart as needed (escalation, etc.)?
The average CEO at a top U.S. company was paid $27.8 million in 2021, including stock awards — 399 times as much as the typical worker — according to research published by EPI. From 1978 to 2021, CEO pay grew by 1,460%, adjusted for inflation, versus just 18.1% for the typical worker.
Auto workers aside, this is always a crappy stat that is thrown about.
"Top US companies" is rife with survivorship bias. It's like saying "the CEOs of the most successful companies had their pay increase..." Well yeah, when a company is successful, compensation rises.
Average CEO pay across all companies in the US is like $250,000.
Honestly, if the union wants similar compensation as the CEO, they should have the same pay structure as the CEO - 10% in cash salary and 90% in options or stock. When the car company does really well, they make a ton of money, when it does poorly, they make almost nothing.
But I would guess they wouldn't go for that.
> Well yeah, when a company is successful, compensation rises.
Only for the C-suite apparently.
> When the car company does really well, they make a ton of money, when it does poorly, they make almost nothing.
That’s already how it works. Workers took pay cuts in 2008 to keep the companies going. It worked and now the UAW is asking for the same pay recovery that the C-suite already received.
Just wondering, but are any of the American car companies doing well besides Tesla? Every year they seem more irrelevant, even Texans will buy Japanese pickup trucks these days. I just don’t see them rich enough to pay their CEO or workers 40% raises, and that increase is just going to be temporary as their business become less viable and layoffs or insolvency follows.
Best-selling cars in the US are
• Ford F-series(F-150 being the most popular car in the US)
• Chevy Silverado
• RAM Pickup
• Tesla Model Y
• Toyota Rav4
• Honda CRV
• Toyota Camry
• GMC Sierra
• Nissan Rogue
• Jeep Grand Cherokee
So 6 out of 10 are American.
It’s important to note the workers made huge concessions in 2008 that saved the companies from bankruptcy. Over the years they’ve seen stagnant wage growth, while the execs got solid gold toilets. Even with 40% increase (inevitably spread out over many years), theyd barely be back to where the would have been without the concessions.
Arguably, without the 2008 concessions, they'd be out of a job entirely.
They were in no position to negotiate back then. Plus, there was probably heavy influence from retirees to save the pension fund.
I think they should get it and it should be in out of the money stock options. I don’t understand why so many dinosaur companies restrict equity based comp to the C suite.
It’s generally a bad deal for the worker compared to cash. An assembly line worker has absolutely zero say in the direction of the company, their work will never meaningfully move the needle on stock price, so it makes no sense to tie their income to something they have no control over.
Profit sharing is common, especially amongst employee owned companies. Base wages are behind inflation and cost of living, so of course it needs to catch up to the current macro. Fast food worker minimum wage is now $20/hr in California, for example, and healthcare worker minimum wage will be $25/hr (SB525).
Stock options are complicated. On a factory worker's salary, you probably don't have the money to throw at a financial advisor who will know how to handle those options competently.
This is great. Add this to SAG-AFTRA, Waffle House workers and Starbucks walkouts and we have real movement toward a general strike
If both Wal-Mart and Amazon drivers strike we might actually have a shot a taking a bite out of capital finally.
serious question: say everyone you described gets a 20% raise
what do you think will happen to the cost of goods? what companies do you think are operating with enough margin that they can just afford a 20% rise in their payroll costs?
Value of a cog, gear, or screw is minimal. Value of a complete and functional engine is much greater than the former. A complete and functional automobile’s value is, most times, greater than cogs, gears, or engines.
An employee’s value is relative to a gear, cog, or assembly of them.
A CEO is akin to an engine, infinitely more valuable, a requirement for functionality, is the force behind a company’s goals and provides locomotion.
The automobile itself is the company.
While an auto may function without gears and assemblies the performance will be sub optimal.
An auto functioning without an engine is said to be coasting. A company without a CEO is also coasting.
The value is supposed to be performative. A great CEO provides direct value, direct movement, and is rewarded thus.
