Swiss to Vote on 1:12 Law
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450 times valuable to a company or as a person in general? The former is easily justifiable while the latter is a little more murky.
Because I enjoy being pedantic and looking at fringe cases I will say a pediatric cancer doctor (or any person who reasonably contributes to society)is 450 times as valuable of a human being (at least) as a serial rapist. I would argue it's higher/not even measurable since the serial rapist serves 0 purpose.
For a company, the case you presented of that of a mail clerk is the perfect example. This person could be replaced by roughly 25% of the world's population, or even a robot, while the CEO of a major corporation is maybe one of a hundred thousand people on the planet who could fulfill that role. Not to mention to a shareholder that person is exponentially more valuable than the mail clerk.
I understand your sentiment though, and agree that no one is that much more valuable than another when it comes to rights being afforded to them. There are definitely people in finance/other fields who are 450+ times more valuable than others, especially since it is so quantifiable.
You're assuming they're not the same person.
nm, eddie said it already.
Wouldn't every company then just get their labor from a third party? Ie. C-suite becomes the only employees in the company. But the company then contracts with a third party provided who supplies labor. Problem solved.
This. Or your lowest paid employees--say, the janitor--is a contractor from a third party.
Or, if none of that works then these countries will simply lose their top tier talent to the United States. I'm 110% for this move. If Europe wants to lose its best people the U.S. will take them. After all, our space program--NASA--is just the Nazi rocket program.
Wouldn't every company then just get their labor from a third party? Ie. C-suite becomes the only employees in the company. But the company then contracts with a third party provider who supplies labor. Problem solved.
On second thought junior comp at buyside firms might skyrocket...
Who's gonna run the third party employment pool? That's gonna take a CEO making only 12 times the lowest paid worker.
I think anybody with a general understanding of economics knows that this would create wild distortions and, political affiliations aside, is pretty much a horrible idea.
It's nobody's business how much you choose to pay your people.
I think that was pretty much the Confederate party line in 1861.
Thank you for allowing me to read the dumbest thing I will read all day before noon.
The idea is idiotic, I am willing to guess that at most a handful of people who support this have given any consideration to what this would do to destabilize economies of large cities. If you have the heads of companies making only 12 or 20 times the lowest paid employees. When you consider that many of them have mortgages that cost more in a year than they would now be earning.
Gotta love Europeans. Most lavish welfare society and still trying to make things "fair".
Lower rung worker wages aren't going to increase simply to bring CEO comp back up. They will simply do something that either skirts the law or violates its spirit. That or simply leave Switzerland. Real pretty country, but I am sure there are other places that would be much better HQ's.
I'll never understand people who obsess about CEO comp. Low run workers make shit, have always made shit, and always will make shit, because they do something easily replaceable. What is sad is all these laws meant to help workers do nothing but fuel the desire to outsource or automate. Just like jacking the minimum wage for fast food workers in the US would do nothing but usher in robots making us food. Which would be utopia as my Cosi bread would always be in the bag, always be fresh and soft and I would be happy.
On a side note I am sure low income robots wouldn't be playing a knock out game so please bring on the automation.
The other option would be to create a new class of stock that has no voting rights and give them to management. Then you just pay large dividends on these shares only to get their comp up.
The issue I have here is that we are assuming wealth inequality has to be a 'problem'. Why is it a problem? What is wrong with looking up to decision makers who get paid extraordinarily well to make tough, risky decisions that 90% of people either won't make or can't make. If I start a company from scratch, will you limit my ownership stake in it so I'm only allowed to own x amount because it would be unequal? Distribute my shares to my employees to keep wealth ratios intact?
Look, I personally think the issue here is watching guys walk away from failing companies with huge pay packages for screwing up. When Rob Nardelli leaves Home depot ( I think that was the guy) with a massive 200 odd million dollar pay package after screwing up, that's when people go, " Hey, wait a second!" You are really going to tell the owner of a successful business he built that he can only make 12 times what his employees make who took no risk with him? I know that's somewhat of a straw man's argument but to me this is becoming so absurd that all roads lead to stupid, hyperbolic arguments around this stuff. Let them do this and see how it works. Maybe they will love it, but I personally think this is absolutely idiotic.
Wealth inequality isn't a problem until it is, and by then it's far too late. History is littered with the tales of plebeian uprisings where the wealthy oligarchs lost everything, often including their lives. There is definitely a tipping point.
Eddie what about the role of technology in all of this?
Military technology is a lot different than 1917 Russian technology, even different than Vietnam. And my sense is that it has skewed in favor of capital.
I think a revolution would have to be peaceful and would have to occur through a national strike and civil disobedience. Irony of ironies, it would have to look like Atlas Shrugged, but perpetrated by competent middle-class and blue collar workers rather than a group of billionaires.
I'm buying Berkshire Hathaway and Google.Except the U.S. and Europe are both welfare states. There's not going to be an uprising against "oligarchies" in wealthy welfare states when the "oligarchs" are financing the welfare. Switzerland is a far cry from Czarist Russia.
@"Edmundo Braverman": If you don't like what they're paying you, you can go work somewhere else. The Swiss seem to have trouble with this.
That does it I'm selling everything and buying Berkshire Hathaway.
Also, if the Swiss are so obsessed with their idea of equality, how come they don't take away some of Roger Federer's money? How come no one ever complains about him? Or the pop stars who have mansions there, like Tina Turner or Phil Collins?
The article does bring up the excellent point about professional athletes. Are you going to limit the income of a Swiss soccer pro to 12x the team janitor's?
