I would like a law

[lynxreign]

It is a simple law.

No employee of any company at any level can make more than 100 times the lowest paid employee of that company.

You're paying someone $20,000 a year, then you can make 2 million a year. Want a raise? You have to raise the salaries of the lowest paid employees.

Now, tell me why you don't like my law.

Comments

[jestermotley.livejournal.com]

Simple legal loophole -

You run a company that RUNS the other companies.

So the CEOs of the top company can make millions and billions because their company only has 10 people, the lowest of which is paid 100k.

And there you have it.

Or not even that complex. The most mundane of tasks would get outsourced to consultants. Very little would be done "in house"

[lynxreign.livejournal.com]

Simply extend the definition of "company" to the entire structure of a corporate hierarchy. This will also benefit transparancy and tax purposes.

If you outsource to consultants, their pay falls under your corporate structure for as long as they're working for you.

[jestermotley.livejournal.com]

Its a nice idea but then the problem THERE becomes people shuffling to do things like.

You're just paying a SERVICES company. Who then decides what to pay people they send in. Its out of your hands.

This wouldn't benefit transparency at all, as you'd have people chomping the bit, who are far more devious and learned than I, to take advantage of the system.

[lynxreign.livejournal.com]

No, you'd be paying the employee. I'm a contractor. My salary is set through my agency with the company I'm working for. If I go work for another company, the rate could be different even though I use the same agency. A similar would prevent abuse.

[whiskeyjack.livejournal.com]

How about 'no one can make more than 100 times minimum wage?'

Or we just return to having a 90% tax bracket on the highest incomes like the one Elvis had to pay.

Or hey - communism baby! Viva la Revolution!

[lynxreign.livejournal.com]

I don't want there to be a legislated minimum wage because this allows company profits to be distributed to employees and gives upper management a reason to pay the employees more. With a law like this there's no need for a minimum wage law at all.

Why put in a 90% tax bracket when you can have the companies pay their employees more directly?

Humans aren't psychologically ready for actual communism. It is an evolution, not a revolution.

[whiskeyjack.livejournal.com]

I don't know that there would be much of an effective difference between a 90% tax bracket and your 100x scenario. I must admit that I haven't given it a lot of thought. I was roughly thinking that if there is a max spread of salaries it doesn't really matter if the spread goes from $10K to $1000K or $20K to $2000K because the companies would tend to stabilize around the same numbers as each other anyway == an effective national minimum wage. Again - I haven't given it a lot of thought.

I will take exception to the "communism will evolve idea" -- there is no reason why it would. Thinking that it's a 'goal' of evolution implies a Guiding Hand. Evolution has no goal and most species go extinct.

[head58.livejournal.com]

It's Socialism and you hate America!

[lynxreign.livejournal.com]

OK, sure, but aside from that.

[chaoticmoth.livejournal.com]

This falls under the "where do you draw the line" situation. Why 100? What if down the road it is revised by the lawmakers to 99 times. Then 98. And so on. When the government is the employer they can set maximum salary just like any other company can set their own maximums, but when they aren't the employer what right do they have to set the salary cap?

What happens if you have all high-paid employees due to excellent work and longevity. Then you need to hire someone and while they are excellent on paper, they are fresh out of college and completely unproven. The normal starting pay for this person would be below the 100 times mark, so you either don't hire them, or have to give people pay cuts just so you can hire this person at a reasonable rate.

I think it is an honorable goal, but not one that should be dictated by law.

And what if you are the owner of a company and it is just you, let's say you developed a brilliant piece of software that you sell, and you are making 5 million a year, but you need to hire someone at $10/hour just to stuff envelopes?

[lynxreign.livejournal.com]

This falls under the "where do you draw the line" situation. Why 100? What if down the road it is revised by the lawmakers to 99 times. Then 98. And so on.

That's not a valid argument. You might as well say "What if velociraptors decide to eat everyone making $45,000 a year?" It has nothing to do with the law as proposed. If "What if future legislators change things" was a valid criticism, no law could ever be passed.

