[SmartCat]

Originally Posted by civic-sense

Who is to decide what is a fair compensation for a CEO? The "average worker"? A CEO, however high he is paid, will be replaced if he is not able to deliver results commensurate to his pay.

Compensation for CEO is decided by Board members, who are in turn nominated by shareholders. Even if a promoter owns 51% plus in a company, shareholders have made noise about insane CEO/top mgmt salaries (Eg: Apollo tyres incident).

Your average worker is not bothered about CEO salaries. He has other more important things to worry about - like what will happen to his job during the next downturn.

Originally Posted by srini1785

My point was not on the sector of activity of companies or about the law , rather it was about whether the ownership pattern have any effect on pay remuneration in companies.

Aah OK. You are using wrong terminology. There are shareholder owned companies and promoter majority owned companies. Usually, promoter CEOs take lower salaries because they get paid huge amounts as dividends.

[Samurai]

Originally Posted by civic-sense

Who is to decide what is a fair compensation for a CEO? The "average worker"?

The board of directors, or a team assigned by them.

Originally Posted by civic-sense

A CEO, however high he is paid, will be replaced if he is not able to deliver results commensurate to his pay.

Data shows that CEO pay and performance has no positive correlation, check this post.

Originally Posted by civic-sense

So if the management is happy to pay 300 times the pay of an average worker to the CEO why should the worker take offence of it?

CEO is the head of Management. If management can set CEO salary, then why no let worker set worker salary?

Originally Posted by civic-sense

Rather than demonizing the CEO, the worker should "work" towards upgrading himself to the level of the CEO where he too could command the same kind of pay.

You are taking a page from Advaita, where atma (worker) can become paramatma (CEO) by following the righteous path? That is not an option for most workers, because the skill required in the lowest level is very different than the skill required for a CEO. I have played both roles, so I have an idea about this. Most workers have no ambition to get into management roles, they just want to make ends meet, retire with a good pension and have medical benefits, etc. But they do wonder why they get the axe when highly paid CEO's sales forecast fails to materialize.

Anyway, it is very hard understand this topic unless you try to understand the human side of business (socioeconomics). Trying to analyse this topic using business economics is akin to using Newtonian physics to explain orbit of Mercury. They tried it for centuries and failed.

[nakul0888]

Originally Posted by Samurai

Are you still confused between political systems and economic systems? I thought I explained the difference last time we discussed.

Looks like you didn't take the advice from Matt Damn to read the book People's History of United States, which describes what happened in 19th century USA, when government didn't interfere in capitalism.

I agree, I was a working adult during the reforms of 1991. I know, lots of people think India turned from socialism to capitalism after 1991. What changed was regulation governing finance and industry. Starting and running a business kbecame lot easier after 1991, because lots of red tape was removed. That unleashed lots of opportunities for Indian entrepreneurs. I would compare it with similar unleashing of opportunities when Rajiv Gandhi removed the restriction of import of computers and telecom technology in 1984. I was a direct beneficiary of this because I worked on telephony technology in the late 80s using computers, made possible by this shift in policy by Rajiv Gandhi. Check this 1989 article by CSM. Meanwhile, education/job reservations in various categories have only increased. PVN Rao actually implemented Mandal commission recommendation, lots of people don't realize that because it got hidden by the bigger event of financial reforms . Social programs have increased too, Only decrease in redistribution I can think of happened in 1997, when the tax slabs/rates were changed drastically. Don't confuse 1991 reforms with change in economic system. That didn't happen.

Anyway, back to the subject. You are thinking entirely using business economics reasoning. That is because business courses like B.Com/CA/MBA focus only on Business economics. But businesses need people to work in them. To understand people in business context, you need to also study socioeconomics, which is lot more complex than business economics. It is impossible to learn in a classroom. You have to work among the people who are affected by business decisions.

No I

The topic of this thread falls entirely in the spectrum of socioeconomics. If you think it is only about demand and supply (as in business economics), you are sorely mistaken.

