What is the highest reasonable salary?

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ieattime20
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Re: What is the highest reasonable salary?

Postby ieattime20 » Wed Mar 25, 2009 7:55 pm UTC

Stormlock wrote:
sikyon wrote:...If you are the last one standing, then your value is infact infinite. So potential rewards of the best CEO's are massive.


This promotes the idea that when faced with a dragon, you should stab everyone near you trying to fight the dragon and run the fuck away.


I'll go even farther and give this kind of thinking a name: Extortion.

"Hire me at this unreasonable rate. Think of what will happen to you if you don't."

sikyon
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Re: What is the highest reasonable salary?

Postby sikyon » Wed Mar 25, 2009 8:19 pm UTC

Stormlock wrote:A person should be valued on what they can provide, not what they can do relative to those they compete with. (And not even directly relative at that.)


You are mistaken in thinking that these are different things.

If Person A is marginally better than Person B, but can beat Person B. Thus, Person A is worth much more than Person B, because when he does he will be the only one left and his value will be (theoretically) infinite. This inifinity is capped by real world restrictions such as industry sizes, and then reduced by hard costs, as well as probabilities of success.

And EVEN if they were paid based on what htey provided, they would still be paid vast amounts.

If a CEO can make a 1% increase in a company, then by your standard he should get 0.990099~% of the company's worth.

So for example, if the CEO of AIG could on average contribute a 1% increase in equity a year, by his own decisions, as opposed to having no CEO, then he should receive 521 000 000 dollars in compensation for this feat.

It's about the effect of their position, the amount that it is soley due to them, and the competition.
I'll go even farther and give this kind of thinking a name: Extortion.

"Hire me at this unreasonable rate. Think of what will happen to you if you don't."


No such thing as Extortion in free market system.

Further, the idea that a CEO gets paid what he/she does in order to be the best in their field is patently ridiculous. I don't doubt these people are smart, but as I've said elsewhere, the degree to which they personally delude themselves (being human beings) into thinking that luck doesn't play a role is sort of staggering. The degree to which luck plays a role is grossly underestimated. How much would you pay someone to go to Vegas with your money and gamble it? Are you sure that's a particularly poor example?


Wrong example. It's more like, "would you pay someone to stand beside you and play real life battleship instead of you?"

If you survive, then you have a net gain.

But if you lose, you(company) are dead.

Also, nobody says luck does not play a role. They all know that uncontrollable conditions exist. The key is that you are approaching this as a summation:

Skill + Luck = total effect

Which is wrong. It's actually

Skill*Luck = total effect

Where a 1% increase in skill is still, on average, a 1% increase in total gain.

ieattime20
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Re: What is the highest reasonable salary?

Postby ieattime20 » Wed Mar 25, 2009 8:36 pm UTC

I'm trying desperately to be civil here, but you're making it very difficult. Granted, I'm not the smartest person in the world, so if I'm utterly failing to get something (as this is so baffling, what you said, that I feel like maybe there's a whole study of science I'm missing), please elaborate. OK. First.

sikyon wrote:If Person A is marginally better than Person B, but can beat Person B. Thus, Person A is worth much more than Person B, because when he does he will be the only one left and his value will be (theoretically) infinite. This inifinity is capped by real world restrictions such as industry sizes, and then reduced by hard costs, as well as probabilities of success.


If something, especially something of a commodity like labor, is valued at infinity, your 'free market' has utterly failed. If there is no cost-analysis possible, then what you are describing is coercion, which is why I call it extortion. America is not a 'free market system' and extortion is illegal. But even in free market systems, coercion is literally one of the only things that the government has the right to step in and stop. You're wrong on the offset though. The worth of someone who could save the company is the worth of the company, max. It's a hard rule that you should not hire someone for more than you expect they could generate in profit. Thankfully, this is born out in reality, as CEOs are not paid even close the total worth of their companies, despite the exhorbitance of their compensation.

sikyon wrote:And EVEN if they were paid based on what htey provided, they would still be paid vast amounts.

If a CEO can make a 1% increase in a company, then by your standard he should get 0.990099~% of the company's worth.