When the government is the employer they can set maximum salary just like any other company can set their own maximums, but when they aren't the employer what right do they have to set the salary cap?

They're the government. They have the same right as they do to set taxes, form regulations, ban dangerous conditions, etc...

The normal starting pay for this person would be below the 100 times mark, so you either don't hire them, or have to give people pay cuts just so you can hire this person at a reasonable rate.

Give me a formula where this would be the case. If you want to hire someone straight out of college and you start paying them at 30,000 a year then the highest salary can be 3 million a year.

I think it is an honorable goal, but not one that should be dictated by law.

If it isn't dictated by law, it isn't going to happen.

And what if you are the owner of a company and it is just you, let's say you developed a brilliant piece of software that you sell, and you are making 5 million a year, but you need to hire someone at $10/hour just to stuff envelopes?

Do you need them to be working a 40 hour week? Then you pay them $50,000 a year and your salary only goes down to $4,950,000 a year. Poor baby. If you only need them to work 20 hours a week, then you're only paying them $25,000 a year and you make $4,975,000 a year. Again, poor baby.

[artemis44.livejournal.com]

but why should somebody get paid $50K a year to stuff envelopes?

And why should someone's pay be so dependent on what the upper management makes? I mean, what incentive would there be to work for a smaller company who pays their CEO less (and therefore can set a lower starting wage), versus striving to work for Company X, where all starting envelope stuffers make $50K+ a year in order to maintain their CEO's salary? It just starts to exert really, really odd pressures on the marketplace that - while noble - could create some very damaging ripple effects.

And as far as caps of any kind on salary - it's all well and good to look at the people pulling in $10M a year and think WTF!!!, but $2M isn't all *that* much anymore, and when you hit that at age 45 - well, what do you do then? Where's the incentive if you can't move up the compensation ladder, even if it is higher than most of us even can see?

Finally, you can cap pay all you want, but there will always be perks, alternative compensation, and the like - and you'll have to pry those golf clubs out of the CEO's cold dead hands...

Oh my god, "The Man" has overtaken my soul!

If "What if future legislators change things" was a valid criticism, no law could ever be passed.

[chaoticmoth.livejournal.com]

There are often laws that are often not passed because of concerns about laws that could be passed based on the law proposed. Possible precedent-setting laws fail quite often.

My basic point is your law boils down to "No more than X times the salary of the lowest person" where X is a variable set by the government at its whim. You picked 100 times because you felt it was logical. I don't think having lawmakers choose a different value for X is quite the same as velociraptors. :)

And, hey, shouldn't this post be here http://community.livejournal.com/reign_of_lynx/ ?

To start a separate thread

[chaoticmoth.livejournal.com]

Since this will be a US law, what is to stop the best people from going to International Companies for higher pay than they can get in the US?

[lynxreign.livejournal.com]

Not a thing. But excessive compensation for executives isn't as rampant in other countries as it is in the USA. And we're talking about a very small set of people that will be affected by this anyway. Salaries for people other than the very highest earners will likely end up being higher than in other countries and we'll attract better people at the levels where you actually need to know something.

[chaoticmoth.livejournal.com]

We would have top people leaving the US for unrestricted earnings at the expense of our companies. People don't like imposed ceilings on their earnings. This could very well result in poorer performance of the company.
Poorer performance means cutting costs, which means lowering salaries to make products cheaper, which makes the company less attractive to work for furthering an exodus of top people for higher paying jobs.

[editswlonghair.livejournal.com]

Another big problem w/r/t unhinged CEO compensation are incestuous boards of directors, glad-handing each other's companies and enable such greed. Boards also need to be more transparent and accountable to shareholders and employees, not just the CEOs and upper management.

And, of course, institutional investors play a big role in this complicity, when fund managers turn a blind eye to corporate mismanagement because they are either more concerned with short-term profits over long-term viability; or they are complicit, getting their pay to play kickbacks and egregious bonuses for their hedge fund and credit default swap shenanegans which create paper wealth.