No I am not going to waste my time learning history by watching a Hollywood movie written by probably a bunch of weed smoking hippies in L.A. Only somebody who is wilfully blind can’t appreciate the beauty of the industrial revolution and the role it played in lifting humanity from mere subsistence farming to civilisation we have today. What happened in US during 19 the century was that in absence of government interference it went from being a third rate colony that nobody in Europe could give a damn about to the superpower you see today.

As far as CEO compensation goes my argument comes from a moral perspective not an economic perspective though I can easily make the latter too.

Here is the deal. Shareholders whether it is one shareholder or thousands own the company. They paid for the land, the facility, the capital equipments, they take on the loans and obligations. Not you, Not me, Not any bystander. If then they enter into non coercive, consensual, voluntary transactions with other people whether assembly worker or it be CEO then the fact of the matter is morally you don’t have any say in the said transaction any more than you having a say in who other people should marry or what religion they should practice. Period. No amount of wishy washy lefty talking points is going to change that. Sorry.

[Samurai]

Originally Posted by nakul0888

Here is the deal. Shareholders whether it is one shareholder or thousands own the company. They paid for the land, the facility, the capital equipments, they take on the loans and obligations. Not you, Not me, Not any bystander. If then they enter into non coercive, consensual, voluntary transactions with other people whether assembly worker or it be CEO then the fact of the matter is morally you don’t have any say in the said transaction any more than you having a say in who other people should marry or what religion they should practice. Period. No amount of wishy washy lefty talking points is going to change that. Sorry.

Yeah, you have a reason to be sorry. I am sorry too. They still teach this nonsense made up by Milton Friedman 50 years ago, that shareholder is god, and management/board has only fiduciary duty to shareholder. I wonder when they will fix those text books.

Prior to that stupid dogma created by Milton Friedman, everyone knew stakeholders were most important. The stakeholders are shareholders, employees, customers and the society. Fortunately, businesses are realizing Milton Friedman was wrong. The following happened couple weeks ago:

https://www.cnbc.com/2019/08/19/the-...objective.html

[ValarMorghulis]

A new article in the ET on this. Link here

In difficult economic environments, companies would want to retain their high-performing CEOs who get more job offers than others. “Even in an absolute bad market, I am not sure if CEO compensation will drop,” said K Sudarshan, managing partner at EMA Partners India. “It is also a function of demand and supply. You cannot hire high-performing CEOs at lower cost.”

So basically, companies want to retain their CEOs 'cos the performance is in a bad place and good management can help them get out of the rut.
If the economy was good, I'd believe they'd say that good management deserves a good raise since they heralded this!
Devious!

[civic-sense]

Originally Posted by Samurai

Anyway, it is very hard understand this topic unless you try to understand the human side of business (socioeconomics). Trying to analyse this topic using business economics is akin to using Newtonian physics to explain orbit of Mercury. They tried it for centuries and failed.

So socioeconomics is that thing that gives me the power to meddle in things where I do not have any stake in. Like telling the management to give xxx amount to the workers and yyy amount to the CEOs without me losing anything in the process?

Last heard, meddling in other people's affairs wasn't exactly a positive virtue.

Originally Posted by nakul0888

No I am not going to waste my time learning history by watching a Hollywood movie written by probably a bunch of weed smoking hippies in L.A.

Sadly public perception is formed by such trash dished out by these bleeding heart leftists.

[Samurai]

Originally Posted by civic-sense

So socioeconomics is that thing that gives me the power to meddle in things where I do not have any stake in....

Last heard, meddling in other people's affairs is not exactly a positive virtue.

No, I am not suggesting that at all. I am telling that stakeholders SHOULD have a say. Not just shareholders.

Who are the stakeholders of a corporation other than shareholders?

It is a long list: https://en.wikipedia.org/wiki/Stakeholder_(corporate)

For those who prefer graphic over reading:

[civic-sense]

Originally Posted by Samurai

No, I am not suggesting that at all. I am telling that stakeholders SHOULD have a say. Not just shareholders.

Who are the stakeholders of a corporation other than shareholders?

