What do you consider fair executive compensation?

[OnlinePoker]

A friend and I were having a discussion on this topic. I remember reading somewhere that Ben & Jerry, before they sold out were getting 7 times the lowest employee's hourly wage. I believe 10 times the lowest is fair. For someone whose lowest employee is earning $8 per hour, the executive's salary would come in at around $170k. Any bonuses would have to be shared equally among all employees. My friend, on the other hand, believes executives should get a base salary with bonuses based on a percentage of the company profits (no profit, no bonus). He also doesn't believe that employees should receive bonuses as a matter of policy but have them decided by the board of directors (I tried arguing that they would never get bonuses under this scheme, but he wouldn't listen). Opinions welcomed.

[NightWatcher]

1. you cant regulate Capitalism, just as you cannot slow or control the worst cancers

Capitalism feeds on labor, resources, and society until society dies.
Cancer feeds on the body until it dies

[Fumesucker]

2. The problem with bonuses for executives is that they tend to encourage short term thinking..

Unless there is some way to structure the bonus to encourage longer term thinking I don't see that a bonus is a particularly helpful means of compensation.

[havocmom]

5. EXACTLY! Execs working just for the next quarter's report are a big part of the problem

Do ANYTHING to make the next quarterly report seem good and give yourself a big raise.

That is how NOT to have a sustainable business, but it is how things have been done for too long. So they have to shuffle a lot of paper (create new entities) to hide the losses and build mirage profits.

Not sustainable.

Someone here at DU remarked that execs now do not, have never actually built or made anything. They just deal in illusion.

When you don't make anything, or provide any real service, you don't need much of a labor force. They thing themselves genius for cutting that business expense. But they forgot that they just killed off their customer base along with killing off production.

Too many MBAs not enough makers of anything.

[Winterblues]

3. No more than triple what the highest paid regular laborer receives..

Some now make over five hundred times as much..The majority of the labor is done by the workers and the "management" gets all the rewards.

[scheming daemons]

4. I like the Japanese model (which Ben & Jerry follow)...

The highest paid employee can make no more than 7 times what the lowest paid full-time employee makes.

CEO wants a raise? Then the people at the bottom have to get one too.



Most Japanese companies follow a model similar to this.



It's more than fair... encourages employees to want to move up the corporate ladder, but also encourages business leaders to treat their employees well. This is truly a "rising tide lifts all boats" set up.

[Alias Dictus Tyrant]

6. The average CEO compensation is $160k per year.

Compensation for executives depends a great deal on the stage of the business and the kind of business that it is. The "10x lowest wage" and similar rules are nonsense and very inflexible even though the vast majority of companies meet this rule already. For example, there are executives that specialize in smoothly winding down failing companies. They usually get paid double their predecessors because their job is to "go down with the ship" in an orderly fashion that minimizes damage. You can't always measure performance in terms of simple metrics of company success.

I don't find an average CEO compensation of $160k to be unreasonable at all. It is not a fun job, and unlike regular employees they are legally liable for the behavior of the company and personally liable to the shareholders. Most people who are CEOs choose to do the job for reasons other than money (e.g. the challenge of building a successful company), there are other professions that pay more for less stress.

By the way, most boards of directors are generally supportive of performance-based employee incentives like bonuses, options, etc. The robber baron caricature is a canard, the real world doesn't work that way.

[Gman2]

7. Bonuses and huge salary are required to insure a sociopath.

[guitar man]

8. Minimum wage

plus the ability to make millions in bonuses IF and only if the company performs. You're the leader Mr/Ms big shot, you're the big "risk taker", get in there and make the company profitable, make it work for the stockholders and the employees and you get a nice big pile for yourself. Fail, and you walk out with what you've earned.

sound fair? :shrug:

[Cleita]

9. I think profits should be divided equally among employees including

executives every quarter. Of course I believe all companies should be employee owned. Some profits should be re-invested in the company. As far as CEO compensation, it shouldn't be more than ten times the lowest paid employee. However, it could be good if the lowest paid employee made a living wage instead of $8 an hour that is not a living wage. No body should be made rich on wages. That's what savings, investments and inheritances are for.

[slackmaster]

10. Whatever the market will bear

It's very simple.