sillychillly OP t1_j5mi9mo wrote
Reply to comment by highvelocityfish in CEO pay has skyrocketed 1,460% since 1978: CEOs were paid 399 times as much as a typical worker in 2021 by sillychillly
Good question!
"We focus on the average compensation of CEOs at the 350 largest publicly owned U.S. firms (i.e., firms that sell stock on the open market) by revenue. Our source of data is the S&P Compustat ExecuComp database for the years 1992 to 2021 and survey data published by The Wall Street Journal for selected years back to 1965. We maintain the sample size of 350 firms each year when using the Compustat ExecuComp data"
Adventurous-Text-680 t1_j5n453z wrote
So in other words ceos that get paid mostly in company stock which has vesting periods and other restrictions.
A form of compensation that most workers would not want because they rather have cash to pay their bills.
It's not surprising the change.
It seems to roughly correlate with the s&p 500 because that's how stocks and company value has grown.
0xd34d10cc t1_j5nyy9s wrote
> A form of compensation that most workers would not want because they rather have cash to pay their bills.
As if CEOs don't have bills to pay. That's not the reason.
Adventurous-Text-680 t1_j5s59dv wrote
Would you rather be paid 40k a year cash or 20k a year cash and 30k in stocks which can't be sold for 5 years and you must give 3 months notice before selling.
The stocks are not liquid and mass selling harms the value further diminishing the benefit. You think the employee will be happy getting only 20k in cash for their bills? Furthermore you will be diluting the stock on each dispersal which decreases value further.
CEOs already have lots of capital and prefer stocks to cash because it's taxed less. Plus already being rich means they can borrow against their assets to avoid most taxes.
Think about this. You have 100k in assets and just it as collateral to borrow 50k. Eventually you need to repay the loan when the term is over right? Sure but you can pay that loan by borrowing against the assets appreciation and the additional assets you acquired (stocks/property/etc). You can continue you this as you accumulate more wealth. Now 100k on assets likely won't take work, but when you are talking 100s of thousands then you can start to see why our tax system can be worked over so well.
Capital gains taxes only come into play when you sell an asset that has appreciated. Borrowing against that asset to make money does not invoke capital gains.
The other thing you need to keep in mind is that profit sharing can be great at company that is doing well but it's horrible when it's not. My company used to compensate everyone partially based on hitting numbers with a effective profit sharing. The problem was that company wasn't able to hit numbers for a few years which meant everyone were being underpaid vs the general market. Eventually they switched the system to have the expected bonus compensation added directly to lower level employees pay checks and only upper level people had their compensation split because lower level employees have no power in the company hitting numbers. This made all the lower level employees happy because it gave them a substantial pay increase vs having a roller coaster pay based on how the company did.
As an FYI, the company still gives performance bonuses for lower level employees. The difference is that higher level employees have their bonus more based on company performance instead of individual (it's a ratio that moves based on level of pay).
0xd34d10cc t1_j5spxbg wrote
Holy shit. You spent too much time explaining to me what I already understand.
> CEOs already have lots of capital and prefer stocks to cash because it's taxed less. Plus already being rich means they can borrow against their assets to avoid most taxes.
That's the reason why CEOs are compensated with stocks. They already rich enough, so they can take more risk and get a better reward as result, which becomes a self sustaining feedback loop.
Adventurous-Text-680 t1_j5tictf wrote
You disagreed with my statement that most low wage workers wouldn't want most of their compensation as illiquid stocks because they don't have enough capital. You don't understand this because you are actually agreed with my assertion. You seem focused on ceos instead of the needs of the worker.
The only way to impact CEO compensation in a positive way would be to come up with better tax schemes for the ultra wealthy so that money can be used to help those who need it. Increasing minimum wage is better than trying to limit CEO compensation. It's more direct in trying to help those employees not making a livable wage.
jethropenistei- t1_j5oq6gq wrote
Most CEOs are paid in cash as well, but the majority is in stock, which is taxed at a lower rate than if they were to receive their higher compensation in cash.
MiltonFriedman2036 t1_j5pf348 wrote
The stock grants are taxed as income. The stock appreciation is capital gains. But if you were given cash and bought stocks, you'd also get the same capital gains tax, so it's not really the tax advantage you think it is.
EuropeanTrainMan t1_j5nyom8 wrote
You get it. Average mouthbreather doesn't, and only whines that they're not in on non existing money.
The numbers are there to confuse the tax payers and boy does it show.
Fausterion18 t1_j5pjka5 wrote
Picking the 350 largest companies which have grown immensely due to globalization is the exact kind of misleading analysis I expected from EPI.
How about a simple exercise of CEO compensation per employee? As in take the CEO's TC and divide it among the total number of employees. I bet you that number has gone down, not up.
MattieShoes t1_j5pl9bh wrote
> 350 largest publicly owned U.S. firms
Also significant... Lots of CEOs make very modest amounts -- they're just not CEO of the 350 largest publicly owned US firms.
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