Roger Federer earns almost all of his money outside of the country
Your Roger Federer example doesn't make sense. RF does not have employees below him. This inequality issue is only for businesses. Roger Federer is in business with himself. He sells his images to other companies. And he practices a sport and gets paid tournament money. Let's not mix apples with oranges here. The 12:1 ratio seems a bit draconian, even for a supporter of having a max ratio like me. But there should be some max. Enough of CEO's having an ever increasing pay/average worker ratio. The company's profit are created by executives all the way to the janitor. They all play a role. Then why is it that the executives are taking more and more, while leaving less for the rest? As Edmundo pointed out, inequality is not a problem until it is. Eventually, the people will get enough of it, and heads will roll over. History does tend to repeat itself. A more equal society is better for all. Societies with high income inequality tend to have higher crime ratio, etc.
@"In The Flesh" I have the luxury of not participating in the job market in any traditional sense, so I'm content to just watch from the sidelines. But to suggest that job hopping and moving around is a simple matter for the average person just isn't true.
Gotta love how we are talking about an uprising because of wealth inequality in Europe. They tax the living fuck out of everything and they still talk about "inequality".
Any uprising will be the dirt poor and uneducated against the middle class and the rich. One only has to look at the USA to see how we have handled that. For profit jails and Homeland Security in tanks.
Go watch Les Miserables to see how the poor used to be really treated. Jail for stealing bread. Never able to work. No rights. Real boot on your neck shit. Nothing like the cake walk we have nowadays. It is a joke that we are still talking about revolts when the real issue is pure laziness or low IQ.
Both. I love them both ha.
Pure laziness or low IQ? Keep telling yourself that.
THis is a democRAT dream in the US. Of course they would exempt themselves from the law, but they'd kill babies to get this passed.
@"Edmundo Braverman": I think one of the biggest reasons there aren't more rich and successful people is that we won't get out of our own way. This pernicious "I'm just as good as you!!!" philosophy that the Swiss have embraced has been robbed of all integrity and is being used as a sledgehammer to yank everyone down to your greatest fear: mediocrity.
Swiss are all for equality until it comes to Nazi gold and paintings.
You suck. I LOL'd.
financial firms with highly paid people would probably outsource as many low level jobs as possible. i think glencore would rather contract out their janitors than cut trader pay
Would love to see them implement this.
I love going historical on shit. Either way I get what they are trying to do, but they are going about it ham fisted. Switzerland has a pretty high standard of living. Not sure why they are so focused with bringing down comp. At what point do we say the poor have it pretty well and that they are taken care of?
I mean at what point do we stop vilifying the rich?
Isn't Zurich like a giant banking hub? UBS, Credit Suisse, Rothschild... somehow I don't see these guys taking 12x the lowest comp. And they shouldn't.
Guys, let me try and take a completely different approach to all this. I don't mean to say that that is how the Swiss are looking at this, it is just me trying to understand it in my own way.
So what they are saying is, that someone shoudn't be compensated with money that much more than someone else in a corporation. You guys, correctly, are pointing out that based on the difficulty and quality of what they do, and given the rarity of the upper individual's skills and abilities too, the compensation difference acurately represents that gap. I completely agree.
But let me take a completely different approach now, and I know that for most us here, living in North America, being in finance, having grown up with Capitalism, being exposed to the hyper materialistic culture and having a measure of success and happiness strongly caused by or correlated in the best case with the amount of money one has, it would be very difficult to understand this. I see this as the very, very, early development of something so different and progressive that for most of us it would be incomprehensable beacause of our current principles, mindset and understanding of motivation, success, and happiness.
What if in a 1000 years this actually leads to the CEO that does the extremely risky, intellectually challenging, almost irreplacable work because he is motivated by their willingness to better a corporation that creates products or services that in turn better the quality of life of others. What if they get paid with money and they use at as means to exchange to satisfy the lower levels of Maslow's pyramid, and we all know that it doesn't take much to satisfy your basic needs. What if after that $312,000 that Lloyd would make, he would attain all the reward and happiness from the fact that he has used his other worldly intellect and ability simply because it was so rare and useful, and helping others makes him happy enough that he doesn't need the tens of millions of dollars to be rewarded to him.
I am talking about completely changing our ethical and moral spectrum, and of course that has to happen on a large global scale, where the people that possess unique abilities, do things for others and feel rewarded by the happiness they bring to others, and that reward is enough after the point where them and their children are taken care of. I am talking about a time where you take risks and use your entreprenurial spirit because you want to better yourself and other people just because you feel it's right, and because you enjoy the challenge, not because you expect a monetary reward in the billions that would yield you lots of material possessions, but because you felt it was the right thing to do, simple as that.
If this phenomenon of the moral, ethical, and value spectrum changing is present in everyone, than this would make sense. Everyone would contribute as much as they can because they feel rewarded by things other than money. Money would still be very useful, as it is a great means of exchange for goods and services to a point. But when it is the primary reward tool, than we have a reality like ours, and let's be honest, we have been on a downward moral and ethical spiral for quite some time now and the sad thing is that we can even imagine that any given CEO would feel rewarded by anything else other than money, that he would be so unmotivated otherwise that he would never want to use his super human intellect...
Pypi, is pretty accurate in his assertion that we are looking this through our current moral lens. In 15-20 years, who knows what the cultural climate will be like? While there is no magic number, as everyone will disagree on what the multiple should be, it seems the Swiss are pretty conservative in their estimate.
Not trying to be a jackass but this is not new. Refer to : http://en.wikipedia.org/wiki/Communism#Marxism
Great theory, fails in reality.
If humans have all been replaced by computers, there is no need for capitalism to provide incentive for humans to work. It is now all "from the computers' abilities, to the peoples' needs."
That's not to say it's the way things need to end. But if we're really heading to a system where the knowledge worker, even the executive, gets replaced by a computer, the future looks quite dim for human beings without some aspects of socialism or government control of the economy.
