America's best-paid CEOs have the worst-paid employees

I don&#x27;t know how we could through legislation mandate things like banning the US government from doing biz with companies that underpay their workers and enrich their C-Suite handsomely, but I support it.<p>With executive pay being over 500x what the average worker at the company makes, no wonder there&#x27;s effectively 2 Americas - our social contract has been broken. While Japan has its own issues, the social contract between low-wage and high-wage workers has been intact and there&#x27;s a reason they don&#x27;t have some of the issues that we do in terms of class disparity and the long-term ramifications of one class of already privileged individuals making astronomical amounts of money by screwing over everyone else.<p>We also need to ban buybacks, or tax them <i>REALLY</i> heavily - over 100%. Make it wildly unprofitable to do so. Or, I like this idea better: for every $10 million you spend on buybacks, you loose your right as a corporation or an officer of a corporation to lobby local, state, and federal governments in any way for a year.

Would be interesting to see if you could track CEOs by &quot;built &#x2F; grew a company into something more than it was&quot; vs &quot;extracted value for shareholders&quot;.<p>I suppose to shareholders it doesn&#x27;t matter so it doesn&#x27;t get much attention.<p>When I worked for either type executive it was almost immediately clear what type they were by their actions. It was no mystery.

I always wondered if and how things would be different if we had regulations like: &quot;the highest paid job can&#x27;t be more than 10 times the lowest one, including all benefits&quot;, or like &quot;where there is a well defined hierarchy, each upper level can&#x27;t be paid more than +50% than the one that immediately follows&quot;, so that giving a raise to high rank executives would also propagate to other workers thus reducing those huge discrepancies.

Corporations are all internally very corrupt and all the top execs are working to stuff their pockets first, second, and third, to lie the the shareholders fourth, and the employees are so disposable, they are not even worth lying to. CEO pay is so ridiculous because you are asking the wolves to take care of the sheep.<p>Just like we have evolved governmental organizations to be more robust against corruption, we need to do the same with corporations.

I dont care how much people are paid but C levels pay should be affected when cost reductions are being implemented.

&gt;Say a company is worth a billion dollars and has issued a million shares. Each of those shares is worth $1,000 (because $1,000 times one million is $1 billion). The company uses its profits to buy half of those shares, so now the remaining 500,000 shares are worth $2,000 ($2,000 times 500,000 is $1 billion).<p>Why would the company still be worth $1B after the buybacks? The company just spent $500M on buybacks. So the company has $500M fewer dollars in the bank. I assume the company would now be worth $500M less. So the company would be worth only $1B - $500M = $500M. So with 500k shares in existence, the stock price would be unchanged from the beginning: $1k.

The more I interact with the business world, the less affection I feel to the entire concept of public companies. Software companies, in particular, seem like a bad fit for the entire concept.<p>What is a share, and why is valuable? More importantly, why should profits of the business be of any value with regards to stock price? In the world of dividend-paying companies, the connection between profit, dividend, and thus stock price is obvious. But most tech companies don&#x27;t pay dividends. With voting shares, there is value in control over the company&#x27;s direction, and the more successful the company is, the more power you control a share of. But most shareholders don&#x27;t vote, and many companies issue shares that don&#x27;t grant the owner a vote. That leaves the base value of shares as being tied to the fact that you have a claim on whatever assets are left when the company goes bust. But software companies don&#x27;t hold much in the way of resellable assets, and few would shutter their doors before their debts wipe out what little assets the company holds. Maybe you can bet on the company being bought out by either a bigger company or a private interest, but that rarely happens anywhere near the peak of a company&#x27;s market cap.

&gt;Why would CEOs prefer buybacks to dividends? Because CEOs sit on tons of shares. Even if only some of those shares have vested, a CEO who uses this ruse to increase share prices can cash those shares out, borrow against the rest, and count on a big stock grant from shareholders who are grateful for their windfall.<p>If the CEOs sit on tons of shares, the CEOs would receive a large dividend too. So the CEO would benefit from both dividends and stock buybacks. And &quot;shareholders who are grateful for their windfall&quot; would be grateful for both dividends and stock buybacks. And announcing a dividend tends to make the stock go up, as seen when Google announced a dividend earlier this year.<p>So the big distinction the article is trying to make between dividends and buybacks doesn&#x27;t make sense to me.

