Bill proposes higher taxes on CEOs with high wage disparity
Allen Young | Sacramento Business Journal
Former U.S. Secretary of Labor Robert
Reich, left, stands beside Sen. Mark DeSaulnier, D-Concord in the
Capitol on Thursday. Reich was on hand to help promote Senate Bill 1372,
which would raise state taxes on publicly traded companies that pay
their top-earning employee 100 times as much or more as the company's
average worker.
Despite a high-profile backing by former U.S. Secretary of Labor Robert Reich, who joined lawmakers in Sacramento on Thursday to promote the bill, passage will require support from both the governor and some Republicans to garner a supermajority.
Bye Toyota, who's next to leave the tarnished Golden State?
ReplyDeleteLou, near as I can tell, Toyota's move is not in any way related to this particular story. Something I couldn't find, however, was whether this law would have even affected them. Comparatively, Toyota's CEO make WAY less than other auto CEO's and it's quite possible his ratio would be less than 100. Most stories I read talked about consolidation, but I'm sure that cutting cost was a motivating factor. Careful what you wish for Texas, Toyota is coming and undoubtedly bringing a hoard of liberal workers with it.
ReplyDeleteTwo links i found interesting http://go.bloomberg.com/multimedia/ceo-pay-ratio/ http://www.bloomberg.com/news/2013-04-30/ceo-pay-1-795-to-1-multiple-of-workers-skirts-law-as-sec-delays.html From the second article, "The average ratio for the S&P 500 companies is up from 170 in 2009, when the financial crisis reduced many compensation packages. Estimates by academics and trade-union groups put the number at 20-to-1 in the 1950s, rising to 42-to-1 in 1980 and 120-to-1 by 2000."
Putting aside my communist beliefs for a second, I'm genuinely interested in why you personally think this ratio has risen so much. I'm also interested in whether you think it's a good thing or if you think it really doesn't have any relevance in our economy in the United States.
Why have wages stagnated for so many years? Does the level of wages begin at the bottom up? Certainly doesn't begin at the top down.
DeleteIs it a relationship between supply and demand? At least here we have a huge amount of entry level workers not counting teens looking for work. The fact we have millions unemployed related to the number of jobs available a determining factor? The fact the government says there is virtually no inflation a factor?
No Toyota bailing out of California isn't related to this story other than they certainly didn't want to consolidate in California where taxes are a bit higher. Relocating to a state with no state tax.
The next question is how many companies will throw in the towel and move as they are tired of government control now the attempt to dictate wages.
Personally the CEO pay is meaningless as it's 1 person. If the person performs, grows the company, share value rises, they are well worth it. If not, sell the stock or don't purchase it, the board of directors will figure it out. If not they will be out of business.
Wages? Starts at the bottom. Why raise wages when there are 3 people willing to do the job for minimum wage? Moves up the chain in the same way until you reach a management position where compensation is paid on performance.
You didn't really answer the question I was asking though, which is why has that ratio gotten so large. Looking at your fifth para, clearly there have been times when companies still grew, increased shareholder value, but the ratios still remained lower. I'm curious as to why that was the case.
DeleteWhy raise wages when you can squeeze labor? From a business perspective, capitalism dictates that you never pay more for labor than you need to lest it become inflationary (and cut into profits). Not saying it's evil, it's just the way things work. I respectfully disagree with the rest about compensation being related to performance. The CEO's at the level we are talking about here will get paid either way, it's more or less a lottery.
Prior to my own business I worked for a large corporation. My compensation was tied to my performance. Pay was set, raises based on performance. Bonus, 30% was based on performance, options/grants, based on performance. I did quite well, others, no so good.
DeleteIf the performance isn't there? Will stock, bond holders still hang in there? I personally don't maybe others do.
Was Steve Jobs worth whatever he wanted for compensation? Was he worth 200x the average worker? I would say yes as I owned their stock and did quite well.
Biggest problem today is how do you gauge worth in an international company? Exxon, an international company, 55% of their workforce is overseas, how do you measure worth and appropriate pay?
The issue today is the CEO is part of the board of directors. The CEO should report to the board not be a part of it. Many of the directors are appointed by the CEO and rubber stamped by the board.
CEOs make most of their money through incentives
As a general rule, base salary accounts for just 20 percent of a CEO's pay. The other 80 percent comes from performance-based pay.
Base pay for the core role and responsibilities of the day-to-day running of the organization. This amount is very often less than $1 million because the IRS has imposed tax restrictions on “excessive” compensation.
Annual bonuses for meeting annual performance objectives.
Long-term incentive payments for meeting performance objectives to be achieved for a two- to five-year period. These awards are sometimes described as performance shares, performance units, or long-term cash incentives.
Restricted stock awards as an incentive to assure the executives are strongly aligned with the interests of shareholders. Because restricted stock awards have an actual cash value when they are granted, the proxy table shows these in dollars, not in shares.
Stock options and stock appreciation rights (SARs) for increasing share price and increasing the shareholders' returns. Options have very favorable accounting treatment for the company, which is why they are so common.