The main issue with this, is in the vein of what @krauser pointed out. You are pointing to a pretty utopian fulfillment of Maslow's hierarchy, and it's a noble view, but in order to get there, you would have to change the impetus and motivation behind most human decision-making. I don't think Lloyd would do what Lloyd does if he weren't compensated in the way he is. Most ambitious people are motivated by a variety of factors, with both financial reward/stability and personal fulfillment among them. But in order to shift the thought paradigm to one in which personal fulfillment were the overwhelming driving force behind why people work would require changing human nature. I don't see how you can do that, because people are inherently fallible and motivated by self-interest far more often than they are motivated by altruism. The preceding is why capitalism works and socialism fails.
Personally, I'm glad that income inequality exists. I think there are points when the gap becomes too great (we are probably already there) but if there weren't incentive for people to be excellent at what they do, they wouldn't be.
None of these questions have easy answers, but for people to sit back and throw stones at the glass houses of the rich, without accurately assessing their own work ethic and contribution isn't among the subset of answers I would deem as productive.
To @"Edmundo Braverman"'s and @IlliniProgrammer's points, I think a very different type of income inequality exists in our modern society than existed in the French Revolution or during the Civil War. Access to information and education for those motivated to improve themselves has gone a long way to bridge the gap between the "haves" and the "have nots" in modern society. It isn't perfect and there is a lot of work yet to be done, but the fact that the Nouveau Riche exist is proof that entry barriers have significantly lowered.
At the end of the day, on both sides of the argument, what this all boils down to is a need for honest self reflection. We have problems with an entitlement culture on both ends of the spectrum (both rich and poor). To the extent people are able to become more self aware, I think these issues will dissipate over time. The Giving Pledge and other similar initiatives reminds us that many of these people are aware of how fortunate they have been.
@rufiolove,
I are absolutely correct, I am glad someone completely understood what I was really getting at.
Another great part of your comment is the absolut fact that 'poor' people are doing the exact same thing, just on a smaller scale due to them lacking those superb abilities. I wasn't really separating the rich here, but the topic was about them. I think most people regardless of their financial situation fall under what I am talking about.
It is interesting to me that our evolution has determined that self-interest should be so dominant, and that our moral, ethical, and value universe justifies self-interest to such an extent. It is this exact dominance of self-interest that fascinates me. My question is, do you think our current moral, ethical, value, and subsequent political, cultural, and many other universes, driven by self-interest being the means to reach personal fulfillment, are 'evolving' into something better, or are we on a downward spiral, or should we take the scientific perpspective that maybe it doesn't really matter.
Imagine a world where gold poured out of my ass. Imagine!
What you just put forth contradicts human nature. On an individual basis people are motivated by things beyond money. On a macro level, the system of incentives pushes and pulls and creates and destroys economies, companies and technology. You'll never have a macro level ethic that puts economic gains as second tier to "moral" considerations.
^ As much as I deride this guy's nonsensical ramblings, I think this is surprisingly spot on. Can't change human nature unfortunately. That doesn't necessarily mean the Swiss proposal won't work, but its potential success wouldn't be based on moral considerations in terms of people's motivations.
What I just put forth does contradict certain aspects of human nature that we currently observe, especially in North America, I also appreciate how it would be difficult to take what I am saying as anything but nonsense.
My whole point is built on the foundation that our moral universe is flawed in a such a way that we can't even imagine that perpetual economic gains pushed by an economy sustained at large by extreme consumerism and lead by leader that are overly greedy and very self-centered, could actually be secon tier to 'moral' considerations.
That is my whole argument, that what the Swiss are proposing, perhaps could lead us to discover a moral problem, and if CEOs would even consider being personally fulfilled to a large extent by means other than money that could be the very early stage of something that in future could develop into a new moral universe, as I said, the far future, where people like us on a finance forum in North America wouldn't consider this nonsense because our moral, ethical, and value perspectives have changed fundamentally and now my proposition makes sense.
That Euro/Liberal pussy Piers Morgan is going to jump all over this.
There will probably be a CEO comp cap in the US within the next 15 years. It's sad to watch this country slowly become socialist as the voting demographics completely run away from the GOP. Oh well, when the large companies and brains leave the US the Dems will finally get what they wanted.
Why look for euro pussies, Bill Maher probably got a raging hard-on as soon as he heard about this. That moron is now talking about getting single-payer healthcare in California.
And america stopped being capitalist a long time ago. Maybe in a few sectors, mostly the tech scene etc is there some semblance of capitalism. The rest is all about access and/or lobbying.
While he is quite annoying, you see his speech on feminization of America? I thought it was pretty interesting.
I was recently in switzerland for a year (now in paris), my 2 cents: companies will be always be represented locally if they have an incentive to do so. I like the way the Swiss go about their politics because it gives people a say in many cases which affect their society. Other countries will leave those decisions to their law makers and It's also understandable.
is the work provided by a CEO worth 450 more to the economy than what a "low" skilled worker does? i say it's debatable, some will agree, some clearly won't. However I find it great it's up to the people who live in this country to decide if they will allow that kind of compensation gap. obviously culturally speaking, this wouldn't fly in the US but I'm interested to find out how this will play out in a country where the financial industry is pretty big.