So for example, if the CEO of AIG could on average contribute a 1% increase in equity a year, by his own decisions, as opposed to having no CEO, then he should receive 521 000 000 dollars in compensation for this feat.


I don't think anyone has said that labor should be paid on its expected value of return. What has been said is that the two should be commensurate: If someone is capable of producing more labor than person A, their compensation should be proportionately higher. Further, if you really think that a company's assets will fall straight to fucking zero without a CEO... I really can say that you are overvaluing their worth.

sikyon wrote:Wrong example. It's more like, "would you pay someone to stand beside you and play real life battleship instead of you?"

If you survive, then you have a net gain.

But if you lose, you(company) are dead.


You're creating a false harm. The downside of hiring a sub-par CEO is that your company will perform sub-par, theoretically. Not that the company will die. The downside of not hiring a CEO isn't even failure of your company. Lots of businesses do great without CEOs. This may be what causes you to grossly overvalue the labor of a CEO.

sikyon wrote:Which is wrong. It's actually

Skill*Luck = total effect

Where a 1% increase in skill is still, on average, a 1% increase in total gain.


What I am saying is that luck very likely plays a much larger role than most people think. The idea that "future success is based on past performance" is fundamentally and progressively more and more flawed if the results are more and more random. No one in the world thinks that someone should get paid for being lucky, or that that sort of lottery-winning is any sort of compensation for labor. You should be paid on the skill component, because you can't incentivize luck. Further, shouldn't a 1% increase in skill, on average, net a 1% increase in pay?

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Re: What is the highest reasonable salary?

Postby sikyon » Wed Mar 25, 2009 8:49 pm UTC

ieattime20 wrote:I'm trying desperately to be civil here, but you're making it very difficult. Granted, I'm not the smartest person in the world, so if I'm utterly failing to get something (as this is so baffling, what you said, that I feel like maybe there's a whole study of science I'm missing), please elaborate. OK. First.


Sorry I didn't realize I wasn't being civil...

Then you can feel free to leave this conversation. And while you're away, be sure to check up on the section rules.

-Az

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Re: What is the highest reasonable salary?

Postby TheStranger » Thu Mar 26, 2009 3:10 am UTC

ieattime20 wrote:
Stormlock wrote:
sikyon wrote:...If you are the last one standing, then your value is infact infinite. So potential rewards of the best CEO's are massive.


This promotes the idea that when faced with a dragon, you should stab everyone near you trying to fight the dragon and run the fuck away.


I'll go even farther and give this kind of thinking a name: Extortion.

"Hire me at this unreasonable rate. Think of what will happen to you if you don't."


That's not really how salary negotiations play out. An individual will come to a company offering a given service... say acting as CEO. Looking at their past actions both the company and the individual come up with how much they should be paid for the task at hand. In this case both sides would also look at the comparable rate for similar CEO's. If a given individual is highly skilled then they are often highly sought after, and are able to ask for more money because various companies are competing over who will get their services...

It's not "Hire me at this unreasonable rate. Think of what will happen to you if you don't"... rather it's "Hire me at this rate because I will run your company and make you money, if you don't then I will find a company that will pay me what I want."

What I am saying is that luck very likely plays a much larger role than most people think. The idea that "future success is based on past performance" is fundamentally and progressively more and more flawed if the results are more and more random. No one in the world thinks that someone should get paid for being lucky, or that that sort of lottery-winning is any sort of compensation for labor. You should be paid on the skill component, because you can't incentivize luck. Further, shouldn't a 1% increase in skill, on average, net a 1% increase in pay?


Except that it is nearly impossible to quantify such an increase without also including the luck factor. All that any given boss can do is look at the performance of a given individual and see how successful they have been in performing the tasks given... luck plays into that, and I cannot see any way for it to be quantified and removed from the calculations.
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ExistentialVigilante
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Re: What is the highest reasonable salary?

Postby ExistentialVigilante » Thu Mar 26, 2009 3:27 am UTC

Why is this discussion so long? As many people have pointed out:

People are paid up to the point where their salary equals the total revenue they generate for the employer.

