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

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.

[lynxreign.livejournal.com]

The earnings at these companies don't have an imposed ceiling. Want to make more money? Make the company more profitable. This is supposedly what stock incentive plans are supposed to do.

Poorer performance than AIG, GM, Enron, Citybank and others where the top people were making a fortune? And where are they going to go? There's no country in the world where top executive rates are as high as here. With this in place, they'll be closer to they are elsewhere, that's all. And there aren't all that many positions open for people at that level. Why would a French company oust their current president for an American?

The earnings at these companies don't have an imposed ceiling.

[chaoticmoth.livejournal.com]

You are looking at it from the top down, not the bottom up. If you have a large workforce then it would be hard to make enough money to boost the top salary because the money you would have to lay out for the lower levels would be prohibitive. Walmart has over two million employees, and you know most of those are going to be lower paid employees. Let's say 10% are at minimum wage. That is 200,000***. So for every person you have that makes $1.5 million, for every dollar you raise the top paid people's salary will cost the company $2000 in additional compensation. You do the math and tell me that isn't going to impose a ceiling. Let's say WalMart has 1 person making $1.5 million. And you want to give them a $1000/year increase. (a .067% increase).

Cost if you only bump up one salary using $1000/yr increase = $1,000/year.

Cost if you use your law= $1000/year + required increases of $2000/dollar of increase (Two million dollars) = $2,001,000.00

So you have to generate, and pay out an extra two million per year just to pay out an extra one thousand to one person.

And let's say the company does poorly after the increases. Instead of getting rid of one person and saving $1,501,000/year, and not having the additional two million in costs, your scenario has the saving of $1,501,000 but you are stuck with the two million/year in increased costs.

*** http://money.cnn.com/magazines/fortune/global500/2008/snapshots/2255.html

[lynxreign.livejournal.com]

I just looked at the Forbes list of top CEO earners. There are only 456 CEOs that would be affected at current minium wage. Raise that to $20K a year and it becomes 436.

There are only 456 CEOs that would be affected at current minium wage

[chaoticmoth.livejournal.com]

I guess I am missing your point on that reply. My point is AFTER you lower the salaries, giving any sort of future increase for the heads of large companies becomes economically unsound, creating the ceiling on compensation that I was arguing would happen in response to your comment "The earnings at these companies don't have an imposed ceiling."

Re: There are only 456 CEOs that would be affected at current minium wage

[lynxreign.livejournal.com]

They can still get increases, but more reasonable ones.

And we're still talking about millions of dollars a year here, that's not chump change.

They can still get increases, but more reasonable ones.

[chaoticmoth.livejournal.com]

Okay, we have established that for a company employing people at minimum wage the maximum salary is $1.5 million under your law. What is your definition of a "reasonable" increase for someone making that much?

[lynxreign.livejournal.com]

Whatever is justified by the profitability of the company. This is Capitalism unleashed, baby! No ideas of entitlement here. Why should the top earner be entitled to any increase at all? You're supposedly so valuable, prove it!

This is Capitalism unleashed, baby!

[chaoticmoth.livejournal.com]

Wait, imposing legal limits on what someone can make as an individual is capitalism unleashed?!

I think either capitalism or unleashed does not mean what you think it means. :)

[lynxreign.livejournal.com]

Again, the only limit on what you can make as an individual is what profitability you can afford your company.

Unfettered Capitalism doesn't work, we've seen that. Properly regulated Capitalism can work, we've seen that too. This is just one more regulation, removing the fetters of gaming the system.

Again, the only limit on what you can make as an individual is what profitability you can afford you

[chaoticmoth.livejournal.com]

And that profitability is impacted by your law since other salaries have to go up. We are back to my $2,000,000 cost of a $1,000 raise.

[lynxreign.livejournal.com]

Only for the top 1 or 2 people working for the very largest companies. Perhaps outliers like this will have to change. Perhaps companies this large will cease to exist. That isn't necessarily a bad thing.

