While your salary disappears, the average financial CEO’s increases.
Interesting article from Forbes regarding compensation guidelines for Financial, Insurance and Real Estate CEOs:
Because compensation has a big component of stock, yearly compensation fluctuates a lot in the FIRE sector and is highly skewed. But the most compelling finding concerns the actual alignment of fortunes of managers and shareholders. We ask this question by computing the elasticity of CEO wealth with respect to shareholder value for all sectors, i.e. the percentage change in CEO wealth following a 1% increase in shareholder wealth (market cap). The striking result is that in the FIRE sector, CEO wealth is far less sensitive to changes in shareholder value than in any other sector–this in spite of the fact that equity holdings are a more important component of compensation. This may explain the widespread perception that top managers of financial firms do not suffer as much when their firms perform poorly.
While the rest of us suffer, the usual culprits continue to thrive. Now, I’m as much of a capitalist as the next person, but we’ve been sold a bill of goods regarding corporate earnings that is, in a word, bullshit.
Take, for example, the issue of taxes. A change in the tax structure, while potentially devastating for the employee or earner, has little effect on a CEO. Their money is earned through a salary, but most of it is gained through dividends. Dividends today have a tax rate of 15%.
Now, I’m a big proponent of the low dividends tax. I think it allows the flexibility for businesses to hire new people and the owners to feel confident that they can increase their wealth exponentially when the company succeeds. What I find hard to swallow is this whining about how a 3 or 4% tax increase is going to shut doors, cause businesses to close up because their owners “won’t be able to make a living”, or that taxes, in and of themselves, are the world’s greatest evil.
I say lets welcome that new $10,000 in taxes. It’s good for the country, it worked during Clinton (and, by the way, you might recall we were in a recession then and the conservatives were crying about raising taxes during such a downturn) and all it will do is force companies to get more business to offset the taxes they have to pay. Companies are not lazy. The large one’s want the lions share of the world and will do what it takes to get it.
And the larger one’s also get enormous state tax breaks simply for having their businesses wherever they happen to be.
Don’t be fooled by the same shit you’ve been listening to for years. If you continue to be, well, you must be a neocon.
