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Subject: What the one percent don't want you to know. rss

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Jon Badolato
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CEOs like to justify their sky-high pay by saying it rewards their work in steering companies toward better performance. But a new analysis doesn’t give much evidence to back that up.


http://thinkprogress.org/economy/2014/07/23/3463066/ceo-pay-...

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Richard Poole
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The 1% don't care if you know it. It's not like you're going to influence the board.
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Matt Connellan
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I think everyone already knew that. But there's a link from that story to this one: http://thinkprogress.org/health/2014/06/02/3443919/teen-girl...
 
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Boaty McBoatface
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As I (partly) work for the local authority overpaid by a massive degree.
 
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jeremy cobert
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jonb wrote:
CEOs like to justify their sky-high pay by saying it rewards their work in steering companies toward better performance. But a new analysis doesn’t give much evidence to back that up.


Uh Oh , someone got D in economics today !

Welcome to the real world. Paying top dollar for a new head coach in football does not guarantee a championship trophy. But you certainly improve your odds when you hire the best available person.

Apple brought Steve Jobs back, was it worth it ? hell yes he was for my shares. The board can remove anyone they want, It's not like its a protected job.

 
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Richard Poole
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I would explain to you that if CEOs were paid in proportion to their likelihood of positive results, the graph would demonstrate a trend, even though some good CEOs would still suffer bad performance.

But you just used a football metaphor to explain economics, so there's no point.
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Jon Badolato
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Quote:
Welcome to the real world. Paying top dollar for a new head coach in football does not guarantee a championship trophy. But you certainly improve your odds when you hire the best available person.


The data shown does not justify that conclusion. And the data shown points to the fact that even when they hire who they believe to be the best available person and pay them obscenely large amounts of money, company performance is still quite random.

As for your football metaphor, if football teams had this same kind of data ( and I am not claiming they actually do ) then it too would suggests their money may be better spent in places other than in the coaching staff.

Of course neither is going to happen because boards, and football teams aren't necessarily rational entities.

Fess up, it was you who got the D right ??
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jeremy cobert
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jonb wrote:
Fess up, it was you who got the D right ??


It's almost as if you did not even read what I wrote and yet to comment on it..... Oh wait, this is RSP...carry on !
 
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Jon Badolato
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Nice try anyway.
 
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Jon Badolato
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Um, no......

http://www.gallup.com/poll/151310/u.s.-republican-not-conser...

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Mac Mcleod
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That poll is worthless.

I could be right of john birch and "view myself" as a liberal or a moderate.

I could be left of Chairman Mao and "view myself" as a conservative.

You'd need a measure of their actual actions.

Or you could ask them how they voted. If they only vote republican or democratic - they may still call themselves "independents".

I'm just exiting "independent" status to liberal status as of the last election but my presidential votes have been democratic for 12 years. My last conservative presidential vote was for Bush senior.

So, googling for some voting records...

High income whites generally vote republican 60/40 (or more up to 75%).



The exception seems to be those with graduate degrees.
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Jon Badolato
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Either way Drew's comment was incorrect. Surprise !
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jeremy cobert
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jonb wrote:


Um, yes.......

http://news.yahoo.com/party-rich-congress-democrats-04022827...
 
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Jon Badolato
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Your comprehension is low today so I will try to help you

Nowhere did Drew use members of congress in his assertion that the 1 percent are mostly Democrats. You are the one bringing that up.

The term 1 percent usually refers to the population as a whole, not just members of Congress. Members of Congress are disproportionately in the 1 percent in both parties compared to the general population. And without even looking it up I would venture to guess that even among Congress the richest ones are likely to be Republican.

Your most recent post lists Congressional leaders who head districts that are the richest in the nation on average, but even here the average income levels don't approach the 1 percent level. And your information absolutely does not state what party affiliation is subscribed to by the actual people in those districts who may actually be in the one percent.

In short, posting that the richest congressional districts on average are democratically controlled in congress is not really convincing evidence that people living in those areas that are actually in the one percent are indeed Democrats.

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Lee Fisher
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From 2010:

Quote:
about 57 members of Congress are part of the 1%.
Roughly 11% of Congress have net worth of more than $9 million, according to a USA TODAY analysis of 2010 financial disclosures compiled by the Center for Responsive Politics. That's enough to put them in the top 1% of wealth.

Congress also has 250 millionaires, the data show. The median net worth: $891,506, almost nine times the typical household.
"The vast majority of members of Congress are doing very well," says they center's Sheila Krumholz. "They've got the resources to tide them over through an extended sour economy."
In the House, 23 Republicans and 10 Democrats are in the 1%, while in the Senate Democrats edge out Republican one percenters 13-11.
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Chad
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OK,

First it seems like there are two definitions of 1% being used

1) top 1% of income earners
2) top 1% of wealth holders

While there is significant overlap between these two groups they are not the same.

Secondly, CEO pay is subject to the same supply/demand that any other skills are - and the simple fact is that the skills needed to be an effective (let alone good or excellent) are considerably rarer than people think - hence high salaries.
 
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Utrecht wrote:
Secondly, CEO pay is subject to the same supply/demand that any other skills are - and the simple fact is that the skills needed to be an effective (let alone good or excellent) are considerably rarer than people think - hence high salaries.


Is CEO pay subject to the same supply and demand that other skills are? That would be an assumption that would explain the high pay, but it's also essentially the assumption that the OP is questioning.
 
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Chad
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Dolphinandrew wrote:
Utrecht wrote:
Secondly, CEO pay is subject to the same supply/demand that any other skills are - and the simple fact is that the skills needed to be an effective (let alone good or excellent) are considerably rarer than people think - hence high salaries.


