My Photo


« Bartlett | Main | Hume, No, Not David..... »

January 05, 2010

Comments

zero

i had to stop reading halfway through. it was making me ill. nothing's changed, either, after the crash/aftermath of the last few years. unfortunately for everyone NOT wealthy.

fundamentalist

The issue of CEO compensation is directly related to the analysis of the just price conducted by Church scholars from Thomas Aquinas through the 17th century. After much debate, those theologians concluded that the variables involved in determining a just price are too numerous for any but God to know. On earth, the closest we can approximate a just price is in a free market.

evagrius

Mr. fundamentalist,

You really should have written for Rowan Atkinson's "Black Adder". You have a superb gift for satire.

I love your reasoning. "Only God knows" why CEOs are paid so much. That's something Baldric could have said with that strange innocent face of his.

Doug

It's very easy to question what somebody else makes. I'm not for CEOs doing unethical things to earn money, even if it's legal. I'm certainly not for Big Business because usually that means seeking government assistance to stay in power. If a CEO leads a company that provides a good or service that people want (Bill Gates comes to mind), making a profit isn't bad whatsoever. If they make lots of profit doing so, it ought to be only because they are offering a really great product or service, and it is very desirable. Bill Gates and Steve Jobs do a world of good for the world by running companies that lead progressive technologies for us all, and have made all our lives better, even if we haven't used their technologies. They are only successful because they have made products people want.

zero

i question how good microsoft products are. that he's made billions doesn't mean he's sold a decent product at a decent price or that his business practices have been ethical or that people necessarily want what he sells.

evagrius

Both Bill Gates and Steve Jobs are touted as "visionaries" and even "geniuses".

They're very smart but certainly not what they are touted to be.

They've been very fortunate in being in the right place at the right time and having the "ability", if that is the word, to be brutal in their drive to dominate.

I certainly don't hold them up as exemplars of excellence.

fundamentalist

evagrius: ""Only God knows" why CEOs are paid so much."

You are certainly highly skilled at distorting what other people say. Why don't you try being just a tad more hones for change.

Personally, I think CEO's are paid too much. But I also understand it's none of my business what boards pay their employees. You refused to answer my question about how much CEO's should make and I understand why. In the first place, you don't know. In the second place, any answer would be too obviously arbitrary. The principle that the free market decides the just price is not arbitrary. It is the rule of principle as opposed to the arbitrary rule of man. The rule of principle as opposed to the arbitrary rule of men, known as the rule of law, is one of the institutions that has made the West wealthier than the rest of the world.

Socialists don't like the rule of law because it doesn't give them the outcomes they want. They want to destroy the rule of law and substitute their own preferences. And they have succeeded a great deal and will continue to succeed for a long time. And the result will be the impoverishment of Americans and a much greater number of poor people.

evagrius

Mr. fundamentalist;

Obviously you did not read your own observation on CEO compensation. You argued that CEO compensation is directly linked to the "theological debates" on just price which concluded that the variables were too numerous and that in a "free market" only God knows the rationale for the price. Therefore, one is lead to conclude that, if the same principle applies to CEO compensation, as you argue, then only God knows why CEOs are paid so highly.

The reason I do not give any indication for what I think is a fair wage for CEOs is quite simple and I stated it.

Just examine Table 2 to begin;

So...patiently, I will guide you through the Table.

Go down to very bottom of the table. Notice the last line.
What does it state?

Average compensation of non-US countries;

$748,904

Average compensation of U.S. executives;

$2,249,080.

Foreign CEO pay relative to US, ( stated as 100%) 33%.

That is, foreign CEO compensation is an average of one-third US CEO compensation.

If you look at Figure 2, you will also notice something interesting. It gives the ratio of CEO compensation to the average worker compensation.

I did the averaging of all the countries except the U.S. It's only a rough estimate, ( difficult to get the exact ratio from the graph so it may be off a bit). I came up with a ratio of 18 to 1 as the average of non-US CEO compensation. That is, the average non-US CEO is compensated at 18 times the compensation of an average worker. The US CEO is compensated at 42 times the compensation of an average worker.

What's the explanation?