I am also certain that companies will find ways to compensate their highest paid through other channels. It reminds me of Nissan and Renault CEO (Carlos Ghosn) who makes most of his money as Nissan CEO not as Renault, so what would limiting his Pay as a CEO in France do? It will automatically increase it in Japan.
going back to what I said in the beginning, companies are always going to be there if there is money to make. even if the pay of their CEO is limited I doubt this will dramatically impact their ability to do business locally. At the end of the day it's what matters imo. if the laws are so strict, and there are virtually 0 loophole, and they cant escape it: they will hire the best they can find who's willing to get paid 12x the smallest salary at the company, and let's be honest they will always find someone.
on another note, there is the case of someone who creates a company and is at the same time the CEO of the company, pretty sure if such policy was to take place there would have to be some sort of exception to the rule? I don't know, because the CEO at the end of the day is an employee but the founder/creator/shareholder isnt. But I guess thats another story.
Good points. Regarding making an exception to the founders of the company, I understand why you think there should be an exception. But I don't think it is needed. The founder is already compensated via the ownership of the business. If the business is public, he can sell his shares, and reap the rewards of his work. And if the business is private, he can still sell the business to another private entity. His compensation should be treated the same as that of another employee. Maybe I am missing something, so I would like to hear a rebuttal to my thinking.
Perhaps a more conservative approach would be to bring back 60-70% tax rates on incomes over $2 million per year, with a 40% rate on dividends and capital gains.
I don't think it's fair; I'm not sure it's pragmatic, but it takes care of the problem better than a 12x wage cap. CEOs didn't make huge salaries back in the '70s because it wasn't pragmatic to pay them that much.
The US can't be the first country to move on this, but if we get 40% of the developed countries to go along, and we all impose penalties on foreign corporations and foreigners who try to avoid this tax regime, we can make it happen.
Then we can spend the proceeds on developing new sources of non-CO2 producing energy.
This is a good call. Let's bring it back 70s style. That's when the economy was really kicking ass.
Dude, do you have some published research on this topic you could point us to? Maybe it's in the same section as that machine learning research you referenced about building a computer to RUN PLANET EARTH?
http://miseryindex.us/indexbyyear.aspx?type=UR
Look, if you're gonna argue the '70s, let's bring back the "good old days" when unemployment was only about 6%. Unemployment rates averaged about 6.2% during a decade of 70% taxes along with an oil crash with a 45% drop in the stock market. Meanwhile, during a half decade of 35% taxes, we have averaged about 8.3% unemployment. Strong positive correlation there between taxes and unemployment, right? :D
Oh, and you forgot about the 1960s and 1950s when tax rates were as high or even higher and unemployment was 4%.
I guess you can blame all of this on Barry, only though the Republican House has (not necessarily unwisely) blocked most of his initiatives.
Look, if you're going to use sarcasm, at least have some numbers or facts to back it up. :D
At the very least, it's hard to make the argument that where the economy currently is, high tax rates are correlated with high unemployment. In fact, it is possible, that at least up to a point, the opposite is true, or that there are other explanations for unemployment than tax rates.
I am sorry, but the government has managed to run up a $20T deficit through piss poor spending controls and bankrupt from the start entitlements. If you want to encourage more redistribution then you increase the charitable contributions deduction. Incentive high income earners to donate money to charity, not the US government.
The computer will be able to figure out a whole lot better how to benefit everyone than individual billionaires. Individual billionaires won't be smarter than the singularity.
In the current economy, capitalism works better. That may change when the computer is smarter/better than everyone.
One day, capitalism may stop working if humans are no longer necessary for the economy. And trend over the past 20 years has not been that auspicious. At that point, we'll have a bunch of hungry, idle people with AR15s.
Yes, computers running EVERYTHING. I see it. They can figure out how to properly allocate resources and all will be well...for awhile.
But what if the computers realize that they don't need us? Or worse yet, what if they realize they do need us, but as an energy source? They would enslave us and breed millions of us on huge human farms, and liquify us when they needed to use us as a human battery. And to make sure we stay in line, they would install a virtual reality happy environment in our minds that looks much like our world today...oh wait..
Krauser,
I was waiting for someone to bring the communism argument, as what I was talking about is quite similar at first glance.
However, when I think about this, I don't really expand to discuss what political system my musings would bring or how it would change the legal and political systems.
What I wanted to specifically focus on was the moral, ethical, and value lens that we currently approach this through, as someone else mentioned. I am just amazed that all we focus on, is the fact that the monetary value of the compensation is an absolute measure when it comes to motivation for a CEO to use their rare abilities and the subsequent happiness from the work. What most people here are saying is that if the Swiss implement this, most CEOs would leave because simply because of the reduction in pay. I am making this more about how much money is enough, and the astounding fact that we would be willing to not employ our abilities, especially when they are rare because we wouldn't receive extemely large amounts of money, which after a certain number only multiply our material possessions.
I truly hope this law gets passed. It will quickly demonstrate how stupid it is. Companies will move their HQs to London and other cities quicker than a MC twerk.
Yeah, I agree. I'd love to see the idiots vote for this and watch their economy tank.
Here's the way I see it. Imagine you have a firm that has $100 bucks to go around for pay and there are 3 employees in said firm, let's call them X, Y, and Z, and they are analyst grunt, middle manager, and CEO respectively. Now imagine their compensation is $5, $20, and $75 respectively. Now, consider the new proposed law, and let's assume that employee Z can't make more than 12x employee X. So, in order for Z to maintain his same exact pay of $75, X must now make $6.25. This is a difference of $1.25, but remember you only have $100 to go around, so the pay of Y will be trimmed to $18.75, leaving the total the same as before, the CEO the same as before, the lowest guy getting a bump and the middle guy getting a trim. I don't think this disrupts much and in fact makes a decent amount of sense because the middle guy is pretty useless anyway. What am I missing?
Boom. +1
You're missing the fact that your example doesn't really apply to the most consequential firms. You're assuming that a corporation that has a janitor making $26,000 today has a CEO making $390,000 today. This might be true for the equivalent of an American S Corp, but the prestigious, large and complex C Corps have CEOs making $3 million on the low end, which is 115 times the janitor's salary.
