Tag: finance

Are CEO’s Paid Too Much?

On By southwerkIn Business Ethics, Capitalism

There appears to a be a considerable consensus on various web sites that indeed they are.

(That does look like corporate leadership, a daunting path, indeed!)

Let’s begin with the Guardian in an article by Michael Sainato talks about his pay.

https://www.theguardian.com/us-news/2025/jul/24/trump-bill-ceo-pay-starbucks

Starbucks’ CEO, Brian Niccol, made 6,666 times more than his average worker last year, according to a report on the growing gap between top executives and their workers.

The inequality gap between CEOs’ pay and that of their median workers rose in 2024 to 285 to 1 from 268 to 1 in 2023, according to a report released this week by the largest federation of labor unions in the US, the AFL-CIO.

I will freely disclose that I find the CEO in question, Brian Niccol, reptilian and repulsive, and that is beside the fact that he is paid way too much.

But there’s more. Here’s an article from 2023 By Nik Popli. He writes about an investor advocacy group that calls out CEO’s who get generous pay packages while their companies suffer losses particularly in shareholder returns. I recommend you read the entire article.

https://time.com/6256076/most-overpaid-ceos-2022/

The typical CEO of a company listed on the S&P 500—a stock market index with 500 large publicly traded corporations—earned $18.8 million last year. That’s up roughly 21% from 2021, even though the S&P 500 index was down 20%. Company boards gave particularly big grants of stock to reward those in charge of navigating their companies through high inflation, continued supply chain problems, and rising wages—as well as meeting performance metrics.

But an investor advocacy group says some of the nation’s most well-known companies overpaid their chief executives. A new report from As You Sow listed 100 “overpaid” CEOs who received high compensation in 2022 despite mixed shareholder returns for their companies.

At the top of the list: Warner Bros. Discovery’s David Zaslav, who received $246 million in 2022 even though the company’s stock fell 60% in the same year and roughly 40% of shares voted against his pay package. The second most overpaid CEO was Estée Lauder’s Fabrizio Freda, who earned $66 million in 2022 while the company’s stock fell 33%. Penn National Gaming’s Jay Snowden, who was paid $65.9 million, comes in at no. 3 on the list; his company’s stock fell 42.7%.

And for the year before, we have the magazine Fortune in an article by Chris Morris, Maria Aspan entitled rather directly These are the 10 most overpaid CEOs in the 2022 Fortune 500. Once again, I liked the article and recommend you read it in full.

https://finance.yahoo.com/news/10-most-overpaid-ceos-2022-175248791.html

Overall hourly U.S. wages fell 2.4% on average last year (after adjusting for inflation), but the median total compensation of CEOs Fortune studied as part of this year’s Fortune 500 ranking jumped 30% from a year earlier to $15.9 million.

That made us curious. Did those CEOs deserve the compensation packages they received? Fortune’s Maria Aspan and Scott DeCarlo analyzed the compensation and stock performance of the 280 Fortune 500 CEOs who have held their jobs for at least three years, ranking them on pay vs. performance.

Apparently factual analysis based on the statistics of market performance does not paint an appealing picture of CEO pay. I am not surprised. The media celebrates these figures as fearless leaders and innovative entrepreneurs with little actual examination of the facts. And the way corporate power is structured, an obedient board of directors is just a matter of time for an aggressive CEO.

The Progressive Shopper posts the “Overpaid CEO Score Card.”

Overpaid CEO Score Card

The list identifies the 100 Most Overpaid CEOs from the S&P 500 index, highlighting those CEOs deemed excessively compensated based on their performance. It specifically focuses on CEOs who were addressed at annual meetings held between July 1, 2022, and June 30, 2023. This year’s findings also incorporate insights from annual voting patterns and regression analysis conducted by HIP Investor.

Mentioned previously was the Shareholder Advocacy Group, “As You Sow.” This is a ten year study they published about CEO compensation entitled 10 Years of Study Shows Overpaid CEOs Underperform.

Listed below the link are its most damning conclusions.

https://www.asyousow.org/press-releases/2023/11/15-ten-year-study-overpaid-ceo-underperform

Key findings: 

  • Companies with the most overpaid CEOs have had lower returns to shareholders than the average S&P 500 company. The typical S&P 500 firm made 8.5% per year annualized from February 2015 to September 2023, the 100 Most Overpaid CEOs’ annual returns lagged at 7.9%, the worst 25 dragged at 6.0%, and the ten worst were behind at 6.5% per year.  As a group, over a decade, overpaid CEOs underperformed.
  • Total pay for the most overpaid CEOs continues to grow. When As You Sow compiled its first overpaid CEO list ten years ago, the average pay of the 10 Most Overpaid was $56 million. This year, the average of the top ten was $88 million, an increase over that time period of 59%. 

