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A Maximum Wage?

By Mike McPhate  |  December 4, 2008; 11:46 PM ET
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Next: A Question of Trust


I don't really like any of the answers. I'm not sure there can be a strict formula or set amount. It seems to me, that a CEO should be paid based on experience and expertise. I don't mind that they're paid more than the worker bees, but many of the large corporation CEOs make more than what's reasonable, and in the end that hurts the worker bees, which are the lifeblood of the company. They should just be paid what's reasonable for the company. Perhaps they should have an operating share, so they're truly stakeholders, and are affected by how well or poorly the company does. I would hope that would make them more concerned about how well the company does, and they would see where the line of "too much" is drawn.

Posted by: akchild | December 5, 2008 7:12 AM | Report abuse

I agree with akchild, in that none of the answers are really good. I think the highest any CEO (of a Fortune 500) should be paid is $1,000,000-$5,000,000, but I DON'T think it should be enforced by the government. There are a lot of factors in deciding salary, plus CEO's receive other compensation stock options, bonuses, and golden parachutes. There are way to many factors to just say what the "right" amount of salary should be, but bonuses and golden parachutes DEFINITELY need to be cut drastically. Those are just plain ridiculous. And yes, I am a true blue Democrat.

Posted by: terp4life1 | December 5, 2008 8:02 AM | Report abuse

Just give them a % of the profits the company makes, not one penny more!

Posted by: rstull49 | December 5, 2008 8:33 AM | Report abuse

If the company is privately owned then the sky should be the limit. If it is a public traded company, then some limits should apply, especially if job performance is bad.

Posted by: charlietuna6661 | December 5, 2008 11:49 AM | Report abuse

I'm not down with the choices, either. I sort of a like a formula re entry-level workers, but I think maybe 25 times is a little too low.

I DO think that in publicly traded entities, golden parachutes, etc. should be prohibited. If a CEO is let go, it is because of performance problems and there should be NO severance beyond perhaps a couple of months (what generous employers give employees).

I also think corporations would be better served to look at what comparable CEOs get overseas. With a global economy, there is no reason that GM's CEO should get so much more than Toyota's, for example.

They're not shy about off-shoring their workers' jobs. They should be off-shoring (or in-shoring) their upper management, too.

Posted by: RealCalGal | December 5, 2008 2:34 PM | Report abuse

I didn't really like any of the answers either. Most are overpaid right now, and unfortunately their pay seldom reflects performance. I wouldn't be opposed to a government restriction on CEO pay, but I'd rather the pay packages for all executives be straightforward, performance based, and sent directly to the shareholders for a vote. The corporate boards in this country have done a poor job of representing the shareholders and in the age of electronic communications it wouldn't take much to allow the shareholders to pick their executives themselves.

Posted by: bill3 | December 5, 2008 2:43 PM | Report abuse

If they're taking money from the Federal Government, then max them out at the GS-15 level. If they don't like it, they can leave and get another job. If anyone would have them.

Posted by: sensible | December 5, 2008 2:55 PM | Report abuse

They shouldn't get any more than the president of the U.S.

Posted by: lynettema | December 5, 2008 3:00 PM | Report abuse

None of these answers are correct. A CEO should not be paid more than about five times the lowest-paid worker. No matter what.

Posted by: bs2004 | December 5, 2008 3:28 PM | Report abuse

Management... That's a frustrating bunch. They should be treated like mushrooms:

-Kept in the dark
-Fed cr@p
-Thrown out when they get too old

I seriously doubt that most of them appreciate what us workers for them and their bottom line. That's why we have unions.

Posted by: eroks | December 5, 2008 3:48 PM | Report abuse

Generally, a worker should be paid their marginal revenue their work brings to a company, for example, if a burger flipper makes $5.75 an hour, that should mean their work is bringing in $5.75 for the company. That's hard to figure out for most workers (how can you show what a burger flipper is bringing in in terms of revenue?), but for a CEO it's relatively easy. They are responsible for managing a company, so their marginal value to that company is shown in the profits brought in under their command. A host of other factors can go into determing a CEO's salary (industry, private/public, how much the average worker in the company makes), but I don't think any CEO should make any more than high six/low seven figures as a base salary due to how difficult it is to work your way up to that position, and what it takes to earn the expertise necessary to attain that sort of position, and any other compensation should be tied directly to profits, sort of the same way many athletes have performance-incentive laden contracts.

Posted by: grimesman | December 5, 2008 3:50 PM | Report abuse

Anyone who has read the IRS code on executive compensation will realize what a great deal the Board of Directors of companies receive.

Posted by: 02251945 | December 5, 2008 4:02 PM | Report abuse

I picked entry level X 25, but that's a bit stingy in this day and age. Entry level x 100 is only $3,000,000 if entry level is $30K. That's not bad, but it's still less than A-Rod makes.

Posted by: st50taw | December 5, 2008 4:03 PM | Report abuse

It really depends.

Nobody minds a really successful Jerry Wang (sp? Yahoo dude) type who started the company.

But these auto execs are criminally stupid

Posted by: Heerman532 | December 5, 2008 5:04 PM | Report abuse

Heerman532's example of Jerry Yang is ironic, because Yang's recent decisions have cost Yahoo's stockholders billions.

Ideally, CEOs should be paid with lots of equity (stock) that is doled out over a longer period of time. This aligns the long-term success of the company with the actions of the management. If CEO talent is considered scarce, then companies like Home Depot will promise people like Bob Nardelli $200M golden parachutes to "take a risk".

Unfortunately, there isn't any way to enforce against rewarding failure.

