POLITICS thread: In appreciation of Rob Ford

by **karn** » Sun Mar 16, 2014 16:19:59

93% figure is absurd though referendum was clearly going to pass regardless, but of equal absurdity is state dept's "rejecting" it while pumping monopoly money into the illegal Ukrainian coup regime. Whole thing is yet another imbecilic bungle and international embarrassment, this year's Benghazi or Syria

by **Monkeyboy** » Sun Mar 16, 2014 16:42:49

A few of our Russian students were standing outside a Ukranian student's room today singing the Russian national anthem when I walked by. The Ukranian student just opened the door and gave them the finger. They're all friends. It must be very weird for them to see this stuff play out. The Ukranian student is from Kiev. He said his parents live on the outskirts of town so they haven't had any problems. He said it's all near the main square, though some people are getting beaten up by groups of youth walking around.

by **TenuredVulture** » Sun Mar 16, 2014 16:44:39

Monkeyboy wrote:A few of our Russian students were standing outside a Ukranian student's room today singing the Russian national anthem when I walked by. The Ukranian student just opened the door and gave them the finger. They're all friends. It must be very weird for them to see this stuff play out. The Ukranian student is from Kiev. He said his parents live on the outskirts of town so they haven't had any problems. He said it's all near the main square, though some people are getting beaten up by groups of youth walking around.

My dept. has a Ukranian and a Russian professor. They didn't like each much before all this happened.

by **Bucky** » Mon Mar 17, 2014 07:18:54

by **slugsrbad** » Mon Mar 17, 2014 07:20:02

Yea, but they have to pay a higher tax rate! Except when they don't because of all the loopholes and offsets! Well, maybe the "avg worker" shouldn't have sucked so much and invented Apple and Google.

by **Monkeyboy** » Mon Mar 17, 2014 10:09:15

Bucky wrote:

I don't see how all those job creators are able to do it in Germany and the other places that are kicking our butts.

That's like a Barry Bonds OBP stat, just so out of the realm of the believable that it's hard to fathom.

by **The Crimson Cyclone** » Mon Mar 17, 2014 10:13:13

Bucky wrote:

I'm maybe 1.5:1 at best, would love to have that 145:1 ratio if my employee's salary stayed the same

by **pacino** » Mon Mar 17, 2014 10:31:35

The Crimson Cyclone wrote:
Bucky wrote:

I'm maybe 1.5:1 at best, would love to have that 145:1 ratio if my employee's salary stayed the same

by **sydnor** » Mon Mar 17, 2014 10:46:33

Monkeyboy wrote:
That's like a Barry Bonds OBP stat, just so out of the realm of the believable that it's hard to fathom.

Right, so I checked it, and it's way off. 11 to 1? Are you kidding me?

Two other things from this:

The idea that a CEO works a 40 hour week is just hilarious.
I don't see why we'd want to cap CEO salaries beyond "the optics". And by we, I mean baseball stats fans. We know that the truly special get obscene salaries, why would we want to limit that for the top 100 or so CEOs? Now, should we be like Germany and shoot for a 40K average salary instead of a 34K? Sure.

And that sets aside the whole idea that we could choose to cut a CEO's average salary 5 million bucks. But if we gave that to a CEO's 20K employees, what would be the average change in salary? 250 dollars.
http://www.theglobalist.com/just-facts-ceos-rest-us/

Anyway, I choose to think of this as an economics post, not a politics post, but shame on all of you for not checking a ridiculously non-believable stat.

by **Werthless** » Mon Mar 17, 2014 10:55:46

The figure probably includes options, which have ballooned in value with the stock market rise. It's a believable figure to me if it includes options, as some CEOs have done quite well in the last year by this measure. (The other countries' figures look wrong) It's pretty typical, in a good year, to have the base salary as only a small fraction as total compensation.

Tim Cook, for example, received a $1.4MM base, $2.8MM cash bonus, and $36.4MM in restricted stock grants.

by **sydnor** » Mon Mar 17, 2014 10:58:32

I was more responding to the idea that Japan was 11 to 1 vs. US 47 to 1. I don't view that as particularly likely.

Also, there's this: http://www.politifact.com/truth-o-meter ... has-obscu/

I'm not sure 3 grad students on a paper is a real source.

by **swishnicholson** » Mon Mar 17, 2014 10:59:33

sydnor wrote:
Monkeyboy wrote:
That's like a Barry Bonds OBP stat, just so out of the realm of the believable that it's hard to fathom.

Right, so I checked it, and it's way off. 11 to 1? Are you kidding me?

Two other things from this:

The idea that a CEO works a 40 hour week is just hilarious.
I don't see why we'd want to cap CEO salaries beyond "the optics". And by we, I mean baseball stats fans. We know that the truly special get obscene salaries, why would we want to limit that for the top 100 or so CEOs? Now, should we be like Germany and shoot for a 40K average salary instead of a 34K? Sure.