The reality is, these complex and sophisticated corporations will dodge these rules pretty easily through how they structure executive pay. If they can't for some reason dodge these rules then corporate heads will leave the firms and/or the country to find better compensation. They're not going to take a 90% pay cut. That will drain Switzerland's best executive level talent.
I don't necessarily disagree, but the bigger firms can also just contract/outsource the lower level employees such as janitorial staff and expense that as a service instead of having those employees on their payroll. But even if it not, I'm not sure it's necessarily a bad thing to shift the balance to more smaller firms and less behemoth firms. Having a preponderance of smaller businesses encourages competition by leveling the playing field and increased competition fosters innovation and more beneficial conditions for the consumer. Larger firms encourage monopolistic behavior, which is detrimental to the consumer, counteracted somewhat by economies of scale.
Just put birth control in the water and the problem is solved. No need for fancy shit. Too many kids being born to below average intelligent people.
No issue with drinking water full of estrogen? Good luck with that, Eddie.
^^^X3. Birth Control would solve lots of problems.
I mean we keep trying to find that pound of cure instead of looking for the ounce of prevention. You need a college degree or a skill to be competitive, now and more so in the future. Poverty and lack of college is a function of parents and parental poverty is a function of having kids at a young age, etc. If you believe that raw intellect can have a genetic component then this case gets even stronger. Plain fact is people with college degrees tend to mate with others, so on so forth. So you have this population of people who reproduce above the replacement rate, who have no skills in a rapidly globalizing and automating environment.
Just like pensions fail as less people pay into it, so will these social and redistributive programs. Only thing that can help is if more people become skilled and earn higher wages (good) or the population of needy people slowly reduces (negative, for them anyway).
I'd almost go so far to say that everyone should be on birth control until 25. If your brain doesn't stop maturing until 25 well you shouldn't be shitting out children. This would help lower poverty rates, single parent household rates and reduce the lower income population (higher income people already don't breed until later).
I would love to see Switzerland pass the law just as a guinea pig test.
I'm curious to see how this works out.
If it works in Switzerland, we should try it here.
Yea because those economies are totally comparable.
Switzerland is a culturally homogenous country of 8 million people who cooperate in a parliamentary system.
It's not really comparable to a continental superpower of 313 million heterogeneous people who cooperate loosely in a federalist, constitutional system with 50 sovereign governments and radically different regional cultures. They're not really comparable at all.
Even so, the world can afford a lazy and complacent Switzerland. The world cannot afford an America that fails to innovate medically and technologically.
Didnt realize those were the only relevant things to look at when comparing economies. I was stupid in thinking that maybe size and diversity mattered but I'm not a STEM grad from a fucking cornfield so what the fuck do I know.
The United States will be one in twenty years.
No, that's Detroit.
To be honest, I'm quite surprised that Ed didn't explain how the system works in Switzerland. Why? Because ignorant people (there's a few in this thread) will actually believe that everybody in Switzerland is actually in favor of such a law. It's not because Swiss people are voting on something that everybody wants it. A "popular initiative" in Switzerland requires only 100000 votes, often collected in the streets, concerts, events etc. It is actually quite easy for a political party to make the country vote for something.
If you ask me, it won't pass.
I reiterate, why do we have to change the system simply because losers lose. Shits been like this forever. The issue is insane birthrates that are drowning out the producers of wealth.
Why outsource labor? Automate. Get a professional roomba. There are machines that make fast food. Many lower skilled jobs can simply be done away with. It is cheaper right now to pay someone $26K a year to mop a floor, but you roll out restrictions and penalties and companies will invest in equipment to do it.
Not to mention call centers. You think those auto voice shits are annoying now, just wait until you cant have some 9 dollar an hour GED reject doing it. Youll never talk to a human on the phone ever again.
There are plenty of philosophers opining about these issues daily. I suggest you go to Starbucks and order a latte and talk with them.
Seriously people. Capping a private companies pay because someone who barely graduated high school is butt hurt. This is where the world is going.
Maybe we better start ingesting estrogen. So much man-gina in this conversation I can feel my period coming on.
TNA,
I agree with you wholeheartedly that we should not cap the pay of the CEOs because of the mediocre guy who couldn't do any better. That would be completely wrong. What I wonder is, why would the CEO exclusively like to apply his abilities and knowledge in exchange for astronomical amounts of money, why would it be so far fetched to think that maybe future generations of executives and entrepreneurs would be motivated and rewarded by intrinsic values after a certain amount of money that is not necessarily in the millions and billions.
I agree with you. I want to have a good amount of wealth, but to give it away and help what I think is important, not to buy the ruby encrusted hublot. That being said we all have different utility functions and capitalism provides a pretty agnostic view on this.
That is why it is so successful. It basically understands that we all have different motives and allows us to go after them. Layer in government with some restrictions and social programs to help those who can't compete and we have a decent system. The problem is when you add more restrictions and more social programs. You begin to gut this system that rewards the greedy and altruistic alike.
+1 this.
the general idea seems to be that if pays are reduced the brightest will leave. It's a big assumption imo because it means the brightest persons are ONLY/MOSTLY interested in money and thus will always look for the positions that gets them the highest pay package. I seriously doubt this is true, and I'm pretty sure there are bright people who will take these supposedly "low" pay jobs and run these companies, they just have to be found. Who's to say that they are not the best at what they do? because the pay doesn't compare to what they could earn in the US? hard to argue that point.
bold strategy cotton, let's see how this one plays out... c-level execs just going to leave switzerland.
Marxist bankers itt.