Whatever is justified by the profitability of the company.

[chaoticmoth.livejournal.com]

So in my example above, if profits are increased by 1.9 millions dollars/year the person is not eligible for an increase. Yet someone at $1.5 million who works for a competing company with less people at minimum wage who brings in less money, but still over the amount required to bump everyone's salary to a new minimum, is eligible for an increase?

Yep, I see how this economic model will work flawlessly.

[lynxreign.livejournal.com]

Why not? The other company is working with less overhead and generating a greater profit. How is that different from today?

How is that different from today?

[chaoticmoth.livejournal.com]

Because you are mandating the extra costs. Today someone could bring in $1.9 million in profit and get an increase because they won't have to pay out $2,000,000 to do so, and leave the company with a bunch of money as profit.

[lynxreign.livejournal.com]

Could, perhaps, but that's not what's happening. Perhaps in a company that size the reaction should be more akin to "$1.9 million? That's the best you can do? You have all these resources and we're paying you that much and all you can pull in is that?"

[lynxreign.livejournal.com]

And again, you're arguing over the fate of a few hundred people who will still be making millions of dollars a year.

And you're calculating with today's economy. In this economy, more people will have more disposable income allowing them to spend more without going into debt. This increases profitability and will allow the CEOs to make more an give raises. A virtuous spiral.

Will it work "flawlessly"? Probably not. Will it work with fewer flaws than the current system? I'd bet on it.

And again, you're arguing over the fate of a few hundred people who will still be making millions of

[chaoticmoth.livejournal.com]

So this is purely an ends justifies the means argument, correct?

[lynxreign.livejournal.com]

No, no more than any other argument. I don't see why the means is so abhorrant. We tax, we regulate, we fine, we imprison, these are all done in the name of a healthy, functioning society. This is no different.

We tax, we regulate, we fine, we imprison

[chaoticmoth.livejournal.com]

Taxes - Imposes no limitation on what you earn. While you may pay a lot of it back to the government in taxes, you have unconstrained potential.

Regulate - Regulations are part of what got us in the CEO compensation mess to begin with. http://sify.com/finance/fullstory.php?id=14749943

Fines - We fine for breaking rules, not for paying people.

Imprison - See Fines, with the exception of bribes and such as far as for paying people. :)

[lynxreign.livejournal.com]

My law no more imposes limitations on what you earn than do taxes.

Regulations can be for good or ill, properly composed ones benefit us as a society.

Fines: Where do you think the rules come from?

Imprison, so you agree that we imprison people for certain types of payments? Good. Then extend to this.

[chaoticmoth.livejournal.com]

My law no more imposes limitations on what you earn than do taxes.

It does because the economy of scale sets in. It gets too expensive to pay everyone else just to pay one. I know you are against big companies, but not all big companies are evil.


Regulations can be for good or ill, properly composed ones benefit us as a society.

True, yet we can't seem to get it right.

Fines: Where do you think the rules come from? There is a difference between a fine, and a limit on compensation. And contrary to your argument that you are not limiting compensation, you are.

Imprison, so you agree that we imprison people for certain types of payments? Good. Then extend to this.

Which is part of what I think is why people object to this. You are going to make it criminal to pay someone more than 100 times someone else in the company, even if it is warranted and deserved.

[lynxreign.livejournal.com]

It does because the economy of scale sets in. It gets too expensive to pay everyone else just to pay one. I know you are against big companies, but not all big companies are evil.

I'm not against big companies. They may be a casualty of this law, but I don't see that they have to be or that that would necessarily be a bad thing. And it isn't too expensive to pay everyone else to just pay one. It is too expensive to pay one too much.

Which is part of what I think is why people object to this. You are going to make it criminal to pay someone more than 100 times someone else in the company, even if it is warranted and deserved.

Nope, not criminal. They wouldn't go to jail, just pay fines making up the difference.
And I can't think of any way it would be warranted and deserved. That's part of the point of the law.