Guinness wrote:MWB wrote:A free market system rewards efforts that are socially beneficial? I guess I'm not clear what you mean. Police, firemen, teachers.... these are all jobs that benefit people socially, but they are not rewarded nearly as much as others in terms of money.
Don't get me wrong, I'm not saying there should be an work effort to compensation parallel. That's impossible. Things run on supply and demand. People get paid whatever someone is willing to pay them to do a job. So a CEO can make millions because he's making millions for the company. A mechanic can make $45k a year because people are willing to pay a certain amount to have a car fixed.
What are we talking about, then? You can't mix a fiscal idealism with the practical realities you describe in your second paragraph.
Look, it would great if firefighters were paid the millions that CEO's of international financial corporations make. But the fact of the matter is, however morally right or wrong any of us might view it, what the market bears is what we have, by and large. You want firefighters to get paid more? Decrease the supply of firefighters. If enough houses burn down, suddenly you'll see a demand for firefighters, and a corresponding up-swing in their pay they're offered. This is the market at work- people pay for services they want/need. Obviously this is simplistic example. But it's an expression of the collective will - people like to have protection from fire.
I've been a free market Republican for my entire life, but I have to agree with the premise that many CEOs in corporate America are grossly overpaid relative to the value they add to their companies. These individuals don't invest startup capital/equity to form these companies. They are basically coming into riskless positions yet reaping millions of $$$ for performance, decision making, etc that isn't commensurate with the value they provide. The executive compensation committees from many boards are basically made up of CEOs of other companies. These guys have their little inner circle and they vote each other exorbitant compensation packages. There are no checks and balances. Stock prices can fluctuate wildly, often manipulated by shady accounting practices, option backdating, unreported debt, etc. All these things distort the financial performance to the point the stock value becomes inflated and the CEOs unload their options while the market value is high all the while knowing they are managing a house of cards.
Take GM for example. I have no idea who their CEO was (is?) but I'm sure the guy made millions while they were living off the high profit margin SUVs, Hummers, etc. The guy piled up a mountain of debt ~$40B and now the company has minimal market capitalization and is nearing bankruptcy. Where is the recourse to get the $$$ back from him? He ran the company into the ground, yet probably was paid like an MVP. Was continuing the development of their electric vehicle mutually exclusive from cranking out as many trucks as possible? Where was the foresight to hedge against rising energy costs and to position the company to capitalize on the next generation of alternative based energy vehicles? There is such a short term focus on maximizing quarterly results and getting the stock price at a price where options are extremely lucrative that sound long term corporate governance is ignored.
I certainly see the argument McCain has about small business owners being taxed. They stake personal capital, take risks, create something from nothing, etc. They deserve to be rewarded for their efforts.
I do not see a rationale for feeling bad about some CEO that is raking in millions paying more taxes when there are literally hundreds if not thousands of people in a large public corporation that could provide essentially the same decision making capacity for a fraction of the price.
If major corporate CEOs were pro sports players the lack of value they deliver relative to their pay and other members of the company would be like some NHL player that has a career 25 goals/25 assists type of average season making $10M per season on a long term deal. He would be a good player, but everybody would wonder why he makes so much more $$$ than the other players when he doesn't deliver corresponding value relative to the pay discrepancy.