What some seem to be implying is a shareholder shouldn't look out for their own interest first.

 

No. I've just said that the way the system has evolved over the last several decades has shifted incentives in a problematic direction.

 

1) I think there's a heightened focus on the short-term valuation of stock price which is not always aligned with the long-term interests of the firm, especially since stock valuations are in large part rooted in perceptions.

 

2) Relatedly, the culture of executive compensation has become detached from the performance of the company. Compensation has exploded, but I don't see any evidence the executives have gotten better. I think this is a shift in corporate culture, especially at the board level, and not a shift in the price of effective executives (Japanese firms tend not to shell out like this and they are still very competitive).

 

3) These are related. Many executives are compensated through stocks or bonuses connected to stock valuations. This again incentivizes executives to make short-term decisions to boost immediate stock-price, rather than the sometimes more difficult decisions to shape the long-term strength of the firm. The article I posted earlier touched on a related phenomenon, which is the misreporting of financial statements to boost incentive-based bonuses. Similarly, a company can be perceived as acting stupidly by not overpaying their executives, even if they are comfortable with the performance they are paying for, which further encourages the growth in compensation.

 

I'm also not saying that this is the case 100% of the time or that short-term perceptions can't match long-term interests. But it seems to me there's a trend in this direction that is not entirely justified in the notion that Wall St. is always right.

No. I've just said that the way the system has evolved over the last several decades has shifted incentives in a problematic direction.

 

1) I think there's a heightened focus on the short-term valuation of stock price which is not always aligned with the long-term interests of the firm, especially since stock valuations are in large part rooted in perceptions.

 

2) Relatedly, the culture of executive compensation has become detached from the performance of the company. Compensation has exploded, but I don't see any evidence the executives have gotten better. I think this is a shift in corporate culture, especially at the board level, and not a shift in the price of effective executives (Japanese firms tend not to shell out like this and they are still very competitive).

 

3) These are related. Many executives are compensated through stocks or bonuses connected to stock valuations. This again incentivizes executives to make short-term decisions to boost immediate stock-price, rather than the sometimes more difficult decisions to shape the long-term strength of the firm. The article I posted earlier touched on a related phenomenon, which is the misreporting of financial statements to boost incentive-based bonuses. Similarly, a company can be perceived as acting stupidly by not overpaying their executives, even if they are comfortable with the performance they are paying for, which further encourages the growth in compensation.

 

I'm also not saying that this is the case 100% of the time or that short-term perceptions can't match long-term interests. But it seems to me there's a trend in this direction that is not entirely justified in the notion that Wall St. is always right.

 

So again I find many flaws in your statements. First obviously 100% of CEO's don't focus entirely on short term valuations as you stated correctly. I would venture to say it's a very small minority and those are the CEO's who lose their jobs.

 

In every board room in America or executive meeting there are plans in place for both short term and long term performance. Is their incentive to perform in the short term? Of course so an executive can't keep kicking the can down the road point entirely at a long term picture. Also the same applies for the reverse.

 

Secondly the misconception that because executives are compensated in stock somehow that is bad thing for long term growth is another false narrative.

 

Executive stock options come with strict liquidity rules so it's not like short term growth guarantees positive future wealth. It is in the best interest of both the company and the executive to have stable growth over the long term to fully grasp the benefit of the executive stock or stock option plan.

I don't want to look for it, but I would like to see the pay ratio of CEO:employees of the thirty constituents of the Dow Jones. I'd bet they are much higher than the average company.

 

Since your original article referenced Wal-Mart let's look at them. Their CEO makes $26MM. According to Wal-Marts website their average hourly pay for full time employees is $12.96/hr ($26,956 annually). They have 1.3MM full time employees. So their CEO makes 964% more than the average full time worker. Fire their CEO and split his pay up evenly and that's a cool extra $20 annually in everyone's pocket.

 

CEO pay isn't the issue. It just makes for a good headline.

Since your original article referenced Wal-Mart let's look at them. Their CEO makes $26MM. According to Wal-Marts website their average hourly pay for full time employees is $12.96/hr ($26,956 annually). They have 1.3MM full time employees. So their CEO makes 964% more than the average full time worker. Fire their CEO and split his pay up evenly and that's a cool extra $20 annually in everyone's pocket.

 

CEO pay isn't the issue. It just makes for a good headline.

 

It isn't the only issue, but it is an issue. Fact is the middle class needs help. If that means the government regulates some of this so be it. Hey if these millionaires/billionaires don't like then they can quit.

This version of Capitalism has been working great for 1% of the nation.

A clueless response. Next!

You've been watching too much TV from the '50s.

 

Do you or have you ever operated, owned, or managed a small business? Just curious.

I never care about nor use executive pay vs average worker's wages as a way to judge "fair" or "right."

 

If the business can get by successfully with lower-wage workers then why should the CEO make less?It's more perception than a real issue IMO.

 

What jobs put someone in the middle class? Have we lost a lot of those jobs due to technology? I think this is where we really need to look when we ask "what happened to the middle class?"

 

While there are still people making money in, say, manufacturing it's a LOT LESS people needed than the old days. Walk through a Ford plant and see how few human hands are now involved. Good news is someone needs to make those robots that Ford uses. Bad news is may require a skill set/education level that we as a country are not producing enough of.

 

Exec pay is just for headlines and for "the MAN is sticking it to us" thinking. Way too simplistic and IMO is ignoring the truth.

A clueless response. Next!

 

Ditto. :walk:

 

FBD, I hope you are in the top 1%. I hope you are not this brainwashed.

With that said it would be possible for the govt to make it really difficult for companies to export labor. That, though, will come with high prices so it's not pain free.

One more thing:

 

These large corporations are not the major employers in this country.

 

About half work for employers with less than 500 employees.

Only about 1/3 work for employers with more than 5000 employees.

I never care about nor use executive pay vs average worker's wages as a way to judge "fair" or "right."

 

If the business can get by successfully with lower-wage workers then why should the CEO make less?It's more perception than a real issue IMO.

 

What jobs put someone in the middle class? Have we lost a lot of those jobs due to technology? I think this is where we really need to look when we ask "what happened to the middle class?"

 

While there are still people making money in, say, manufacturing it's a LOT LESS people needed than the old days. Walk through a Ford plant and see how few human hands are now involved. Good news is someone needs to make those robots that Ford uses. Bad news is may require a skill set/education level that we as a country are not producing enough of.

 

Exec pay is just for headlines and for "the MAN is sticking it to us" thinking. Way too simplistic and IMO is ignoring the truth.

 

Headlines get change. I could careless what they put on the spin as long as it helps push our country ( government and business) to nurse our middle class back to full strength.

While there are still people making money in, say, manufacturing it's a LOT LESS people needed than the old days.

 

A while back, I read that in 1970, a little over 25% of employees worked in manufacturing. In 2010, 10% of employees worked in manufacturing.

 

I would imagine China's growth as a manufacturing power contributed mightily to that.

Headlines get change. I could careless what they put on the spin as long as it helps push our country ( government and business) to nurse our middle class back to full strength.

 

Tell me how limiting executive pay at Wal-Mart helps the middle class.

Ditto. :walk:

 

FBD, I hope you are in the top 1%. I hope you are not this brainwashed.

FAR from top 1%!! But if I were top 1%, it would be no skin off of your back. Capitalism is NOT a zero sum game.

Headlines get change. I could careless what they put on the spin as long as it helps push our country ( government and business) to nurse our middle class back to full strength.

Sounds like we all want the same thing, but have much different views on how to achieve it.