That's it!

I does not matter how much people should be paid or how hard the work is.
To restate: Economics. It works, bitches.

Needless to say, this applies only to a perfectly competitive labor market.
Unions, monopsony, imperfect market, etc. all partially invalidate this.

If you want to go all Marxian on me, that is a completely different issue.

Any questions?

1) Have you read the Serious Business Rules?
2) Do you really think your current rhetorical tactic will work?
3) How long do you suppose you can keep it up before I start deleting non-contributory, redundant and generally uncivil posts like this one?

-Az
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Re: What is the highest reasonable salary?

Postby Stormlock » Thu Mar 26, 2009 3:50 am UTC

Well yeah, we already know that they're getting paid that much. Thats like saying con artists get paid as much as stupid people are willing to give them. Scams! it works bitches! The question would be, why the hell are all the mitigating factors such as luck, unfair competition, and untrustworthy behaviour so completely ignored in some cases but not others? You wouldn't hire a chef that sprinkles Atavan into all his dishes just because he can bring in 5% more money than the other chefs, but when it comes to hiring a lawyer or CEO no pit of hell is too deep. Is it just a matter of morals no longer being relevant beyond a certain degree of wealth at stake? If it is, then why, as a society, do the vast majority condone it? The hope that they can someday be on top too? Ineffectiveness of mediocrity in the face of established wealth?
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ieattime20
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Re: What is the highest reasonable salary?

Postby ieattime20 » Thu Mar 26, 2009 4:55 am UTC

TheStranger wrote:That's not really how salary negotiations play out. [...]

It's not "Hire me at this unreasonable rate. Think of what will happen to you if you don't"... rather it's "Hire me at this rate because I will run your company and make you money, if you don't then I will find a company that will pay me what I want."


Here's where things get sticky. I'll grant you that most stockholders do not think their company is being held hostage by a CEO, but there are two reasons for that. One, the CEO pay is, like I've mentioned, a thin margin compared to the total profits of a company. 50 million compensations pale in comparison to billions-dollar profits. (Mind you, I'm not railing against corporate profits.) The other reason is that most stockholders are lazy, or know little if anything about the company. Granted, the large stockholders who've been around for a while do care, but the CEO does everything he/she can to whittle out their influence on his/her compensation packages, among other things, claiming that that's 'to be left up to the CEO! I mean, why'd you hire me, right guys? *wink wink*"

The core underlying problem is that there is the possibility (some would say very likely) that CEOs are, overall, overpaid. So let's think about how a concerted effort to drive down CEO pay any amount would go. Company A says they're transferring all of their Golden Parachute compensation over to stocks. Collectively, every CEO on the market says, "Fuck you, that sounds like an awful deal." While Companies B-ZZZ say, "No way we're following that route. We want to have better CEOs than Company A, so we have to offer more, we have to offer what each other are offering." This can, does, and will happen. Therefore, regardless of whether CEOs are overcompensated or not, there is no solid method in the status-quo to break the 'price floor' on a CEO's labor, mostly because of a grossly overestimated contribution of the CEO to a company's worth.

The lunatic stock markets also has something to do with this. Just as they react favorably to CEOs who 'clean house' in bad times by firing Blue Sky divisions (historically horrible for long-term stocks), they would immediately react unfavorably to any company who offered 'sub-par' compensation. Can you not see this as a problem? It's literally the reverse problem of the pre-Union days, where people were being extorted to work whatever they could get, at whatever rate they could get until they had the balls (and enforced permission) to Unionize to jolt the market. If there is no market mechanism (and if I'm wrong, please tell me) to drive the wage down, but there are mechanisms to drive it up, how can we expect, over any given period of time, that the wage ISN'T entirely too much? Speaking of Unions,
ExistentialVigilante wrote: Unions, monopsony, imperfect market, etc. all partially invalidate this.


Unions aren't part of fair market action? What right does the market have to prevent people from freely associating? :-D

TheStranger wrote:Except that it is nearly impossible to quantify such an increase without also including the luck factor. All that any given boss can do is look at the performance of a given individual and see how successful they have been in performing the tasks given... luck plays into that, and I cannot see any way for it to be quantified and removed from the calculations.


