Should salaries be capped?

[ribozyme]

Gee… I thought some of the staunchly conservative people would be attracted to this thread and invoke things such as the Laffer curve, an icon of Reganomics.

 

[consumedconvert]

I know, I’m a bit disappointed myself.

But all joking aside, I do hold the current economic situation as darn near intolerable. Recently a CEO at a major investment firm got canned for poor performance and got an $80 mil bonus. Really, I guess I’m liberal in some ways; but this is not justice, and none dare call it so. The best cop-out we can find is sighing and calling it “the laws of economics.” Tell that to the unemployed.

 

[whatevergirl]

I know, I’m a bit disappointed myself.

But all joking aside, I do hold the current economic situation as darn near intolerable. Recently a CEO at a major investment firm got canned for poor performance and got an $80 mil bonus. Really, I guess I’m liberal in some ways; but this is not justice, and none dare call it so. The best cop-out we can find is sighing and calling it “the laws of economics.” Tell that to the unemployed.

where is this money coming from, I’d like to know? I mean…if you are laying off people, why is a departing CEO getting anything…? With the exception of a severence package, or the ability to liquidate his stock options…where is something to the tune of $80 mill coming from?? Even thriving companies like the one I work for, can fall short of EBIT. They run their profit margins pretty tight…so where is this secret stash coming from?

 

[consumedconvert]

where is this money coming from, I’d like to know? I mean…if you are laying off people, why is a departing CEO getting anything…? With the exception of a severence package, or the ability to liquidate his stock options…where is something to the tune of $80 mill coming from?? Even thriving companies like the one I work for, can fall short of EBIT. They run their profit margins pretty tight…so where is this secret stash coming from?

Yeah, I’m trying to remember the name of the firm, but that’s probably not that important anyway–the story repeats itself. Some shareholders were ticked. Really, that’s not even free-market if the board does something that would be obviously against the will of the owner/shareholders. My friend who used to be employed by the firm (was it Morgan Stanley? Edward Jones? Some UK-sounding name like that) was pretty ticked, too. (Oh, he left of his own free will, btw.)

 

[melensdad]

Seems to me that most people here are espousing and/or practicing class envy. The number of CEOs who make those wild amounts is very very very small. Do they deserve it? I’m not one to judge. As for the athletes making wild amounts of money, why not include actors, musicians, writers, and Oprah? These are people who perform at their peak ability and lead their fields, if not entire industries. No, I don’t want to pay $75 for a ticket to a sports game, or $100 to see a concert, but that is the price that you’ll pay to see many professional events.

If someone falls into that 00.01% of the population and they make those mega-millions salaries then I’m not going to begrudge them their pay.

And I’m not going to play the ‘class warfare’ game that seems to be playing here in this thread, albeit in a mild fashion.

 

[whatevergirl]

No, I don’t have class envy …I think that it is sad that the small percentage that you name is making its money often off the backs of the broken hearted, and down trodden. (lay offs are often part and parcel to these enormous bonuses being paid to departing CEO’s…look at US Air, as a pitiful example) We are not to trample on those less fortunate, and justify it as business as usual. The thread took a turn into talking about athletes, etc…I do agree with you though…why are we so enamored with movie stars, entertainers, and the like, which is the reason they are in high demand…and thus, demand a large salary. (supply and demand even for our entertainers) And school teachers are paid so low in this country, it is kind of a priority check that we as consumers should do. Does it mean that we place a higher importance on entertainment than learning? (I would have to say yes, if you go with the supply and demand theory of economics)

Plus, we are being rather tongue in cheek with many of our comments.

 

[whatevergirl]

I don’t have class envy…I think that it is sad that the small percentage that you name is making its money often off the backs of the broken hearted, and down trodden. (lay offs are often part and parcel to these enormous bonuses being paid to departing CEO’s…look at US Air, as a pitiful example) We are not to trample on those less fortunate, and justify it as business as usual. The thread took a turn into talking about athletes, etc…I do agree with you though…why are we so enamored with movie stars, entertainers, and the like, which is the reason they are in high demand…and thus, demand a large salary. (supply and demand even for our entertainers) And school teachers are paid so low in this country, it is kind of a priority check that we as consumers should do. Does it mean that we place a higher importance on entertainment than learning? (I would have to say yes, if you go with the supply and demand theory of economics)

Plus, we are being rather tongue in cheek with many of our comments.

