Marvin Miller Rails About CEO Pay
Marvin Miller, the slayer of the reserve clause in baseball, has an eerily soothing voice. He would gaze into the television camera as if he were in a trance, speaking slowly, softly, with a calm demeanor that not only would convince me of what he was saying, but make me wonder how anyone could possibly believe anything else.
The reserve clause? Abolish it. Baseball players are not cattle, as my grandfather used to say. Baseball is not entitled to an exemption from the reserve clause because it is an "amusement," whatever that means. Baseball is a business. A baseball player is entitled to sell his services to the highest bidder when his contract expires, not be forced to have it renewed at the discretion of the major league baseball team that "owns him."
As Curt Flood said to Howard Cosell when he refused to accept his trade to the Philadelphia Phillies in 1969, "a well paid slave is still a slave." Curt Flood was earning $90,000 a year when he spoke those words. His struggle became a selfless act because, even though the Supreme Court ruled against him, his short term failure paved the way for the long term success of those who followed him. The Catfish Hunters. The Dave McNallys and the Andy Messersmiths. And, more recently, Alex Rodriguez.
I would imagine that Miller is fine with Alex Rodriguez and his $30 million dollar contract, even when A-Rod strikes out with the bases loaded, even when he doesn't field every ball that's hit to him, because that contract represents a negotiated agreement between A-Rod and his employer, the New York Yankees.
Corporate contracts are another matter, however. This is what the Associated Press reported on April 25 of this year:
Appearing at the New York University School of Law on Tuesday night to discuss the 40th anniversary of the first baseball strike and the rise of the players' association, the 95-year-old former union head spoke for 68 minutes and delivered a blistering criticism of corporate pay.
First of all, I'm happy that Marvin Miller is still around, as opinionated and controversial and thought-provoking as ever. Here is some of what he had to say:
stock exchange or Wall Street firms," he said. "The typical way that compensation is set is for the board of directors, most of whom if not all of whom have been appointed directly by the CEO, decide what the CEO's salary should be, or they have a committee, a compensation committee composed of board members."Let's take chief executive officers of important corporations, or the
"The first thing about that is that here you have a direct conflict of interest, because sitting on a board are executives of other corporations, and what they are doing is adding ammunition to their own quest for higher salaries. And it's such an obvious conflict of interest that it's awful. Of course they're going to vote for higher salaries."He said the directors are at fault because "they don't pay for it. It's paid for by stockholders, who have had no voice on what the salaries and compensation and perks of the chief executive should be."
Are most members of the Board of Directors appointed directly by the CEO? I don't think so, as the following explanation by Wikipedia reveals:
proxy statement. For publicly-traded companies in the U.S., the directors which are available to vote on are largely selected by either the board as a whole or a nominating committee.[16] Although in 2002 the NYSE and the NASDAQ required that nominating committees consist of independent directors as a condition of listing,[17] nomination committees have historically received input from management in their selections even when the CEO does not have a position on the board.[16] Shareholder nominations can only occur at the general meeting itself or through the prohibitively expensive process of mailing out ballots separately; in May 2009 the SEC proposed a new rule allowing shareholders meeting certain criteria to add nominees to the proxy statement.[18] In practice for publicly-traded companies, the managers (inside directors) who are purportedly accountable to the board of directors have historically played a major role in selecting and nominating the directors who are voted on by the shareholders, in which case more "gray outsider directors" (independent directors with conflicts of interest) are nominated and elected.In most legal systems, the appointment and removal of directors is voted upon by the shareholders in general meeting[15] or through a
Agency costs can be very expensive, so companies have an incentive to minimize those costs whenever possible. And the Dodd-Frank Act has an provision for shareholders to vote on the salaries of CEOs and other upper management, even though the results are not binding.
However, as Justin Hilley wrote on March 16, 2012 for www.housingwire.com:
The Dodd-Frank Act mandates that public companies disclose the ratio of CEO pay to the median salary of employees. However, two years after the Act's passage, the SEC has yet to implement the rule, which business groups oppose and corporate-reform advocates are compelling the agency to pass.
I wonder whether the point of this is for CEOs to be embarrassed by this overly inflated ratio being disclosed?
CEO-to-employee pay ratios ballooned after 1980, a year in which top executives of large U.S. companies made 42 times the pay of factory workers, BusinessWeek estimated at the time. By 2010, CEO pay at S&P 500 companies soared to 343 times that of the median U.S. worker, according to the AFL-CIO.
I imagine that if this mandate were enforced, the pay ratio would decline, but by how much? I wish some of those millions were put back into the company or donated to charity or given to me, but I don't have any resentment toward Lloyd Blankfein or Alex Rodriguez or anyone else who makes a lot more money than I do.
Lol this is BS. I have no resentment towards either Blankfein or Rodriguez, but I'm feeling some towards Mr. Miller. He's just another guy jumping on the liberal bandwagon of "it's cool" to bash CEO pay. Frankly, there are too many extremely valid arguments for high CEO pay for me to mention them here. Of course, shitty CEO's should be paid less, or be fired, especially if they have fake compsci degrees.
Actually, mentioning the rise of salaries in baseball brings up a good point - It's not just CEOs since 1980, it's a lot of people: JUDGE JUDY making $30 million a year? BB traders making $75 million bonuses? Hedge fund founders taking home a billion in a single year? Trial lawyers taking home hundreds of millions for working on a tobacco settlement? A 24-year old kid worth a billion by starting and maintaining a website? Even adjusting for inflation, the people who made a lot of money back in the day didn't make the kind of money that high earners make post-1980. Or, similarly: adjust for inflation, I guarantee you that $10 million houses were not nearly as commonplace in California as they are now.
Maybe I'm seeing something that's not there, but it seems like there's just a lot more wealth sloshing around in this country, or at least that it finds its way into other people's pockets more easily, quickly, and flexibly. It is no longer all that impressive to make merely double what a factory worker makes.
by the way, re:Japan, CEOs there would make more if their culture allowed/put up with it. Poor guys.
Some CEOs are worth it, others are not. To deny that there are some severely overpaid CEOs is foolish.
I would agree that some are overpaid, based on how well they did, how much they actually contribute, etc., but my point was really to say that making an overarching statement that "all CEO's are severely overpaid" is just as foolish.
Yeah, I agree to a reasonable extent. Though, when you look outside the US, at countries like Japan, CEO pay is much lower relative to the average worker and CEOs aren't less motivated.
HappyPants -
I agree. Some of the severance packages are out of control. "Well, you fucked up royally and only lasted a year...here's $20 million."
Couldn't agree more. The people who deserve as much as they make and more are the founder CEOs that stay with the bank, company, firm, etc. as it grows and remains profitable.
I think the real issue is tying so much of exec comp to options rather than having cash bonus types incentives.
Agreed. Tying pay to options often gives CEO's the wrong incentives and shifts the focus from maximizing long-term shareholder value to maximizing option worth.
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