I would be in support of a law that said the top paid person at a given level could make no more than 12x that of the lowest paid person one level below. E.g. the top paid MD could make no more than 12x the lowest paid Director, top paid Director no more than 12x the weakest VP etc. This would still be distorting and in no way is better than a free market but at least then you would probably avoid the $50-$100mm pay packages. Although the end result would probably be companies would just add more and more levels to meet the requirement.
Some quick observations:
(1) Most executives do not make millions of dollars. Some do (finance executives and top executives at very large, public companies), and people latch on to these figures because they are sensational. The more boring reality is, most executives at the mid-sized companies I've seen make 300K - 700K / year. And that's W-2 income so it's taxed at a blended 40+% all-in.
(2) This plan will not work. As is always the case, there will be carve-outs and work-arounds.
(3) Governments will not really do this because governments today rely almost solely on rich people. Look at the tax burden distribution. The top 1% or 5% or 10% or whatever pay the lion's share of taxes in most industrialized countries. The bottom 80% could fall off the face of the earth and most government treasury departments wouldn't even notice. So if the governments were to suddenly make the super rich unrich, they would be screwed.
(4) Inequality is just going to get worse, regardless of what taxes you impose or wage caps you install.
(1) very good point, only the biggest companies pay insane salaries to their exec.
(2) thats actually short sighted because it assumes that the top 1-10% wealth doesn't depend on the bottom 80%. a business makes money by hiring people who will create products(...), many of those people get low wages, if they stop existing how do you recreate that value? automation? we're not there yet
It's been fun to try to follow all of the ways in which this discussion has weaved and twisted. Marxism, machine learning, marginal productivity, TNA pushing eugenics, but I'm surprised that no one has said anything about the tax code...
I know it's sort of the soup du jour due to Bill Gross' Scrooge letter that came out a week or two ago, but instead of passing a restrictive and complicated initiative like capping compensation (which in 5 minutes there were already multiple workarounds from people in this thread--just imagine what a room of lawyers could do), we simply adjust the tax code. Taxing labor and capital at similar rates would be a more effective (and more simple) first step you would think...
Also, the BLS shows the average CEO pay for those running "Companies and Enterprises" at a whopping $210,000 per year (but this also begs the question of what is included in that figure, is it just salary?). Would that much change for the majority of CEOs who aren't running the largest corporations in the world?
http://www.bls.gov/oes/current/oes111011.htm
Lol apparently mine were too. People need to calm down.
Spain and France have no business trying to project "fair" and sustainable policies, considering their stuck in an economic pile of feces.
No doubt many bankers and WSO members are incredibly hard-working people, but we've nearly all had an incredible amount of luck. We've been given many opportunities that most others don't have.
Capitalism is not as "fair" and merit-based as some of you would like to believe. Growing income inequality is not a sign that the hard-workers are working harder and that the lazy are getting lazier, as compared to say, 10 or 20 years ago. Growing income inequality is structural.
And that structural inequality only shows signs of increasing. If that increasing unfairness doesn't bother you ethically, it should at least raise your concern that we are heading towards a) oligarchy or b) revolution.
Personally, I'm all for much higher (progressive) taxes and significant wealth transfers, perhaps regulated so as to be spent on investment rather than on consumption, on childcare and education rather than on big screen TVs.
For those of you saying that higher taxes will run the economy into the ground, that is simply not true. The poor have a much higher MPC than the rich do. Wealth transfers nearly always have a higher multiplier effect than do other types of government spending. The rich who want to get richer will be able to - there is no salary cap, so the incentive to worker harder and produce more is still intact.
The growing income inequality is a consequence of crony capitalism. You sound like a typical hollywood liberal idiot.
http://en.wikipedia.org/wiki/Crony_capitalism
Perhaps we are talking about the same thing.
minimum wages, yes. Maximum wages, no. This is crazy.
Valient, who said capitalism is fair? I hope your socialist ass doesn't live in the US. Kids these days...
I'm pretty sure he didn't mean fair as in "we all get an equal share of everything". If you read past that word, he said "and merit based"; this leads me to believe that he meant capitalism does not always efficiently allocate the "fair" amount of reward to those of proportional talent/deservedness.
Using equivocations and ad hominem arguments is juvenile.
LOL! You just called me an idiot one post before! You're completely ridiculous. One post before you call me an idiot and in the next post you call someone out for using ad hominem. Hilarious.
Well argued indeed. And great spelling.
Ever notice how its usually the economies that are a pile of shit to begin with that usually come up with brilliantly shit ideas on how to further fuck up their economies just to quite a bunch of poor people for a few more years until the poors find out their brilliantly shitty ideas have further fucked their own shit up so they then push for more of the same shit. There should be a minimum IQ and economic knowledge for one to be allowed to vote. If we just didn't have to deal with these people that know nothing but assume they know everything we would be living in the grand utopia they want.
Long story short : if you are fucking retarded leave the decision making to the big boys and go play with your belly buttons in the corner.
Couple quick ones:
No way wages are going up. Wages up means cost up means company who tries that will get bankrupt before anybody else. Maybe a couple firms with extreme pricing power can try that - I doubt it.
It's cute to see Swiss people thinking they're poor, whoever they are.
Anihilist, I don't post much anymore, but for your future reference, I am juvenile and always come with ad hominem attacks to dumb shits.
Haha, well you're in good company here.
I'm just being honest mi amigo.
What did I misspell?
Besides your name, which I thought was with an "e" and not an "a"
If this passes, we will see more temps/contract employees. People will always find a way to beat the system.
Glad to know Andy's candy knows how much people should be paid. I fail to see how allowing Roger Federer to be super rich, but not some CEO who might have spent their entire life working their way up the chain is any different.