I'm not sure what you're saying. Are you saying it's impossible to quantify how much of a CEO's success or failure is due to luck? You're right in that sense. But it's not information that's not ascertainable. You could, for example, look at an infamous "CEO Strategy" or several of the hundreds of "Executive Training Courses" and try to find correlations with success. If you don't, maybe you should consider not giving a shit when your prospective CEO says he has the best new thing to fix up the company. Maybe you start to think, like traders do, that random monkeys making picks outperform 'strategies', and that really all you need is someone to handle basic rules every CEO should follow and beyond that, I dunno, pay a small group of people to think up actions for the company.

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Re: What is the highest reasonable salary?

Postby ExistentialVigilante » Thu Mar 26, 2009 5:09 am UTC

I suppose I was directing my response too much toward the initial question imposed by the topic title, rather than toward the subsequent developments in the discussion. I will now attempt to address the point(s) made by Stormlock:

Stormlock wrote:Thats like saying con artists get paid as much as stupid people are willing to give them.


That statement is true. Con artists will get paid as much as stupid people are will to give them. The reason for this (same goes for the CEO issue) is misinformation. They overvalue the "services" of said con artist, and his product (a big pile of nothing), is subsequently over-demanded. Of course, he is self-employed, so all revenue is accounted for in his salary. (You could actually argue that he has quite an economically efficient salary because of this. :))

Stormlock wrote:why the hell are all the mitigating factors such as luck, unfair competition, and untrustworthy behaviour so completely ignored in some cases but not others?


All I can say is that the world is an extremely imperfect place. These factors exist (from barely existent to overwhelming) in all aspects of the economy and it is really just situational.

Stormlock wrote:You wouldn't hire a chef that sprinkles Atavan into all his dishes just because he can bring in 5% more money than the other chefs,


Actually, I would, given ceteris paribus (all other things constant) conditions. Unfortunately, for me, ceteris paribus never exists in the real world (which is why fiscal policy is so difficult). People would find out (eliminating the misinformation), object, and stop coming to my restaurant, making this a very poor economic decision.

I am unsure how to respond to the the part about hell and morals. It is entirely possible that lawyers and CEOs are less likely to have strong morals, and are therefore more likely to permit or even exacerbate the misinformation that inevitably exists. But this analysis is very much situational, and would require much more information. (Ironic, isn't it?)
As for society, I believe we do value morality and the destruction of misinformation and do not condone this activity. Unfortunately, we are often not involved in these questionable situations, meaning that often all we can do is sit here and watch.

All in all, this problem with the CEOs being overpaid ed is due misinformation. In a perfectly competitive market, CEOs are never over or under-paid. But when the salary for a CEO of a failing bank being repossessed by the government is determined by policy makers and/or populist anger, we are fucked. There is so much misinformation, we really don't have any conception of the revenue generated by said CEO, and therefore cannot make any economically sound judgments when it comes to pay. In this way I, question the validity of many of the arguments made so far (relating to the CEO pay), as no one here (or anywhere) really knows what the value of these CEOs are. Sorry.

I hope this helps. I consider this topic and most other related topics quite frustrating.
Sry bout spelin.

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ieattime20
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Re: What is the highest reasonable salary?

Postby ieattime20 » Thu Mar 26, 2009 5:23 am UTC

ExistentialVigilante wrote: But when the salary for a CEO of a failing bank being repossesed by the government is determined by policy makers and/or populist anger, we are fucked. There is so much misinformation, we really don't have any conception of the revenue generated by said CEO, and therefore cannot make any economically sound judgements when it comes to pay. In this way I, question the validity of many of the arguments made so far (relating to the CEO pay), as no one here (or anywhere) really knows what the value of these CEOs are. Sorry.


Truthfully, no one ever really has any knowledge on how much something's instantaneous worth is valued. It's why setting prices by the government is a terrible, terrible idea; one guy sitting in a room is not capable of accurately pricing even something so simple as bread. It requires competition, constant 'jostling' until a price is arrived at that is comfortable with everyone.