 

[consumedconvert]

“The [income] of the tp one percent of household in America exeeds the combined wealth that the top-earning one-percent of households in America exceeds the combined wealth of the bottom ninety-five percent. A snapshot look at 1998 shows that the top-earning one percent had as much income as the one hundred million Americans with the lowest earnings; and while the corporate exeutives’ pay in 1980 was a “mere” forty-two times that of the average productive worker, by 1998 the figure grew to 419 times!”

IHS Press Directors, in the introduction to Hillaire Belloc’s An Essay on the Restoration of Property (Norfolk: IHS Press, 2002), 14-15.

Note that I’m not saying I should be paid more! Happily, the owner/boss of the tiny company I work for already pays me enough as it is! And I’m pretty sure he (a good Catholic) doesn’t make more than say, twelve times what I make (just kidding).

This isn’t about “class envy”; it’s about limiting the hording of wealth and recognizing “the universal destination of goods” (in the words of Centesimus Annus, JPII).

 

[Ridgerunner]

It seems to me the real question is whether the person is worth that to the enterprise. It seems to me, for instance, that Steve Jobs is almost certainly worth it to Apple. What would Microsoft have been without Bill Gates? Walmart without Sam Walton? Tyson Foods without Don Tyson? Some entrepreneurs have created jobs, technologies and worthwhile investments. Some CEOs have brought moribund companies back, seemingly, from the grave.

What they get for doing it is really secondary, if they benefit others sufficiently, and what they get really isn’t important in the grand scheme of things.

What is troubling, of course, are those cases in which some CEO gets some staggering sum of money and does the enterprise no good, or even harms it. In such cases, it seems to me, the problem is in disclosure. If you read the prospectus or annual report of most companies, it is simply the most turgid, unintelligible stuff that can be imagined. One could imagine a law requiring full and simple disclosure. "Since Sam became CEO and X, Y and Z joined the board, the company has not fared well. Stockholders have lost value and employees have lost jobs. Sam proposes that he be rehired next year and paid $80 million for this. The board wants to be re-elected, and would like to each get $250,000 and box seats to the Superbowl for serving. Shall we do it or fire them? Whaddya say?

I have a feeling those proxies everybody throws away would come in like a blizzard, with “HELL NO! FIRE THEM ALL!” written all over them. A big part of the problem is that those in control also control the dissemination of information or make it so unintelligible that nobody who has a stake in the enterprise really comprehends what’s going on.

 

[ribozyme]

Seems to me that most people here are espousing and/or practicing class envy. The number of CEOs who make those wild amounts is very very very small. Do they deserve it? I’m not one to judge. As for the athletes making wild amounts of money, why not include actors, musicians, writers, and Oprah? These are people who perform at their peak ability and lead their fields, if not entire industries. No, I don’t want to pay $75 for a ticket to a sports game, or $100 to see a concert, but that is the price that you’ll pay to see many professional events.

If someone falls into that 00.01% of the population and they make those mega-millions salaries then I’m not going to begrudge them their pay.

And I’m not going to play the ‘class warfare’ game that seems to be playing here in this thread, albeit in a mild fashion.

Do you want to know why people are considered with gini?

Consider this story:

online.wsj.com/article/SB118781024289705455.html?mod=home_health_right

Discuss the plight of an uninsured women who had breast cancer.

Ms. Loewe first noticed a nickel-sized mass in her left breast in early 2003, according to her medical records. But she was distracted by the death of her father that spring. Her lack of insurance, combined with the fear and denial experienced by many cancer patients, also made her put off a doctor visit. By the time she showed up in late June at the emergency room at Good Shepherd, one of two hospitals in Longview, the mass had grown to nearly four inches in diameter.

Ms. Loewe earned too much to get Medicaid in Texas the regular way, but she would have qualified for it under the Treatment Act had she been diagnosed by the Wellness Center, a nearby clinic that participates in the federal cancer-detection program. Good Shepherd could have referred her there, but instead it sent her to Byron Cook, a staff surgeon. Dr. Cook diagnosed Ms. Loewe with inflammatory breast cancer, a rare and aggressive cancer that is often fatal, and referred her to a local oncology clinic, the Longview Cancer Center.