There were more articles and many opinion pieces. All these sources saying that CEO’s are over paid — and, yet, they continue to be overpaid!

But it seems likely that AI and an increasingly darkening economic horizon under our current regime’s bizarre decision making may very well diminish these payouts.

We can hope!

James Alan Pilant

Ethics and the Personal Finance Industry

On By southwerkIn Business Ethics

 

Seemed like a good idea at the time.
Seemed like a good idea at the time.

Ethics and the Personal Finance Industry

The personal finance industry can’t save us – Salon.com

How does the industry prey on our fears about our inability to save and plan for the future?

We can’t articulate that for all too many of us our problem is not an inability to manage and invest money effectively; it’s that we’re expected to do more and more with less and less. So we think we are individually messing up, that we lack the financial skills and smarts to get ahead. The financial services industry presents itself as our savior. But by doing that, it has to confirm our cultural bias that we are alone responsible for our financial fates.

You see this dynamic especially in personal finance and investment initiatives aimed at women, which contain an almost odd mix of the language of empowerment and infantalization. They tell us we are women, we are so strong because we do so much more around the home and work than men, but yet we are financial illiterates who have no clue. In fact, both sexes have low financial knowledge. Men have more money than women for the most obvious of reasons: they earn more.

You mention the work of economist Teresa Ghilarducci, “the most dangerous woman in America.” Who is afraid of her and why?

It became very clear to me while reporting this book that Teresa Ghilarducci had hit a nerve in the financial services sector that no one else had. The reason, to me, was obvious. Most other people discussing retirement reform schemes (Auto IRAs, Save More Tomorrow and the like) were talking about expanding the role – or at least the bottom line of — the current dominant players on the retirement scene. I mean the retail brokerages, the 401(k) plan providers, the dominant mutual fund companies and the like. Ghilarducci’s Guaranteed Retirement Accounts calls BS on this model. First, she points out how much money the current retirement is making on what we think is our money. Second, her model would bring new players in, and I mean new, powerful players – state pension funds, institutional investors, and hedge funds – into the game.

The personal finance industry can’t save us – Salon.com

Ethics and the Personal Finance Industry

Personal responsibility. I believe in it. I recognize the power of it, the usefulness of it. But circumstances have to be taken into consideration. We do get injured, become ill and suffer accidents. We can be killed by natural disaster or more mercifully, have homes or businesses destroyed. Choice and environment interact to produce our reality.

Here we have a situation which the personal finance industry proclaims loudly and persistently that if you only change your decision making and be tough on yourself, that you can attain financial stability and even possible eventual wealth. I would prefer that industry to look at this situation from a business ethics stand point and promise less because personal choice is only part of the equation. If a great majority of the American people had shared in the profits of the increased production and financialization of the last thirty years, I think most financial suffering might be attributable to poor planning. But here again, we have circumstances, downward wage pressure, very high unemployment, a replacement of stable pension with the disastrous 401K’s, the changes in the bankruptcy act, the plague of student loans, etc.

Americans of the middle class suffer from real wage pressure and for many, no amount of planning will fix those problems. Americans of the lower class are simply in the midst on an ongoing week to week, day to day, financial disaster.

Financial planning can be useful but only in proportion to the amount of disposable income in the individual cases. If the disposable income is inadequate, no amount of planning can fix it. Promising magical fixes from non-existent resources is not ethical. Financial planning is not for everybody.

James Pilant

From around the web –

From the web site, Personal Finance for Beginners:

Your questions in personal finance would revolve around the following:

How much money will be needed by you at various points in the future?
Where will this money come from (e.g. savings or borrowing)?
How can you protect yourself against unforeseen events in your lives, and risk in financial markets?
How can family assets be best transferred across generations (bequests and inheritance)?
How do taxes (tax subsidies or penalties) affect personal financial decisions?
Your Personal financial decisions will involve paying for education, financing durable goods such as real estate and cars, buying insurance, e.g. health and property insurance, investing and saving for retirement. Personal financial decisions may also involve paying for a loan.

From the web site, Finance for Youth: The Blog:

A couple of days ago, a young student approached me and asked me for some career advice. The student wanted to understand a little more about what banking and finance is about, and how it measures up in terms of their “dream job“. I was very impressed with this young student, because unlike many of their peers, they were actually trying to look at their future and start planning. This student, to be fair, is part of an advanced group of students. They get tutoring as part of their regular school day, they have additional instruction in note-taking and other study skills, and they are in advanced Math and English classes. They have a leg up over many students already. This young person seemed to have a leg up on even this group.