Is CEO pay subject to the same supply and demand that other skills are? That would be an assumption that would explain the high pay, but it's also essentially the assumption that the OP is questioning.


Is CEO pay subject to the same supply and demand - effectively yes. But it is certainly worth the question - is increasing CEO pay by 50% worth a .1% or .2% increase in corporate performance? Ultimately, that comes down to a cost vs. benefit analysis (with things like merger value, profitability, revenue, cost containment, vision, etc. all being part of the equation.

As a general rule - CEOs are amazingly talented individuals - they are the starting quarterbacks, the star central midfielders of the business world. Having worked with many of them, I am constantly amazed by their vision, intelligence and skill. I get that it is easy to disparage them - because it is stupid money - but are most of them worth it...... yes they are.
 
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Utrecht wrote:
Is CEO pay subject to the same supply and demand - effectively yes. But it is certainly worth the question - is increasing CEO pay by 50% worth a .1% or .2% increase in corporate performance?


That's a question, but it's not the question raised by the data in the OP.

The question raised by that is, why doesn't increasing CEO pay seem to have any effect whatsoever on corporate performance?
 
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Dolphinandrew wrote:
Utrecht wrote:
Is CEO pay subject to the same supply and demand - effectively yes. But it is certainly worth the question - is increasing CEO pay by 50% worth a .1% or .2% increase in corporate performance?


That's a question, but it's not the question raised by the data in the OP.

The question raised by that is, why doesn't increasing CEO pay seem to have any effect whatsoever on corporate performance?

Why would it be expected to, especially if the CEO is not the chief of operations?
 
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Mac Mcleod
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whac3 wrote:
Dolphinandrew wrote:
Utrecht wrote:
Is CEO pay subject to the same supply and demand - effectively yes. But it is certainly worth the question - is increasing CEO pay by 50% worth a .1% or .2% increase in corporate performance?


That's a question, but it's not the question raised by the data in the OP.

The question raised by that is, why doesn't increasing CEO pay seem to have any effect whatsoever on corporate performance?

Why would it be expected to, especially if the CEO is not the chief of operations?


Keep in mind that a substantial portion of the 1% alternate between being in the 1% and having poverty level or negative income. This is probably due to the fact that they can control the timing of their income and losses or special treatment of their income (hedge fund managers, for example).

Even if the top CEO's perform poorly, also keep in mind that many of them went to school together at private elementary, middle, and high schools. It may be a case of "A connected CEO performs randomly" but ones who had no connections would generally do poorly. (not definitely- just maybe).

As a shareholder, the high pay of CEO's functions like higher expenses at a mutual fund. While a few unpredictable mutual funds do better, generally paying a high fee just insures you underform by the amount of the fee.

Also - just like you can't beat the market- CEO's can't beat it either. You can't have competing companies in zero sum markets and all of them win.

And finally- just like obama was handed a massive pile of crap*- CEO's who are handed massive piles of crap may underperform. If the employees are disillusioned, the hardware is unmaintained, the customers are pissed off, and the product is dated or too expensive or just lost the Beta vs VHS battle (I'm looking at you Palm and Blackberry), then the CEO is doomed anyway.


*See what I did there, eh? eh? hehehehe.
 
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Dolphinandrew wrote:
Utrecht wrote:
Is CEO pay subject to the same supply and demand - effectively yes. But it is certainly worth the question - is increasing CEO pay by 50% worth a .1% or .2% increase in corporate performance?


That's a question, but it's not the question raised by the data in the OP.

The question raised by that is, why doesn't increasing CEO pay seem to have any effect whatsoever on corporate performance?


my point - and one that the study does seem to ignore - is that the number of people who can even do the job competently, let alone well or exceptionally is very small.

Now I will certainly concede is that there does become a point of diminishing returns of salary vs performance in the CEO spot - but the underlying premise of CEOs are not worth their pay is BS because what it completely ignores is the opportunity cost of having a non-competent CEO is (i.e one of the plebes whose salary is exceeded by 300x)

I will ABSOLUTELY agree that they game the system - but so does every other employee group - and that is a waaay different argument.
 
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Mac Mcleod
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Utrecht wrote:
Dolphinandrew wrote:
Utrecht wrote:
Is CEO pay subject to the same supply and demand - effectively yes. But it is certainly worth the question - is increasing CEO pay by 50% worth a .1% or .2% increase in corporate performance?


That's a question, but it's not the question raised by the data in the OP.

The question raised by that is, why doesn't increasing CEO pay seem to have any effect whatsoever on corporate performance?


my point - and one that the study does seem to ignore - is that the number of people who can even do the job competently, let alone well or exceptionally is very small.

Now I will certainly concede is that there does become a point of diminishing returns of salary vs performance in the CEO spot - but the underlying premise of CEOs are not worth their pay is BS because what it completely ignores is the opportunity cost of having a non-competent CEO is (i.e one of the plebes whose salary is exceeded by 300x)

I will ABSOLUTELY agree that they game the system - but so does every other employee group - and that is a waaay different argument.


As counter-evidence- I give you business prior to 1988. CEO's compensated an 8th as well did just as well or better.

As a shareholder, I think CEO compensation is about 8 times too high. And I think there are hundreds of potential CEO's waiting in the wings who could do equally well. Thousands if you think globally.
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Utrecht wrote:
my point - and one that the study does seem to ignore - is that the number of people who can even do the job competently, let alone well or exceptionally is very small.


That's probably true, though I don't see how we can say for sure. I suspect it depends on the company. An up and coming company might be quite hard on the CEO. A more established company on the other hand might not be so difficult.

My point was though that this data does show that CEO's pay does not operate according to normal supply and demand rules. At least, not if we take 'stock return' as a good measure that the CEO is 'supplying' well.
 
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