With no means to pay for medical bills, Ms. Loewe went to her county’s indigent clinic. The only assets she listed were $40 in cash and $60 in a checking account, but her application was rejected. Her most recent paycheck showed she had earned $7,096.02 in the first 5½ months of the year. That translated into an annual income far higher than the $8,980-a-year limit imposed by the county’s charity guidelines for a single adult.

It only disgusts me because there are people who live opulently in this world.

I wonder if uninsured women would be encouraged to get mammograms.

But you are a conservative, that is unlikely to disgust you. Your feelings of kindness and fairness will be eclipsed for your respect of purity, authority, and in-group boundaries. In contrast, my moral reasoning does not rely on recourse to the latter three. I will not castigate you because you are a different person.

ascribe.org/cgi-bin/behold.pl?ascribeid=20070516.140730&time=11%2000%20PDT&year=2007&public=1

 

[ribozyme]

Now, let’s castigate Warren Buffett, a “socialist”:

Last week, superinvestor Warren Buffett, America’s second richest man, testified before the Senate Finance Committee on the subject of why people like him can well afford to pay taxes. In fact, Buffett is ceasing to be among the very wealthiest because he is giving most of his fortune away to philanthropies while he is still alive.

"Dynastic wealth, the enemy of a meritocracy, is on the rise," Buffett told the senators. "Equality of opportunity has been on the decline. A progressive and meaningful estate tax is needed to curb the movement of a democracy toward a plutocracy."

Buffett also proposed higher taxes on the wealthy in order to give working people a break on their payroll taxes, which now cost three Americans in four more than they pay in income taxes. And he supports taxing hedge fund bonuses at the same rate as ordinary income, so that billionaire hedge fund managers don't pay taxes at a lower rate than the people who clean their offices.

The conservatives on the committee were somewhat nonplussed, since Buffett is a poster boy for capitalist entrepreneurship. He isn't supposed to hold such views. And indeed, few Americans of great wealth do.

Another one who does is William Gates Sr., who writes in the current issue of the magazine Politico with coauthor Chuck Collins that "Without our society's substantial investments in taxpayer-funded research, technology, education, and infrastructure, the wealth of the Forbes 400 richest Americans would not be so robust."

The source of great wealth is not just private entrepreneurs, but the society they inhabit and the public resources on which they build.

truthout.org/docs_2006/112307G.shtml

 

[consumedconvert]

*Well, this thread is finally getting interesting.

Lest some misunderstand me, I am not a socialist, by any stretch. I believe every individual has the right to private property, that the free market provides great solutions to very many problems, that issues ought to be handled mostly on the local level, and that the Feds botch nearly everything they touch.

But I am definitely against lassez-faire capitalism, capitalism unfettered by any goverment intervention whatever. And I hold that salary caps at least on execs at publicly traded companies, say between 1 to 1.5 mil adjusted for inflation, would serve everyone.

Anyone else ever investigate the economic theory known as Distributism? I had to special-order materials from IHS press. It’s an economic view espoused by Belloc and Chesterton once upon a time. Very interesting and good principles. Just wish it could happen here.*

 

[aurora77]

Discuss the plight of an uninsured women who had breast cancer.

It only disgusts me because there are people who live opulently in this world.

I wonder if uninsured women would be encouraged to get mammograms.

I don’t see the correlation–it is the fault of the wealthy that this woman has breast cancer and didn’t seek out a doctor in time? What has happened to this woman is a tragedy, but even if the mega-millionaires had their salaries drastically cut, this sort of thing would still happen.

But you are a conservative, that is unlikely to disgust you.

Prove it. Please prove that conservatives are heartless and don’t care about the poor.

I have a problem with salary caps. Who decides how much is too much? To someone making $20,000 a year, a person making $100,000 is rich. Where I live, $150,000 will buy a very nice home; in some areas $150,000 won’t buy much house at all. It’s just too vague to say that salaries should be capped. Maybe $1 million is generous to you (and I agree, anyone should be able to live comfortably on that), but what about the people who set the standard after you? What if they decide that it needs to be $500,000 or $100,000, or $50,000, or even less? It’s a slippery slope.