Why does LeBron James make so much more than the ball boy and concession stand workers and ushers?
A CEO that delivers alpha deserves a big cut of that. The board exists to hire leaders that can deliver alpha. A good deal fail to. But the ones that do are more than worth their compensation.
And btw you have 0 chance of attracting the kind of CEO that can deliver alpha by offering peanuts. It doesn’t always work out and there’s plenty of snake oil CEOs, but the good and great ones are worth every cent to stock holders.
My understanding is that the CEO's in question are not even remotely comparable to Lebron James's stature in basketball.
It's not unreasonable unless you feel the C-suite are simply parasites trying to leech as much out of the system as it can stand
I don't follow why workers' pay should increase at the same rate as their CEOs' pay. They're subject to entirely different labor markets with accompanying risks, opportunity costs, supply, demand, cost of replacement, etc.
"Should" is a loaded word here. Market equilibrium is not always the best thing for society as a whole, morally or practically.
Imagine a FAANG software union asking for 40% more pay for devs, to match the CEOs'.
I got an average 20% annual TC increase every year of the decade I worked at a FAANG, so 40% over 4 years would be well below average.
I’m assuming auto workers don’t make 400k a year already.
Hard to argue against.
I hope they succeed.
CEOs are often overpaid by a lot. If I had as regular access to the books and the board of directors as C-levels do, I bet I could be paid a lot more too.
IDK about the current guy, but the CEOs who moved production to Mexico will be seen as deserving every penny.
On a per-unit cost, what’s labor vs CEO?
Why not have a law that C-suite compensation can only increase as much percentage as the lowest increase in the company?
imagine a line worker comparing themselves to a ceo. tim gurner is right the workers really are becoming arrogant
The word you're looking for is "uppity." "Arrogant" is the CEO assuming he's worth hundreds of times more than a different man.
How about this compromise: cut the CEO's pay by 40% and give an 80% raise to the workers.
her pay was $29m
40% is $11.6m
there’s 160,000 employees
$72.50 a year per employee
a $1/hr raise for a full time employee is $2,080/year
they makes $17/hr and UPS makes $21/hr on the low end part time wise
lots of employees want at least $8k/yr raise ($4/hr on the low)
a bit different from $72.50
I have to wonder. What percent of Tesla's success is attributable to not having legacy union baggage. Unions are the tech debt of the manufacturing world.
It starts with a good idea, but if you let it fester, then it quickly becomes more of a drag than a productive addition to your organization.
Unions don’t serve the company. They serve the workers. The real irony here is that Henry Ford jumpstarted the middle class by increasing pay to match increased productivity. That new middle class then bought his cars. A company that doesn’t serve workers and thus society has no right to exist.
It’s a balance. Tesla employees are not having a good time, I can tell you from first hand experience. You’ll make reasonable money but it’s not really a life worth living with 12 hour days and extreme stress. Atleast the options made me rich so maybe it was worth it?
I remember getting downvoted then flagged for making a reasonable argument against a bunch of employees from Tesla unionising.
While its not exactly a vindication, I feel super vindicated right now and I'm not gonna be reasonable this time.
These companies have no way out, they are going to die! All these people will lose their livelihood and worse their options to monetise their skillset/experience will be next to zero. Is this your utopia?!
I've been researching Ford for a while, they have so much debt and an extremely small margin for error for the EV transition. It was gonna be so tight and now their fate is sealed.
I'm not proud of this but a part of me find a bit of joy in what comes next. There is this Thanos side of me that feels like a grave injustice have been done here. These people have no right to have this much power over a company.
You really think a CEO isn't worth 300-400x more than a line worker? Honestly I can't fathom that level of ignorance/cognitive-dissonance.
Replace CEO with any sort of leadership role in any kind of organisation/entity with skin in the game (where outcomes can hurt). Whether if its football coaches, generals, head of state etc.
I know nobody (sane) disputes the difference between a c-suite employee vs a line worker but what I'm talking about is the exponential nature.
