Striking auto workers want a 40% pay increase–the same rate their CEOs’ pay grew

https://www.cnbc.com/2023/09/15/striking-uaw-auto-workers-want-a-40percent-pay-increase-how-much-they-make-now.html

by heavyset_go • 3 years ago

370 585 3 years ago

Whereabouts should we purchase land in Mexico? Needs to be near the new factories that'll go in next year.

supertrope2• 3 years ago

Companies and individuals do not make decisions based on posturing or their pet peeves. If a company has not outsourced a plant already for cost savings there are reasons for still keeping that operation in the US.

cplusplusfellow3• 3 years ago

Are you aware of the cost implications that may exist by them keeping the plants here?

Maybe that article linked would help you understand the structural cost implications that are proposed.

bagels6• 3 years ago

If labor costs go up 40%, but only in the US factories, I don't see how that doesn't lead to more parts & assembly in Mexico, Canada, China, etc.

mortureb9• 3 years ago

40%? I sincerely wish them the best of luck and I hope they get what is their due but this is probably good news for India, Mexico and China.

mschuster915• 3 years ago

So what, nothing prohibits the US and Europe from raising tariffs on industrial products.

The pendulum of globalization is bound to swing backwards for a multitude of reasons.

mortureb9• 3 years ago

Isn’t that what leads to Ladas and Trabants.

thriftwy3• 3 years ago

cough WTO cough

arcticbull• 3 years ago

So what, nothing prohibits the US and Europe from raising tariffs on industrial products.

I mean, there's retaliation. Trade is mutual.

astrange22• 3 years ago

Tariffs, which are just a regressive tax increase on car consumers, are a very bad industrial policy. You want to do export promotion instead.

vadym909• 3 years ago

If it was that easy it would’ve happened already. And software engineers jobs would have moved first due to savings and low effort and low infrastructure changes required.

mortureb9• 3 years ago

40% of IT work is already outsourced and that’s a number that is rapidly growing and that’s only over a decade and a half. It doesn’t even take into account foreign employees that now just work remotely.

tyingq2• 3 years ago

It's interesting to see workgroups that are harder to outsource, and the kind of contract renewals they are getting. Like airline pilots, for example...and not just forward pay increases, but retroactive pay raises for 2+ years as a lump sum, and many other perks and changes to work rules, higher reimbursement for various things, etc.

fabianhjr• 3 years ago

China has been averaging a 9% wage increase yoy or about 41% per 4 years. This wouldn't be news in China instead it would be the average case.

https://www.statista.com/statistics/743563/china-average-yea...

https://www.china-briefing.com/news/average-salaries-in-chin...

astrange22• 3 years ago

US market car manufacturing isn't in India/China because of NAFTA. And because cars are big and heavy, of course.

mortureb9• 3 years ago

Mexico it is then.

AmVess• 3 years ago

Buick Enclave and Lincoln Nautilus are two Chinese made cars in the US. Expect US car manufacturers to have the bulk of their product lines to be made and designed in China before too long.

endisneigh4• 3 years ago

40% over 4 years isn't as crazy (especially when you consider that they had some concessions back in '08). typical clickbait when you consider this is a high value for negotiation and they're likely looking for anywhere between 20-30% over 4 years when it's all said and done. barely above inflation YoY.

dmitrygr• 3 years ago

they're likely looking for anywhere between 20-30% over 4 years when it's all said and done.

TFA conveniently points out to you that 20% has been offered to them and was rejected.

endisneigh4• 3 years ago

TFA conveniently points out that the average offer between the three automakers is less than 20-30% :), and 20% is the low-end of 20-30% btw

l33t73322733• 3 years ago

Good. As it should be. Record profits deserve record contracts.

mr_toad5• 3 years ago

It’s not entirely on the media for using these headline numbers. The Unions like these numbers being used. It sounds better to their members that they’re getting a 40% pay rise.

foogazi• 3 years ago

It sounds better to their members that they’re getting a 40% pay rise.

When they get it - right now every reports that they are asking for 40%

r00fus7• 3 years ago

Shawn Fain (UAW President) has outright rejected a 20% offer. Not to say they won't agree to 30% but for context - UAW workers gave up a LOT of pay and rights in the 2010 auto bailout - the workers essentially helped to bail out management in that case along with the USG.

40% is table stakes.

burnte• 3 years ago

40% over 4 years is PREPOSTEROUS.

jonathankoren2• 3 years ago

It’s important to note the workers made huge concessions in 2008 that saved the companies from bankruptcy. Over the years they’ve seen stagnant wage growth, while the execs got solid gold toilets. Even with 40% increase (inevitably spread out over many years), theyd barely be back to where the would have been without the concessions.

sokoloff• 3 years ago

Arguably, without the 2008 concessions, they'd be out of a job entirely.

thriftwy3• 3 years ago

Or maybe they would already be employed at a better place paying more and using their labor with greater leverage.

I believe that workers and non-CS engineers are horribly underpaid around the world. They are underpaid in the US's Aerospace, they are underpaid in Russia's military industrial complex and they are also underpaid in China which actually supplies the stuff that everybody uses. Don't doubt they are also underpaid in Japan and Korea.

nerdponx7• 3 years ago

All the more reason why they ought to get a little back at this point.

TheCoelacanth• 3 years ago

And the shareholders would be out of their investment.

ceejayoz2• 3 years ago

Same for the CEOs, though.

lr4444lr3• 3 years ago

They were in no position to negotiate back then. Plus, there was probably heavy influence from retirees to save the pension fund.

readthenotes1• 3 years ago

It's not unreasonable unless you feel the C-suite are simply parasites trying to leech as much out of the system as it can stand

econperplexed• 3 years ago

From 1978 to 2021, CEO pay grew by 1,460%, adjusted for inflation, versus just 18.1% for the typical worker.

Why has the supply of CEOs not kept up with the demand for them? Surely, with the improvement in education and in increase in MBA programs, there must be far more CEOs today than in 1978. Why has the ratio of CEOs to Companies fallen by 14x for their wages to rise this much? /s

As many argue, wages are only set by supply and demand. And if workers are underpaid, then it is because they are replaceable. Use the same framework to explain CEO pay.

kortilla5• 3 years ago

There is no academic training to be a good CEO. They are not easily replaceable. If they were, board members wouldn’t bother offering such high pay. Shareholders don’t appreciate wasting money.

hinkley7• 3 years ago

But if we offer more money, surely we will attract the attention of a better CEO!

thechao2• 3 years ago

They've become 14.6x more efficient at ... what? Increasing their pay? C'mon.

throw0101b7• 3 years ago

There is no training to be a good CEO. They are not easily replaceable.

If Steve Jobs—who first created and then basically rescued Apple and started it on the path to where it is today—can be 'replaced' then any other leader can be replaced.

Similarly there are plenty of CEOs that are paid oodles of money that were or are absolute garbage: see Boeing for the last 15+ years as Exhibit A.

dymk3• 3 years ago

Of course there is training to be a CEO. Do you think all the good CEOs were born with the knowledge to be a CEO?

nerdponx7• 3 years ago

The argument is not that CEOs are not valuable. The argument is that there's no obvious increase in their value since the 70s that might justify their relative pay increase.

pydry• 3 years ago

Since there's no pay penalty for being a bad CEO (pay correlates almost exclusively with company size) I guess we can assume that being good at the job is not the quality most important to those who do the selection.

polemic• 3 years ago

Alternatively, as many argue, wages are not only set by supply and demand.

Invictus0• 3 years ago

What if CEOs were underpaid in 1978?

dymk3• 3 years ago

They weren't

endisneigh4• 3 years ago

the supply of prospective management people definitely has kept up. there are literally tens of thousands of MBAs graduating every year, to say nothing of managers at existing F500 companies. there are only so many large companies, and thus so many CEOs.

look at tiny barely profitable companies, the gap between median wage and CEO is sometimes less than 2X.

all these takes on CEO pay when the reality is simple - CEOs are paid a lot because they the cost of being wrong is more than their pay. this results in companies that have a lot of money competing, driving up the price. the end. it's the same reason lebron james is paid 10X more than NBA average.

nerdponx7• 3 years ago

there are only so many large companies, and thus so many CEOs

This is a statement that there is low quantity demanded by the market. It's actually a great example of how the naive supply-and-demand argument doesn't make a lot of sense.

astrange22• 3 years ago

It depends how they're counting.

There was an example in Money Stuff this week where a CEO got a pay package "worth $110 million". It's actually made of stock options that vest if the share price went above $150, but the expected value was $110 million so that's what was reported.

…But the share price only reached $66. So in fact he was paid zero, and he quit. (Well, $1.5 million in cash.)

https://www.wsj.com/business/ceo-with-110-million-pay-packag...

vel0city5• 3 years ago

paid zero
paid $1.5 million in cash

These are two wildly different things.

aaomidi2• 3 years ago

Right, but in general the CEO doesn’t really do much to the stock price. If the general market is up, it’s going up. If the market is down, it’s going down.

How many companies really break that relationship in their market sector?

So tldr, ceo pay is based on the economic cycle rather than how the company does.

spondyl• 3 years ago

It's actually made of stock options that vest if the share price went above $150, but the expected value was $110 million so that's what was reported.

It gets a little weirder than that I suppose since you might have a great deal of shares in a company, which you never exercise so you could say that money doesn't really exist until exercised.

You can however use those shares as collateral for a mortgage or other line of credit which is a pretty common tactic for wealthy people to avoid paying income tax that they otherwise would if they were to sell said shares.

olliej• 3 years ago

As someone pointed out "1.5 million in cash" for not doing the job you were hired for is .. not zero.

I'm fairly sure I could achieve the same results for considerably less.

Moreover making compensation dependent on stock price movement encourages corruption and fraud - look at the numerous Enrons and other financial claims. All of which left the majority of those responsible enriched while destroying the lives of others.

distortionfield• 3 years ago

Absolute lukewarm take here. Wages are not only set by supply and demand. Institutional power, regulatory concerns, etc... are huge factors in compensation, too. You can argue they're abstracted over by the market anyway, but you're not saying anything interesting until you dive into the tensions between those concerns.

And that's not even touching the fact that the workers are clearly valuable and irreplaceable enough that they can halt production like this.

fallingfrog3• 3 years ago

“Supply and demand” is a very limited special case of a broader principal, which is that pay reflects power. CEO’s power and control over their own pay has increased, and the power of regular workers has decreased. There are a myriad of reasons for this but it’s certainly deliberate.

r3trohack3r2• 3 years ago

Not all jobs have quantitative measures for impact. The more a job is decoupled from a measurable value, the more likely that job is to be bid up to "as much as the company can afford."

I've seen this in my career, the closer I get to "SRE" or "platform engineer" the more decoupled my salary has become from my actual measurable value.

I'd articulate the thinking as, roughly:

We know this role is important. We know that having a bad SRE team (or CEO or platform team) is expensive, it could cost us the 100% of the business. And we don't know how to measure the value a good one provides. Therefore we are willing to spend as much as we can afford to make sure we get a good one.

candiddevmike• 3 years ago

SREs aren't on the board of directors setting the pay for other SREs who are on their board of directors though.

The elite/ownership/"capitalism winner" class are playing on an entirely different level with their power and influence. Don't kid yourself into drawing comparisons with your situation and miniscule in comparison compensation. It's always heads they win, tails you lose.

mr_toad5• 3 years ago

as much as the company can afford.

This is pretty much it. Everyone wants to avoid hiring a bad CEO so it’s a bidding war for executives with track records at large companies.

