Knowledge

The debate over CEO pay

Published on May 12, 2011 under Business, Career

Monty Burns

Turn on the news or open any news-related website, and you'll see another article about how the "working man" makes less and less while CEOs make massive paychecks with bonuses and benefits. Many claim endlessly on how unfair it all is and even scream for some kind of "action" to be taken to reign in the compensation many executives receive.

Despite the angst and poor economy on the working class, it's not a simple black-and-white matter when it comes to CEO pay. One can get angry or even jealous when they take home a modest 5-figure salary or less while some suit gets millions per year, even if he runs the company into the ground. I used to be part of the "tax the rich more!" ethos, but I had to realize this isn't so much a Robin Hood ordeal.

Remember everyone is his/her own boss

Jack Donaghy of 30 RockBack when I wrote articles like The Value of Time and the more recent Should You Be Self-Employed?, I went into the idea that your pay and compensation isn't out of your hands, but more on how much you can assess your worth in the working world, and how much you're able to negotiate getting said pay.

When I came out of post-dotcom unemployment back in 2003 and finally landed a job, I'll admit I didn't negotiate enough because I didn't know how much a web designer/developer was worth in the post-dotcom US. I took a pay cut, worked my tail off, took some bad managerial abuse, and finally understood my worth when I sought out better employment three years later. This is not so different than what CEOs do.

We can get astounded on how some CEO managed to land a $15 million salary with benefits, bonuses, and stock options that make him $100 million a year, but that person negotiated that deal, and someone else approved it. It took two to tango, and this isn't so much a "new royalty" getting perks off the working man's back. It's someone way cleverer than the rest of us who can show worth to get said compensation out of a board. This is something we all have to aspire to be when we seek a better job with better pay.

Blame the board if you don't like it.

Should the Government get involved?

There have been attempts over the course of many administrations to try to limit or chop down CEO pay, but tax loopholes and even corporate office moves simply made it easier to get around it all. I mentioned earlier that I used to think in the "tax the rich more" logic, but my opinion has now changed to "redo the whole tax code and make it simpler and more effective". I've come to realize and accept that it's not the role of Government to decide if a CEO should get a massive paycheck.

I've seen some Conservatives claim that we're punishing people for being successful, and I'm sorry to say we partially are. Let's be honest, if we the taxpayers are not holding stock in a company and have no real investments or piece of said company, what right do we have to tell a CEO what he can make?

This is why I want the tax code redone. The question shouldn't be if a CEO is making too much or too little, but if we're taxing EVERYONE equally. Some can claim that 20% of my income will feel like a bigger take from my life than 20% of a millionaire's income, but that's how life works and it should work. I'll make a complaint if I'm paying 20% and yet the millionaire is paying 10%, but I can't make a stink if he's getting millions per year in salary/compensation. He's a CEO and I'm an Interactive Media Designer/Developer. If I want that big money, then I'll give up my career and work to become a CEO.

Shareholders have a say

The only people who can make a fuss are the shareholders. If you invest in British Petroleum and they hire a new CEO who makes an insanely high paycheck, you have the right to say "no way!" Unfortunately too many shareholders only worry how their investment is doing. This new CEO could laugh hysterically and toss puppies out of a 20th floor window, but if he's also making the company a massive profit (which benefits the shareholders), many shareholders simply won't care.

If you are a shareholder and have a problem, state your case to the board though the communications medium provided. If one is not provided or they won't listen, sell your stock then. If an "evil CEO" gets hired for an exorbitant pay, a massive sudden selling of the stock (which drives the price down) will hurt the CEO and board way more than anything else. You have a voice because you invested.

What can the non-shareholders do?

Ok, so you don't own any stock in that company or any company in general. You're still a CONSUMER.

Line outside the Apple Store in NYCYou don't like Wal-Mart's business practices? Don't shop there. Spend more at the local "mom and pop" shops. You think BP's handling of the oil spill was pathetic and inexcusable? Don't buy BP fuel, even if it means their privately-owned gas stations go out of business. You hate the outsourcing of jobs? Don't stand in line for that shiny new iPhone or iPad.

I roll my eyes many times at how much I'll see the "working class" on TV complaining about CEO pay and the corporate greed, but they still shop at Wal-Mart, rush to the Apple Store for the new gadgets, and buy gasoline at BP stations. You have a right and a say. If these big companies are losing money and see the consumers saying they do not like their practices, then they will change.

Also, as a taxpayer, you can make a stink to your elected officials when they're handing out big contracts to these companies. Organize, take the votes away from those officials and elect people who will not give in to those interests. Unfortunately, you have to be involved in the long haul. You can't just switch off Dancing with the Stars for an hour, do a few things, and then think you've done enough.

Do you think CEO pay should be regulated by the Government? What do you think the people can do to fight what they think is unfair?

Tags: business, ceo, compensation, taxes

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