These people are barely human. Imagine the stakes, the leverage, the consequences and the sheer amount of context you need. Being in the top percentile of IQ, EQ, competence, industriousness etc are just tablestakes. You need to be ruthless while at the same time have an immense capacity for empathy. You need to be extremely conscientious/industrious while at the same time having a large reservoir of creativity. Its like the infinity stones, you can't just be a galaxy brain or just have the gift of the gab or be a psycopath. You need it all and more while competing against people just like you for rarified roles.
To top it off, all of this just gets you into the ring, you also need to actually win and win consistently over period of time. Usually this requires sacrificing your entire life. Btw this where the barely human part comes in, these people thrive on this. All these CEOs have enough money to retire on a beautiful ranch or oceanfront mansion, instead they work 70 hour weeks.
And you think these people are somewhat similar to the guy who screws in car parts? You think society should value these people in somewhat the same realm? like a linear nature (50% or 300% more).
This kind of thinking is what leads to the end of civilisations. These people should be revered. We should be grateful.
I still can't accept there are people in the world who think its somewhat similar. This is not an IQ thing, its not even a being well read thing.. This is common sense.
We all have met people in our lives where we go "oh there are level to this game", like freaks of nature.
How can you not think its the same for you know, leading a multi billion dollar public corporation with hundreds of thousands of employees.. Its mind boggling. How can people no see the asymmetry!
Some executives are as you say. In general, those companies which are lead by executives like that are leaders and produce high quality and innovative products that people love.
But many execs are not. They work just as obsessively as the first type, but only to increase their own power inside of the organization, at the expense of the organization's cohesion, trust, productivity, and quality. They live in a bubble, totally disconnected from the organization's purpose. They make strategic mistakes over and over again. They fail to truly understand why even a single dollar of revenue happens; instead they take it as a given that the money is coming in and only think of ways their unit can siphon off more of it, at the expense of all the others.
If just one of these type 2's enters your organization, you can typically get by, as long as you recognize them quickly enough. If even a small handful enter your C-suite, they will metastasize, cause your type 1's to leave, and put your org on a death spiral.
Many execs are of the second type. You can tell: if you use a product or service, and it sucks, that's probably what's going on at the top.
Yes the CEO should make more, but where do you get off that a single individual can possibly do 300-400x more work than another individual. It is sheer absurdity of an opinion to hold.
In a civilized society I would say maxing out the top paid employee of a company to 20-30x of the average of the salaries of the bottom half of all salaries in the company is what should be done. Anything more than that creates a system of perverse incentives to take action that is against the greater good of the community.
They are going for at least relative parity if not absolute parity.
Well, if interest rates remain high, perhaps CEO pay will go down.
The only person losing out is going to be the consumer. What's to stop executives at Ford, GM and Stellantis from saying "sure, 40% pay increases, no problem" and then just passing it along to consumers one way or another?
There isn't enough margin in the R&D + logistics of producing cars as is.
Ford's stock is up 25% in 5 years, vastly underperforming the index
GM stock is -5.6% over 5 years
Stellantis stock is +3.55% over 5 years.
Where is the argument that the greedy capitalist meanies at the top are doing nothing but buybacks with the millions in profits inflation the stock?
“and then just passing it along to consumers one way or another?”
The consumer will buy a car from a non-union automaker that charges less.
Ford jumpstarted the middle class by increasing compensation to a level that created more customers. This is consistent with the idea that value is created.
This is great, I hope they get it. The wave of unionization in this country is a good thing over the long term.
Robot makers and overseas workers are all in supporting this strike.
40%? I sincerely wish them the best of luck and I hope they get what is their due but this is probably good news for India, Mexico and China.
If it was that easy it would’ve happened already. And software engineers jobs would have moved first due to savings and low effort and low infrastructure changes required.
So what, nothing prohibits the US and Europe from raising tariffs on industrial products.
The pendulum of globalization is bound to swing backwards for a multitude of reasons.
China has been averaging a 9% wage increase yoy or about 41% per 4 years. This wouldn't be news in China instead it would be the average case.