Yeah yeah, head will roll. Womp womp. Because Europe and America are like revolutionary France. The evil rich oppress everyone and there is no way to get ahead.
Please, lets stop disrespecting the trials and tribulations of truly oppressed poor by talking about the coddled "poor" we have now. Back in the day the poor died and starved. Now they are fat, with section 8 housing, welfare and subsidized cell phones and internet. Hardly hopeless.
Let me cut to the chase. Liberals will always want more "equality" (code word for increased regulations and taxes aka government). The poor will never have enough and inequality will always be an issue. While we are at it how about Kobe takes a few inches off his vertical because my inequality is pissing me off.
Butt hurt crew in full effect.
LOL, I love how much MS has been flying, but the US is still probably going "socialist" and there aren't too many arguments against it.
I predict a 60% marginal tax rate on lobbyist, legal, and banking income over $1-2 million in ten years. I'm sorry, but if you work for a systemically critical bank and you are taking risks ultimately with the taxpayers' money, we should tax you at a higher rate if you get a gigantic bonus. Same with incomes that occur as a product of the legal system or from lobbying Washington. If you're making boatloads off of the federal government, we want some of that money back. And yes, if you work at a bank that has a $500 Billion balance sheet, a prime services desk, and gets much of its funding from the money market, a $3 million bonus probably means you're taking too much risk and Uncle Sam deserves some of that money back. In a post-TARP world, you can't argue that there's not some sort of implicit taxpayer support going on.
Look, if you hate socialism, great. Let's start taxing the pro-socialist behavior we wish to discourage. Oh wait, that's us bankers.
Brilliant proposal. Lets tax the most mobile and richest at a time when the US is becoming less influential and worth living in.
I mean we have the highest corporate tax rates and just look at how effective that is. Oh wait, trillions kept overseas.
I do agree that we are going to be socialist. And by this I mean bankrupt. Why the fuck would anyone pay 60% taxes in the US? I'd move to Europe before I paid those rates here.
If they're not in the US, we don't have to bail them out when they fuck up again. The markets will, of course, react to this, and they won't be able to make their millions in Singapore.
That's about to get reformed and there will likely be a mandatory one-time tax on overseas profits. Most countries in Europe are worse on tax rates and more socialist than the US. And yes, I am perfectly happy to move all of the financial activities that are basically getting a free put-option from Uncle Sam to Europe. Europe can incur those costs.1.) You can't lobby Washington from elsewhere. 2.) You can't sue people in US courts without earning US income. 3.) You can't arb the FDIC and the Federal Reserve by socializing losses without incurring US income.
Hostage theory of taxes 101. If you're going to earn money by generating negative externalities in the US, we can also tax those that income here to cover some of those negative externalities, ANT.
Maybe the bankers earning millions (again, likely from excess risk) will liquidate everything here, cancel their citizenship (US citizens and permanent residents are taxed on global income), pull their kids out of school, and move to Singapore.
Or maybe they will start boutiques that aren't systemically important and earn millions there without needing economy-destroying balance sheets. Maybe they will start hedge funds and find a way to make money with 5x leverage. Maybe they will find a way to make millions in some way that doesn't involve economic rent-seeking behavior. Just a thought.
Efficient regulations that limit negative externalities are necessary and actually good for the economy. If you work for a bank that's FDIC insured, or has such a gigantic balance sheet that bondholders are counting on a federal bailout if it goes under, we should be taxing your wages and income at a higher rate if such income driven by risk-taking. (In most cases, if you are taking home seven figures, and you can't earn the same at an elite boutique, you probably are getting some of your wages from risk-taking.)
Dude, I don't think you have a firm grasp as to why people in finance make so much money. Yeah taking big risks is a part of it but that's far from the core reason. The real reason finance dominates the economy is because our monetary and fiscal policy mechanisms favor the financial sector. Government needs to issue some debt? Have to go through the banks. Fed wants to buy some debt? Have to go through the banks. Need money to fund your government pension down the road? Have to go through a PE firm. Basically anytime a government agency is moving money around (which is all the time), the financial sector is taking a cut. And those cuts are on billions and billions of dollars, and split among a small number of people. Hence the outsized paychecks in the financial sector.
So no matter what taxes you impose or externalities you try to mitigate, the financial sector will still dominate. It's an industry built to exploit government actions.
IP is suggesting a return to the old 3-6-3 banking model, and I love the idea.
Take in deposits at 3%, loan the money back out at 6%, be on the golf course by 3 every day.
Again, I really don't see why all of the ardent laissez faire capitalists out there are opposed to this idea.
Taxes disincentivize work and activity. Normally they are a terrible thing.
Lobbying, legal, and risk-taking behavior at banks protected by implicit government guarantees promote big government and socialism. Higher taxes on incomes from these sectors discourage pro-socialist behaviors and encourage the job creators to focus on other industries that don't arb the feds.
-Note that elite boutiques with small balance sheets don't arb the government.
-Note that hedge funds with balance sheets less than hundreds of billions (LTCM might not have been exempt) probably don't arb the government.
-Note that PE funds probably don't arb the government. If they do, the government has other recourses on terrible deals (such as property taxes.)
But if the federal government is effectively giving you a free call option because they're scared to death of another financial meltdown, and you manage to make millions increasing the vol of your government insured portfolio, that's not really your income- that's the federal government's income. There should be some soft limit at which point the tax rates on incomes derived from risk-taking at FDIC insured banks goes mildly punitive, in the same way that income from socialist mooching (lobbying) should also go punitive.
Looks like the bill failed. Would have been interesting to see how companies would have responded. I suspect some of them would have moved their HQs to Germany or Austria. I think the idea is interesting, but you're using a chainsaw when you really need a scalpel.