The reason these arguments are valid is that we aren't setting a price for CEOs. We are making a qualitative assessment that, due to current mechanisms and yes, obstruction of information, they are overpaid. The same can be said of pre-Union factory workers; we assess that there is no mechanism that allows their wage to rise, but for years it was permitted to fall or stand still. So we took measures for transparency and more power over your own labor. I show above that CEO wages are suffering from a limit on how low they can go, while suffering no limits on incremental increases. That is valid reason enough to consider some method (as yet discussed-- income caps are a bad way to do it) to give stockholders the power to decrease their wage, to jostle the price without these limits and see where it lands.

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Re: What is the highest reasonable salary?

Postby Syndar » Thu Mar 26, 2009 6:00 am UTC

If you believe in capitalism, salary caps are retarded. Throw people into a competetive system, and things gradually reach an equilibrium. People might argue about whether that equilibrium is too high, but unless the entirety of corporate America simultaneously decides that such is the case, it won't make a difference. Now, you might say that when that CEO is getting paid by taxpayer bailout money it BECOMES a problem, but if you believe in capitalism, then bailout money is retarded. I'm not saying that it necessarily is, but if things are out of whack then its the capitalist structure of the market that is to blame, not greedy CEOs (sure, they're jerks, but in a system like what exists now, I posit that each and every one of us would say, "YES! I will take those millions of dollars, tyvm, bye" in their shoes.)
Well, I don't know about that.

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Re: What is the highest reasonable salary?

Postby ExistentialVigilante » Thu Mar 26, 2009 6:10 am UTC

It seems my post didn't go through. Hopefully this won't double post.

ieattime20 wrote:
ExistentialVigilante wrote: Unions, monopoly, imperfect market, etc. all partially invalidate this.


Unions aren't part of fair market action? What right does the market have to prevent people from freely associating? :-D


I apologize, you are correct. Unions do not obscure the revenue=salary relationship, rather they force the salary up making the firm reduce employment to the point where the last worker hired generates the new, higher salary (diminishing marginal returns).
I was confused because unions and monopolies are closely related (being enemies of the sort), but create different market disequilibrium.

ieattime20 wrote:Truthfully, no one ever really has any knowledge on how much something's instantaneous worth is valued. It's why setting prices by the government is a terrible, terrible idea; one guy sitting in a room is not capable of accurately pricing even something so simple as bread. It requires competition, constant 'jostling' until a price is arrived at that is comfortable with everyone.


I disagree. Well, sort of. I believe you are referring the instantaneous value of bread if it were in a perfectly competitive market, which never exists (the market, of course). In this way, no one can ever know the true market value of anything. But, being realistic, the market for bread is a very stable and very near perfect competition, so I am quite able to make a very accurate determination of the market value of bread by looking at the price label at my grocery store.
The reason government pricing is so bad is that rather than being determined by said "jostling" (supply and demand to be accurate), price is determined by bureaucracy, which is slow-moving and inefficient compared to the market forces, pushing the product market even further away from perf-comp. So even if the true value is known and set, it will instantly be off due to "jostling" and has the capacity the drift further, creating surplus, shortage, or a host of other problems.

ieattime20 wrote:The reason these arguments are valid is that we aren't setting a price for CEOs. We are making a qualitative assessment that, due to current mechanisms and yes, obstruction of information, they are overpaid.


I'm sorry, but by making this assessment and concluding they are overpiad, you are setting a value-based salary. It is not an exact one, but it is still based on the same misinformation and therefore unsubstantiated. Relative or exact, no accurate salary can be reached with the information we have.
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Re: What is the highest reasonable salary?

Postby Cynwulf » Thu Mar 26, 2009 6:17 am UTC

ExistentialVigilante wrote:All in all, this problem with the CEOs being overpaided is due misinformation. In a perfectly competitive market, CEOs are never over or under-paid. But when the salary for a CEO of a failing bank being repossesed by the government is determined by policy makers and/or populist anger, we are fucked. There is so much misinformation, we really don't have any conception of the revenue generated by said CEO, and therefore cannot make any economically sound judgements when it comes to pay. In this way I, question the validity of many of the arguments made so far (relating to the CEO pay), as no one here (or anywhere) really knows what the value of these CEOs are. Sorry.