And from the web site, Nancyeewing:

You need to make a plan of what you really want in life that money can buy. Then you must find out how to get the money it takes to finance it and finally start to implement this plan. This is the long term part of your financial life – the process of personal financial development from the state you are in right now – to the state you want to be in. This journey toward financial freedom is in my opinion the most interesting and exciting part of personal financing you can have.

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Welcome To Pottersville, USA (via Crowhavenscriptsfarm’s Blog)

On By southwerkIn business ethics

A few stories of the banking industry and how it plays the public for every last extractable fraction of a cent!

I’ll let the stories speak for themselves of the constant danger of being a consumer in America.

James Pilant

Welcome To Pottersville, USA Yes, that is a reference to that classic film, “It’s A Wonderful Life”. Oh where, oh where is George Bailey when you need him?! Because most banks, MOST not all, are run by Mr. Potter type thinkers. Get ’em while they ain’t lookin’. And get ’em good! We have debt, who doesn’t these days? I own up to it, or “own it” as the financial gurus tell you you must. I do, we have debt. And with two teens, more is coming. My hours at work have been cut in h … Read More

via Crowhavenscriptsfarm’s Blog

Financial Roulette – America Loses

On By southwerkIn business ethics

Twenty percent of the American economy is the financial sector, the largest proportion in all of history.

For most of American history, banking was a vital part of economic growth. Bank loans provided the capital for small businesses and government to build factories, stores, highways and other public works. This is no longer the bank’s major function. While bank lending is still a critical part of the function of banks as far as the welfare of the nation is concerned, the profits are elsewhere.

It is hardcore speculation, casino capitalism, where the real money is made. This is not wealth creation, it is more similar to the board game, monopoly, you try to make money speculating on property although in the modern sense this is more likely stocks, mutual funds, derivatives, etc. This is not a benefit to the economy. It is a drag and a danger to the larger economy. When the financial sector loses, the taxpayer picks up the losses, while taxpayers share nothing in the winnings. This is because the nation insures deposits and because changes in the law in 1999 allows banks to speculate with these federally insured funds – Corporate welfare on a scale of trillions of dollars.

This gambling has far reaching societal effects. Those who benefit from this no way to lose game make more and more money while those who insure them against loss make less and less.

From the New York Times Article – Scrutinizing the Elite, Whether They Like It or Not –

Olivier Godechot, a French academic on the sociology panel, presented research that quantified just how skewed the increase in wealth at the very top has become. Mr. Godechot, a researcher at the National Center for Scientific Research in France, said that two professions — finance and business services — accounted for almost all of the increase in income inequality.

Professor Godechot has put his finger on it. Our society has focused, fixated on finance as the only mode of economic growth. Everything else from services to manufacturing are poor relations whose share in the wealth and even the concern of the government continues to dwindle.

Because of these changes we have an enormous inequality of income in the United States. From wikipedia –

Americans have the highest income inequality in the rich world and over the past 20–30 years Americans have also experienced the greatest increase in income inequality among rich nations. The more detailed the data we can use to observe this change, the more skewed the change appears to be… the majority of large gains are indeed at the top of the distribution.

The big incomes in America are strongly aligned with the world of finance. So, many of the great incomes in the United States are associated with a socially negative activity that not only produces no value to the large economy but actively endangers the economy through its taxpayer guaranteed bets.

It this wasn’t bad enough, hundreds of thousands of graduates from the most expensive and prestigious universities in the United States pursue careers in this field often starting at a quarter of a million dollars in annual salary, a massive diversion of talent from every other field of endeavor. So, our focus on finance weakens the nation and diverts its future leadership into the same unproductive path resulting in further devastating losses to society as a whole.

What can be done? Well, we could consider making things. We could make actual products in this country, televisions, stereos, building materials, etc. We could base our economy on things of value. We could rise in morality and ethics to a point where the idea of making money by financial speculation becomes an abomination to any upright citizen with even a smattering of civic conscience.

We will do it. Either by choice or by necessity.

You see, the financial way of making money, this casino capitalism, when applied to a society as large is a disaster that unfolds over the years. It hollows out a society diverting the money that would have built manufacturing and countless other useful investment, diverting the young from useful and productive enterprise and diverting the attention of society away from the important endeavors of life and nation building and into a life of profit based on speculation. Why work, when you can gamble with other people’s money?

When this cardboard edifice falls, once again we will find virtue in the making of value.

James Pilant