And when you’re making billions a year the CEO compensation is a drop in the bucket.

carlosjobim• 3 years ago

We know this role is important. We know that having a bad SRE team (or CEO or platform team) is expensive, it could cost us the 100% of the business. And we don't know how to measure the value a good one provides. Therefore we are willing to spend as much as we can afford to make sure we get a good one.

And who are "we" in this train-of-thought? If it's shareholders, that's where the root of any problem lies. If shareholders are real businessmen and entrepreneurs who built up the company or similar companies, they will have a clue as to what is a good CEO. If the shareholders are real workers who believe in the company they're working for, they will have a clue as to what is a good CEO.

Today, shareholders are no longer real businessmen or real workers, but retirees represented by bureaucratic investors. That's why they have no clue as to what is a good CEO.

chiefalchemist2• 3 years ago

Yes. But now take CEOs and their pay and map it to company performance and stock performance. Are they skilled at bringing out the best in their company, or squeezing staff wages more and more?

hackerlight• 3 years ago

Is that an apples to apples comparison? Is the mean inflation-adjusted market cap of all the companies in both their 1978 dataset and 2021 dataset the same?

gretch• 3 years ago

I support the workers' decision and negotiating on labor rates is the basis of our economic system. Get what you deserve.

That said, the CEO pay is easily explainable:

Profits at the struck auto companies increased 92% from 2013 to 2022, totaling $250 billion, according to EPI
CEO pay at the Big Three has grown 40% in the last decade, according to EPI

If you're the CEO of a company and you increased profits by 92%, I don't know seems pretty fair to me. There's a lot of other businesses that suck and haven't raised their profits in the meanwhile.

I think talking about the CEO pay is the wrong path (though I do admit it's marketable in the mainstream news). Just ask for what you think you deserve and don't work if you don't get it. It's as simple as that.

pratheekrebala• 3 years ago

The workers also contributed to that 92% increase in profit.

afavour2• 3 years ago

If you're the CEO of a company and you increased profits by 92%

Did you? Attributing all the success a company achieves to the CEO feels shortsighted.

Aside from anything else: if all these companies saw their profits grow by so much surely there’s an external commonality there? “The CEO did it all” would be slightly more plausible if only one company experienced that success.

l33t73322733• 3 years ago

It seems erroneous to me to imply that the CEO deserves a bigger pay increase than the workers that actually increased profits by 92%

amarshall• 3 years ago

If you're the CEO of a company and you increased profits by 92%

This assumes that the increase in profit is attributable primarily to the CEO. Well, that at least 43% (40/92) of it is.

Just ask for what you think you deserve and don't work if you don't get it. It's as simple as that.

This only really works with unions. Fortunately, these workers have one.

nitwit005• 3 years ago

CEO pay has gone up pretty much across the board, significantly outpacing workers for several decades, even at companies that have not done well.

cratermoon3• 3 years ago

If you're the CEO of a company and you increased profits by 92%

YOU, the CEO, didn't single-handedly increase profits by even a single percentage point. One employee out of 1 million, take your millionth of a cut of the profits, that's still $150K.

DanHulton• 3 years ago

There is a big difference between "CEO responsible for increasing profits" and "CEO while profits increased", and it's not at all clear that this is one or the other. (Although in fact, if all competitors in an industry all had their profits grow, I think that's actually likely excellent proof that the CEOs weren't responsible at all.)

lancesells• 3 years ago

If you're the CEO of a company and you increased profits by 92%,

If it's a company of one than I agree. In any other scenario the CEO led the company to a 92% increase. The CEO didn't do this alone. They maybe managed that increase and had a part in it but others most likely did the vast majority of all the work.

Now, how do you feel if the CEO fired 50% of the workers and maybe the remaining work twice as much to make up the slack. This leads to a 92% increase in profits and the CEO deserves the vast rewards?

mint2• 3 years ago

So ceo and boards increased profits by screwing workers out of pay and in return ceos got pay raises.

If a ceo grew front line employ pay and also profits at the same rate, the ceo pay should naturally follow that rate.

On the other hand, if they grow profits by suppressing wages, then they should eat the same pudding they served everyone else.

smileysteve• 3 years ago

gross growth should be less important than relative growth.

From 2013 to 2023 GM was beat in innovation by both Tesla (Model s,X , Y, and 3) and Ford (aluminum f150 and electric f150, mustang mach e) and has only recently been producing vehicles that look like their 2030 lineup - on the competitor's charging network technologies.

GM was even particularly slow on ice adoption of things like independent rear suspension. Or, the Corvette - where they basically pulled a Nissan and bought the competitor's engine.

Slow to innovate, early to fail (Volt/bolt), purchase from the competition is not what we should define as a good CEO.

digdugdirk• 3 years ago

That's assuming that the CEO has anything to do with the growth in profits. Average US GDP looks to have grown by ~66% in the past decade. Do some spreadsheet shenanigans and it wouldn't take much to drastically outperform that number.

Who's to say that the various attempts to "chart a new course" and change business strategy for the shareholder's benefit during that time didn't actually make these corporations underperform vs locking the executives in the boardroom and cutting off all their decision making ability for the same time period?

highwaylights2• 3 years ago

To paint the above in starker terms:

Worker pay is set by the leadership, leadership pay is set by the leadership.

kangaroozach• 3 years ago

100% this. Leadership gets to decide how insanely hooked up they will be. Same as congress. Remember when they carved themselves out their own Health Insurance requirements? Same thing.

hellojesus7• 3 years ago

Leadership is set by shareholders. There is still accountability.

Public unions seem more undesirable. There we have the gov negotiating with itself with no external accountability, unlike your example.

mr_toad5• 3 years ago

The board, elected by the shareholders, sets the compensation of executives.

WalterBright9• 3 years ago

Worker pay is set by supply & demand. After all, the pay has to be enough to attract workers.

adventured• 3 years ago

Use the same framework to explain CEO pay.

Sure. It's the same framework that explains the pay of Lebron James. The NBA became a massively popular global game during the era of fast growth globalization, in which billions of consumers entered into the active global economy.

Now you've got like 50 players earning $30m or more per year in the NBA. To play a game in just the US market.

~450 active players earning around $5 billion per year in just league salary (not counting endorsements).

Now do it for global football, NFL football, Nascar, Major League Baseball, Hockey, F1, and so on.

Who knows the insane total compensation figure. $30 billion?

The economic force producing that comically massive figure, is the exact same reason Tim Cook is worth every dollar he's getting paid to operate the juggernaut that is Apple. The same goes for Nadella at Microsoft.

The top 450 NBA players earn more in salary every year than the CEOs of the S&P 500. Why shouldn't a CEO get paid extraordinarily well, as well as an NBA all-star, for operating a $10 or $20 billion market cap corporation? Obviously they should.

The only time I see arguments against high CEO pay (speaking generally), it's from people that know absolutely nothing about what a CEO does or how exceptionally difficult it is to operate a very big company.

And should mediocre CEOs that fail or otherwise perform poorly get golden parachutes? No, of course not. Exceptional CEOs should get properly exceptional pay. They deserve to earn drastically more than the average worker.

The common Redditor railing against CEO pay, looks at a Tim Cook and thinks they can maybe do what Cook does (he just sits in his chair in a big office while other people do all the work, dur dur dur), or what Nadella does, or a random S&P 500 CEO does. In reality they can barely do their own basic job, much less one ten tiers above them. The average Redditor is further away from being able to do Tim Cook's job than they are being able to do the job of Lebron James. The issue is the average person doesn't know anything about what a CEO does at all, they're entirely ignorant of it. However they can watch Lebron James play basketball and immediately understand they can't do anything like what James can do, because they get the physical visual display immediately, meanwhile they know zip about the job of a CEO at a big company. As usual the issue is extreme ignorance and mediocre education.

davorak4• 3 years ago

The only time I see arguments against high CEO pay (speaking generally), it's from people that know absolutely nothing about what a CEO does or how exceptionally difficult it is to operate a very big company.

The most common argument I see is that the ceo pay has increased relative to the common or average employee salary. I doubt being a ceo has become that much more difficult over the same time period though.

ripvanwinkle• 3 years ago

One big difference is with a NBA team there are only about 9 - 11 other primary contributors, maybe some coaches and back office staff. At any large company there are tens of thousands pulling the boat (pick your metaphor), however the rest have limited bargaining power (without a union). CEOs sit on the board and are good friends with board members and often return the favor on other boards and networks.

CEO wage negotiations have nothing in common with employee wage setting.

wudangmonk• 3 years ago

I can follow your logic for basketball players beause I know the players compete with each in grade school, middle school, high school etc.. until being recruited to play in the NBA.

Does this mean that I have been missing the CEO tournaments? surely they must compete with one another after all how else can you compare who is better without a direct face off?. It seems like the big companies always get the best CEOs so they must have scouts all over the place on the lookout for that great undiscovered CEO talent.

Or could it be that big companies always produce "great" CEO because its a lot harder to fail and a lot easier to win when you are stearing the biggest ships.

pixelatedindex• 3 years ago

And should mediocre CEOs that fail or otherwise perform poorly get golden parachutes? No, of course not.

Oh but they do! That’s the rub. Also it’s very hand wavy to say “the CEO’s job is exceptionally difficult”. But that person has a whole bunch of people bringing him ideas and trying to improve the company. In fact, that’s how you even get promoted. So they pick a bunch of things to do. If it doesn’t go well and the stock tanks, the first person to leave are the workers and not the CEO. In fact, in almost every case the CEO is the last to get affected. Win or lose for the company, the CEOs only win.

iamdbtoo• 3 years ago

Lebron James is not the CEO of his team. In your analogy, he's a worker not a CEO. He was the vice president of the player's union.

The NBA compensates workers based on the value they bring to the team. Isn't that what the UAW is arguing for?

BlargMcLarg• 3 years ago

And should mediocre CEOs that fail or otherwise perform poorly get golden parachutes? No, of course not

So start there instead of making it seem like your few specific examples speak for the entire population of CEOs. Talk about the CEOs who fumbled completely during COVID despite having a great position, demanded benefits despite their huge reserves and are now crying about having to pay it back while their profits are up.

Talk about the CEOs dumping their toxic waste straight into the rivers to avoid having to pay costs. And the CEOs who push for every trick in the book to pay a close to zero net tax. And the ones who will lobby and keep almost any potential upstart from ever becoming a threat. And those who have solidified themselves in their branch thanks to first mover advantage, and can do whatever they want and still succeed despite our 'competitive free market' (yeah right).

They deserve to earn drastically more than the average worker.

They already did in absolute terms. Percentages compound. How about explaining why CEOs need an even bigger advantage in both absolute and relative terms than they had before? Did the workers not contribute to their success?

And why are the workers the first to feel the headwind whereas the CEOs are the first to feel the tailwind?

FireBeyond4• 3 years ago

The top 450 NBA players...

The top 450? There's only 450 players. 30 teams, 15 players on the roster.

earn more in salary every year than the CEOs of the S&P 500.

No, they don't.

There are 30 teams, with a salary cap of $136M, i.e. $4.08B.

I'm looking at the top CEO salaries and I'm already at $2.6B and I'm only at number 20.

_hcuq• 3 years ago

The CEO's of the banks that went bankrupt in 2008 carried on "earning" 10´s of millions of dollars for years after they were bailed out by the government.

Is that performance related pay?

Or is it Crony Capitalism?

drt5b7j• 3 years ago

Because the number 1 quality that you want in a CEO is that he has experience being CEO, and there aren't that many openings for you to get in on it, and the ones that are are given to people who's been CEO before.

Obviously.

jjoonathan3• 3 years ago

No, the number 1 quality I, as a board member, want in a CEO is that he will vote me a massive pay package when I take my turn.