 

[ribozyme]

I don’t see the correlation–it is the fault of the wealthy that this woman has breast cancer and didn’t seek out a doctor in time? What has happened to this woman is a tragedy, but even if the mega-millionaires had their salaries drastically cut, this sort of thing would still happen.

It is impossible to prove; even if she did have equal access to preventative medicine as wealthy people, I do not know if she will utilitize it. I remember a paper written by Linda Gottfredson that argued that even when the poor (IQ is someone correlated to income ) had equal access to medical resources, there was still unequal outcomes as those with lower intelligence are less likely to utilize those resources.

However, copays can deter statin use, and statins saves lives.

Many patients taking statins to lower their cholesterol stop taking the drugs because of co-payments and shared drug costs, a new study found.
These drugs, which have been shown to prevent heart attacks, should be fully covered by insurance, said study lead researcher Dr. Sebastian Schneeweiss, an associate professor of medicine and epidemiology at Harvard Medical School.

“There are a bunch of conditions, like high cholesterol, where patients should be totally exempted from any cost-sharing just in order for them to take the medication,” Schneeweiss said. “The patient’s health will be better, but it also makes economic sense for the insurance plan – if the plan is thinking not just about the pharmacy cost but the overall costs. The cost to insurance companies to treat a heart attack is far more than the cost to prevent one.”

Schneeweiss thinks that because statins are a preventive drug, they may be easy for someone to discontinue when cost becomes an issue.

“It’s not treating an acute symptom,” he said. “There is no pain or anything that is alleviated by the medicine. It is the long-term consequences that are reduced through the medication. It is a preventative medication. Therefore, it is very important that patients not only get started on these medications, but that they remain on them.”

Schneeweiss’s team collected data on 51,561 Canadian patients who started taking statins to help prevent a heart attack. The researchers found that when patients were switched to drug insurance plans that had a $10 to $25 co-payment, 5.4 percent of the people stopped taking the medications or reduced the amount they were taking to a level where the drugs were ineffective.

forbes.com/forbeslife/health/feeds/hscout/2007/04/10/hscout603546.html

So financial barriers do prevent adherence to statins and in controlled studies, statins reduced coronary events.

The IDEAL trial was not powered to detect a significant difference in all-cause mortality. In the 4S Scandinavian Simvastatin Survival Study] study, the comparator was placebo, and in the placebo group 74% of the deaths were coronary.1 In IDEAL, only 48% of the deaths in the simvastatin group had a coronary cause, which is considerably lower than the 61% of deaths having a coronary cause in the simvastatin group in 4S. This decline in coronary mortality may well reflect improvements in coronary prevention and care during the last decade. While this improvement must be welcomed, it has made it more difficult for trialists to demonstrate further benefit in survival.

jama.ama-assn.org/cgi/content/full/294/19/2437

I do not know if atorvastatin is cost-effective when compared to the generic simvastatin. The study that I quoted did not find a difference in mortality with patients using simvastatin vs. atorvastatin although non-fatal coronary events were higher in the simvastatin group. I do not know if the state should encourage atorvastatin instead of simvastatin and allocate resources for atorvastatin use instead of simvastatin. But this question will be irrelevant in a few years anyway.

Prove it. Please prove that conservatives are heartless and don’t care about the poor

I never said they disregarded the poor; I simply stated that their sense of equality and aversion to harm are eclipsed by other modules for moral reasoning such as a respect for authority and in-group boundaries and association.

 

[Newbie2]

Capped by whom? Government?

That’s all we need is Government mandating salary caps in business. We all know how efficiently the Government runs it’s own business.

The salaries can already be capped. All it takes is a mandate from the shareholders of the public corporations, right? That little ballot you get in the mail every year or so and throw away?

 

[vern_humphrey]

Here’s a novel idea culled straight (more or less) from Distributist theory:

Would it be morally superior to cap the total compensation of CEOs and other top execs? Say, to $1 mil annually?

How about we cap your salary – to say, $1,000 a year?