It's interesting to see workgroups that are harder to outsource, and the kind of contract renewals they are getting. Like airline pilots, for example...and not just forward pay increases, but retroactive pay raises for 2+ years as a lump sum, and many other perks and changes to work rules, higher reimbursement for various things, etc.
US market car manufacturing isn't in India/China because of NAFTA. And because cars are big and heavy, of course.
Whereabouts should we purchase land in Mexico? Needs to be near the new factories that'll go in next year.
Companies and individuals do not make decisions based on posturing or their pet peeves. If a company has not outsourced a plant already for cost savings there are reasons for still keeping that operation in the US.
This kind of logic doesn't help anyone - yes, CEO pay is insane but its that way because of how much risk they take ownership of and shoulder day in day out. If one line worker forgets to tie a wire-harness it's not like the entire company will end up in financial ruin... However, the CEO making serious mistakes can and has cost GM millions.
A failed CEO of a large company almost never ends up bankrupt, and they almost always remain a multi-millionaire. What exactly is the risk they're taking on?
CEOs make mistakes all the time and often face few consequences.
We should all be lucky enough to have the chance to earn in a few months what we'd normally make in a lifetime. I'll gladly accept the extra risk that goes with that.
Do they take ownership though? That hasn't been that way in a while.
Used to be the best warrior had skin in the game. We have them resources so when the lions came or the boars got into the crops, they were ready to kick some ass, even if the rest of us were undernourished due to a drought.
Now they just "take full responsibility" where that just means they have to announce that something dumb happened on camera. Truly a gruesome fate. So brave.
Yeah but these guys typically fail upwards such that they are immune to failure, and take almost no personal risk at all.
> because of how much risk they take ownership of and shoulder day in day out
What? The CEO of any substantial company is going to have a golden parachute in their contract. Literally the opposite of putting everything on the line, just merely "Will only make X, not 10X, where X may well be more than median lifetime earnings, even if the company completely collapses."
> CEO making serious mistakes can and has cost GM millions
So despite GM paying the CEO millions, they couldn’t prevent him from making mistakes?
Are we supposed to pretend that most CEOs don't have an entire fleet of people at their disposal to ensure that they aren't making incredibly boneheaded decisions?
That's why the pay rates are different, but that doesn't explain why the pay rates should increase by different percentages
I totally agree that CEO pay is out of control for the most part, but I doubt the companies can really afford to give such a huge raise to thousands of employees. I think in the 1950's US, the average CEO's salary was "only" around 5-10x that of the average workers rates. This meant while CEO's were wealthy, they weren't Uber-wealthy like they are today with 100x salaries vs. average worker pay.
Next year’s headline: Auto Makers Hike Prices 40%, Leaving Buyers Stranded
Amazing how the people who are so "concerned" that raising working class wages will result in higher prices never seem to consider that outsize executive compensation, massive stock buybacks, etc are responsible for higher prices. Almost like they aren't concerned with the prices at all!
Buyers are already stranded. I should know, my car got totaled a few months back and a 1:1 replacement with current model year was about $15k more than my last one. Worse, the value of my totaled car was only $8k less than the original sticker.
The car market is extremely ugly right now.
They can't do that, because there are plenty of other car makers including from Japan, Germany, etc. This is why competition is good.
Next year's other headline: More industries seeing more interest in unionizing.
Does it work the other way round?
Settle in for a wild propaganda-filled fall season.
Between UAW Strike, SWG Strike, barely avoided UPS Strike, and probably a few I'm leaving out, we're going to be inundated with half truths, misdirection, selective statistics and even the occasional outright lie.
UAW opening demand isn't just a 40% pay hike - but also a four day workweek (when combined is ~70% increase in pay). Nobody expects for UAW to get everything they demand (that's not how negotiations work of course) but still, it's a particularly unreasonable starting position and is likely demonstrating just how far apart both parties are.
It's become a sort of meme to bag on C-Suite salaries - with a lot of folks fundamentally believing C-Suiters don't earn their pay or at the very least don't earn the extreme pay gap between them an your average line worker.