TaylorAlexander8• 3 years ago

As many argue, wages are only set by supply and demand.

Most of the time that I see people invoke "Econ 101" concepts, they are wrong. Supply and demand does not account for the power imbalance between workers and leadership, which unions specifically attempt to address. It does not account for the class differences between workers trying to make ends meet and the board of directors who believe they deserve much higher pay than workers. We are free to change the perceived value of workers through the power of worker solidarity - ensuring that individual workers are not so easily replaced to keep wages suppressed. You can simply say "it's supply and demand" and do nothing to support the workers whose labor is so clearly needed for our economy to function, or we can support collective bargaining rights to make sure that individual workers are not crushed under the power of company leadership. How you view this is up to you, and not a simple fact of natural laws of economics.

WalterBright9• 3 years ago

Supply and demand does not account for ...

Yes, it does, in each scenario you presented.

We are free to change the perceived value of workers through the power of worker solidarity

It's more like using the power of government to ensure the company has no alternative to the union.

Company leaders have no actual power over the workers. They cannot force anyone to come to work. They cannot have you arrested. They cannot confiscate your property. They cannot beat you. They cannot prevent you from accepting a job at another company. They cannot prevent you from leaving. They cannot extort, libel, slander, blackmail, or threaten you. They cannot put a hit on you.

All they can do is offer you money in exchange for your labor. That's it.

whatshisface4• 3 years ago

My econ 101 talked about the difference between commodity and illiquid markets which explains the difference between worker and CEO pay. The CEOs are coming from a restricted group of insiders and can't be replaced because of their relationships which make them unique. Workers in the sectors most often unionized have few distinguishing characteristics from the perspective of the company and are thrown around by the same laws as the price of corn. The black death is a well-documented example of a restriction in the labor supply raising the price of labor and improving the wellbeing of laborers. There is no indication anywhere that supply and demand is wrong about the job market.

conradev• 3 years ago

Supply and demand does not account for the power imbalance between workers and leadership, which unions specifically attempt to address.

You’re both right. Power dynamics and supply and demand are interrelated.

Most forms of human organization involve hierarchy. Even co-ops have a CEO and that CEO makes a multiple of base worker pay.

What that multiple is and how it gets decided is a fair question: in co-ops, voting rights are built-in, but for private corporations you need collective bargaining

drewcoo• 3 years ago

Most of the time that I see people invoke "Econ 101" concepts, they are wrong.

It's not that they're wrong. Worse, they're thought-stopping.

They're mantras we all know and we are trained to "accept their wisdom" and stop questioning.

hgdfhgfdhgdf• 3 years ago

I have bad news for you. Those workers who demand 40% wage increases and 32 hour work weeks will be "easily replaced" by auto factories in the South who have right to work laws.

mr_toad5• 3 years ago

Supply and demand does not account for the power imbalance between workers and leadership

Supply and demand is the imbalance. The workers, individually have no control over supply. The whole point of a union is to control the supply of labour and shift the balance of power.

kwar13• 3 years ago

More like the CEO pay is a cushy symbiotic relationship with the board, which sets their pay. This is not a line worker job when there's competition.

lumost• 3 years ago

What we choose to value as society is entirely subjective. While supply and demand influence the change in the mid point of the bid/ask spread - it doesn’t set the absolute clearing price.

MuffinFlavored10• 3 years ago

Stellantis has 270,000+ employees across 16 brands. I'm not saying their CEO does or doesn't deserve $20m in compensation but at some point you're going to run into a problem where... nobody wants to do that job for $1m/yr and they wouldn't be qualified or very good at it.

kibwen• 3 years ago

nobody wants to do that job for $1m/yr

I invite everyone here to raise their hand if they're just as hard-pressed as me to think of any job that they wouldn't do for a million per year.

anigbrowl4• 3 years ago

Maybe if a company gets so big that finding people to manage it becomes disproportionately expensive, it's time to break it up.

turnsout4• 3 years ago

True, although if you're getting above $1M/year as a CEO, it's not because "the job is really hard." In fact, the bigger the company, the more layers of management to keep you from any real work.

Instead, the board has approved that compensation based on very real business needs: growing the company, acquiring competitors, changing business models, etc. It's actually hard to find a leader who has experience doing that thing and is also the right fit. Hiring the wrong CEO is a quick way to kill the whole company. On the flip side, to the board, a CEO that can drive meaningful growth is worth the risk, even if they have to fire with a golden parachute two years later.

I'm not trying to justify pay disparity (in fact I think there should be minimum AND maximum FT salaries when currently there are neither), but that's what's going through the board's mind when they set CEO compensation.

mgerdts• 3 years ago

But apparently people will do it for $2 - $5 million. In the most recent fiscal years, Stellantis’ revenue was about double Honda’s.

https://www.motorbiscuit.com/how-much-money-does-ceo-of-hond...

colordrops• 3 years ago

Are you being rhetorical, or are you actually positing that CEO pay is driven purely by supply and demand?

randomdata8• 3 years ago

Why has the supply of CEOs not kept up with the demand for them?

Why would it?

jacobr13• 3 years ago

Because the pool for a CEO hire is much smaller, than "people with MBAs" as has been floated in thread elsewhere.

If you want to hire a CEO, you either usually are looking either at A) A CEO of another company with experiences relevant the current situation, at a size similar to the current company's size. Or B) A senior exec (CFO, COO, etc ...) at the same company, or more rarely an involved board member.

These are self-limiting pools.

jcranmer• 3 years ago

CEOs are an illiquid market, and demand for CEOs is pretty inelastic (companies need but one CEO after all). It's not a market which can reach price equilibrium.

If you expand your horizon somewhat to C-suite in general, it seems that demand for C-suite has tended to increase over time. If you also consider that C-suite is to some degree a Veblen good (demand increases as price goes up) [1], that makes sense under economic laws. Worker pay, unlike executive pay, is going to be considered a significant cost center, and business will higher fewer workers if individual pay is growing too quickly, making worker pay act like regular goods and not Veblen goods.

[1] The framework for setting CEO salaries tends to be "take the median CEO pay, add a little extra because our CEO's clearly better than average..."

queuebert2• 3 years ago

... thus increasing the median CEO pay. Rinse and repeat and that explains a lot.

oneTbrain23• 3 years ago

CEO pay is adjusted based on another CEOs in the market. Since every board members has already markup their CEO pays higher and then higher, the increases are what you see today for CEO pay. Not every CEO skills at Steve/Tim/Jensen but they all delude themselves by paying high, hoping they will eventually get Elon-quality CEO into their company and make their stock the next Tesla-NVIDIA-Netflix. Most of the time, they get Stephen Elop type of CEO, unconsciously destroying company in the name of strategic stakeholder value maximization (MBA lingo). Now what about workers? The good one will just hop away. They then will tell everyone "no one is replaceable" and then go on to mis-hire even more incompetent or noob staff in. Or they will outsource it just like Dell and others during Bush Jr time.

What they need to do is to publicly disclose the performance of their CEO. Have CEOs rated by staff and publicly distribute this info worldwide. They also need to implement clawback dating as far as a decade depending whatever products they in charge during their tenure. And lastly, always put full jail offenses directly on CEO without any plea bargain. Not doable? Then workers need to get retrenched as they rightly deserve it when they didnt bother to hop away.

fallingknife3• 3 years ago

There are two determinants of your pay. One is supply and demand, and the other is how much could your potential replacement screw things up. For most workers the supply/demand is the only part that matters because if you are a line worker, you don't really have the potential to do much damage if you screw up. So if Ford needs to replace a competent line worker, their potential bad replacement won't be able to cost the company much even in the worst case, so this does not grant the worker any leverage.

CEOs are much different. A bad CEO can cost a large company 10s of billions in stock valuation. If you have a decent CEO, and you fire and replace him with a poor replacement, the damage to the company will be tremendous, so the board won't want to risk it. This gives good CEOs the leverage to demand massive compensation. A CEO can basically hold the company hostage by saying "I want a $10 million raise this year, and if I don't get it I'll quit. Have fun rolling the dice with my replacement!" (Though they would never actually say it that way) And the company will basically have to choose to pay an extra $10 million or roll the dice on potentially losing billions. This is why they almost always pay CEOs a massive amount.

AndrewKemendo3• 3 years ago

It's actually hard to find people who will reliably break unions, and generally do whatever it takes to de-prioritize line workers and eliminate "cost centers" - while also showing pure allegiance to the board without defecting.

That's the entire process of creating the professional corporate managerial class - you have reliably shown that you care more about the financial success of the company, and yourself, than you care for your employees and coworkers.

I mean how many movies and characters have we made that are precisely calling out this exact behavior:

Gordon Gekko

Bill Lumburgh

Mr "Coffee is for closers" Blake

Richard Chesler (Fight Club boss)

etc...

Like...we've been roasting this precise kind of corporate myopic psychopathic forever as what precisely not to be yet it's like an entire generation used them as pathfinders

jandrewrogers• 3 years ago

The fact that terrible CEOs obviously exist is what drives up the prices for the ones that are not obviously terrible. It is an extremely high leverage role (see also: Microsoft).

What separates the good CEOs from the poor CEOs isn't something you can readily teach. Some of the best ones have a preternatural ability for the role in the same sense that Lionel Messi has a preternatural ability at his sport, and are equally rare. The majority of CEOs are journeymen with the skills to do the job but not to be great at it. This doesn't mean that average employees are fit to be CEOs; you don't have to look further than startup CEOs, which are pulled from an above average pool of semi-random people, to discredit that notion. It is a highly specialized skill set that is difficult to acquire and most people aren't mentally cut out for what is required to be good at it. The experiment of promoting rando employees to CEO has been tried on occasion across industry with almost universally poor results.

This is true of most professions that command a high wage. Thinking that anyone could be a CEO is like thinking any dev can be Fabrice Bellard. Even if that turned out to be the case in a specific instance, no one should expect it to generalize.

cft• 3 years ago

During the same time, the US automakers worldwide market share shrunk from 30% to about 10%.

gus_massa• 3 years ago

That's almost a x100 increase.

If you ignore Pelé, the top soccer player had a similar increase in the same period. https://www.expensivity.com/soccer-salary-inflation/ Compared with the median income, they went from 10x in 1979 to 1300x in 2020. Why has the supply of Messis not kept up with the demand for them?

hn_throwaway_99• 3 years ago

Thanks, I think this is the best answer and really gets at what is going on.

"Star" pay has exploded across all industries (entertainment, sports, and yes, business) and it's not hard to see why. Technology has vastly grown the size of markets, and the "winner take all/most" dynamics of these star-driven occupations means the winners are able to take an outsize chunk of the revenue.

I think there are some other things going on with CEO pay (CEO salaries are basically set by other CEOs, for example), but the parent comment absolutely gets it wrong when they say "the supply of potential CEOs has increased". In the competitive market for CEOs (as well as actors, musicians, sports stars, etc.), people are not interchangeable commodities. Someone who is only slightly better can be responsible for their corporation completely "winning" in some industry, and thus companies are willing to pay top dollar for this chance at getting the brass ring.

TuringNYC• 3 years ago

From 1978 to 2021, CEO pay grew by 1,460%, adjusted for inflation, versus just 18.1% for the typical worker.