Consider the modern delimma. We here time and again of companies losing money, laying of workers, and CEOs getting multi-million dollar bonuses. If you capped total compensation and required any excess income to be either donated to a charity of one’s choice, re-invested in the company, or used for a government program of your choice,

Ah, take other people’s money and give it to the government. Those starving bureaucrats really need it.

everyone (except the CEO) would benefit. Charities would see a big boost; the government would receive a slight increase in income; shareholders would benefit; employees would work in a much more equitable situation; and in any case, no one would be laid off to pay for the bosses’ new beachfront houses. And I think, after considerable self-sacrifice, corporate-types could learn to live with $1 mil a year

What do you think?

I think you should set the example by sending 90% of your salary to the government.

 

[manualman]

Distributism will never come to be if we seek to impose it by direct limits on income. On knee jerk basis, I’d love to see it happen, but that particular medicine would be worse than the disease (always beware the unintended consequences of new law!). Something DOES need to be done, however. There is certainly a club of VERY chummy country club fraternity brothers that appoints one another to boards, nominates each other for CEO positions and generally looks out for each other at the expense of the interest of stockholders and employees. The structure of the system combined with the fallen part of our human nature almost guarantee it!

IMO, the best way to combat it is with a tax structure that is punitive towards mega-corporations and friendlier to smaller companies. For example, Walmart can force manufacturers to sell to them for less based on volume. Why not tax them more to level out the playing field again? The vultures of the financial world are drawn to the big corporations because of their deep pockets. If they all broke up into SMALLER companies it would be MUCH harder for the limited number of frat boys to dominate the boards.

The next best step towards Distributism is a big, fat heavy death tax and elimination of the trust fund loopholes. Taxation of inheritence won’t stifle investment, innovation and risk like taxation of income and profits do, so have at it. This will also hit the oligarchs hard and require each new generation to earn his own way instead of merely leveraging daddy’s capital and rolodex.

We’ll never get a Distributist economy by trying to impose limits on personal achievement. Instead we should target the structures that foster excessive concentration of wealth: mega-corporations and inheritence.

 

[melensdad]

I still don’t understand why it should be capped at all and what moral justification there is to cap someone’s salary.

We are talking about a very very very small portion of our population that is making these bizarre salaries. Literally only a few hundred people in the whole of the USA (out of a total of a few hundred million. And there is some evidence that SOME of those people* (like the examples of Steve Jobs and Bill Gates)* actually deserve huge salaries.

Then later in the thread there was discussion about the top 1% of the taxpayers in the US. That is a different group. To get into the top 1% of the income earners/tax payers you do not need to earn $5,000,000+++ per year. You don’t even need to earn $1,000,000 per year. In fact you don’t even need to earn 1/2 million dollars per year to get into the top 1%. In fact to hit that level you only need to earn about $250,000 per year and you will be in the top 1% of the income earners. Virtually every successful doctor and lawyer and small businessman in the US probably hits the income level required to reach the top 1% of the income earners and many of those people are your neighbors and you probably don’t even realize it.

I see a lot of class envy in this thread, albeit veiled. But it exists never the less. It is not pretty and it is based on assumptions that we cannot prove.

I see a couple horror stories that have been told in this thread that attempt to justify things but totally miss the mark and are not even applicable. The story of the lady with cancer doesn’t change anything and is not even related to salary caps for a very few people.

I’ve seen statements that these people have earned some of these salaries off the backs of oppressed workers, but while those claims were made, no evidence was shown to support such a wild claim. In my younger days I was fortunate enough to, during a couple very good years, earn some pretty wild amounts of money. But I never earned those amounts ‘off the backs’ of oppressed workers. I worked in a small company, which for many years was employee owned, and there were some opportunities that I was able to grasp that made money for both me and for the company and I’m sure some folks here would love to have capped my salary, but if I had faced a salary cap then I probably would not have had any incentive to take the calculated risks to earn that money in the first place! In fact I would have earned less in bonuses and the whole of the employee ownership would have earned less if there were salary caps. So how would a salary cap have helped anyone?

I see a couple examples of salary abuse, that from the outside, appear to be real abuse. Those are probably the odd cases but the people to blame for those bizarre salary abuses are the board of directors of the companies who hired those people.

Heck why don’t we cap the type of food we buy? Who needs name brands when generics cost less!?!