A quick note: I was mostly with you until here. As libertarian as I am, once a private company accepts whining/bailout/rescue money that is from the public then that company forfeits any sort of self-determination as far as I am concerned. Effectively they are nationalized. If AIG was a totally independent, successful firm then I could care less what an executive brought home. Enlarged salaries just means less net, less efficiency. Not my problem - I'm not a shareholder. However, since AIG is an absolute failure propped up by the wallets of me and every other taxpayer in the United States, you can expect people to be pissed off when executives egregiously blow money on their inflated salaries. I don't care if it was 0.1% of what they received. By them accepting my taxdollars, I am effectively a shareholder. I would have hoped that the people directly responsible for driving the company into the ground would lose their jobs. At the very least, they shouldn't have received a penny.

Ok, that wasn't so quick a note. Sorry. What an executive is paid should be determined by the shareholders or board of the company. Ideally an executive should be paid equitably, and most importantly, the pay should reflect the executive's value to the company. The problem is that most executives are effectively paid a salary that they determine for themselves. There is no incentive to perform. I can appreciate sales people who work purely on commission. If they perform well, they are paid well. If they perform poorly, they have to eat instant ramen and live in their car. If executives were paid on commission (of net), then that would be great: there would be real incentive to perform and advance. Right now it is a revolving door gentleman's club of incompetents. Not good.

Syndar wrote:If you believe in capitalism, salary caps are retarded. Throw people into a competetive system, and things gradually reach an equilibrium. People might argue about whether that equilibrium is too high, but unless the entirety of corporate America simultaneously decides that such is the case, it won't make a difference. Now, you might say that when that CEO is getting paid by taxpayer bailout money it BECOMES a problem, but if you believe in capitalism, then bailout money is retarded. I'm not saying that it necessarily is, but if things are out of whack then its the capitalist structure of the market that is to blame, not greedy CEOs (sure, they're jerks, but in a system like what exists now, I posit that each and every one of us would say, "YES! I will take those millions of dollars, tyvm, bye" in their shoes.)


Personally I thought the whining/bailout/rescue money was a terrible idea - I knew this kind of crap would happen. Unfortunately, it can't be helped now. The money is out there. The only thing that can be done now is the struggle to ensure that a majority of it is not wasted. And no, I wouldn't take a couple million and run. I would refuse it, turn whistle-blower, get in the public eye, ride the wave of populism, and launch a political career.
L'homme est libre au moment qu'il veut l'être. | Man is free at the instant he wants to be.
- Voltaire

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Re: What is the highest reasonable salary?

Postby ExistentialVigilante » Thu Mar 26, 2009 7:15 am UTC

Cynwulf wrote:
ExistentialVigilante wrote:All in all, this problem with the CEOs being overpaid is due misinformation. In a perfectly competitive market, CEOs are never over or under-paid. But when the salary for a CEO of a failing bank being repossessed by the government is determined by policy makers and/or populist anger, we are fucked. There is so much misinformation, we really don't have any conception of the revenue generated by said CEO, and therefore cannot make any economically sound judgments when it comes to pay. In this way I, question the validity of many of the arguments made so far (relating to the CEO pay), as no one here (or anywhere) really knows what the value of these CEOs are. Sorry.


A quick note: I was mostly with you until here. As libertarian as I am, once a private company accepts whining/bailout/rescue money that is from the public then that company forfeits any sort of self-determination as far as I am concerned. Effectively they are nationalized. If AIG was a totally independent, successful firm then I could care less what an executive brought home. Enlarged salaries just means less net, less efficiency. Not my problem - I'm not a shareholder. However, since AIG is an absolute failure propped up by the wallets of me and every other taxpayer in the United States, you can expect people to be pissed off when executives egregiously blow money on their inflated salaries. I don't care if it was 0.1% of what they received. By them accepting my taxdollars, I am effectively a shareholder. I would have hoped that the people directly responsible for driving the company into the ground would lose their jobs. At the very least, they shouldn't have received a penny.