We should remember that CEO pay is often equity linked, and thus can vary. Not sure if workers want large portions of pay equity linked. I remember I was once in discussion with a hedge fund for a job and they offerred a sliding scale of pay that was cash vs equity. The more equity I opted for, the greater the pay, since of course there was risk involved.

hollerith• 3 years ago

Because the board and the investors don't want just any MBA to be their CEO: they want a person with a record of success in leading organizations (or at least collaborating closely with such a leader).

tysam_and2• 3 years ago

There is an equation with an equilibrium:

CEO's pay rate = (some multiplier) * median salaried worker's pay rate

CEO's pay rate = (some multiplier) * minimum salaried worker's pay rate

We've been conditioned to think it's not fair somehow, but the discrepancy is just....engorgingly terrible. I'm not arguing for how this metric would be enforced, only that it would be a good one to have. Especially in a time when greed is the lowest common denominator in the race to the bottom for some of these large corporations.

It wouldn't fix the stockholder "value" chase, but at least it would shore up one part of the system weak to corruption.

hinkley7• 3 years ago

It's also been suggested that Congressional salaries be a fixed multiple of minimum wage, and for similar reasons.

Honestly I think that would probably fix things a lot faster.

skyyler7• 3 years ago

Congress already makes more money from cutting deals with their power & influence than they do from their salary...

astrange22• 3 years ago

If you underpay elected officials then 1. they just start taking bribes 2. only rich people will run in the election.

This is why Singapore pays them even more than we do.

Anyway, minimum wages (despite being ok policies) aren't what people are actually paid, and of course aren't especially what non-working people are paid. And remember that non-working people, namely children and the elderly, are poorer than workers.

Alupis12• 3 years ago

suggested that Congressional salaries be a fixed multiple of minimum wage

That's insane no matter how you look at it.

Minimum wage is paid by individuals, private businesses and their owners. Congressional pay is paid for with your money - an effective infinite of your money, or they'll just poof new money out of nowhere to continue to pay themselves.

Correlating the two is plain wrong.

bagels6• 3 years ago

People in congress are millionaires, and it's not from congressional salaries. It's due to it being somehow legal for them to insider trade, and bribes in other guises.

IG_Semmelweiss4• 3 years ago

100% agree.

Serving in public choice should for duty, not a career.

Make a fixed salary. If you dont like it, get a job elsewhere just like everyone else.

And oh, you wont get qualified candidates - nonsense. We had a movie actor, a silver spoon heir, a community organizer, a real estate broker and a lifelong politician as presidents.

There's nothing in technical expertise that they have in common. They were just good orators with some charistma and a penchant to lie with a smile...on their face.

Oh, you are worried of a bribe? Good thing we have FEC disclosure forms etc. Make them audited every year. Have more bite. Increase sentences. Put bounties on whistleblowing. Then sit back and relax

cj• 3 years ago

IMO an equation like that would be fine as long as you made it possible for CEOs of larger companies to make more money than CEOs of small and medium sized companies.

There’s a job market for C-Suite employees (whether we care to admit it or not). At a certain point you won’t get qualified candidates if you can’t reward them enough, same as engineers or any other role.

The answer for how much CEOs should be paid is the amount of money you would need to pay to employ the most optimal person to run the company. Figuring out what that number is is difficult.

skyyler7• 3 years ago

Well that's simple, larger companies that want to pay their CEO more can pay their lowest paid employees more.

nerdponx7• 3 years ago

The answer for how much CEOs should be paid is the amount of money you would need to pay to employ the most optimal person to run the company.

"Should" by what standard? Minimizing deadweight loss?

tysam_and2• 3 years ago

And hence median vs minimum, median scales well, but minimum is more aggressively equitable -- after all, it's a nice 'soft scaling lock', which we currently seem to struggle with.

If we can hit a nice logarithmic return on investment for company size, I think that would be nice. Like many things, perhaps impossible to easily achieve, but it's a nice thought in idea at least methinks <3 :'))))

nateburke• 3 years ago

There’s a job market for C-Suite employees

And it can sometimes be VERY illiquid. Headhunters help to provide this liquidity and get paid for it.

Sometimes C-suite career people can go years without a job. Not every CEO or CFO makes fortune 500 comp and many people falsely assume low compensation volatility as e.g. a "career CFO". It can be extremely stressful, especially with family/dependents.

pizzafeelsright• 3 years ago

What about CEO pay * Widgets shipped?

I always think "I can clock out at 5pm" or "If I screw up it'll only cost me my job and not 1,000 people their jobs"

C levels deal with stuff I am not interested in and the while the pay is appealing the added life complexity is not. Thus I W2 while seeing my kids 90+ hours a week.

ryukoposting2• 3 years ago

I would love it if my brokerage would show me that multiplier for the companies I invest in.

chadash2• 3 years ago

The problem with this is that the CEO of Walmart is a much more important job than the CEO of McKinsey but under this formula they would get paid a fraction of the amount, no matter how well they did for Walmart workers.

The end result of this situation would probably be a mad dash to automate away any blue collar work, which may not be such a great thing.

It’s a tough problem.

umeshunni3• 3 years ago

The end result of this situation would probably be a mad dash to automate away any blue collar work, which may not be such a great thing.

More typically, this results in the outsourcing/contracting away of lower value work.

amrocha8• 3 years ago

The CEO of Walmart doesn't do anything for the Walmart workers, he works for the investors.

I would say it would be a huge upgrade to get rid of investor CEOs and put in a worker CEO in place instead.

syndicatedjelly4• 3 years ago

Who decides how important a company is to the economy?

throw0101b7• 3 years ago

Good episode of Bloomberg's Odd Lots podcast from a little while ago on the topic:

On September 14, the contract between the United Auto Workers and the Big Three carmakers (GM, Ford and Stellantis) is expiring — and the possibility of a strike is real. This comes at a delicate time for multiple reasons. The labor market is tight, which means workers have other options. Inflation is high. And the auto industry is undergoing a major shift to the electric vehicle market, which may change the composition and pay of the labor force. The stakes are high. So what does the union want and how does it fit into the goals of the broader labor market? To understand more, we speak with Dan Vicente, the director of UAW Region 9, as well as Alex Press, a labor reporter at Jacobin magazine.

* https://omny.fm/shows/odd-lots/what-the-uaw-wants-from-its-f...

* https://www.youtube.com/watch?v=LBP8_8_S7Ls

There were some items that the unions conceded in 2008 when the US automakers were going bankrupt that have still have not been restored.

aaronbrethorst• 3 years ago

Alex Press also appeared on last week's episode of the podcast Why Is This Happening, hosted by Chris Hayes. https://www.msnbc.com/msnbc-podcast/why-is-this-happening/un...

jdpedrie• 3 years ago

Glad to see such a range of views, all the way from labor unions to communist magazines!

JKCalhoun• 3 years ago

“Obviously, CEOs should be the highest-paid person in an enterprise, but then the question is exactly just how much higher than everyone else,” Josh Bivens, chief economist at EPI, told NPR.

I thought I read that at Japanese companies the CEO doesn't make 300 times what the workers make. Maybe the CEO made 10 times at most?

hinkley7• 3 years ago

Why should the CEO be the highest paid person in an enterprise?

Why is that obvious? This foregone conclusion stuff is just notes cribbed from the aristocracy. You're not aristocrats, you're citizens.

astrange22• 3 years ago

This is true, but they also tend to get free use of things like homes and cars owned by their company.

umeshunni3• 3 years ago

https://www.japantimes.co.jp/news/2023/06/30/business/top-au...

...Akio Toyoda, was paid ¥999 million ($6.9 million) last fiscal year...

"Owing to culture or corporate structure, the salaries of American executives and foreign executives in Japan have historically been much higher,” a Toyota spokesperson said Friday. "We’re aware of the gap and we’re working to fix it.”

Nissan, which has just shuffled its leadership, also published salaries Friday, showing that former Chief Operation Officer Ashwani Gupta was paid ¥726 million last fiscal year. CEO Makoto Uchida made ¥673 million.

Honda said last week that its CEO Toshihiro Mibe was paid ¥348 million and Chairman Seiji Kuraishi got ¥138 million.

ElevenLathe2• 3 years ago

I'm not sure why it's obvious that the CEO should be the highest paid? Why should everybody's boss make more than them? I know that isn't the case for many line managers of highly-paid programmers, for example, and I assume the same is true of other similar professions, at least sometimes.

Wages are theoretically a market, and probably it's often easier to replace a skilled manager/business bro than it is a skilled engineer/artist/salesman, and often it's more important to your business.

bradleyjg• 3 years ago

I think they should get it and it should be in out of the money stock options. I don’t understand why so many dinosaur companies restrict equity based comp to the C suite.

toomuchtodo2• 3 years ago

Profit sharing is common, especially amongst employee owned companies. Base wages are behind inflation and cost of living, so of course it needs to catch up to the current macro. Fast food worker minimum wage is now $20/hr in California, for example, and healthcare worker minimum wage will be $25/hr (SB525).

https://news.ycombinator.com/item?id=37558256

callalex• 3 years ago

It’s generally a bad deal for the worker compared to cash. An assembly line worker has absolutely zero say in the direction of the company, their work will never meaningfully move the needle on stock price, so it makes no sense to tie their income to something they have no control over.

astrange22• 3 years ago

Share-based compensation can be good if the stock is heading up, because it's cheaper for the company to pay it than cash is. In between the award and vesting, the increase is paid for by equity investors.

But, you have to keep working there and you have to be able to afford to wait for the vesting.

MuffinFlavored10• 3 years ago

why is it working for Tesla line workers?

ryukoposting2• 3 years ago

Stock options are complicated. On a factory worker's salary, you probably don't have the money to throw at a financial advisor who will know how to handle those options competently.

andrewstuart• 3 years ago

Hard to argue against.

ARandomerDude2• 3 years ago

Next year’s headline: Auto Makers Hike Prices 40%, Leaving Buyers Stranded

astrange22• 3 years ago

Does it work the other way round?

chiefalchemist2• 3 years ago

Next year's other headline: More industries seeing more interest in unionizing.

clipsy• 3 years ago

Amazing how the people who are so "concerned" that raising working class wages will result in higher prices never seem to consider that outsize executive compensation, massive stock buybacks, etc are responsible for higher prices. Almost like they aren't concerned with the prices at all!

ARandomerDude2• 3 years ago

I actually never made any of those claims. My general take is that companies who are in dominant market position will use basically any excuse to raise prices, including the ones you listed.

astrange22• 3 years ago

They accidentally have a point there though.

1. poorer people spend a much higher % of their income, whereas rich people save it.

2. there's a lot more poorer people than rich people, which unfortunately can mean they're more capable of moving prices.

This is sort of related to why the middle class thinks full employment+low inequality economy is worse. There's other middle class people to bid up prices, and service at restaurants is worse/more expensive. It's nice to be in a high-unemployment high-inequality economy, if you're employed.

lr4444lr3• 3 years ago

How much is executive comp really at a publicly traded company as a percentage of revenue? 40% raises for most employees across the board probably dwarfs it.

I don't see how stock buybacks relate more directly to anything here than retained earnings, or other kinds of reinvestment. They're just an effect of market conditions and the stock price.

babyshake• 3 years ago

They can't do that, because there are plenty of other car makers including from Japan, Germany, etc. This is why competition is good.

webworker• 3 years ago

Buyers are already stranded. I should know, my car got totaled a few months back and a 1:1 replacement with current model year was about $15k more than my last one. Worse, the value of my totaled car was only $8k less than the original sticker.

The car market is extremely ugly right now.

Waterluvian• 3 years ago

I hope they succeed.

CEOs are often overpaid by a lot. If I had as regular access to the books and the board of directors as C-levels do, I bet I could be paid a lot more too.

mempko• 3 years ago

This is great, I hope they get it. The wave of unionization in this country is a good thing over the long term.