Read the quotes below, ( from the PDF);

That money was taken, directly, from company shareholders. But the loss, viewed
on a larger scale, is a loss to the community of people who believe in the capitalist
free-market system. Because extortions of that size tell us, really, that the market
system is not working—in respect of executive remuneration. What is going on is
phony. It is shoddy, it is contemptible, and it is philosophically blasphemous.
(Buckley, 2005)
An extensive body of academic work has searched for an answer that can accurately
explain the phenomenon of CEO compensation. One explanation that makes a lot of
sense is that of “managerial power”: The fact that managers have considerable power to
shape their own pay arrangements helps to explain why the pay arrangements set by the
boards of directors fail to maximize shareholder value (Bebchuk et al., 2002; Bebchuk
and Grinstein, 2005).
The academic argument, based on the data, is borne out by the anecdotal record.
Compensation consultant James Reda puts it bluntly: “There’s no rule that a CEO can’t
be present when directors discuss his pay. And if you ask 10 consultants to evaluate
performance, there are no standards. It’s an area ripe for misjudgment” (Strauss and
Hansen, 2005).

The PDF goes into more detail outlining some of the reasons.

Now, in my estimation, it's quite clear the reason why but I do think you do have a point; only God knows.

Consider that the non-US countries also have "free markets". Why should their "free markets" compensate CEO's at a lesser rate than the US? Is there something wrong with them or the US?

Only God knows.

zero

http://www.ourfuture.org/blog-entry/2010010106/people-who-matter

this ties in with the conversation about ceo pay. did you see where a banker board member say that ceos were like rock stars and movie stars? meaning more important than the rest of us? which is the topic of the link. those who matter and those who don't. and all of us who aren't in important positions of power don't.

fundamentalist

evagrius: "...the variables were too numerous and that in a "free market" only God knows the rationale for the price."

That is not what I wrote and you know it. Your dishonesty knows no limits. I wrote that the Church scholars wrote that only God knows the just price. I did not write that only God knows the causes of any price.

As I wrote before, which you clearly did not read, you chose the Rest of the World (ROW) average as the standard by which others should be judged. But, as I wrote, that is not a principle by which business can guide itself, it's an arbitrary decision based on your preferences. How do you know that CEO's elsewhere are not paid too little? Or too much, based on performance? And you never gave any principle as to why the ROW is the proper guide. You can't because there isn't one.

If the determination of CEO pay is not coerced by the state, or illegally by private individuals, then Church scholars would say it is a just price. You repugnance simply doesn't matter.

As for the author's and Buckley's foaming at the mouth, neither one gives an objective principle for determining CEO pay. And the author is simply wrong that it hurts anyone. He does not know the circumstances of every company. Boards hire the CEOs they hire and pay them what they do because they think those CEOs will enrich shareholders. The author and Buckley have no right or expertise to substitute their opinions for the judgment of the CEOs elected by shareholders.

evagrius:"Consider that the non-US countries also have "free markets". Why should their "free markets" compensate CEO's at a lesser rate than the US?"

They aren't as free as the US, that's the obvious explanation. Also, in Europe, the unions sit on the board.

What strikes me as odd is that socialists obsess over CEO pay, as if it makes any difference. If you fired all of the CEOs in the country and distributed their pay among the workers they wouldn't even notice. And it wouldn't reduce prices enough to notice, either. Maybe you can enlighten me as to why socialists are so obsessed with something so utterly insignificant.

zero

evagrius, your dishonesty knows no limits!!!
and you can't read!

i'm still laughing heartily. gaffaw!!!!

fundamentalist

I don't think I was clear enough in the previous post. What I meant to say was that since evagrius is digusted by CEO pay in America, then he must think it is unjust. If he thinks it is unjust, then he must think there is a just wage for CEO's, or a just price. But Church scholars disagreed and insisted that the free market gives the most just price possible for humans.

evagrius' response was that CEO pay in the US should not be higher than what CEO's in the rest of the world earn. Why that should be the principle we live by is not clear. CEO pay does no harm to anyone, is not coerced in the US (while the state and unions determine much of ceo pay outside the US), and is a tiny part of the profits or any company.

evagrius

Mr. fundamentalist,

I'm at a loss here.

It seems to me that you have made the "free market" into a metaphysical substance that replaces God and the concepts of morality.
After all, it, ( the "free market"), will, by its "invisible hand", ( a term found only a few times in Adam Smith but quoted by many defenders of the "free market" as from his writing and having a near metaphysical quality), will adjust everything to its "just" level.

But, according to you, the "free market" only exists in the U.S. Other countries and cultures do not have "free markets". They, instead, have markets constrained by "the state", ( this is an alien entity that is completely separate from the populace and imposes itself from without against the people's will and consent), or by unions, ( again, another alien entity imposing itself on hapless workers and harassing owners of businesses), and social norms, ( again another alien entity), which looks upon disdain at those who dare to compensate themselves more than what is perceived as just compensation. Those countries are obviously backwards and in need of the true gospel of the "free market".

Do I have this right? Am I reading you correctly?

