That Forbes article is a great one. Personally I think now that the cat is out of the bag, we should start to see things changing at the executive level (though it's going to take years).
For a long time, many of us have speculated that CEOs were overpaid but suggesting this was met with claims of being "anti-capitalist" and other such nonsense. Now thanks to the Forbes article and the book it's talking about, we can demonstrate that CEOs are * clearly* overpaid. Their own pay has gone up, while company performance per salary dollar has gone down. Meanwhile the rest of us produce vastly more than, say, 20 years ago, yet wages remain mostly flat.
Could you define what you mean by "overpaid"? Is it merely a complaint that CEOs are paid more than you wish they were, or something else?
Meanwhile the rest of us produce vastly more than, say, 20 years ago, yet wages remain mostly flat.
This claim betrays a misunderstanding of how productivity is measured, and how workers are compensated for their productivity (i.e., comp is wages + benefits, not wages).
And productivity can easily go up due to factors unrelated to workers. E.g., if a company replaces workers with robots, the measured productivity (total production / # of employees) of the remainder will go up. Is this a reason to increase their pay?
Yeah, except he didn't say compensation was flat. He said wages were flat. The fact that we have a higher percentage of our compensation tied up in the skyrocketing cost of health care only underscores his point.
I wasn't disagreeing that CPI-adjusted wages are flat, I was pointing out that there is no reason for CPI-adjusted wages to be related to productivity.
Wages are related to creation of value, which itself is related to productivity. By what logic would productivity go through the roof but CEOs realize the gains of it?
You can try to claim that's simply the market value of getting a CEO, but this doesn't hold up: CEO salary-to-revenue has decreased. We're paying more and getting worse performance. Further, your argument depends on efficient markets which don't pass the common sense test and has been shown to be an N!=NP problem.
You find productivity goes up due to robots, who should get the higher pay? The CEO? If so, why? Or should prices be lowered? It is completely disingenuous to argue over on "deserves" economic surplus, the whole point is that surplus is in excess of everyone's contribution, so social and power factors come into the forefront in determining the distribution.
I already did. We can now prove that revenue has actually decreased per dollar paid to a CEO. One might say that that that is because salaries have gone up, but for everyone else wages have stayed mostly flat. So by what possible logic would CEOs now make more money for accomplishing less? And why wouldn't these same factors apply to anyone else?
>This claim betrays a misunderstanding of how productivity is measured
I understand the theories of how it's supposed to work just fine, thank you. In theory, if I can accomplish more than those before me I should make more because I'm creating more value. In my career I've made an uncountable number of jobs unnecessary through automation. But did I capture any of this productivity boost? No, the executives took it all.
The system is broken because CEOs have been gaming it ever since this idiotic "Shareholder value" focus came about. Everyone has known this deep down for years and now we're finally starting to prove it concretely. To me it's going to be funny watching so-called "experts" explain why they spent decades preaching nonsense about CEO pay being correct as it's systematically shown to be a product of system exploitation.
EconTalk interviewed Kaplan about this very subject. His research shows that CEO's pay has _not_ risen faster than any other "highly skilled labor", such as doctors, lawyers, etc. If you listen to the podcast, it is a very convincing set of data backing up his conclusion.
Instead, hedge fund managers are the ones that have absolutely rocketed out of the stratosphere in terms of inflating pay.
I'm afraid you've been tricked. CEOs used to make 40-70 times as much as the average worker. Now it can be hundreds of times. All the while, revenue per dollar of CEO salary has gone down. The cat is out of the bag. Everyone who defends the status quot in regards to CEO pay is either benefiting from it (and wishes to continue) of suffering from Stockholm syndrome.
We can now prove that revenue has actually decreased per dollar paid to a CEO...CEOs now make more money for accomplishing less?
Your metric is a ratio and it does not prove that CEO's accomplish less.
For example, suppose a CEO doubles revenues (did you mean profit?) from $1B to $2B and their pay increases from $10M to $30M. They have accomplished more, but revenue/pay has gone down.
In my career I've made an uncountable number of jobs unnecessary through automation. But did I capture any of this productivity boost?
Most likely. Pay for programmers has skyrocketed, unlike pay for ordinary workers.
Besides, the productivity of the few people you failed to replace has also gone up. If you make 8/10 jobs redundant, should the pay of the remaining 2 increase commensurately with their drastically increased productivity?
For a long time, many of us have speculated that CEOs were overpaid but suggesting this was met with claims of being "anti-capitalist" and other such nonsense. Now thanks to the Forbes article and the book it's talking about, we can demonstrate that CEOs are * clearly* overpaid. Their own pay has gone up, while company performance per salary dollar has gone down. Meanwhile the rest of us produce vastly more than, say, 20 years ago, yet wages remain mostly flat.