I've heard a suggestion that shareholders get to vote and decide the CEO's salary --

[gateley]

is that doable, or did Reagan finagle something so the actual OWNERS of the companies had no say? I know it was his doing that they get paid w/stock options so they didn't have to pay higher income taxes, but don't know who has the power to decide how much stock and how much salary.

This is something we should into.

[SomethingFishy]

1. I think Costco already does something like this...

I know there is a limit to how much their CEO can make. And he seems to be a really happy dude so....

[gateley]

7. That seems fair. It's quite a responsibility to be in charge

of a large company/corporation, and they should be compensated fairly, but it's gotten out of hand. Thanks for the info!

And welcome to DU! :hi:

[elleng]

2. Not sure of history, but Boards of Directors have done so.

Some changes in the authority may have been made, I do seem to recall such, but much more recently than reagan.

History and analysis here: http://www.usatoday.com/money/companies/management/2010-05-10-ceo-pay_N.htm

[gateley]

8. Hey, you!

:pals:

I wasn't too clear. It was during the Reagan admin that it became the thing to pay CEOs w/stock options. Apparently they can pay lesser tax on revenue from those (capital gains?).

Previously, that wasn't allowed but they got this passed by saying hey, a stockholder will work harder to make the company more profitable so ALL the stockholders will benefit. But times had changed since Walter started out in the mail room, worked his way up, knew the company inside and out and finally became CEO. These were guns for hire that were called in to increase profits (read: slash jobs) then they just moved on to the next victim.

The few times I've owned stock I've gotten ballots for the BoD -- but I had no idea who any of these people were, and I assume it's much the same today. So, REGARDLESS of who gets elected to the Board, the rank and file shareholders would ideally be able to set the salary range for the CEO.

Seems fair to me. :7 Think it can be done?

[Yo_Mama_Been_Loggin]

12. Actually it became more popular under Clinton

Taxes went up for corporations that paid their CEOs more than one million a year in salary. They were unaffected if they received a stock option instead.

[gateley]

16. But, if what I heard was correct, it was under Reagan that

it became possible/legal to compensate with stock options. Prior to that they couldn't.

And, as you say, they were able to save on taxes. Another tax loophole for the corporations.

[joeglow3]

14. Not exactly lower taxes

IRC Section 162(m) disallows a corporation from deductions for salaries over $1,000,000 for the CEO and other 3 executives required to be disclosed in their 10-k under the SEC Act of 1934.

The exception to this is for "performance based pay." This is achieved by a compensation committee (required to have members outside the company) setting clear goals and tying the pay to meeting those goals. The executives usually get paid in stock options, restricted stock or RSU's (restricted stock units). Either way, any amounts received by the exective are fully taxed as earned income.

Now, once they pay taxes on the stock (at the market rate), they can elect to hold the stock and any gains from that point on are taxed at the capital gains rate.

[gateley]

17. Yeah, I remembered that after I posted it --

even though I got the details fuzzy, still another tax "break" for the corporations and those receiving high compensation, right?

[elleng]

22. Hey, YOU!

:pals:

Sorry I missed you last night; was listening to Breyer + Scalia; kept me busy!

http://www.c-span.org/Events/Supreme-Court-Justices-Take-a-Seat-at-the-Witness-Table/10737424545/

[Fire Walk With Me]

3. Your OP subject just sent a shockwave through the 1%.

They're cringing like Obi Wan Kenobi, saying "I felt a great disturbance in the force...I fear something terrible has happened..."

:rofl:

[Indydem]

4. Generally.

Stockholders elect the board of directors.

BoD sets management salaries.

[gateley]

9. I just posted to elleng that it should be the stockholders

themselves (the little guys) who determine the salary range, not the BOD. When I've owned stock and got ballots to vote for the BOD, I had no idea who these people were and if it was their brother-in-law they were deciding how much salary/stock to pay.

Can't the decision go to the rank and file? Easy ballot, I'd think.

[ChandlerJr]

5. They always have

but your 1 symbolic share won't have any effect.

[RB TexLa]

6. They do by electing members of the board of directors who negotiate the salary

of the CEO.

[gateley]

10. Well they've been far too generous and the stock option thing

(that only became allowable under Reagan) should be decided by the shareholders. Isn't that fair?

[RB TexLa]

11. Stock options are a part of compensation that is negotiated by the

board of directors who are elected by the shareholders.

What you are asking for is already done.

[Yo_Mama_Been_Loggin]

13. True but

votes are based on the number of shares one owns. The more shares one owns the more votes they get.

Often some of the largest holders of shares are fellow board members or mutual fund managers.

[doc03]

15. The stockholders get to vote for or against members of

the Board of Directors that are hand picked by the Board of Directors themselves. Go to an annual report and look at your Board of Directors, chances are most of them are CEOs or CFOs of another company and they belong to a half dozen other BODs. So what happens the CEO of A corp. wants a raise so the Board Members of A corp. vote to give him a raise because the CEO of A corp sits on the BOD for B, C and D Corp where they are CEO. Hell they aren't going to deny him a raise when many times he will make the decision for their own raise. It's f---d up.

[gateley]

18. I've received ballots for the BOD and I didn't know who any

of these people were, so I think people get a false sense of security thinking that the BOD has their best interests at heart.

Which is why I think it would be great if every shareholder received a ballot to vote on the max they were willing to pay the CEO, including a limit on stock options.

Doesn't that just seem RIGHT? Or am I just way the hell off base thinking the little guys should have a more direct say in all this?

[doc03]

19. I totally agree. Like I said if you look in the annual report it will

have pictures of the BOD and their credentials. Every one of them is on several boards and usually they are also CEO's of other companies themselves. It's a good old boys network the BOD nominates one candidate for the BOD and they send you a ballot recommending you vote for their candidate. It doesn't matter what you do because the BOD either owns or represents the majority of the stock anyway. Since the BOD themselves are also CEOs they give your CEO a multi-million dollar contract because in many cases he will vote for their own raise in the future. That's why we have CEOs making hundreds of millions a year.

[gateley]

21. And that's why we ("we") should look into having having

that policy changed. If I owned any stock, I'd attend a stockholders meeting and bring it up in the Q&A. Nice fantasy. But I really don't see why it couldn't be done. Along with my ballot to vote on the BOD, there could be a ballot on how much salary and stock we would pay the CEO. Is that too reasonable?

Edit. Smilies don't work in the subject line? That sucks. :7

[SwampG8r]

20. i have stock in several recession proof companies

i have never been asked to vote on the ceos pay