SeanAnderson• 3 years ago

I've heard a counter-argument to this before and I'm curious to get other's take on it.

Basically, the story goes that when an individual rises into a significant leadership position at a large enough company that the economic calculations become different. There's still an element of domain expertise, but, for the most part, leadership is leadership wherever you go. This implies that a leader could (potentially) move across sectors and still be effective which results in a wider pool of companies that are interested in competing for this person when contrasted to the ICs. Since some sectors are very profitable they end up "bidding up" quality leadership. The combination of this effect along with the fact there are objectively fewer CEOs than ICs results in a mismatch in salaries.

I think there's an element of truth to this, but probably not to the extent that it justifies the widening pay gaps everywhere?

fallingfrog3• 3 years ago

I’d like to see one of these guys use their magic leadership mojo to lead a platoon of marines into battle. I think he’d find that domain knowledge does, in fact, matter.

To the extent that it truly doesn’t matter, the ceo is a glorified mascot.

vasco• 3 years ago

It's more likely that it is the only role that tends to be in the room when the board is deciding salaries. Turns out it's great to be able to decide how much your own compensation should be.

elcritch2• 3 years ago

Though this argument falls apart with evidence that CEOs of big firms do need to deeply understand their companies domain. It may work to a degree, but doesn’t seem to coincide with the most valuable companies.

It’s why when Intel was floundering a few years back they got rid of CEO and brought on a CEO with deep engineering expertise.

Tim Cook is a wizard of supply chain, and in many ways that’s a large part of Apples current success, IMHO. The list goes on.

gruez• 3 years ago

Tim Cook is a wizard of supply chain, and in many ways that’s a large part of Apples current success, IMHO. The list goes on.

Okay but don't many other companies deal with supply chains? I guess software companies don't, but "companies that trade in physical goods" is a pretty big segment, and it stands to reason that having "a wizard of supply chain" would be useful. Doesn't this translate into an argument in favor of "leadership is leadership wherever you go"?

throw0101b7• 3 years ago

Though this argument falls apart with evidence that CEOs of big firms do need to deeply understand their companies domain.

Counter-example: the last few CEOs of Boeing who have completely messed up the company.

They came from the Jack Welch of GE school of management, and it turns out that Welch et al were cooking the books. See also Enron and WorldCom.

MuffinFlavored10• 3 years ago

leadership is leadership

what is leadership other than being stern, following up, driving projects to completion or up/down the org chart as needed (escalation, etc.)?

jmye3• 3 years ago

I mean, it involves leading. Making strategic decisions and then gaining support for them. Leadership is not just a synonym for project management.

I don’t understand your comment at all.

mwbajor• 3 years ago

I think the MBA mantra that specific product expertise is not important: a widget is a widget, died with Jack Welch and Carly Fiorina (her career). Its still around but not nearly as much as 15-20 years ago.

abdullahkhalids• 3 years ago

HR people and accountants also have the same sort of domain independence. Their salary has not particularly risen faster than the average worker salary.

thewileyone• 3 years ago

"leadership is leadership wherever you go"

Not all CEOs are built the same. Only a minority are able to cross industries successfully, the majority fail miserably. This is because elements that drives success are different between industries. Most of the time, if the CEO is successful one way in one industry, he/she would pursue the same path in another industry, without acknowledging that the second industry is different. What's worse if when they bring their previously successful team. Now you've got a bunch of people doing more the wrong things at the same time.

danaris• 3 years ago

Only a minority are able to cross industries successfully, the majority fail miserably.

Now analyze that a little deeper: How do we know they were successful before they tried to cross industries? Solely because the company they were CEO of did well while they were CEO?

Absent a fairly egregious set of drastic changes (eg, Musk's Twitter), the success or failure of a company is both much more complicated than the contributions of any one person, including the CEO, and a trailing indicator. It is very easy for a CEO to make changes that will not be fully felt—for better or for worse—for years after they "step down to spend more time with their families".

We do not have good metrics for successful leadership. We just don't. And despite this, we have whole subcultures that have grown up around the idea that these people, who are often actively detrimental to the organizations they manage, are geniuses singularly responsible for the company's many-million-dollar (or even many-billion-dollar) profits.

Turskarama4• 3 years ago

I think the whole thing falls apart when you get to the point of a CEO making so much money, regardless of their performance, that they can just retire after a single year.

So what if I don't get my contract renewed if I have $50 Million, that's more than most people make in their entire lives. See you at the beach!

therealdrag0• 3 years ago

A counter consideration I’ve heard is that they have to pay more to keep them off the beach! If the board thinks Turskarama is the best leader for the org, then they have to pay enough to keep you off the beach. Which could be absurd amounts of money.

71a54xd• 3 years ago

This kind of logic doesn't help anyone - yes, CEO pay is insane but its that way because of how much risk they take ownership of and shoulder day in day out. If one line worker forgets to tie a wire-harness it's not like the entire company will end up in financial ruin... However, the CEO making serious mistakes can and has cost GM millions.

hinkley7• 3 years ago

Do they take ownership though? That hasn't been that way in a while.

Used to be the best warrior had skin in the game. We have them resources so when the lions came or the boars got into the crops, they were ready to kick some ass, even if the rest of us were undernourished due to a drought.

Now they just "take full responsibility" where that just means they have to announce that something dumb happened on camera. Truly a gruesome fate. So brave.

jezzamon• 3 years ago

That's why the pay rates are different, but that doesn't explain why the pay rates should increase by different percentages

dymk3• 3 years ago

A failed CEO of a large company almost never ends up bankrupt, and they almost always remain a multi-millionaire. What exactly is the risk they're taking on?

fallingfrog3• 3 years ago

Yeah but these guys typically fail upwards such that they are immune to failure, and take almost no personal risk at all.

yunohn• 3 years ago

CEO making serious mistakes can and has cost GM millions

So despite GM paying the CEO millions, they couldn’t prevent him from making mistakes?

NicuCalcea• 3 years ago

CEOs make mistakes all the time and often face few consequences.

We should all be lucky enough to have the chance to earn in a few months what we'd normally make in a lifetime. I'll gladly accept the extra risk that goes with that.

MisterBastahrd• 3 years ago

Are we supposed to pretend that most CEOs don't have an entire fleet of people at their disposal to ensure that they aren't making incredibly boneheaded decisions?

FireBeyond4• 3 years ago

because of how much risk they take ownership of and shoulder day in day out

What? The CEO of any substantial company is going to have a golden parachute in their contract. Literally the opposite of putting everything on the line, just merely "Will only make X, not 10X, where X may well be more than median lifetime earnings, even if the company completely collapses."

la64710• 3 years ago

They are going for at least relative parity if not absolute parity.

cratermoon3• 3 years ago

How about this compromise: cut the CEO's pay by 40% and give an 80% raise to the workers.

MuffinFlavored10• 3 years ago

her pay was $29m 40% is $11.6m

there’s 160,000 employees

$72.50 a year per employee

a $1/hr raise for a full time employee is $2,080/year

they makes $17/hr and UPS makes $21/hr on the low end part time wise

lots of employees want at least $8k/yr raise ($4/hr on the low)

a bit different from $72.50

cratermoon3• 3 years ago

I didn't say "take 40% of the CEO's pay and divide it up among the workers", I said, "take 40% of the CEOs pay AND give the workers an 80% raise". Take $11.6m from the CEO. Give the $17/hr worker at $13.60/hr raise. Give the $21/hr worker a $16.80 raise. Both.

lazzlazzlazz2• 3 years ago

I don't follow why workers' pay should increase at the same rate as their CEOs' pay. They're subject to entirely different labor markets with accompanying risks, opportunity costs, supply, demand, cost of replacement, etc.

nerdponx7• 3 years ago

"Should" is a loaded word here. Market equilibrium is not always the best thing for society as a whole, morally or practically.

lazzlazzlazz2• 3 years ago

I agree — but deliberately breaking the market equilibrium almost always seems to be hysterically worse!

nine_zeros• 3 years ago

Why not have a law that C-suite compensation can only increase as much percentage as the lowest increase in the company?

Alupis12• 3 years ago

Settle in for a wild propaganda-filled fall season.

Between UAW Strike, SWG Strike, barely avoided UPS Strike, and probably a few I'm leaving out, we're going to be inundated with half truths, misdirection, selective statistics and even the occasional outright lie.

UAW opening demand isn't just a 40% pay hike - but also a four day workweek (when combined is ~70% increase in pay). Nobody expects for UAW to get everything they demand (that's not how negotiations work of course) but still, it's a particularly unreasonable starting position and is likely demonstrating just how far apart both parties are.

It's become a sort of meme to bag on C-Suite salaries - with a lot of folks fundamentally believing C-Suiters don't earn their pay or at the very least don't earn the extreme pay gap between them an your average line worker.

Anyone thinking a C-Suiter clocks out at 5pm and doesn't work after hours has no experience in the C-Suite (or even upper management for the matter). There isn't really a such thing as "off hours" for these folks on average. Correspondingly, decisions made by your C-Suite can earn a company huge returns, or doom the company and all of it's employees and stake holders.

Comparing C-Suite compensation, pay scale, growth rate and disparity from line workers is disingenuous at best. They cannot be compared, nor should they.

aaomidi2• 3 years ago

4 day work week has been successful in most places. As a world we should move towards it.

Other benefit: less environmental impact, more time for people to improve themselves and their mental health, etc.

Alupis12• 3 years ago

Successful or not is not the point.

If met with the 40% pay increase it's another huge pay raise. There is no reality where line workers screwing in the same 3 door bolts all day long are getting what amounts to an effective ~70% pay increase.

Additionally, the 4 day work week is yet unproven in an industrial setting, such as are UAW member's jobs.

Minor49er3• 3 years ago

When picking candidates for employment, why would an employer choose someone who is willing to work five days over someone willing to only work four? A stressed-out employee who is at work is going to outperform a well-rested employee who isn't present

bugglebeetle2• 3 years ago

I’ve worked with “c-suiters” and in an auto parts factory. In no instance did the former work harder than the latter and in some instances the “c-suiters” were far below a factory worker in terms of ability and intelligence. I have, however, never met an auto worker that was born into a rich or well-connected family, which seems to be the primary differentiator between the two groups.

ocdtrekkie2• 3 years ago

I'm not sure how you hope coming out justifying the ridiculous state of CEO pay is going to go for you, but the problem is the incentives are not aligned.

CEOs make big decisions... but they get paid more money than they'll ever need even if they do doom the company. In fact, many CEOs against union workers are torching their own companies to avoid a fair deal which would cost their businesses less.

The only way CEOs would justify their high pay is if we were able to hold them responsible for their company's misdeeds and throw them in jail. But since Sundar Pichai is still a free man, we clearly definitely don't do that either.

CEO is a completely zero-risk, massive return job that you get largely for knowing the right people and having a deeply flawed moral fiber that enables you to sleep at night after doing unusually cruel things to everyone else. That's really all there is to it.

Aeolun3• 3 years ago

having a deeply flawed moral fiber that enables you to sleep at night after doing unusually cruel things to everyone else

I don’t think this is necessarily true. You might just be really good at lying to yourself.

ajross2• 3 years ago

Anyone thinking a C-Suiter clocks out at 5pm and doesn't work after hours has no experience in the C-Suite

That's not the standard, though. The criteria is cost above replacement, and quite frankly modern executives show up extremely mediocre on that measure. Companies flip executives all the time, and it almost never results in significant changes to revenue (and when it does, it's down as often as up). In fact there's almost no measurable meritocracy among salaried executives.