But I have to admit, the libertarian in me does not like such overt legislating of capitalism in this way (for many of the reasons already outlined). Oversight and regulation for health, safety, and environmental reasons are one thing-- but ultimately I think market forces should (and will) decide economic concerns such as price and remuneration... Hell, as much as I hate seeing the de-industrialization of our country, I don't know if such cost of manufacturing concerns should be legislated either.

I hope (and really do believe) that the out of control executive wage and bonus inflation of the past couple of decades is coming to an end because of this depression... shareholders who've seen such huge losses are hopefully not going to stand for continuing the $20m salaries and $100m golden parachutes anymore. But, just like the cycle of business, this social responsibility is a cycle too... soon enough, I'm sure we'll have another gilded age in the mid-21st century once memories fade and future Republican admins and congresses loosen whatever 'Newer Deal' regs get put into place during this mishigas...

[lynxreign.livejournal.com]

I think market forces should (and will) decide economic concerns such as price and remuneration

But they don't today. We're witnessing how that part of the market has completely failed.

And I'm not saying this would be a panacea, just one part of the package. Other regulation is also needed. In addition to greater transparancy, etc, we need Single Payer Universal Healthcae. It'd save businesses and employees a fortune, making business more profitable immediately and making this plan more palatable.

We're witnessing how that part of the market has completely failed.

[chaoticmoth.livejournal.com]

A large part of what failed is how stocks function. If you want to put in a law that is going to legislate anything, why don't you regulate the prices of stocks? Make it so that stock prices are a direct reflection of reality and not based on emotion and wild speculation. If your company has X earnings, with Y profits your stock is priced at Z.

[editswlonghair.livejournal.com]

But they don't today. We're witnessing how that part of the market has completely failed.

Yes... today. But these market forces have worked in the past, and they will once again in the future. It's the sturm und drang of capitalism, which is one of it's strengths. This meltdown is a 'market correction' writ large... after 20 some-odd years of deregulation, irrational bubbles and casino capitalism, I hope that pragmatism, common sense fundamentals, sanity-- and hopefully at least some modicum of social responsibility-- come back into vogue.

And in many ways it's a sea-change in social attitudes and norms that needs to happen to bring about these changes... somebody else said it elsewhere in this thread, and I agree with them: it's more about sociology than economics in a lot of ways... If this depression leads to anything worthwhile, it'll be a generation of thrifty savers and pragmatists, and a move away from Boomer (and Gen X and Y) rapacious consumerism and egoism.

Your beloved Spock said it best: "The needs of the many outweigh the needs of the few, or the one." ;)

...just don't apply that principle to civil liberties! :D

[whiskeyjack.livejournal.com]

Your comments go BOOM!

[lynxreign.livejournal.com]

Apparently!

[kevnes.livejournal.com]

I remember hearing this from a professor back at UMass...not sure the name of the class but Justin Lewis was the professor:

Back in the '80s, Japanese top executive pay was capped at about 7 times what their lowest paid worker makes. If I remember correctly, this was not a mandated cap, but an expectation that was honored by most major companies.

This cap apparently enabled them to reinvest more of their profits in their companies which enabled Japanese businesses to be very successful and productive during that time. Professor Lewis asked why American companies didn't follow suit.

My own opinion is that the problem is cultural, not economic or legal in nature. American culture demands competition to the extreme. To be considered successful, you need to be as successful or more successful than everyone you grew up with.

You can't address this issue with just a law, the culture needs to be addressed, which is much harder.

[lynxreign.livejournal.com]

Really? I had no idea. 7 times, huh? Makes my 100 times seem horribly unjust.

And yeah, it'd be a huge shock to the culture, but you have to start somewhere.

Thanks for the information!

To be considered successful...

[chaoticmoth.livejournal.com]

You hit the nail on the head. That is part of what is in the link I posted in regards to regulations being part of what got us where we are today:
http://sify.com/finance/fullstory.php?id=14749943