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Bill James on American Economy/CEO pay

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MHBDemon

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http://deadspin.com/bill-james-calls-for-revolutionary-changes-to-the-ameri-1595361407?utm_campaign=socialflow_deadspin_twitter&utm_source=deadspin_twitter&utm_medium=socialflow

I suppose it is quasi-socialist of me, but I do favor a "10 to 1" law stating that no company may pay any employee more than ten times as much as it pays any other employee, on a full-time basis. Enforceable by lawsuit: If your company pays anyone else ten times more than they pay you, you can bring suit against the company AND against the person who is excessively compensated.
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Thomas Piketty's book cited some studies showing that executive pay has basically no correlation to corporate performance vs. competitors, but a very high correlation to corporate performance arising from non-CEO-controllable events (i.e., recessions and recoveries, market prices for commodities).
 
Do you mean that higher paid CEOs perform better in tough economic times?
 
Shut up Bill James, Ray Kroc Jr. will replace us all with robots if he hears you. ALL OF US.
 
Quote isn't very clear. Which scenario is it proposing?
A) The highest paid employee must make no more than ten times what the next highest paid employee makes
B) The highest paid employee must make no more than ten times the lowest paid employee.

A would have virtually no effect on anything. B is looney tunes and would have disastrous ramifications (so the CEO of McDonalds should be limited to comp of $300k? Nuts).

Agree with the general idea that executive compensation, particularly CEO compensation, is out of control. But, it's also pretty low impact economically.
 
WFU Lurker said:
Quote isn't very clear. Which scenario is it proposing?
A) The highest paid employee must make no more than ten times what the next highest paid employee makes
B) The highest paid employee must make no more than ten times the lowest paid employee.

A would have virtually no effect on anything. B is looney tunes and would have disastrous ramifications (so the CEO of McDonalds should be limited to comp of $300k? Nuts).

Agree with the general idea that executive compensation, particularly CEO compensation, is out of control. But, it's also pretty low impact economically.
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I think B, but I'd agree its problematic. His answer doesn't sufficiently answer that question:

One reader invoked "the law of intended consequences" to explain that James's proposal would dry up the supply of shitty jobs, because an executive whose company was paying people badly would be able to make only 10 times what the badly paid people were making. James's reply, in part:

There is not and never will be any shortage of scutwork jobs. The economy is drowning in scutwork jobs.
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A company like McDonalds probably has 15+ layers within it operations, the kind of salary compression required for a 10x rule would really reduce incentive to take on responsibility and move up in the organization.
 
Some people's value to a company is worth way more than 10x the value of others. But I agree with 923 that CEOs are ridiculously overcompensated when their value isn't necessarily clear. Many different corporate strategies will work if executed correctly. The key is in the execution. The rest is PR and glad handing.

The idea that a VP of Tax should make only 10x more than the mail clerk however, is pretty ridiculous. How about CFO or accounting controller where you can literally go to jail for not exercising the proper professional competence. Who in the world is going to take on that responsibility without the pay to justify it?
 
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PhDeac said:
Do you mean that higher paid CEOs perform better in tough economic times?
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i have not read the studies myself, but I think no- high pay is just correlated with good economic luck. ceos are rewarded for being in the right place at the right time far more than for anything they actually did, according to these studies.
 
On my phone so can't research easily, but I think I have read that in the 50s and 60s ie the good old days, the multiple was generally in the 20-30x lowest salary range. In today's dollars that is top pay of what maybe 500k to 750k? That's not exactly chump change.
 
Gotcha. And those findings makes sense.
 
Deacon923 said:
On my phone so can't research easily, but I think I have read that in the 50s and 60s ie the good old days, the multiple was generally in the 20-30x lowest salary range. In today's dollars that is top pay of what maybe 500k to 750k? That's not exactly chump change.
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With minimum wage at $7.25, you're way overestimating the CEO wage for mid to large companies with any unskilled workers. A multiple of 40-50x would work.
 
Deacon923 said:
On my phone so can't research easily, but I think I have read that in the 50s and 60s ie the good old days, the multiple was generally in the 20-30x lowest salary range. In today's dollars that is top pay of what maybe 500k to 750k? That's not exactly chump change.
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That's a lot better than 10x. And, no, it isn't chump change at all. The problem isn't the top rung, it's all the rungs between the top and the bottom rung.

It's also not very logical to really even think in these terms. A company's minimum salary is not an indicator of the size of the organization or the complexity of running it.
 
WFU71 said:
With minimum wage at $7.25, you're way overestimating the CEO wage for mid to large companies with any unskilled workers. A multiple of 40-50x would work.
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FWIW, when I came up with the $300k for McDonald's CEO, that was based on $30k / year for the line worker (using the proposed $15 minimum wage, which I also happen to think is a dangerous idea).
 
WFU Lurker said:
That's a lot better than 10x. And, no, it isn't chump change at all. The problem isn't the top rung, it's all the rungs between the top and the bottom rung.

It's also not very logical to really even think in these terms. A company's minimum salary is not an indicator of the size of the organization or the complexity of running it.
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i would not advocate for such a law. but at the same time, I don't think it's that much more arbitrary than the system we have now.
 
What next? Should we limit the return shareholders can get from investments? What if wages at the bottom don't go up much and almost all the difference is passed on to shareholders?
 
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