It is a long list: https://en.wikipedia.org/wiki/Stakeholder_(corporate)

Only those who own the company should have a say. Employees are like tools and machinery. They don't deserve the profits, nor do they share the burden in case there are losses. They can't have a say on how the company is run.

[Samurai]

Originally Posted by civic-sense

Only those who own the company should have a say. Employees are like tools and machinery. They don't deserve the profits, nor do they share the burden in case there are losses. They can't have a say on how the company is run.

Hmm, I am assuming you have no background in business. Even people who have merely attended business school would know the definition of stakeholders.

Well, you are entitled to have your opinion.

[ashokrajagopal]

I am just an onlooker in this thread now, but how would this look like in an ad campaign

Hyundai - New thinking, new possibilities. Only those who own the company have a say in the way we run. Employees are tools.

iPhone - Think different. Only those who own the company have a say in the way we run. Employees are tools.

[selfdrive]

Originally Posted by civic-sense

Only those who own the company should have a say. Employees are like tools and machinery. They don't deserve the profits, nor do they share the burden in case there are losses. They can't have a say on how the company is run.

I think that was how the slave trade was run.
Not sure if companies still work that way.

[nakul0888]

Originally Posted by selfdrive

I think that was how the slave trade was run. Not sure if companies still work that way.

Slaves can’t quit their jobs and walk away. Employees today can. They are adults with free will who have the capacity to consent to a contract. Don’t like the terms of your contract then call for re negotiations whether individually or through a group. And if nothing works for you walk away. But you don’t get to force your whims and wishes on how company should run , what’s the CEO s pay is on the owners/shareholders either.

Originally Posted by Samurai

No, I am not suggesting that at all. I am telling that stakeholders SHOULD have a say. Not just shareholders.

Dude stakeholders do have a say in how things are run.

A company can’t force any of its suppliers to dance to its whims at will. Only when the trade is beneficial to the supplier itself do the supplier agree to make the supplies. But in the same vein the suppliers are not entitled to shove down the company’s throats whatever terms it comes up with either.

Same goes for employees, customers, creditors and other stakeholders. What you are doing is treating all the other stakeholders besides shareholders like a bunch of brain dead babies, completely and utterly unable to think and make any sort of rational decisions for themselves.

By the way, would you like to know which entity can shove down its dictates down everyone’s throats whether the other party agree to it or not at the point of a gun? That would be the Government . The thing everyone seems to love and worship these days.

Again in the absence of fraud/ cheating/coercion, there is no moral arguments that justify intruding into a transaction entered into between two consenting parties. Both of them decided to do it with their free will. And none of us here get to poke our noses into it.

[selfdrive]

Originally Posted by nakul0888

Slaves can’t quit their jobs and walk away. Employees today can.

Sure they can. It would perhaps result in a revolving door for employees. It does work for some organisations to function like that in specific areas to keep costs down. Whether it really helps innovation or commitment from employees is debatable.
And if the company wants it or not is completely another Pandora's box.

[civic-sense]

Originally Posted by ashokrajagopal

I am just an onlooker in this thread now, but how would this look like in an ad campaign

Hyundai - New thinking, new possibilities. Only those who own the company have a say in the way we run. Employees are tools.

iPhone - Think different. Only those who own the company have a say in the way we run. Employees are tools.

A century ago, there weren't any machinery, only workers. A century from now there won't be any workers, only machinery. Guess leftists will be campaigning for robot rights, then.

Originally Posted by selfdrive

I think that was how the slave trade was run.
Not sure if companies still work that way.

No time for strawmans mate.

[ashokrajagopal]

Originally Posted by civic-sense

A century ago, there weren't any machinery, only workers. A century from now there won't be any workers, only machinery. Guess leftists will be campaigning for robot rights, then.

If a business has to sell, the buyers have to buy. A century ago, now, or in future. No businessman worth his salt would publish he treats employees as tools because they know this -- left or right, the society has a perception for others like themselves. And that influences their decision to buy from the business. That is like chapter one in sales I guess.