I think the sad truth is that a lot of us don't necessarily believe deep-down that us forgoing, say, 10% of our potential income will actually be an investment into the world but will simply be sucked up somewhere else. That's why I like schemes like micro-investment where you can see that your money is genuinely invested in making the world better.
IMO, a better question is to ask what allowed the single investor to become an investor to begin with. The nature of investing means the investor must be able to also lose all their capital. What can we do as a society to make easier for the 99 other employees to 'invest'. For me this means having social safety nets like healthcare and UBI so that people can take less salary or risk what little they have in a venture like you originally described.
Had Bolt made it, those employees would have become investors...
It's all about luck IMO
What is actual work?
The coding or the graphics or perhaps the music? What about the QA?
The way your comment is formatted, I guess you don't mean the accounting, parole, shipping and receiving.
On this forum, I often see developers lamenting how much unrelated work, overhead and meetings they have to do and how saying how they could be more productive if they could just be allowed to sit down and code.
How much more "actual work" can you and others like you do when you have to meet with lawyers, file trademarks, order hardware/software while staying in a budget. Or perhaps, the CEO does some of those tasks so you can do the "actual work".
How did this person become the sole shareholder of a 100 person game company producing wildly successful game without any work in your story?
> How did this person become the sole shareholder of a 100 person game company producing wildly successful game without any work in your story?
Steve Jobs somewhat famously never wrote any code for Apple. So the answer to how a person becomes the sole shareholder without doing any work is that they focus on things like bank loans, which enable the hiring of people to do the "work" that leads to the company's success. Same as any company.
Many, many, many companies are headed by people who have never engaged in the low-level work done by that companies. Many of them are there because they deal with finance.
Presumably the CEO bring something to the table - capital, fundraising ability. I mean why else have him/her?
CEO hires a bunch of employees, all who get paid. The game is a success and since he put the capital at risk, he gets most the reward. The employees get their salary.
Unfair?
Well, what if it doesn't work out? Employees all get their salary, CEO loses his capital.
Workers can certainly get a similar trade off in some industries - plenty of tech start-ups will pay you $50,000/yr (when you could be making $300,000 at Google) and a chunk of the company.
Why not take that job if you want CEO-type risk and reward?
You're so close! In fact, there's an expectation that the more you pay a CEO, the better they perform, and that those making the most must be the best. This seems to be a largely-unexamined assumption that "just makes sense," but it turns out when you try to see whether it's true, it's not[0].
By and large, highly-paid CEOs are a drain on corporate profits. As the research paper I linked shows, even those highly-compensated CEOs who win awards end up performing worse than their non-award-winning counterparts.
Everybody seems to like the idea of a CEO providing strong leadership and deserving their high compensation. The stress, they say, makes it worth it. Besides, if we didn't pay them that much, someone else would! And yet the facts don't seem to support any of that.
0. http://d1c25a6gwz7q5e.cloudfront.net/reports/2014-02-2-Armst...
You're forgetting who decides CEO pay - the board / shareholders.
They are aware of this. And despite that, they keep these pay packages.
Is it fair? I dunno. I personally don't think CEO's should be getting paid what they do. Does anyone care? No.
Is anyone's salary fair? I dunno.
If you distribute the CEO's pay to the rest of the company it wouldn't materially impact average workers wages (less than a 1% increase) - except in rare cases (less than 5% of large companies).
Why should I get raged out that my CEO makes $100M+ per year? If you distribute that to everyone at the company - it's not even a 1% increase. There's much easier ways I can make 1% more money...
It's really not worth discussing except in rare cases - and those are exceptions that don't change the larger picture.
When those come in at 90% or 95% of target based on company performance, and yet the CEO still takes home tens of millions, that's when what seems like a tiny thing on a raw number basis, a matter of $2k for a single employee, can seem like a large thing. As an employee who performed well is still feeling the impact of company performance that fell short of expectations, probably on the basis of nothing the employee did, probably more attributably to the CEO (who helped set the expectations, and is more likely to have had a material impact on the result), it's natural for employees to at least wonder why the impact seems to be falling more on them.
That kind of thing is very common, not a super-rare case.
Instead of raising $10M for a business through a CEO (either their own money or through road shows), there is nothing stopping a company of 100 employees from ponying up $100,000 of their own money and reaping a share of the rewards (or losing it all).
Are you really that surprised that workers prefer a risk-free salary instead?
I mean I have the option of taking cash or equity at my company and I turn down the equity every time. I don't begrudge the ones who take the risk and make 10x what I do.
I'll be honest, you don't seem to understand how businesses work today - you're working from a flawed understanding.
Okay.
Do the math.
Intel employs 120k people. The CEO makes $10M per year.
Distribute his salary evenly to everyone at the company, it's not even a 0.2% increase to the average person's pay.
Let's say there's 10 execs like this. Still not even 2% (and there aren't 10 execs like that).
Most of the megacaps look the same. The salaries are massive. But they employ a LOT of people, and the average salaries at those companies are high.
You can find edge cases for sure with smaller startups that are wildly successful - or Elon Musk and Jeff Bezos and Mark Zuckerberg.
A counterpoint with 5 minutes of searching: from [1], Peter Kern (3rd highest paid CEO) got $296M in 2022 overseeing ~15k employees (from [2]). Distribute that salary evenly and everyone gets a ~19k boost which, on an average base of $108k (from [3]), is about +17%, if I'm not mistaken.
