Paying Less at the Top

[james&olya 1,121]

See my comments above in red.

It is theoretically possible but statistically fairly improbable that you pay a higher share of your income in federal income tax. But I would be delighted to know that you 'win' this one!

[mawilson 2,133]

It is theoretically possible but statistically fairly improbable that you pay a higher share of your income in federal income tax.

Why is it improbable? I'm not in the $77.4 million+ club, most of my income is earned.

[I AM NOT THAT GUY 5,715]

Why is it improbable?

Hippie dogma. People who are successful did it by stealing from other people. That is the only reason there are poor people. That is why it is okay for normal people to steal from their bosses and lawyers to sue large corporations. Government should take all that ill-gotten gain and do some good with it.

[one...two...tree 2,762]

Profit sharing means all employees enjoy the fruits of their labor and not just the ones at the very top.

The growth in top pay has not taken place in isolation. It demonstrates the dominance of a particular form of capitalism in the UK and an elevation of the concept of the rational self-interested man to unprecedented heights. In this environment human nature, aspiration and endeavour are seen through a prism of self interest, or as some would put it "greed" as ever larger rewards are required to generate performance from individuals at the top of companies whose predecessors but a generation ago did the job for a tenth of the pay. yet top pay is not only a symptom of a particular form of capitalism but is also contributing to many of the problems we see in our economy, society and companies.

It was argued that to achieve the necessary dynamism those at the top of companies must be incentivised, and their interests must be tied to those of the shareholders. Nothing should stop those capable of generating wealth from doing. That wealth would then trickle down to the rest of society as the wealth creators spent their rewards, created new jobs, started new companies. After all, it was argued, if free to do so, people will always make rational economic decisions based on self-interest.

Paying the best more and taxing the high paid less became a cornerstone of this economic argument. The wealth creators needed to be freed to create wealth, and if they were not properly rewarded they might go off and do something else with their talents, somewhere else.

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There's a number of reasons that people give about what has happened to executive pay. It started off quite quickly when the Conservative party got into power in 1979. Differentials were squeezed at the time and they wanted to change this. They introduced tax relief on executive share options in 1984. That was one of the first big incentives and was on their agenda quite early. They had an ideological view about the need to encourage entrepreneurship. The cultural shackles were off and high pay became acceptable at the top. Share options were a minority incentive and then became pretty universal after that point.

That tax relief was scrapped in the 1990s after the recession when lots of people were losing their jobs and there was pay restraint, and growing awareness of the disconnect between what happened in board room compared with shop floor. It's not dissimilar to what's happening today. The 90s changed the whole pattern of the way organisations worked with globalisation. The real emphasis on pay performance came in in the 1990s and shareholders became the focus of accountability. There were a whole range of incentive schemes that came into play and maximum value of bonuses started to go up. In the early 1980s maximum bonus might have been only 30 or 50% of salary; now it's 180%.

It's not uncontroversial to say that a lot of research demonstrates little relationship between pay and performance. But shareholders believe that that is what will happen - if you call it performance pay it will improve performance. That gets built into the market. It becomes a self reinforcing cycle where pay is ratcheted up to match competitors. There are genuine global companies such as Barclays or GlaxoSmithKline. They will set the pace. What then happens is companies lower down, smaller companies, will start to it match. It becomes a benchmark; a market norm.

http://www.guardian....2011/nov/22/pay

Edited June 11, 2012 by Mister Fancypants