The reason executive salaries got so high is simply that the class the makes up the C-suite residents (the major investors and board members) got jealous that the outgoing founders of these companies got so rich, and wanted to play in the same sandbox. It's only fair, right?

But that's exactly the moral argument UAW is making: these companies got fabulously wealthy over recent decades owing to GDP growth and stock market booms, and they should share that wealth with their employees and not just keep it for the owners. The only difference is in how you define "employee".

Alupis12• 3 years ago

Flipped on it's head - 2 thoughts:

1) You cite cost of replacement - yet these companies are unable to replace their C-Suite with anyone costing less. Therefore, they can command the compensation levels they do (not to mention compensation != in pocket pay).

2) UAW employees are indeed readily replicable with little or no training on average. Offshoring is very realistic, and there is no shortage of high-school educated folks willing to work in a factory/plant for current levels of pay.

Inflation is putting a squeeze on everyone, and it just so happens your average worker is feeling it the most. It's no coincidence all these labor issues and strikes are happening right now.

faeriechangling• 3 years ago

Comparing C-Suite compensation, pay scale, growth rate and disparity from line workers is disingenuous at best. They cannot be compared, nor should they.

Why? Why is it that CEO pay reflects company performance but not the line workers? It seems incoherent. How does the collective performance of line workers, which we can predict somewhat from salary, not impact company performance? Where did this idea that only in upper management does salary correspond to company performance? What research was done?

Aside from the rare company built by the CEO wholly or largely, CEOs just seem to come from wealthy families, are tall handsome men, and have all the right connections. These are not brilliant geniuses. Being a c-suite executive is not a meritocratic thing most of the time, it’s an inherited privilege.

Compensation is not a function of their performance, it’s a function of their ability to hold their businesses hostage and threaten to tank their companies unless they’re paid high salaries. Rotating out the c-suite will at least temporarily tank company profits. It’s about power not merit. So why uh, doesn’t the union do the same thing and also hold the business hostage? 40% is not wild at all, it’s a drop in the bucket for shareholders because salaries are so low to begin with.

lolinder5• 3 years ago

Comparing C-Suite compensation, pay scale, growth rate and disparity from line workers is disingenuous at best. They cannot be compared, nor should they.

For everything besides growth rate I can see arguing that they can't be compared—I don't agree, but I can understand where you're coming from—but why should a CEO's salary go up dramatically faster as a percentage than line workers'? Is the CEO somehow working 40% more hours than they did last year? Working 40% harder? What is that 40% tied to that line worker salaries shouldn't be tied to?

Alupis12• 3 years ago

The CEO is measured by company performance over a period (may be a year or years), and the value they bring the organization as a whole.

Your average line worker cannot impact the entire business like this. They alone cannot be responsible for huge growth or periods of rapid shrinkage.

They just happen to be the most visible...

doublespanner• 3 years ago

Because the CEO is managing a company that is either 40% bigger or 40% more profitable. The worker is likely doing similar work...

sgarland3• 3 years ago

A bad SRE team can destroy your company. Yet, even at the best places, you’re lucky if you get a small per diem when you’re on-call.

I’m not saying SREs are poorly paid, but they often are keeping entire companies afloat, and their pay is nowhere near that of the C-Suite.

If the entire SRE team quit / went on strike, there is a non-zero chance the next incident would utterly break the company.

If the entire C-Suite quit, uh… what exactly would happen? People would continue doing what they had already been doing?

Executives are overpaid. Period.

Alupis12• 3 years ago

A bad SRE team can destroy your company.

Ah, and the SRE team assembled themselves, hired themselves, decided what to work on, direction, technology, plans, etc all on their own?

Or is there a C-Suite running the SRE team, even if indirectly?

If the entire C-Suite quit, uh… what exactly would happen? People would continue doing what they had already been doing?

This is beyond naïve, I'm not sure what to call it. Yes, things hum along for some duration... and then what?

C-Suite are not laborers, as you've queued into. They provide direction, guidance, goals, identify problems, etc.

Take a human being without any of that in their personal life. What becomes of them? Nothing good... it's similar for a company. The wrong leadership dooms a company before any of the line workers even notice.

kahnclusions• 3 years ago

Of course they can and should be compared. They’re human beings, and I don’t care how much additional “value” you brought to the company (you know that’s BS they tell to justify being overpaid) or how many late hours you worked, in my eyes you’re not deserving to earn 1000x more money than your ordinary workers.

atleastoptimal• 3 years ago

So those with the least leverage to earn more just so happen to deserve to be paid just as little as they are, and those who have severely disproportionate influence on their earnings just happen to be making exactly what they deserve?

Trying to justify exorbitant C-suite salaries because they often work hard (in conditions significantly easing working hard due to having a litany of assistants to handle boring stuff, private jets, drivers, Michelin starred meals with regulators, lawyers an executives counting as "work") is silly when you look at how hard so many working class people work. But I know you know this, so it seems you're just blaming them for being born poor, unconnected and not having the "big business brain" that all C-suite executives must have.

whynotmaybe• 3 years ago

Jeff bezos has something to say about the 5pm thing :

"By 5 p.m., I'm like, 'I can't think about that today. Let's try this again tomorrow at 10 a.m,'" he told the Economic Club of Washington, DC.

https://www.businessinsider.com/jeff-bezos-daily-routine-201...

lucaspm982• 3 years ago

That's a well known quote precisely because it's such an outlier.

Alupis12• 3 years ago

If you believe this means after 5pm Jeff Bezos forgot all about Amazon, then you are sorely wrong. Nobody, and that means nobody builds a business the size of Amazon within a single lifetime and did not work/think constantly.

It's kind of like how people think Bill Gates or Steve Jobs just accidentally became some of the most successful people on earth...

dfiohnio• 3 years ago

it's a particularly unreasonable starting position and is likely demonstrating just how far apart both parties are.

Their demands are only unreasonable if they lose. This is a strike. It's fight, not a discussion. The goal is to give the company no choice but to give in. The strikers are under no obligation to be fair. They can make whatever demands they want. They don't have to give an inch if they don't want to.

They cannot be compared, nor should they.

Comparing them is pretty simple, actually.

$ units

You have: 21 million USD / year

You want: (28 USD / hour) * (40 hours / week)

* 359.35059

/ 0.0027827977

the_third_wave• 3 years ago

Defending the excessive remuneration for C-suite inhabitants by saying they're never off work falls flat when you realise there are many other professions where this is the case. Whether this be a veterinarian who gets called out at night, a farmer who stays up all night because one of his cows is about to give birth, a mechanic on board a fishing boat with the responsibility for keeping the thing running or any of the other professions where responsibility is combined with unpredictable and/or uncontrollable event timing.

"Yes, but the C-suite is responsible for $zillions"...

Are they personally responsible? If they fail in their job do they get to reimburse the investors for money they lost? Hardly, they tend to get a golden handshake and move on to another company whereas that vet, the farmer or the mechanic tend to be punished for failure in some way - by loosing their accreditation, livestock or livelihood.

C-suite remuneration has far outgrown its justification.

Comparing C-Suite compensation, pay scale, growth rate and disparity from line workers is disingenuous at best. They cannot be compared, nor should they.

Why should they not be compared? Why should it not be discussed whether an hour of a systems engineer's life is worth far less than an hour of a CFO's life? What great sacrifice does the CFO make which the farmer does not to explain the disparity in remuneration? An hour in a life is an hour in a life no matter your profession, you won't get it back when it is gone.

IgorPartola• 3 years ago

The point isn’t to compare CEO and factory worker salaries dollar for dollar. The point is to compare growth rates of both over years. If the company grows 3x, CEO salary grows 10x, and worker salary grows not at all, how does that make sense to you?

no_wizard4• 3 years ago

Anyone thinking a C-Suiter clocks out at 5pm and doesn't work after hours has no experience in the C-Suite (or even upper management for the matter). There isn't really a such thing as "off hours" for these folks on average. Correspondingly, decisions made by your C-Suite can earn a company huge returns, or doom the company and all of it's employees and stake holders.

you're ignoring the contributions of people in the company that make the C-suites job possible. Why should the C-suite be entitled to this just because they work long hours?

I work long hours. I've had jobs - salaried, mind you - where I worked past 5 PM, well into the evening, and no stock options are not the same. At any rate, one of those jobs the stock options weren't worth anything anyway.

CEOs get golden parachutes and gobs of money and for what all, exactly? What do they actually contribute?

I'd love for there to be an experiment where you take a senior operations person, for instance, and put them in the CEO role, and see, if given the same support and onboarding, if they can't make good or possibly better decisions than the someone with "CEO experience"

I've met alot of CEOs, and they don't tend to be very in touch with their workforce, they simply see what they want to see, most of the time, few exceptions.

meindnoch2• 3 years ago

"Obviously, CEOs should be the highest-paid person in an enterprise"

Hold on there chap! How is this obvious?

lr4444lr3• 3 years ago

They have the highest accountability.

galleywest200• 3 years ago

But do they do the most for the company, though? What about those who actually invent their products in R&D, or any of that?

lowbloodsugar• 3 years ago

Not really true. They have the most people beneath them that can take the fall for them. Finance shenanigans? CFO takes the fall. Missed targets? COO or CMO. Major hack? CTO. Etc.

kccqzy• 3 years ago

These people with the highest accountability do not hesitate to blame lowly software engineers when it suits them.

https://www.theverge.com/2015/10/8/9481651/volkswagen-congre...

meindnoch2• 3 years ago

But isn't compensation proportional to the cost of replacing someone?

I can imagine a bunch of roles that are more costly to replace than "someone with accountability".

Turskarama4• 3 years ago

Do they? They will frequently tank a company and then golden parachute into retirement. This happens all the time.

ftxbro3• 3 years ago

they are at the top of the hierarchy and the top dog eats first

randomdata8• 3 years ago

Not so. The board sits above the CEO.

grecy4• 3 years ago

For a fun thought experiment:

If the CEO go on strike and don't come to work for a month, how many cars will not be built, and how money will the company lose?

If the union factory workers go on strike and don't come to work for a month, how many cars will not be built, and how much money will the company lose?

Therefore, who is actually more important to the earnings and success of the company?

burnerburnson3• 3 years ago

That's not an interesting thought experiment at all. The workers in aggregate are clearly more valuable than the CEO alone. That's why their cumulative salary is way higher than the CEO's.

fragmede2• 3 years ago

That's just the nature of the work though. If the CEO of a film camera business decided that digital cameras weren't going to be a thing, and refuses to pivot, that'll doom the company, but it'll take decades to realize his mistake. The company will lose all its money all the same. If the CEO of the car company decides not to build any factories to make electric vehicles, that decision's also going to take years to play out. They're both important, in different ways.

savanaly• 3 years ago

Permanently losing one line worker vs one CEO? You don't have to be a disciple of Ayn Rand to think the latter would have a greater negative impact on productivity.

TrackerFF• 3 years ago

Depends on what executive actions only the CEO can perform. I've seen this happen in a microcosm, where the managing director just refused to do things, and due to tasks only he had authority to do, contracts went unsigned.

Obviously large corporation will be more robust, and have things like attorney of power that - so that there's no single point of failure. But, these things happen.

burnerburnson3• 3 years ago

It's obviously wrong. NBA teams are a good counter-example. Nobody talks about the team's president/CEO/etc when prognosticating which team will be the best.

a_f• 3 years ago

Do NBA CEOs get paid less than the highest paid players? I would expect them to get paid more.

randomdata8• 3 years ago

I would have thought the owner would be the highest paid person in an enterprise.

So much for that whole capitalism thing.

nemo44x2• 3 years ago

Why does LeBron James make so much more than the ball boy and concession stand workers and ushers?