Posted by: menloshark | December 5, 2008 5:14 PM | Report abuse

Given the absence of a nexus between measurable performance and salary, it is time for publicly traded companies to have pay scale not unlike the public sector, though higher to account for lack of job security. Bonuses should be delayed for at least a couple uf years so impact of decision can be judged over longer term.

Posted by: lhaz | December 5, 2008 5:51 PM | Report abuse

It is NOT government's place to place caps on pay in the private sector. It's absolutely absurd that there is now manufactured populist rage at CEOs of Fortune 100 companies who make $1 million a year for keeping the nation's economy running and overseeing billions of dollars, while baseball players earn tens of millions -- many times more than CEOs -- for what? Playing a kid's game for 6 months a year. Given that MLB (and the other pro leagues) are monopolies regulated by Congress, if we're going to go Communist (not a good idea at all to begin with), let's start by attacking professional athletes.

What the government can do is make sure corporate governance rules are strong. Pass more laws ensuring greater financial transparency, including among private companies. It's absurd that private companies don't have public financial filings, for instance. With stronger corporate governance, the boards of companies will be less likely to over-compensate CEOs. That's where reform has to happen. But government-ordered salary caps are a terrifying notion. They would TORPEDO the economy. Yes to stronger corporate governance rules. But don't go Lenin on us.

Posted by: itchy1 | December 5, 2008 6:26 PM | Report abuse

One of the hip corporate buzzwords is "value." What "value" do CEOs bring to the company? Not much in many cases. And to the ones that do, it can't be seven figures. It can't. Unless we are seeing payoffs (the board of directors scratches each others backs), these schmoes aren't producing ANYTHING of value. Let's get real. The old Walmart head, Sam Walton, was paid FAR FAR less than the ones today. But even still, WalMart officials get first come first serve parking, small offices, and travel economically. That's part of their ethos.

If they still bought American and would pay decent wages, it would be a model of a company.

But most CEOs want to pay Walmart wages, charge Lexus prices, and deliver Chevy Chevette quality. All while raking in seven, eight, or nine figure salaries.

Something HAS to be done. Taxes have to be raised enough. CEO compensation has to come down.

Does anyone really think that the schmoes we have seen before Congress from any company, including Goldman Sachs, are worth what they are paid? No, only their Ivy League buddies and Wall Street and Greenwich co conspirators.

Congress MUST act. The White House must show leadership. Regulators must act. And boards and businesses need to step up to the plate.

Posted by: theeasypartsover | December 5, 2008 6:38 PM | Report abuse

Well, in the fifties, the spread was 40 times the lowest paid worker. I agree with this. It is NOT capping salaries, it is just saying that if the guy at the top wants more, the lowest guy is also entitled. After all they are the producers. No more glorifying CEO's! They are human too. Look at our economy and you will see its true. so if a CEO wants a billion dollars a year, fine. But, the emmployees should also have salaries that go up. It is called fairness.

Posted by: sandnsmith | December 5, 2008 6:47 PM | Report abuse

I'm all for not capping CEO pay, but it stands to reason that the CEO and the Board of directors combined can't be making more than the company is earning. So, if the company loses money, the one's taking the real hit are the corporate officers.

Posted by: ahowl7mx | December 6, 2008 6:31 AM | Report abuse

Normally, I don't think the CEO's salary should be capped by the government. However, any time a company claims to need (asks for) government assistance, then I think the government definitely has the right to cap or even set the CEO's salary. The government may even have a right to control how the money is spent. Beggar's should give up some of their autonomy.

Posted by: PersonL | December 6, 2008 8:16 AM | Report abuse

The notion of a 25-to-1 ratio between workers and corporate top execs has support from one source people might not expect: the work of Peter Drucker, the founder of modern business management science.

Drucker, who died three years ago at the age of 95, started calling for common-sense limits on CEO pay early in the 1980s, when the CEO pay explosion first started revving up. Drucker felt that any top-to-bottom pay gap wider than 25-to-1 undermines the teamwork that modern enterprises need to operate effectively.

The current ratio? The latest "Executive Excess" report from the Institute for Policy Studies puts last year's pay gap between CEOs and workers at 344-to-1.

Posted by: TooMuchEditor | December 6, 2008 9:42 AM | Report abuse

If you and your spouse started a business, I doubt you'd favor the feds telling you how much you should be able to pay yourselves. Granted, the CEO pay situation today can be offensive and ludicrous. But government fiat isn't the answer.

Revision of the tax code would help, with prohibitively high taxes on salaries in excess of a certain number - say about $10 or $20 million? Between 1946 and 1967, the maximum effective tax rate in the U.S. never was LOWER than 70 percent! Those were pretty productive years.

Professional entertainers - singers, actors, and athletes in their monopolistic industries are paid far more than corporate CEO's and contribute little or nothing to the economic health of the nation.

I recently had neurosurgery - performed by one of the leading specialists in the U.S. He has 20 years experience in that field, and charges about $1,000 an hour for his services. Figures out to $2 million a year.

That's a lot of money, but the Washington Wizards have the worst record in the NBA and 10 of their 15 players get paid more than that. $2 million would put my doc 16th on the NY Yankees players payroll. And Angelina Joli collected seven years worth of my doc's earnings just for allowing People Magazine to take pictures of her kids! By comparison, Exxon-Mobil's shareholders are getting a bargain.

Stockholders - meaning university endowments, mutual funds and pension trustees should be the ones screaming about CEO pay for publicly held companies, ans osme of them are. Sports and entertainment fans should be complaining about paying outrageous ticket, DVD and cable TV package prices, but I don't hear a word.

Posted by: atrepos1 | December 7, 2008 2:16 PM | Report abuse

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