Yes, CEOs are overpaid, but there is only one per company. There are 100s of useless overpaid directors, VPs, senior managers per F500. Essentially yes men whose job is to brew koolaid all day. They aren&#x27;t talked about as much.

Well, in contrast to other situations, this appears to be a zero-sum game.<p>A company has a certain revenue, which is used to pay employees, invest back into the business, etc. If you pay the CEO an exorbitant amount of money, it means it takes up a larger part of the income, which means you have to pay employees less, invest less, etc.<p>Then these lowest-paid employees need to be supported by social programs, which means we - the taxpayers - are subsidizing the enormous paychecks CEOs are taking home. Corporate socialism.<p>Eat the rich.

And they also probably end up paying a lower effective tax rate.

The argument he makes about buybacks just doesn&#x27;t work. If the money didn&#x27;t go to buybacks it&#x27;d go out in dividends. If there were no way to extract profits from a company and return them to shareholders then the whole investment model doesn&#x27;t work. At the end of the day the owners of the company have the first claim on the profits. If the profits don&#x27;t get paid out in dividends or used in buybacks they don&#x27;t suddenly become the property of the employees. Having said that, yes stock based compensation works to align CEO incentives with share holder incentives and yes share holder short term incentives are to drive down employee wages.<p>Fundamentally I think the bigger issue is the taxation system not only preferencing unearned income, but then also being full of loopholes to mask income entirely. I think you&#x27;d be much better off proposing new rules around what it means to &quot;realize&quot; a capital gain (for example, if your asset is used as collateral, you are realizing it&#x27;s value and it should be taxable). Rather than creating more byzantine rules around who can earn what.

The article provides almost no hard data to back the headline up. They link a report on buy backs, but at least the abstract&#x2F;summary does not provide support for the claim either.<p>Written in a very partisan way, although the description of how stock buy backs create bad incentives for CEOs sounds convincing to me.

It&#x27;s almost as if for the last 35 years, we compensated C-suites using massive stock grants and then plowed all of the value created by labor into equities instead of, you know, paying the people who did the actual work.<p>The good news is, there&#x27;s no precedent for populations at large deciding this is a reason to use violence to displace the ruling classes in drawn-out, society-devastating wars that radically alter global geopolitics. Nope, none at all.<p>By the way, I&#x27;ve just learned about these two countries, Russia and France. You guys heard of these before? Can&#x27;t wait to read more.

Nice to see someone sore about the content flagging this perfectly valid article.

&quot;The billions that Boeing spent on buybacks are billions that Boeing didn&#x27;t spend on airworthiness&quot;<p>and the article suggests that CEOs only do dumb buybacks because they personally profit from the raising stock price.

That&#x27;s cause and effect right there.

There is an enourmous amount of economic value in simplying a complicated task so that it can be completed by an unskilled ie low paid worker.

The author seems to have just realized that fast food workers don&#x27;t make much compared to the CEO of the fast food company.<p>I mean it would be great to see Chipotle&#x27;s restaurant employees grow their wages and benefits in a sustainable way but am I supposed to be surprised they dont have a 401k?

The ideal company has no CEO and no employees, only shareholders and customers. Real companies should be approximations of this ideal.

This entire diatribe about stock buybacks makes 0 sense. It&#x27;s just another way of returning money to shareholders, it&#x27;s exactly the same thing as dividends but gives the shareholder the option to realize their gain. A business <i>only</i> exists for the benefit of its owners, if businesses negatively impacted owners, they would not own shares in the company. If employees want to enjoy the benefit of being owners of companies they can start their own companies or themselves use their income to buy shares in companies. They will quickly realize that starting a business is really fucking hard.<p>Before you mention monopolies, yes I agree and I think what Lina Khan is doing is great and she should be doing more.<p>Also, just because you don&#x27;t understand or disagree with the logic economists use doesn&#x27;t mean they are wrong. Stick to writing bad fiction please.