A CEO that delivers alpha deserves a big cut of that. The board exists to hire leaders that can deliver alpha. A good deal fail to. But the ones that do are more than worth their compensation.

And btw you have 0 chance of attracting the kind of CEO that can deliver alpha by offering peanuts. It doesn’t always work out and there’s plenty of snake oil CEOs, but the good and great ones are worth every cent to stock holders.

ken472• 3 years ago

My understanding is that the CEO's in question are not even remotely comparable to Lebron James's stature in basketball.

nemo44x2• 3 years ago

Then your understanding is misinformed I’m sorry to report. CEOs are generally top level business people and most business people can’t play at their level. There are exceptions but the system cycles poor performers out much like the NBA does to high draft picks that have lower than replacement value.

Businesses compete against each other and the CEO orchestrates the strategy and is accountable for the the execution across a broad spectrum of functions. There is a power law distribution where the very best CEOs are vastly superior to the good who are to the replacement level ones. So like in the NBA you may overpay for a guy in the hopes they are great or you pay handsomely for a good player that is above replacement level or you pay the highest for the best to run your company. Sometimes it pays off and sometimes not.

But the value that great CEOs produce is astronomical. Well more than a basketball player could ever hope to produce.

MuffinFlavored10• 3 years ago

The only person losing out is going to be the consumer. What's to stop executives at Ford, GM and Stellantis from saying "sure, 40% pay increases, no problem" and then just passing it along to consumers one way or another?

There isn't enough margin in the R&D + logistics of producing cars as is.

Ford's stock is up 25% in 5 years, vastly underperforming the index

GM stock is -5.6% over 5 years

Stellantis stock is +3.55% over 5 years.

Where is the argument that the greedy capitalist meanies at the top are doing nothing but buybacks with the millions in profits inflation the stock?

massysett• 3 years ago

“and then just passing it along to consumers one way or another?”

The consumer will buy a car from a non-union automaker that charges less.

mulmen3• 3 years ago

Ford jumpstarted the middle class by increasing compensation to a level that created more customers. This is consistent with the idea that value is created.

pyrophane• 3 years ago

Well, if interest rates remain high, perhaps CEO pay will go down.

abeppu3• 3 years ago

Just to point out a demonstrated, viable, successful reality achieved under different values and assumptions, the Mondragon Corporation/cooperative produces car parts, among many other things, and has pre-agreed ratios for wages for executives relative to the lowest wages paid to workers, and this tops out at 9:1. Studies have found that worker-owned coops have a greater survival rate than conventional businesses, and that they have higher productivity.

https://en.wikipedia.org/wiki/Mondragon_Corporation#Wage_reg... https://en.wikipedia.org/wiki/Worker_cooperative#Longevity_a...

reddozen2• 3 years ago

Mondragon is not a worker cooperative. They have a three-tiered worked system[0] with clear hierarchical structures and differences in voting power. The temporary worker tier (largest) having no voting power whatsoever.

[0] https://www.researchgate.net/publication/290978631_The_Mondr...

thelastgallon• 3 years ago

"cooperatives don't have to treat everyone exactly the same. You can have different "classes" of members.

some ideas about how to offer "founder incentives" in workers cooperatives."

From a recent HN comment: https://news.ycombinator.com/item?id=37304911

boppo12• 3 years ago

How is equity comp factored in?

nataliste3• 3 years ago

The paradox of worker-coops is that workers capable of successfully running businesses together are also capable of running businesses independently, so why create more failure points?

r00fus7• 3 years ago

This comment seems ignorant of basic economics - you might as well ask why mergers/acquisitions happen at all.

nwalizer• 3 years ago

How does collaboration create more failure points, rather then fewer?

abeppu3• 3 years ago

I don't think it's a given that what a group can do, the constituent individuals can do? You probably need a team to build and ship a meaningful product regardless of the type of organization that develops it.

It's a little weird that tech-folk are generally ok with the idea that groups can yield good predictions in the context of a non-owner community that is harnessed to improve a product, or in the context of a prediction-market, where people placing bets in disagreement can lead to a more accurate outcome than the participants taken separately would produce -- but somehow think this mechanism will fall apart if workers who have an interest in a firm's ongoing revenue are able to vote.

throwaway143562• 3 years ago

economy of scale doesn't seem paradoxical?

There is also the thrill of making something happen together. Like barn raising with 200 people is quite different from building a shed alone.

1970-01-01• 3 years ago

Imagine a FAANG software union asking for 40% more pay for devs, to match the CEOs'.

Mistletoe• 3 years ago

I’m assuming auto workers don’t make 400k a year already.

umeshunni3• 3 years ago

I got an average 20% annual TC increase every year of the decade I worked at a FAANG, so 40% over 4 years would be well below average.

ftxbro3• 3 years ago

imagine a line worker comparing themselves to a ceo. tim gurner is right the workers really are becoming arrogant

Exoristos• 3 years ago

The word you're looking for is "uppity." "Arrogant" is the CEO assuming he's worth hundreds of times more than a different man.

ftxbro3• 3 years ago

at least in usa the word uppity has some other connotations. also i was quoting that guy as saying arrogant so i guess he was the one looking for the other word not me

hindsightbias• 3 years ago

IDK about the current guy, but the CEOs who moved production to Mexico will be seen as deserving every penny.

On a per-unit cost, what’s labor vs CEO?

vondur• 3 years ago

I totally agree that CEO pay is out of control for the most part, but I doubt the companies can really afford to give such a huge raise to thousands of employees. I think in the 1950's US, the average CEO's salary was "only" around 5-10x that of the average workers rates. This meant while CEO's were wealthy, they weren't Uber-wealthy like they are today with 100x salaries vs. average worker pay.

refurb2• 3 years ago

The average CEO at a top U.S. company was paid $27.8 million in 2021, including stock awards — 399 times as much as the typical worker — according to research published by EPI. From 1978 to 2021, CEO pay grew by 1,460%, adjusted for inflation, versus just 18.1% for the typical worker.

Auto workers aside, this is always a crappy stat that is thrown about.

"Top US companies" is rife with survivorship bias. It's like saying "the CEOs of the most successful companies had their pay increase..." Well yeah, when a company is successful, compensation rises.

Average CEO pay across all companies in the US is like $250,000.

Honestly, if the union wants similar compensation as the CEO, they should have the same pay structure as the CEO - 10% in cash salary and 90% in options or stock. When the car company does really well, they make a ton of money, when it does poorly, they make almost nothing.

But I would guess they wouldn't go for that.

mulmen3• 3 years ago

Well yeah, when a company is successful, compensation rises.

Only for the C-suite apparently.

When the car company does really well, they make a ton of money, when it does poorly, they make almost nothing.

That’s already how it works. Workers took pay cuts in 2008 to keep the companies going. It worked and now the UAW is asking for the same pay recovery that the C-suite already received.

refurb2• 3 years ago

Only for the C-suite apparently.

Seems like you missed the point entirely, but ok.

But anyways, that's false, US autoworkers have a profit sharing component to compensation.

https://www.freep.com/story/money/cars/general-motors/2023/0...

That’s already how it works. Workers took pay cuts in 2008 to keep the companies going. It worked and now the UAW is asking for the same pay recovery that the C-suite already received.

Workers did not take pay cuts in 2008, the autoworker unions actually created a multi-tier compensation structure that protected existing union workers (surprise!) and penalized all the new hires.

And CEO compensation, at least at GM dropped by ~80% after the 2008 crash.

https://www.reuters.com/article/us-gm-compensation-idUSTRE73...

lostlogin• 3 years ago

“Obviously, CEOs should be the highest-paid person in an enterprise, but then the question is exactly just how much higher than everyone else,” Josh Bivens, chief economist at EPI, told NPR.

Are there any examples where this isn’t true?

I know someone who works as an engineer cleaning up nuclear waste. The workers who do the job he engineers are paid more than him. He is ok with that but did pass the comment that it’s an unusual situation.

marricks• 3 years ago

"Of course they should be paid more, cause they are."

I think NPR does a lot of damage not questioning assumptions like this. Or, often times, putting them out there themselves.

chadash2• 3 years ago

The football coach is often the highest paid employee at the university. I wouldn’t be surprised if many rockstar doctors made more than some of their hospital CEOs.

wincy• 3 years ago

I’d imagine Linus Sebastian (of YouTube Linus Tech Tips fame) is taking home more money than the recently appointed CEO of the Linus Media Group. But that’s also a weird situation because he basically hired the CEO to free himself up to do the parts of the job he likes.

He said someone offered to buy the company for $60M cash I think it was? Which is astounding.

belltaco• 3 years ago

He and his wife own 100% the company so it might be better to hold on to the cash for tax purposes than pay themselves a lot because tax on payroll is pretty high compared to company's cash sitting in the bank.

I think the offer he mentioned was $100M for LTT.

lz400• 3 years ago

In banks and financial companies it's relatively common that some rock star trader or quant that has an exceptionally good year might make more than the CEO.

vaadu• 3 years ago

Robot makers and overseas workers are all in supporting this strike.

screye• 3 years ago

I have to wonder. What percent of Tesla's success is attributable to not having legacy union baggage. Unions are the tech debt of the manufacturing world.

It starts with a good idea, but if you let it fester, then it quickly becomes more of a drag than a productive addition to your organization.

mortureb9• 3 years ago

It’s a balance. Tesla employees are not having a good time, I can tell you from first hand experience. You’ll make reasonable money but it’s not really a life worth living with 12 hour days and extreme stress. Atleast the options made me rich so maybe it was worth it?

MuffinFlavored10• 3 years ago

what’s something Elon has done better/differently than the GM CEO?

mulmen3• 3 years ago

Unions don’t serve the company. They serve the workers. The real irony here is that Henry Ford jumpstarted the middle class by increasing pay to match increased productivity. That new middle class then bought his cars. A company that doesn’t serve workers and thus society has no right to exist.

bagels6• 3 years ago

People get really fixated on CEO pay. Its only of symbolic importance.

Google says: 167,000 GM employees Mary Barra salary: $29M

Distribute that salary across the whole workforce: $174 per employee

They should really be talking about it in terms of inflation or profit margin. GM profit for 2022 was $21B

pests2• 3 years ago

I always see people show this equation and it never made sense to me.

No one is saying the CEO is taking money the employees would have otherwise earned. When you divide it out like that of course its a pittance per employee.

The statement is about the relative scale of the CEO pay to one employee. I don't care about the difference applied to all employees.

An absurd parody I always imagine: John is 7ft tall. His group of 6 other other friends are only 6ft tall. Wow John is really tall! Nah, if you distribute his tallness between his friends they would only gain 2 inches! That has nothing to do with John being 12inches taller than any one of them.

bagels6• 3 years ago

It frequently doesn't matter how much the CEO makes. It's not why the other employees aren't making more money. It's just a distraction. It boils down to "it's not fair". If what is important is the ratio between CEO pay and employee pay, then the board can cut CEO pay, and call it a day. That doesn't improve employee pay.

If the employees really only care about that ratio, then they should accept that outcome from their strike. That's not why they are on strike, they also want to be paid more, just like the CEO.

notatoad• 3 years ago

yes, you're right, if you distributed john's height across his 6 friends, they'd all still be normal height, and nothing would really change for them, except that john would no longer be abnormally tall. you've taken a situation where there's something noteworthy, and made that noteworthiness disappear.

the same logic applies to CEO pay. you can either pay the CEO a lot, or you can pay everybody else an amount so slightly different that it's unnoticeable. there's value in paying a CEO a lot, or you can not pay them a lot, and not pay anybody else any more either. surely you can see how there might be value in offering a high salary for a role that can have a big impact on the company, and how simply not doing that and essentially erasing that money instead would be a bad decision?

thisgoesnowhere2• 3 years ago

This is a super bizarre argument.