Total compensation for CEOs goes beyond cash and stock
Although typically excluded from pay calculations, executive benefits and perquisites are disclosed in the summary compensation table and the retirement plan section of the proxy. They include the following:
Supplemental executive retirement plans (SERPs), which may keep the executive whole (that is, make up the difference) or better from a tax regulation that prevents the executive from receiving a pension benefit that exceeds ERISA limits ($135,000 per year or less based on the pension plan). For a CEO making $2 million a year, a $135,000 benefit may be inadequate for maintaining a comparable lifestyle.
Executive insurance plans that provide a source of retirement income and a richer death benefit to the executive's family. These plans are used to guarantee retirement benefits from bankruptcy. Unlike standard retirement plans that receive protection from bankruptcy by the federal government, SERP benefits can be lost in the event of bankruptcy.
Miscellaneous executive perquisites and other compensation for various programs or negotiated deals that don't properly fit into the above categories, including perks such as country club dues and financial planning. These are often small numbers that disclose imputed income amounts for those additional special benefits, but can also include some very large amounts for items such as loan forgiveness, special insurance programs, relocation expenses, etc.
Are they over paid, in many cases, yes.
The problem I have is it isn't any business of government what people are paid. More social engineering. Perfect.
I'm not trying to be obstinate about this, but my chief question remains, Why? This post here is awesome in describing how the mechanisms of CEO pay works, and how they structure it to dodge taxes (that the rest of us pick up the tab for) but it still doesn't explain to me why the ratio went from 42-1 in 1980 to nearly triple that in 2000 to 170-1 in 2009. Has CEO brainpower increased by a similar amount?
DeleteThis is a comment I agree with "The issue today is the CEO is part of the board of directors. The CEO should report to the board not be a part of it. Many of the directors are appointed by the CEO and rubber stamped by the board." 100% agree, but it still doesn't answer my question entirely.
So outta touch with reality. California created more private sector jobs then any other state in 2013 at 320,000. Unemployment dropped from 12% to 8%. Gov Jerry Brown has all but eliminated the 26 billion dollar deficit. He has now twice been called on to fix the state after movie star governors drove it into the ground.
ReplyDeleteCalifornia had 1,656,500 unemployed residents in 2013 according to the Current Population Survey. In addition, there were 1,309,100 workers who were employed part time for economic reasons. These individuals were working part time because of slack work or business conditions, or because they were unable to find a full-time job. Nationwide, there were 7.9 million individuals working part time for economic reasons in 2013.
ReplyDelete- 2 -
California had
1,656,500
unemployed residents in 2013 according to the Current Population Survey. In
addition, there were 1,309,100 workers who were employed part time for economic reasons (also known
a
s involuntary part time). These individuals were working part time because of slack work or business
conditions, or because they were unable to find a full-time job. (See chart 2.) Nationwide, there were 7.9
mi
llion individuals working part time for economic reasons in 2013.
In 2013, the number of individuals considered to be marginally attached to the labor force in California was 318,300. People marginally attached to the labor force are not working but indicate that they would like to work, are available to work, and have looked for work at some time during the past 12 months even though they had not searched for work in the 4 weeks preceding the survey. In the United States, the number marginally attached totaled 2.4 million in 2013.
States with high U-6 rates included California (17.3 percent)
Jerry Brown raised income taxes to a record high in the country at 13.3% for wealthy individuals. Raise taxes your sure to get a few bucks for now.
Someone making 28K a year, 6%.
49K a year, 9.3%
Tax everyone and it's sure to help for a while.
Despite the good news for the deficit, Brown cautioned that a "wall of debt" remains to be addressed. The state still has more than $34 billion in outstanding debts.
Don't worry, be happy.
You would shill for any liberal, maybe you can cheer on Detroit. pathetic.
Speaking of Detroit yea you are again out of touch. At the old GM R&D center
ReplyDelete(The Argonaut) which I understand is not in the best part of town big things are happening. You familiar with Tom Karsotis? He founded Fossil Brands Inc in 1984. He has long ago quit that company and has now started a new one in of all places Detroit. For the first time in decades high end watches are being made in the United States and they are moving towards being made with all American made parts. Why aren't they 100% American made? Well no one in America makes some of the necessary components. He has also founded the Bedrock Manufacturing Capital Investments to help start new American Business.
The new company Shinola, expects to make about 450,000 watches a year all hand made and increasingly all American made. Retailing will be done from company store fronts (currently 2 Detroit and NYC). The company is also making in America and in Detroit leather goods such as wallets, IPAD and kindle covers, and high end hand built American made bicycles. Do you have any doubt that this proven entrepreneur will fail? I don't.
http://www.economist.com/blogs/schumpeter/2014/02/making-it-america
DeleteOh here's your link I know you just Have to have them.
If I only lived in your dream world.
DeleteWhat has Detroit to do with the mess called Californicate?
You brought it up look at your last comment. Maybe angry old man if you would get your head out of the sand and look for what's right instead of dwelling on what's wrong you would feel better about the world.
Delete