Anyone thinking a C-Suiter clocks out at 5pm and doesn't work after hours has no experience in the C-Suite (or even upper management for the matter). There isn't really a such thing as "off hours" for these folks on average. Correspondingly, decisions made by your C-Suite can earn a company huge returns, or doom the company and all of it's employees and stake holders.
Comparing C-Suite compensation, pay scale, growth rate and disparity from line workers is disingenuous at best. They cannot be compared, nor should they.
> Comparing C-Suite compensation, pay scale, growth rate and disparity from line workers is disingenuous at best. They cannot be compared, nor should they.
Why? Why is it that CEO pay reflects company performance but not the line workers? It seems incoherent. How does the collective performance of line workers, which we can predict somewhat from salary, not impact company performance? Where did this idea that only in upper management does salary correspond to company performance? What research was done?
Aside from the rare company built by the CEO wholly or largely, CEOs just seem to come from wealthy families, are tall handsome men, and have all the right connections. These are not brilliant geniuses. Being a c-suite executive is not a meritocratic thing most of the time, it’s an inherited privilege.
Compensation is not a function of their performance, it’s a function of their ability to hold their businesses hostage and threaten to tank their companies unless they’re paid high salaries. Rotating out the c-suite will at least temporarily tank company profits. It’s about power not merit. So why uh, doesn’t the union do the same thing and also hold the business hostage? 40% is not wild at all, it’s a drop in the bucket for shareholders because salaries are so low to begin with.
Jeff bezos has something to say about the 5pm thing :
"By 5 p.m., I'm like, 'I can't think about that today. Let's try this again tomorrow at 10 a.m,'" he told the Economic Club of Washington, DC.
A bad SRE team can destroy your company. Yet, even at the best places, you’re lucky if you get a small per diem when you’re on-call.
I’m not saying SREs are poorly paid, but they often are keeping entire companies afloat, and their pay is nowhere near that of the C-Suite.
If the entire SRE team quit / went on strike, there is a non-zero chance the next incident would utterly break the company.
If the entire C-Suite quit, uh… what exactly would happen? People would continue doing what they had already been doing?
Executives are overpaid. Period.
Defending the excessive remuneration for C-suite inhabitants by saying they're never off work falls flat when you realise there are many other professions where this is the case. Whether this be a veterinarian who gets called out at night, a farmer who stays up all night because one of his cows is about to give birth, a mechanic on board a fishing boat with the responsibility for keeping the thing running or any of the other professions where responsibility is combined with unpredictable and/or uncontrollable event timing.
"Yes, but the C-suite is responsible for $zillions"...
Are they personally responsible? If they fail in their job do they get to reimburse the investors for money they lost? Hardly, they tend to get a golden handshake and move on to another company whereas that vet, the farmer or the mechanic tend to be punished for failure in some way - by loosing their accreditation, livestock or livelihood.
C-suite remuneration has far outgrown its justification.
Why should they not be compared? Why should it not be discussed whether an hour of a systems engineer's life is worth far less than an hour of a CFO's life? What great sacrifice does the CFO make which the farmer does not to explain the disparity in remuneration? An hour in a life is an hour in a life no matter your profession, you won't get it back when it is gone.
I’ve worked with “c-suiters” and in an auto parts factory. In no instance did the former work harder than the latter and in some instances the “c-suiters” were far below a factory worker in terms of ability and intelligence. I have, however, never met an auto worker that was born into a rich or well-connected family, which seems to be the primary differentiator between the two groups.
>it's a particularly unreasonable starting position and is likely demonstrating just how far apart both parties are.
Their demands are only unreasonable if they lose. This is a strike. It's fight, not a discussion. The goal is to give the company no choice but to give in. The strikers are under no obligation to be fair. They can make whatever demands they want. They don't have to give an inch if they don't want to.
>They cannot be compared, nor should they.
Comparing them is pretty simple, actually.