And that sets aside the whole idea that we could choose to cut a CEO's average salary 5 million bucks. But if we gave that to a CEO's 20K employees, what would be the average change in salary? 250 dollars.
http://www.theglobalist.com/just-facts-ceos-rest-us/

Anyway, I choose to think of this as an economics post, not a politics post, but shame on all of you for not checking a ridiculously non-believable stat.

sydnor, that link you posted has numbers that vary (and indicates how widely the gap can swing over just a few years, especially in the U.S.) but makes the same point as the chart that was posted.

by **sydnor** » Mon Mar 17, 2014 11:07:07

I thought, swish, that showing that a liberal site also thought the number was wrong and that clearly it's lopsided in other countries would show how silly the chart was. Maybe I should have led with the second link.

Are average workers underpaid? Sure, that wages have stagnated is scandalous. Are CEOs overpaid? Not clear to me at all, especially given how much we root for players like Jimmy Rollins who is guaranteed to make 16 million dollars if not 22 over the next 2 years for pretty crappy production. At the long end of a curve, talent needs to be paid for.

But don't use a shitty chart.

by **Bucky** » Mon Mar 17, 2014 11:15:03

but nobody has proven to me that CEO's are the moneymakers, moreso than the line workers, developers, etc., whom populate a company's workforce. Jimmy Rollins demands a higher salary because he is an undeniable main reason his company derives major revenue.

by **dajafi** » Mon Mar 17, 2014 11:32:34

sydnor wrote: Are CEOs overpaid? Not clear to me at all, especially given how much we root for players like Jimmy Rollins who is guaranteed to make 16 million dollars if not 22 over the next 2 years for pretty crappy production. At the long end of a curve, talent needs to be paid for.

I don't think it's as easy as asserting one group (ballplayers) or another (corporate executives) are "overpaid." I think it's about the factors that go into how their pay is set.

Jimmy's compensation, justified or not, is market-based and at least dimly reflective of ability. CEO compensation, as I understand it, tends to be set by Boards comprised of members who often have non-market incentives to inflate compensation packages (they might be executives at other firms, etc).

It's not difficult to trace the relationship between compensation and performance in sports; one probably could craft an equation that defines it (inputs would be past performance, experience, relative scarcity of other viable options for the position, etc) and measures the strength of the link. I really doubt one could do the same for corporate executive compensation.

by **Bucky** » Mon Mar 17, 2014 12:02:30

YEAH WHAT DAJAFI SAID

by **TenuredVulture** » Mon Mar 17, 2014 13:22:27

Someone should develop a WAR for CEOs.

by **Werthless** » Mon Mar 17, 2014 13:45:11

It's very easy to argue that CEOs as a whole are overpaid and it offends our sense of fairness. However, it's hard to argue against a chart without an accompanying argument, when people think that the chart IS the argument. This is particularly true when the chart is false.

When you have a market where the decisions of a good CEO can positively impact your company by billions of dollars, but that it's hard to evaluate whether you have a good CEO when they're hired, you're going to get out-sized incentive compensation. Especially when the executive committee's are choosing biasedpeer groups to base their pay. That doesn't explain the disparity, but is merely one of many contributing causes. You might note from your research that the multiplier factor increases when the stock market is up, and contracts when the stock market is down. This is due to weakly structured incentive compensation.

There are 4 ways to assign pay:
1. Market based: decide on the skill/worth of the job, then pick the people to fill it
2. Superstar pricing: the best of the best get a premium
3. Negotiated pricing: once they decide on a person, then negotiate on a price (opposite of 1)
4. Signaling theory: Employers try to avoid mistakes by paying a premium for "known quantities". No one ever got fired for hiring IBM.

CEO pricing is 2-4, when people want to force it into 1. Unskilled labor is 1, when people want it to be 3. As CEO's can get leveraged across larger and larger organizations and make decisions that have a greater impact on the company, their salary should increase (By "should," I mean it makes sense economically, not necessarily morally).

:dh:

by **Werthless** » Mon Mar 17, 2014 14:00:00

BTW, when I was teaching high school economics, this was their favorite topic. They all thought they were going to be rich when they graduated college.

by **TenuredVulture** » Mon Mar 17, 2014 14:09:34

I think when people talk about what people "should" earn, regardless of category, they usually mean something like value added to a company. A commissioned salesperson is easiest to value on this metric, perhaps an associate at a firm that charges clients by the hour is pretty straightforward as well.

Of course, that's not how compensation works. No firm can long survive paying people more than they generate, but evaluating individual contributions to the bottom line is impossible. Then you add supply and demand considerations as well, productivity, and it gets impossibly complicated really quickly.

I do wonder if all superstars are overpaid. Assume the #1 ranked guy commands 100 million, while the #100 ranked guy gets $5 million. Both are outstanding executives. Is #1 really 20 times better than #100? Again, baseball metrics that divide wins/total payroll to evaluate get at this to an extent. Another way superstar pricing raises problems is the assumption that you need to pay 100 million to get the guy. That assumes that there is another company out there willing to pay 99 million, but is that true? I mean, how many Ryan Howards are there in the corporate world?

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