I think the best solution is to find ways to flatten the compensation pyramid. I do not necessarily believe that CEOs are overpaid just by looking at absolute figures. What I would like to see is a reduction in the CEO to employee compensation ratio.
I do not believe in caps. If at all, its the ratio that should be capped so that no one group pulls away, or another left behind.
BurtB, there is more than one way of looking at the current situation, whether or not you decide to listen to the AFL-CIO. I can tell that right now you're probably employed because you'd have a little different perspective if you weren't. You also need to understand that there are various reasons some of us didn't happen to be employed back in '08 or whenever when in this pathetic game of musical chairs "the music stopped" and anyone who wasn't employed had to start competing with imported labor and their miniscule wages in order to become employed. See you're still "lucky enough" (not really, I'll get to that in a moment) to think of your employment in terms of you providing value to the corporation you work for in excess of that amount. There are a lot of us who USED to think in those terms before our bosses got it into their collective heads that in all likelihood you really AREN'T worth THAT much more than the $2 or $3 or $4 an hour that they'd have to pay to employ someone offshore to replace you, or the minimum wage they'd have to pay to bring someone over here on an H1B visa. (Or maybe you work for a defense contractor where their numbers aren't all that important, and/or they may not be able to employ a non-citizen for security reasons.) Now if we get to the point about "what value does the CEO provide for his salary" I presume you'd be just FINE with him replacing you tomorrow and adding a good portion of the "money he saved the corporation" to HIS compensation? Oh you're not? Well then how is he SUPPOSED to be compensated again? Hmmm...
As to why you're not really "lucky" to still be employed, what I'm saying is you'll be absolutely SHOCKED how long you'll STAY that way if you're on the street without work for more than something like three months or so, they'll put your name on the list with all the other "unemployables". THEN you'll understand what the rest of us are so doggone upset about! Oh yeah, now what is the TRUE ratio of a CEO's salary to that of his average offshore employee? I haven't seen anyone even TRY to calculate that one!
People seem to forget that The question is not "Fairness" as the AFL/CIO has would have you believe.
That there are CEO's that get pay raises when their company loses money is the real problem, not that they make more money than another employee of the company .
The Question should be "does this person contribute to the profitability of the company".
Kobe Bryant makes 61Mil, not because someone wants to stick it to the hot dog vendor, but because Kobe puts people in the seats by helping the team win.
When he stops contributing to the success of the team, he will no longer recieve his huge salary.
Engineers need to rember that their salary is a function of how much money they allow the company to make or save. Does the job need to be done? Can they get someone cheaper to do it? How much is your experience really worth? It is up to The engineer to make the case that his knowledge, skill and experience is worth more than an recent Engineering grad, an H1-b visa, or next illegal immigrant.
Rather than crony capitalism, as the President of the AFL/CIO (whose salary and benefits are stated as
who knows what under the table trips and meals he actually gets)
the salary of a CEO should be directly tied to profit he generates for the share holders.
Thank you @otta...the difference between Switzerland US is smaller than I thought...the problmem with the Swiss porposal was that it was going too far...12:1 ration is not realistic...I would be happy with 30:1 which will compress the problem in US by an order of magnitude...perhaps we coudl poll EE Times readers whah they think the fair ration is! Kris
Ratio to average salary in Switzerland is 148 and in US is 354. Data are after AFL-CIO. Group difficult to suspect of much sympathy for CEO's. Also, average pay of Swiss CEO was $7.4 mln and US CEO $12.3 . Yes, it is difference but much lower than someone may expect. I mean Swiss voters have almost the same reason as (potential) american voters, to cap CEO compensations.
Personally I don't see how (especially when implemented as rule of OECD) resonable cap of CEO salary (as multiplication of average employee salary) can negatively impact economy! Actually I think it would be positive impact. CEO would have personal interest in raising employes salaries but in same time would be responsible to shareholders and have to guarantee company growth. That is exactly what society expect from that group.
Currently main problems are lack of decency, cult of celebrities and money grab and run mentality.
There would be many ways to go around this rule (for engineering companies for example CEO can contract out all lower paid jobs) but still it should be improvement compare to current status quo.
This could be THE big political challenge of the next several decades, starting with getting support and recognition of the need for reasonable reform of the existing system, since there's no "natural representation" of the middle class (although clearly the Tea Party is far from hostile to them). According to the "political elites" if you're a moderate on the left, the union system is supposed to "provide all the answers to your problems" and if you're not a union member then you're PART of the problem! If you're further to the left then you're an advocate of class warfare and income redistribution and the only possible "reform" to capitalism that's acceptable is to tear it up and start over. If you're a moderate on the right it's almost "politically incorrect" to even bring up the topic that the system is less than fair, if you're further to the right then "reform of the system" probably consists mostly of an agenda to get rid of unions altogether and to radically shrink government regardless of the consequences. And of course it's not at all helpful that the left represents the Tea Party as a social club of racist, homophobic, gun-loving redneck "haters"!
The closest that the political consultants have come to identifying the middle class as a constituency is probably "soccer moms" and that's clearly more than a little off the mark. And economists have for decades considered the measurement of economic "efficiency" nearly as important as profit itself, and historically that was OK because there were always new jobs coming to replace the ones that were lost. They never want to discuss economist David Ricardo's finding that "labor arbitrage" (which we see all the time in the form of offshoring, outsourcing and bringing in immigrants on visas and paying them very low wages) is such a fundamental disturbance to the economic system that it renders most economic models essentially worthless. Yes it's going to be a very long time before any kind of meaningful economic "equlibrium" is established, whether it's imposed by some sort of government decree or by the market itself.
Postscript: It seems there is starting to be some general interest in the topic of artificially low wages among tech workers, see http://www.cnbc.com/id/101312871 in which an analyst actually downgrades Apple and Amazon on "moral and ethical grounds".
Basically if most of the people are working (hard) and over the years a higher and higher percentage of the total wealth of the nation ends up to be possessed by fewer and fewer people then something is wrong, isn't it ? I wouldn't point a finger at somebody particular. It's not an evil club of old men, it's just the "system" itself which makes that happen. Unfortunately the consequences are very unpleasant.