You have: 21 million USD / year
You want: (28 USD / hour) * (40 hours / week)
The point isn’t to compare CEO and factory worker salaries dollar for dollar. The point is to compare growth rates of both over years. If the company grows 3x, CEO salary grows 10x, and worker salary grows not at all, how does that make sense to you?
Of course they can and should be compared. They’re human beings, and I don’t care how much additional “value” you brought to the company (you know that’s BS they tell to justify being overpaid) or how many late hours you worked, in my eyes you’re not deserving to earn 1000x more money than your ordinary workers.
>Anyone thinking a C-Suiter clocks out at 5pm and doesn't work after hours has no experience in the C-Suite (or even upper management for the matter). There isn't really a such thing as "off hours" for these folks on average. Correspondingly, decisions made by your C-Suite can earn a company huge returns, or doom the company and all of it's employees and stake holders.
you're ignoring the contributions of people in the company that make the C-suites job possible. Why should the C-suite be entitled to this just because they work long hours?
I work long hours. I've had jobs - salaried, mind you - where I worked past 5 PM, well into the evening, and no stock options are not the same. At any rate, one of those jobs the stock options weren't worth anything anyway.
CEOs get golden parachutes and gobs of money and for what all, exactly? What do they actually contribute?
I'd love for there to be an experiment where you take a senior operations person, for instance, and put them in the CEO role, and see, if given the same support and onboarding, if they can't make good or possibly better decisions than the someone with "CEO experience"
I've met alot of CEOs, and they don't tend to be very in touch with their workforce, they simply see what they want to see, most of the time, few exceptions.
For everything besides growth rate I can see arguing that they can't be compared—I don't agree, but I can understand where you're coming from—but why should a CEO's salary go up dramatically faster as a percentage than line workers'? Is the CEO somehow working 40% more hours than they did last year? Working 40% harder? What is that 40% tied to that line worker salaries shouldn't be tied to?
> Anyone thinking a C-Suiter clocks out at 5pm and doesn't work after hours has no experience in the C-Suite
That's not the standard, though. The criteria is cost above replacement, and quite frankly modern executives show up extremely mediocre on that measure. Companies flip executives all the time, and it almost never results in significant changes to revenue (and when it does, it's down as often as up). In fact there's almost no measurable meritocracy among salaried executives.
The reason executive salaries got so high is simply that the class the makes up the C-suite residents (the major investors and board members) got jealous that the outgoing founders of these companies got so rich, and wanted to play in the same sandbox. It's only fair, right?
But that's exactly the moral argument UAW is making: these companies got fabulously wealthy over recent decades owing to GDP growth and stock market booms, and they should share that wealth with their employees and not just keep it for the owners. The only difference is in how you define "employee".
I'm not sure how you hope coming out justifying the ridiculous state of CEO pay is going to go for you, but the problem is the incentives are not aligned.
CEOs make big decisions... but they get paid more money than they'll ever need even if they do doom the company. In fact, many CEOs against union workers are torching their own companies to avoid a fair deal which would cost their businesses less.
The only way CEOs would justify their high pay is if we were able to hold them responsible for their company's misdeeds and throw them in jail. But since Sundar Pichai is still a free man, we clearly definitely don't do that either.
CEO is a completely zero-risk, massive return job that you get largely for knowing the right people and having a deeply flawed moral fiber that enables you to sleep at night after doing unusually cruel things to everyone else. That's really all there is to it.
So those with the least leverage to earn more just so happen to deserve to be paid just as little as they are, and those who have severely disproportionate influence on their earnings just happen to be making exactly what they deserve?
Trying to justify exorbitant C-suite salaries because they often work hard (in conditions significantly easing working hard due to having a litany of assistants to handle boring stuff, private jets, drivers, Michelin starred meals with regulators, lawyers an executives counting as "work") is silly when you look at how hard so many working class people work. But I know you know this, so it seems you're just blaming them for being born poor, unconnected and not having the "big business brain" that all C-suite executives must have.
4 day work week has been successful in most places. As a world we should move towards it.
Other benefit: less environmental impact, more time for people to improve themselves and their mental health, etc.