If this is so, then you will have to explain why those countries seem to be quite well off materially speaking. True, they don't quite have the same level of material prosperity but then, again, they don't seem to have quite the deep contrast between rich and poor as in the U.S. which, according to the latest data, seems to be at the same Gini level as "third world" countries in Latin America.

Also, these countries seem to have quite a presence in U.S. markets with some very fine products made by companies headed by seemingly low-paid CEOs. They certainly seem to be performing quite well.

Doug

Evagrius, for what it's worth, you're not reading fundamentalist correctly. I've not gleamed any of what you attribute to his attitudes or concepts about anything the way you have. Maybe he's not communicating correctly, or you are projecting your misunderstood readings of the free market onto fundamentalist.

I do appreciate that you asked "Do I have this right?" I really think part of the problem with discussion is we don't ask permission if we've understood the person correctly.

Fundamentalist, while I'm inclined to agree with you on almost every factual statement you make, you tend to be a bit defensive, and evagrius won't listen to you because of that (let alone the initial disagreements). For what it's worth.

fundamentalist

Doug, evagrius won't listen because he is afraid of having his socialist worldview destroyed. He knows very well he is distorting what I wrote. I found it to be the case with most socialists that they cannot be honest and maintain their socialist ideology. But then, I've never found a socialist who cared two bits for truth, either.

evagrius

Well, I would really like to know what both of you mean by "free market".

It seems that Mr. fundamentalist does not think that "free markets" exist in ROW, ( rest of the world).

It seems that "free markets" only exist in the U.S. but then, it seems that Mr. fundamentalist also argues that, because of "state" intervention, they don't really exist in the U.S. ( See remarks on the Fed).

Except when CEO compensation is involved when, suddenly, they do.

So...could you explain how "free markets" exist for CEO compensation yet do not exist otherwise due to government intervention.

fundamentalist

evagrius: "It seems that Mr. fundamentalist does not think that "free markets" exist in ROW..."

Doug, I'm sorry I sound defensive. What I'm trying to do is point out that I'm familiar with socialist techniques for discussion. Evagrius' statement above is another example of what socialists do when cornered. First they insult. If that doesn't cause their antagonist to flee, then they resort to distortion of his comments. The goal is to frustrate the antagonist enough that he will quit posting and the socialists can go back to the self-congratulatory club. All the while, the socialists ignore substantive points and questions because they can't respond without denying their ideology.

However, I never thought I would witness a Christian falling back on polylogism the way Chuck did in the Bartlett post. That's a typical refuge of atheists, but it really surprised me to see it coming from a Christian.

evagrius

Mr. fundamentalist,

You did not respond to my question.

Instead, you write a tirade about "socialists" and their technique of avoiding discussion.

Ironic, since you are the one avoiding discussion bu using the very techniques you accuse me, ( and Chuck), of using. The term polylogism which you use is defined in the Ayn Rand lexicon as a dosctrine arguing that different logics apply to different people. I do not see evidence that Chuck has used polylogic in any of his statements and arguments. It would be nice if you could provide the evidence for such an accusation.

Could you please provide a definition of "free market" so that we can at least know what you mean by it.

On CEO compensation;

Here's a nice article on the subject. The CEO of Continental Airlines has actually refused his pay until the airline posts a full year profit, ( gasp!):

http://www.montrealgazette.com/business/Continental+Smisek+sets+shinning+example/2412207/story.html

This action of Mr. Smiskek is fully in accordance with ethical requirements and is to be commended.

fundamentalist

evagrius: "Could you please provide a definition of "free market" so that we can at least know what you mean by it."

That's not a serious question. You are intelligent enough to know what free market means.

evagrius: "I do not see evidence that Chuck has used polylogic in any of his statements and arguments."

Chuck made this comment: "you hold positions that some portion of the politico-economic spectrum hold. Similarly, I have stated that I am of a strand (and there are more than one) that reject your way of framing the issue and, thus, come to different conclusions about the same data."

That is essentially the same as polylogism. And by the way, Rand did not invent the term.

evagrius

evagrius: "Could you please provide a definition of "free market" so that we can at least know what you mean by it."

"That's not a serious question. You are intelligent enough to know what free market means."

It is a serious question and since you won't answer it, I take it that you haven't really a clear idea of what it is either.

Your definition of polylogism is not what Ayn Rand or the wikipedia gives.

Their definition holds that certain peoples or racial groups, ("whites", Jews, blacks, Asians etc;), have different "logics".
The idea comes from Nazi ideology.

Chuck, to my reading of him, does not suscribe to this. He merely argues that how you frame arguments, ( your assumptions and their consequences), is different from how his assumptions and their consequences. That's not polylogism.

The comments to this entry are closed.