This NYT article discusses current compensation packages for the top earning business executives. Essentially, the article argues that financial crisis reforms have done very little to fix inequality. While compensation for Wall Street (banking) executives has somewhat decreased, compensation packages for large media and technology firms are as high as ever.
For example, the three CEOs of John C Malone's media empire earned a combined $342 million last year. Go Pro's founder & CEO earned $77.4 million, and Oracle's CEO, Larry Ellison, earned $67.2 million. Furthermore, the highest earning hedge fund manager walked away with $1.3 billion last year, while the top private equity manager made $690 million.
Clearly, executive pay packages are still enormous. Why? The article argues that the Dodd-Frank Act and other similar legislation was developed on the basis that transparency would stop enormous executive pay. While transparency has lead to some improvements, it certainly hasn't shamed or guilted board members and executives to reduce inflated compensation.
A Columbia Law School professor of corporate governance is quoted saying:
“The inside, clubby mentality of being in the right group at the right time is still the way to get paid at big American companies.” “Even after say-on-pay, even after disclosure rules, even after the financial crisis, it shows how much work we still have to do.”
What is your stance on this article's claims: do you believe that financial crisis reforms have been relatively ineffective?
What are your thoughts, in general, about CEO compensation?
Wow, I knew top executives were still making a lot of money, but those numbers are unfathomable. What do you need all that for?? Anyway, I think we're seeing that a lot of the regulations that came in the aftermath of the financial crisis haven't really made the big changes that they were supposed to. As the article says, even though transparency increased, Wall Street hasn't stopped thinking that they deserve these massive salaries. Furthermore, these kinds of compensation packages are only fueling the upper centile that Piketty speaks of. The super rich are earning hundreds of millions, while a minimum wage worker can't get $10 an hour for part time work. There is certainly something wrong here.
ReplyDeleteYeah, like Shelby says, it's remarkable how much these CEOs are getting paid and as far as the measures after the crisis to reduce this, it seems pretty ineffective. It's frustrating that people are still getting "pay for luck" like Piketty mentions in the book and also enormous pay for innovations. People should be rewarded for their work. My question becomes - how are these CEOs and innovators getting paid what they do? The article, and Piketty calls it "pay packages" like its something that a boss hands down to an employee and the employee agrees, but these are the CEOs so they are the bosses. I assume that they are receiving dividends and returns on shares from the company as well as money they've taken from their shares of the company and reinvested elsewhere. So this doesn't really sound like a "package" it sounds like paying the right people to invest their money in the right places. This doesn't make it right, but just playing devils advocate here - is there really a way to avoid this kind of financial gain from a growing field like technology? I think this is where Piketty's wealth tax comes in. It's an important discussion as it certainly bolsters the 1% without much of a trickle down effect to the lower and middle classes.
ReplyDeleteI'm happy you wrote about this Alex. I was watching Shark Tank last night and found it interesting that the CEO of Go Pro was a new shark (along with billionaires like Mark Cuban). Now I can see why with earning (paying himself?) $77 million a year. Regardless, I have to agree with Taylor. I don't think there is a good way to avoid these kind of financial gains by executives other than by taxation.
ReplyDeleteThe salary figures listed in the article really are hard to imagine. It's difficult to understand why salaries that large are even necessary, as Piketty stated in one of the interviews we watched last class, at a certain point increasing a person's salary doesn't really increase their consumption. I agree with everyone that the current legislation after the financial crisis does seem to be relatively ineffective and that it seems that there is no good way to reduce financial gains by executives. Something we talked about in one of the last couple classes was the fact that it is very hard to picture what certain policies will look like if we are not familiar with them. While it currently seems that taxation would be the only way to reduce huge financial gains (even though this is unlikely to ever pass through a legislative body) there may be a different type of policy that could be effective. I think in that case it is important for people to continue to demand better policies to decrease inequality.
ReplyDeleteI have to agree with everyone above, at a certain threshold, additional salary doesn't really make sense in terms of consumption. I think it is tough to judge whether reforms have been effective considering where we are and where we were before the crisis. It would seem that any changes are minute or not doing nearly enough to help restore us back to pre-crisis levels. Although, it remains to be seen if those levels are attainable without the enormous amount of risk from before.
ReplyDeleteThese salaries do seem pretty outrageous in my opinion, and honestly I don't really know what I would do with all of that money, if I was making that much in a year. I hope some of this money is going back into the economy, but one can only hope. I agree with Taylor and Tyler; the only way to try and control this is through taxation. Also, I do not believe that the actions taken after the Great Recession have had the effect that many suspected they would.
ReplyDeleteI have to agree with everyone's points above and cannot believe that these executives are making so much. Before reading this much I never knew that executives like this were taking in so much money as well as in some cases paying themselves. Going along with several other people's points I also agree that taxation seems to be the only answer to trying to be able to control this issue.
ReplyDeleteI agree with the previous commentators. I find this article enlightening and have gained insight on the earnings of executives. Personally, It was hard to believe that executives earn that much of a salary a year. Like others have suggested, it appears that taxation may be the only way to counter the outrageous yearly salaries of executives. However, I think this solution in the past has proven to be challenging because of the "elites Americans" influence on policy makers. To be truthful, I think it will be very difficult to end this perpetuating cycle of where the rich just keep getting richer and the majority of Americans live in baseline poverty levels.
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