Ok, that wasn't so quick a note. Sorry. What an executive is paid should be determined by the shareholders or board of the company. Ideally an executive should be paid equitably, and most importantly, the pay should reflect the executive's value to the company. The problem is that most executives are effectively paid a salary that they determine for themselves. There is no incentive to perform. I can appreciate sales people who work purely on commission. If they perform well, they are paid well. If they perform poorly, they have to eat instant ramen and live in their car. If executives were paid on commission (of net), then that would be great: there would be real incentive to perform and advance. Right now it is a revolving door gentleman's club of incompetents. Not good.


I agree with just about everything you said, and I realize much of a CEO's pay is self-determined and not performance based. However, now that we essentially own this company, it is in our best interest to make it run as best as possible. (This includes not demonizing every single upper management employee in AIG as the media has done, a matter which is tangentially related to this topic.) This said, we cannot expect to run a company where people work out of guilt for a few reasons:
-many of them are not responsible for this situation, and therefore will not work for long or at all for reduced pay
-those few who are responsible (some CEO's and parts of upper management) will probably not feel guilty and leave
This said, the best course of action (I believe), is to confirm the workforce is now working in the interest of the taxpayer (this includes firing those responsible), and pay a wage equal to the revenue each employee generates. The company cannot function if we submit to populist anger (no matter how warranted) and revoke all/most of the wages. The rest of my argument is that we don't know the value of a CEO, and therefore cannot determine a wage.
Of course, as you mentioned, we could have avoided this issue in the first place. We have the FDIC for a reason. Too bad we already lost that battle.

I am quickly tiring of editing your posts. Quality improvement necessary.

-Az
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Re: What is the highest reasonable salary?

Postby wisty » Thu Mar 26, 2009 9:21 am UTC

OK, I'll make an exception on my 20x rule. (BTW, it could be 40x, or whatever ...)

Sports stars, movie stars, opera stars, and other people who are obviously more skilled, and who really haul in the cash. Their skills are obviously superior, and have a huge impact on earnings. Business owners (who took the risks themselves) are also possibly in this category.

The performance of a CEO is not obvious - it might be luck, or the extra cash might actually encourage them to cheat their way up. Let's be realistic - there is no way to accurately measure 2 managers. The difference between a manager who is 1 in 100, and 1 in 10,000 is almost imperceptible (well, one will be a better speaker, or better at financial allocations, or better at listening, or giving instructions, or know their business, or know the strategic landscape, or play golf with the chairman of the board). It's too damn hard to differentiate. The best bet is just to minimize the odds of getting a real snake.

An addendum: Traders do not get an exemption. If they want to invest their own money, fine, they can earn as much as they want. Traders who manage other people's money should get a reasonable salary, otherwise they will mess up the markets. They all know how the system works ( I am certainly not smarter than them, and even I know how it works). You chase a bubble. The bubble goes up (because all the traders are buying). You make a million dollars in bonuses, then the bubble crashes, and you blame the market. Maybe you even get a bailout (to help the traders recover from losing their investors cash ... payed for with their investors tax dollars). Most of it's a zero sum game, except the trading fees, bonus and bailouts. Guess where all the money ends up?

PPS: The best bubbles to chase are the ones that nobody understands, but sound like they might be profitable. Some people will believe anything if it sounds vaguely convincing (or complex enough that they assume you are an expert), and you tell them that the new instrument / industry will make them rich. Once the bubble starts growing, it justifies itself. That's just the definition of a bubble.

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Re: What is the highest reasonable salary?

Postby Azrael » Thu Mar 26, 2009 12:24 pm UTC

On second (err ... 16th?) thought, this thread is a mess.

Locked for being unsupported, poorly reasoned, poorly presented and generally useless.

Everyone participating in this thread who is new to the boards or to Serious Business needs to read the section rules and lurk for a more significant period before continuing to post in a fashion that will bring you into increasingly direct conflict with the purple.


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