I suppose I should be paid 167,000 more per year as a software engineer at GM because it's only 1 dollar per employee?

bagels6• 3 years ago

Sure if the board thinks that you singularly deliver the value, why not?

randomdata8• 3 years ago

Mary Barra salary: $29M

$2 million, actually. The $29 million is total compensation; mostly stock awards.

imchillyb• 3 years ago

Value of a cog, gear, or screw is minimal. Value of a complete and functional engine is much greater than the former. A complete and functional automobile’s value is, most times, greater than cogs, gears, or engines.

An employee’s value is relative to a gear, cog, or assembly of them.

A CEO is akin to an engine, infinitely more valuable, a requirement for functionality, is the force behind a company’s goals and provides locomotion.

The automobile itself is the company.

While an auto may function without gears and assemblies the performance will be sub optimal.

An auto functioning without an engine is said to be coasting. A company without a CEO is also coasting.

The value is supposed to be performative. A great CEO provides direct value, direct movement, and is rewarded thus.

AndrewKemendo3• 3 years ago

This is great. Add this to SAG-AFTRA, Waffle House workers and Starbucks walkouts and we have real movement toward a general strike

If both Wal-Mart and Amazon drivers strike we might actually have a shot a taking a bite out of capital finally.

MuffinFlavored10• 3 years ago

serious question: say everyone you described gets a 20% raise

what do you think will happen to the cost of goods? what companies do you think are operating with enough margin that they can just afford a 20% rise in their payroll costs?

amrocha8• 3 years ago

Serious question: if every company was working with razor thin margins, and every worker made make minimum wage while investors reap profits from speculation, would that be good?

AndrewKemendo3• 3 years ago

Think differently

It’s not about a one time 20% raise

Think more like:

“4 day work week”

“Return to 1945-1949 tax rates”

“convert corporate to cooperative ownership”

somsak23• 3 years ago

great question! profit margins have indeed been rising significantly over the past few decades, from around 5% to 12% just since the mid-90s -- https://www.yardeni.com/pub/sp500margin.pdf

Sugimot02• 3 years ago

The costs of goods will increase regardless of labor cost as they have already. The issue lies in the contradiction between relatively stagnant wages and the rising cost of goods/housing/etc which naturally develops into labor organizing.

A better question to ask is what will happen when a larger portion of the profit that these workers created now flows back into their communities?

Workers spend their money at family run business, and small to medium size businesses in their community and contribute to the local economy. The economic implications of this effort are not just beneficial for the 150,000 UAW workers but their communities and local economies as well.

In contrast the board members who are reaping those profits are not spending money in those communities. Even if they theoretically lived in the same communities and frequented the same businesses they would not buy anywhere close to the same quantity of goods and services that the 150,000 uaw workers would with those same profits.

r00fus7• 3 years ago

Did you realize that only 5% of the cost of the vehicle is from labor? So essentially car prices would rise 1%.

Sounds acceptable to me.

OkayPhysicist2• 3 years ago

You're deluding yourself into believing that costs set prices. This is econ 101: prices are made when supply meets demand. Costs only set a floor on supply. In any case where a business has a moat of any kind, only the demand curve matters: prices will be set where price times # of people willing to pay that price is maximized.

Companies are profitable, by definition. If they aren't profitable, they die (eventually). As long as there is a profit, worker pay raises does not need to be completely covered by an increase in price. Where does profit go? Into the hands of the rich.

Thus, workers demanding raises is simply a progressive wealth redistribution, from lining the wallets of fatcats, to rewarding the people who actually created that wealth.

pc_edwin4• 3 years ago

I remember getting downvoted then flagged for making a reasonable argument against a bunch of employees from Tesla unionising.

While its not exactly a vindication, I feel super vindicated right now and I'm not gonna be reasonable this time.

These companies have no way out, they are going to die! All these people will lose their livelihood and worse their options to monetise their skillset/experience will be next to zero. Is this your utopia?!

I've been researching Ford for a while, they have so much debt and an extremely small margin for error for the EV transition. It was gonna be so tight and now their fate is sealed.

I'm not proud of this but a part of me find a bit of joy in what comes next. There is this Thanos side of me that feels like a grave injustice have been done here. These people have no right to have this much power over a company.

You really think a CEO isn't worth 300-400x more than a line worker? Honestly I can't fathom that level of ignorance/cognitive-dissonance.

Replace CEO with any sort of leadership role in any kind of organisation/entity with skin in the game (where outcomes can hurt). Whether if its football coaches, generals, head of state etc.

I know nobody (sane) disputes the difference between a c-suite employee vs a line worker but what I'm talking about is the exponential nature.

These people are barely human. Imagine the stakes, the leverage, the consequences and the sheer amount of context you need. Being in the top percentile of IQ, EQ, competence, industriousness etc are just tablestakes. You need to be ruthless while at the same time have an immense capacity for empathy. You need to be extremely conscientious/industrious while at the same time having a large reservoir of creativity. Its like the infinity stones, you can't just be a galaxy brain or just have the gift of the gab or be a psycopath. You need it all and more while competing against people just like you for rarified roles.

To top it off, all of this just gets you into the ring, you also need to actually win and win consistently over period of time. Usually this requires sacrificing your entire life. Btw this where the barely human part comes in, these people thrive on this. All these CEOs have enough money to retire on a beautiful ranch or oceanfront mansion, instead they work 70 hour weeks.

And you think these people are somewhat similar to the guy who screws in car parts? You think society should value these people in somewhat the same realm? like a linear nature (50% or 300% more).

This kind of thinking is what leads to the end of civilisations. These people should be revered. We should be grateful.

I still can't accept there are people in the world who think its somewhat similar. This is not an IQ thing, its not even a being well read thing.. This is common sense. We all have met people in our lives where we go "oh there are level to this game", like freaks of nature.

How can you not think its the same for you know, leading a multi billion dollar public corporation with hundreds of thousands of employees.. Its mind boggling. How can people no see the asymmetry!

mlsu• 3 years ago

Some executives are as you say. In general, those companies which are lead by executives like that are leaders and produce high quality and innovative products that people love.

But many execs are not. They work just as obsessively as the first type, but only to increase their own power inside of the organization, at the expense of the organization's cohesion, trust, productivity, and quality. They live in a bubble, totally disconnected from the organization's purpose. They make strategic mistakes over and over again. They fail to truly understand why even a single dollar of revenue happens; instead they take it as a given that the money is coming in and only think of ways their unit can siphon off more of it, at the expense of all the others.

If just one of these type 2's enters your organization, you can typically get by, as long as you recognize them quickly enough. If even a small handful enter your C-suite, they will metastasize, cause your type 1's to leave, and put your org on a death spiral.

Many execs are of the second type. You can tell: if you use a product or service, and it sucks, that's probably what's going on at the top.

pc_edwin4• 3 years ago

I tend to agree with you. I was generalising quite a bit for the sake of conciseness (& being a little cheeky)

Its not uncommon to see people in these roles because of nepotism, they write the checks or they are good at short term games (machiavellian, gift of the gab, office politics).

That said, such exceptions tend to not last long because of the unstable nature of these situations.

In other words, those who match the description I made earlier tend to eat these peoples lunch given enough time.

doctorwho42• 3 years ago

Yes the CEO should make more, but where do you get off that a single individual can possibly do 300-400x more work than another individual. It is sheer absurdity of an opinion to hold.

In a civilized society I would say maxing out the top paid employee of a company to 20-30x of the average of the salaries of the bottom half of all salaries in the company is what should be done. Anything more than that creates a system of perverse incentives to take action that is against the greater good of the community.

Sugimot02• 3 years ago

Also Akida Toyoda made $6.9m last year, and Toyota is larger than any of the US companies by a wide margin in every metric, while bringing in more net income. How do these US CEO's calculate their worth as 5x as much for smaller less profitable companies? It's avarice clear as day.

pc_edwin4• 3 years ago

I tried to address this in the latter part of my post.

I'll start by saying there is a lot of nuance here with cases where I might even agree with you but I'm going set aside nuance in service of getting to the core of my point.

The guy who pushes around a trolley, unpacks a box of goods and puts it in the shelfs of a local branch of a nation wide grocery chain is not just worth 30x less than the CEO of that multi billion dollar grocery chain.

The key distinction here is that the difference isn't just linear, its non linear with a steep gradient. You can replace that guy with a 12 year old disabled girl and it would make almost no different to outcome for the multi billion dollar grocery chain.

Whereas if you hired a slightly less competent/experienced CEO and I mean like 0.5% less, the difference is tens or even hundreds of millions.

The non linear nature to this is not just something to do with humans, its a natural phenomenon. Its the Pareto principle & distribution.

Maybe things can be in the realm of 20-30x when we are talking about CEO vs the rest of the C-suite.

P.S. Just to directly address your civilised society claim: There is nothing civilised about the proletariat or their puppeteers dictating by fiat how far high a person can fly before their wings get chopped off. Btw in such a society, those who chose are an order of magnitude more powerful than the most richest and powerful in our current society. You just replaced one set of elites who "atleast" "somewhat" earned their station with another set of elites whos only skill is in being a good orator.

mullingitover3• 3 years ago

I'm surprised unions don't throw their weight around more via equity ownership in the company. Controlling the company directly is really the endgame move, once they control a majority stake, they're literally just negotiating with themselves for their labor contracts.

Even better, if they're managing their pensions via investment houses, why not just build their own investment house and leverage their negotiating position that way?

mr_toad5• 3 years ago

If they could afford that they wouldn’t need jobs. They’d need to hire a bunch of new workers.

It would be interesting to see what happened when the shoe was on the other foot.

mullingitover3• 3 years ago

I'm surprised, I did a little digging and there are actually quite a few companies that are at least 50% employee owned[1]. The biggest company in the list is Publix Supermarkets, but there are also quite a few manufacturing and engineering firms.

[1] https://www.nceo.org/articles/employee-ownership-100

gen220• 3 years ago

I always thought the same. Bargaining for some minimum amount of cash is important (food on the table, gas in the car, etc.).

But beyond that, meaningful equity in the hands of labor should surely be the goal — it aligns interest in a way that cash can’t.

ryathal• 3 years ago

US unions are notoriously anticorporate, they generally despise the idea of stock based compensation.

seanmcdirmid3• 3 years ago

Just wondering, but are any of the American car companies doing well besides Tesla? Every year they seem more irrelevant, even Texans will buy Japanese pickup trucks these days. I just don’t see them rich enough to pay their CEO or workers 40% raises, and that increase is just going to be temporary as their business become less viable and layoffs or insolvency follows.

bufferoverflow• 3 years ago

Best-selling cars in the US are

• Ford F-series(F-150 being the most popular car in the US)

• Chevy Silverado

• RAM Pickup

• Tesla Model Y

• Toyota Rav4

• Honda CRV

• Toyota Camry

• GMC Sierra

• Nissan Rogue

• Jeep Grand Cherokee

So 6 out of 10 are American.

apexalpha• 3 years ago

Okay but that's in a protected market with high entry barriers and import tariffs for foreign competitors.

What's the list globally?

seanmcdirmid3• 3 years ago

So 4 pickups? At least pickups are high margin now (they used to be cheaper than cars when I was a kid).

I guess American non-Tesla cars still are popular in places like Texas then?

Striking auto workers want a 40% pay increase–the same rate their CEOs’ pay grew

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