How about we cap the type of vehicles we drive? We could eliminate gas guzzlers and everyone could drive a Toyota Prius or Honda Civic.

What about all the houses over 2500 square feet, we need to cap house sizes? They are too big and waste energy. Back in the 1940’s families were bigger and houses were roughly 1400 sq ft. In the 1960’s families had shrunk and houses were 1600-to-1700 sq.ft in size. Now in 2007 we see a typical house exceeding 2600 sq.ft. and families are the smallest they have ever been in modern history. Clearly people have too much!

Oh and lets cap telephones. Back in 1960 the typical home had 1 telephone hardwired to the wall. Many homes shared a party line. Today a typical home has 4 cordless phones and 1 hardwired phone, and every member in the household older than the age of 16 has a cellular phone in addition to the home phones! Why are we wasting all this money on telephone use?

*Threads like this make me sick. ** Sure cap salaries and enjoy your class envy (and you don’t even know you have class envy) *but when people stop creating jobs and stop employing you/your spouse/your kids then you have only yourselves to blame. I see no reason why we can’t impose a blanket solution across the whole of the US, or for that matter all of the world society, just to take care of a handful of cases of salary abuse. Sure, let’s do that. We could use are military to enforce it.

 

[manualman]

easy there melensdad.

Have you REALLY thought your response all the way through? Jobs and Gates aside (as they are entrepenuers who actually CREATED the companies and products, not just MBA saddled managers who schmoozed their way in), is your average CEO REALLY so much more crucial to the organization than other staff members? Sure, I probably couldn’t do it. But I guarantee that generic CEOs can’t do 1/10th of the mission critical task that keep their companies afloat on a day to day basis. From engineers, to customer relations, to electricians, to programmers… Capitalists like to pretend that the CEOs are the only crucial people in the company. Reality says that the entire team needs to do its job or it won’t succeed.

So why is the CEO paid 24 times as much as the chief engineer of the corporation? Because the CEO plays golf with all the board members and has deals to nominate them to board positions in other corporations in which he has contacts. Both are crucial to the function of the business, but the CEO also knows how to game the system, while the engineer simply does his job.

THAT’s why companies need to shrink in size. More, smaller pies make the same amount of food but are harder to exploit.

 

[melensdad]

easy there melensdad.

Have you REALLY thought your response all the way through? Jobs and Gates aside (as they are entrepenuers who actually CREATED the companies and products, not just MBA saddled managers who schmoozed their way in), is your average CEO REALLY so much more crucial to the organization than other staff members? Sure, I probably couldn’t do it. But I guarantee that generic CEOs can’t do 1/10th of the mission critical task that keep their companies afloat on a day to day basis. From engineers, to customer relations, to electricians, to programmers… Capitalists like to pretend that the CEOs are the only crucial people in the company. Reality says that the entire team needs to do its job or it won’t succeed.

So why is the CEO paid 24 times as much as the chief engineer of the corporation? Because the CEO plays golf with all the board members and has deals to nominate them to board positions in other corporations in which he has contacts. Both are crucial to the function of the business, but the CEO also knows how to game the system, while the engineer simply does his job.

THAT’s why companies need to shrink in size. More, smaller pies make the same amount of food but are harder to exploit.

Yes I have thought through my answers, have you?

You are making things up as to why YOU THINK companies need to shrink. You are suggesting that ONLY the founders are worthy of huge salaries but dismissing the work of those folks who may salvage a company from ruin or choose a new path for the company? You ignore the economies of scale in a world economy and suggest that smaller will work when it clearly can only work in SOME circumstances. You suggest that people only get their jobs because of the golf score and not their management skills. You suggest that a CEO must be qualified to do specific tasks within the company but ignore the fact that his job is not to do those things but to lead a divergent group of people to greater success. Heck as a sales rep for our company I couldn’t use our telephone system at work to successfully transfer a call to someone in the warehouse but that didn’t stop me from getting a string of promotions and leading the company to grow from $23 Million in sales to nearly $150,000,000.00 in sales and vastly grow the workforce and then buy out the ownership so that the employees actually owned the company.

Sorry I don’t buy into the sort of socialistic theory and class/job envy others favor.