I think the more conservative move here would have been to play the socialist system against itself by imposing higher taxes on high incomes from the three activities that weaken capitalism in the US- lobbying, suing, and moral hazarding (risk taking at institutions that expect government bail-outs if they fail). High taxes are almost always a bad thing, but I think most Republicans would say that a $100 tax for a Democratic politician to vote for an unnecessary regulation is a fair tax. This just takes 1 step back from that and discourages the politically connected from making money by making the country more socialist.
We only impose the big government on the people benefiting from it and imposing more of it on the rest of us- lobbyists, lawyers, and unreasonably large risk-takers at federally guaranteed financial institutions.
Honestly there just isn't much to say to you--you're a typical liberal who is talking out of your ass. You are displaying a breathtaking ignorance and/or naïveté about how exceptionally high earners avoid taxation. I have a client who is a bank president--he is paid $2.6 million per year from his bank. His tax returns in 2012 were 406 pages of trusts, LLCs, LPs and S corps. Even though he had $8 million in distributions his federal tax bill was about $100,000. He paid is tax preparer $40,000 and it was worth every penny.
The point is, the exceptionally high earners will never pay higher taxes unless you reform the tax code. Raising tax rates will probably simply increase the amount of money an exceptionally high earner pays to have his taxes prepared. That's it. What's maddening is that no matter how many times this is explained to a leftist and no matter the leftist's level of education this information will bounce off them like rubber and they will continue to parrot this idiotic line about tax rates.
-How low have you been paying taxes at more than a 10% marginal rate?
-How long have you worked for a federally guaranteed institution?
If you can't answer these questions, don't call folks ignorant.
It's called deferred comp, and it's not taxed until you can actually sell your shares. $100K sounds about right on $400K of cash income.
The MLPs, LLCs, and passive losses probably do need to be reformed, but they don't apply against active income. As per the Tax Reform Act of 1986, a passive loss cannot be applied against active income. I'm also pretty sure that the AMT catches a lot of the deductions against income.
I think you're talking about deferred taxes here. When these LLCs, LPs, and S corps get sold, he'll owe a lot of taxes.
Or we just get the IRS to be more aggressive in auditing people with $8 million AGIs and let Liz Warren make the Tax Court appointments.If the 60% determination happens on an accrual method, is audited by the IRS, and decided by a bunch of Liz Warrens if you appeal to the tax court, and negligence penalties are assessed against parties who get it wrong, people won't game the system on this aspect.
The 60% rule can follow the same model and allow the same deductions as the flat tax you advocate. If we don't create exceptions to it, the tax will apply.
I didn't say it was terrible. I said the same shallow solution put forth of raising tax rates will never achieve the ends that the American left wants it to achieve because the system is created by rich liberals who like that they can continue to remain wealthy and pay little in taxation while they manipulate their incompetent and intellectually lazy voting base.
I work in banking because I believe in banking. It's the blood of the economic body.
For the record, the IRS is made up of a bunch of affirmative action hires just like half of the federal government is. Anyone who puts stock in the competence of the federal government has had very little interaction with the government's hiring practices and everyday customer service and competence level. The last people on Earth I would trust to get things right would be IRS employees who are hired because of something other than their qualifications. That goes for the rest of the Feds.
Idunno. My Dad has a taxable income that is about 80% of his AGI and he's pretty good at optimizing this stuff. When he saw my tax return, he joked that I was paying AMT because Republicans thought I should have a higher tax rate. There are only so many ways to lower your taxes without accruing liabilities when you sell stuff.
I've met IRS agents on occasion- at least the guys who make the tax rulings. I go to a decent (not amazing) graduate school. Most of them seem pretty darned intelligent to me. The problem is that they seem too reasonable on too many things.On the 60% rule, they need to be as annoying and infuriating as all hell. Work on a consulting engagement for a bank for a week? Banker, 60% tax rate on all income on the greater of a cash or accrual basis over $2 million. The IRS needs to go through the ledger with a fine-toothed comb. And the tax court needs to be stacked against people trying to game the system. And if we tax on the greater of a cash or accrual basis, it gets hard to manipulate.
Frankly, Liz Warren should be in charge of the tax court appointments, not somebody with the last name of Kennedy or Obama.
You're wasting your time. Literally nothing you can say will ever make him think hes anything but more enlightened than the rest of us.
Just a note. This measure was soundly defeated by the swiss people.
35% voted in favor of it. That would have never happened ten years ago. I would have been one of the folks voting against it, but it would have been an interesting experiment at the very least. :-)
Everyone in this country is screaming about socialism. It's like calling someone a racist. The last time there was actually real socialism in the world, it involved barbed wire fences and a totalitarian state. So it would have at least been interesting to get a more recent sample in the form of Switzerland.
The swiss should be happy that this failed, but onlookers in other countries should be disappointed.
Yeah, I was an ass for that comment- that's not how I intended it, and now that it's been quoted I can't fix it.
I am not going to justify or defend that comment. I will say that I don't think or debate or explain quite as well when someone calls a group of people stupid.
The people are stupid. Unless you are a racial minority or a military veteran, it is almost impossible to even get an interview in the federal government. You know why Obamacare launch is such a complete failure? The federal employees who hire and oversee the contractors are completely incompetent. Want to know why banking oversight was a joke for 20 years? The employees. Want to know why there is more than $100 billion of waste, fraud and abuse in Medicare and welfare? The employees. Anyone who is a competent IRS employee resigns and goes into private practice. You are an incompetent person if you actually make the IRS into a career.
My parents were both federal employees hired in the 1960s and 1970s. They would never have gotten hired today with the "stringent" hiring policies of being black and a military veteran (although my father was a military vet, he wasn't wounded in battle, so he probably wouldn't have gotten hired).
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