If you want an even more ludicrous example, David Baszucki (Roblox, 7th highest, also [1]) got $232M in 2022 overseeing ~1600 employees (from [4]). Even distribution gives a $145k boost on an average base of ~$135k (from [5]) is about +107%. Which is a bit better than Intel's +0.2%, no?
In summary, you can pick and choose examples to make either point.
[1] https://www.equilar.com/reports/95-equilar-new-york-times-to... [2] https://www.macrotrends.net/stocks/charts/EXPE/expedia/numbe... [3] https://www.payscale.com/research/US/Employer=Expedia%2C_Inc... [4] https://www.statista.com/statistics/1279348/roblox-number-of... [5] https://www.comparably.com/companies/roblox/salaries
Congratulations. You found one extreme case, and included links to some others.
There are many.
There are also 5000+ large companies in the US that employ tens of thousands of people. 20,000+ companies globally.
This isn't the average. Use a normal distribution, and you'd expect 20+ companies with 3 sigma (where CEO pay would increase pay by 6%+). Corporate profits definitely don't have a normal distribution, neither does CEO pay. This isn't surprising to me.
Elon Musk has $200B. He's an edge case of an edge case. Should we pretend all billionaires are like him, too? The average Billionaire has almost 50x less money. The average CEO makes much less than 50x the links you cited.
The average CEO for the top 350 companies made $24M in 2020 (a good year). The average CEO for all companies over the last decade makes less than $1M - according to BLS it's $190k: https://www.bls.gov/ooh/management/top-executives.htm#:~:tex.... And that's the average not the median - so people like the links you provided are skewing that higher than the median...
> In summary, you can pick and choose examples to make either point.
This is called cherry picking. You can always find what you're looking for if you're willing to cherry pick hard enough on a large dataset.
Your starting hypothesis is that CEO pay is ridiculous - and you're finding examples to confirm that - rather than looking at averages to easily disprove the idea that the examples you cited are the exception not the norm.
Still you gotta admit there is a problem with CEOs making off with huge salaries/stock value especially in very hot sectors, with some of them even trying to dodge taxes. Sure you can make an argument for the increased salary with the increased responsibilities and risk, but there is no cap there and little say from the employees.
When CEOs make a few lifetime's worth of money in a year while the employee makes far less in a year, that's going to raise inequalities and eventually render systems unstable. The balance is not there.
I couldn't agree more.
It doesn't mean they're the reason workers aren't significantly richer.
Still, I'm interested in your other reasons if you got any.
Imagine a world in which the only product is apples.
If everyone needs 3 apples per day to be healthy and happy - and you only produce 1 apple per person - it does not matter if the richest 0.1% get 200 apples per day. If you distributed them evenly, there is still not enough apples. And distributing them evenly does not even improve things in any significant way.
Sure, it is a problem. The bottom decile that lives on .1 apple per day now gets .3 apples per day. But they still don't even have close to enough apples! Neither does anyone else!
People like to hand-wave this away. But GLOBAL GDP per capita is less than $11,000 per year. That is NOT enough money for everyone to have a house with a white picket fence, and a car in the garage, and a chicken in the oven, and a wife who stays at home and takes care of the kids. It's not even enough for everyone to live a life that resembles being upper lower class in France.
And remember, the rich pay most of the taxes. Now you have to pay an even share - so of your $11,000, 25% of that is taxes! You only actually get ~$8,200.
~$8,200 per year wouldn't even qualify you for a mortgage to buy a $35,000 house. That's barely buying you enough materials to build a dollhouse. It's not buying you land anywhere you'd want live. And it's definitely not enough to connect to utilities.
Distribution is a problem. THE problem is total output. ~$11,000 per person per year. Remember this is in inflated 2022 dollars - ~$9000 in 2019 dollars - this is including all-time highs due to massive stimulus and unprecedented levels of debt. ~$9000 in 2019 dollars is Mexico's GDP per capita - Bulgaria & Belarus. I love Mexico to death - but these are not paradises.
Globally, the much bigger problem is that there are not enough apples being produced!
Locally, in the US and the EU - GDP per capita is quite high. If we lived in a socialized society, sure, things could definitely be better for minimum wage workers.
But I'm quitting my job at FAANG tomorrow to be a yoga teacher if I make the same amount of money. I don't know who in their right mind is going to continue being a nurse or most doctors. I'm not sure why many people are going to do hard physical labor like construction or dangerous jobs like fighting fires and crime - if everyone makes the same amount of money... Good luck keeping production high and society functioning...
Given how my (non-western) dollar converts to USD, I wouldn't hire a US person for grunt work unless he/she had specific expertise to teach or a local knowledge bias for when my firm expands to the US. So there's less inflow to the US, and only to a select few people. So where does that lead us to? The US printing money and doing as much as it can to mitigate the side effects.
So your population has only a select few who get the inflows. And you can tax them for distribution.
And chances are you're not going to get other countries to spend their apples. You could get workers to accept lower pay rates, but I highly doubt it's possible without upsetting stability. Are you doomed to huge amounts of money printing then? Maybe you'd get away with it since you're the US after all.
Let's say the game is wildly successful and the employees are collectively paid 60% of the profit, with the remaining 40% going to the sole shareholder. This is not an uncommon arrangement, and it is allowed and encouraged, culturally and legally.
Morally and practically speaking, not legally speaking, does this not amount to wage theft?