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Executive compensation is completely ludicrous

2,285 Views / Posted by Aaron Greenspan

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I've read far too many articles about CEOs of companies getting paid 600 to 700 times as much as their average employees. Many of these CEOs are failed leaders whose management skills led to decreases in shareholder value or outright disasters.
Supporters: Aaron Greenspan, Javed Qadrud-Din, Eric Teasley, Aaron Wilton, Jonathan Wallis, Kyle Halgerson, Scott Cederberg, Arbi Llaveshi, Brian Sperling, William Hughes, Reddit User Person, Timothy Suen
Opponents: None
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    Arbi Llaveshi

    Arbi Llaveshi / October 31, 2011 at 7:36 PM DT

    What would these justifications do? Would that mean that the U.S. government would have to institute wage caps for individuals?

    Ed Bradford

    Ed Bradford / November 6, 2011 at 6:56 PM ST

    For financial companies with 'fiduciary responsibility' write a one page Federal law that says:


    Dick Fuld, Frankin Raines, Hank Paulson, Jamie Dimon and Lloyd Blankfein would have play vastly different tunes in the 2001-2008 time frame is their skin was "all in" the game.

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    Solution Require CEOs to justify annual compensation above $1 million to the SEC in a public report
    Explain to us why you're really that special. Go ahead. Try.
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    Solution Raise taxes dramatically (2-3x) at the upper end of the progressive scale.
    Top marginal rate on exuberant salaries should exceed 75%, and has historically been as high at 91% in the US. Make the tax scale truly progressive, which will make compensation above a certain limit inefficient.
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    Solution Limit the maximum compensation of any company to 35 times that of the average employee.
    While this is still a large gap, it is a starting point for limiting how much the upper management can take advantage of the average worker. There is still no numerical limit on how much a CEO can make. Instead, it simply requires that they increase everyone's salary before increasing their own.

    In this case, compensation includes all benefits that have a monetary value. These include (but are not limited to): salary, healthcare, company car, housing allowance, meal allowance, and retirement benefits.
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    Solution Strengthen unions by statutorily revoking all "Right To Work" laws in various states, require that corporations of a certain size provide one board slot for an elected employee representative, require that industries negotiate with unions as a whole
    "Right To Work" legislation has made it impossible for workers to every be on even footing with the legion of shareholders with whom they are forced to negotiate as individuals in competition with other workers by these RTW statutes, which allows the shareholders to give all the value added by workers to the executives instead (and which makes the executives more beholden to the shareholders than basic fiduciary duty).

    An employee representative on the board with a full vote would be able to stymie attempts to overcompensate the executives:

    I have heard but can't find corroborating evidence that South Korea's unions negotiate with entire blocs of industry at once to establish a contract for all workers in that industry. For instance, all Korean auto manufacturers would negotiate at once, as a group, with the UAW. This would allow employees to have a more stable footing in negotiations.
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