A couple easy fixes to CEO Pay and college costs

[stahleyp]

Perhaps there are plenty of holes with the couple approaches here but why couldn't the government do something along the lines of this?


1) To help control college costs, the government could link college costs to inflation. In order to qualify for any government assistance/loans colleges could not increase total price of education above the level of inflation. If they violate this, they lose funding for a certain amount of time.

2) Tie executive compensation to median workers' compensation. The IRS could basically say that if executive pay is more than 100x or 150x (or whatever) then none of the expenses associated with salaries for any employee is tax deducible. Sure, you run the risk of companies laying people off but I think the more likely scenario is to stop over paying executives.


I think almost everyone, regardless of political party, thinks college costs are crazy and so is executive pay.

[clutch]

If you were to link college costs to anything, I feel like it should be the average wage of new graduates. Costs should also differ between departments, e.g., liberal arts vs engineering, based on the respective average wages.

[ERICOPOLY]

The average person is more likely to need to hire an attorney than to need to hire a CEO. 

But an attorney makes at least 10x what the average person makes.

I see that as a bigger social problem.

[Cigarbutt]

Paul,

The two issues you describe are significant and I plan to contribute if value can be added but, while doing research/thinking, before asking how the government could "solve" the issues, perhaps reasonable to use inversion and try to define the underlying causes or driving forces behind the two phenomena?

[cubsfan]

There are standardized tests to enter college - SAT & ACT - there should be standardized tests to EXIT college.
This would eliminate much of the nonsense going on in college - as those programs that do not teach anything of value would be exposed.
It would force academics to provide real education on important skills - that could be measured upon graduation.

A lot of foolishness would be eliminated - and eventually folks would wise up and not pay for much of this garbage.

[cubsfan]

Paul,

The two issues you describe are significant and I plan to contribute if value can be added but, while doing research/thinking, before asking how the government could "solve" the issues, perhaps reasonable to use inversion and try to define the underlying causes or driving forces behind the two phenomena?

I think much of the "cause" is government backed and guaranteed loans. This has allowed the universities a pork barrel they can not resist.
Therefore, they bump up their course offerings of useless skill courses (minorities "studies", LGBT "studies", etc, etc) - all these social awareness
and useless skills that attract students, all the time knowing they will get paid - but also insuring that the students graduate knowing nothing.
The administrations have increased staffing with so many positions as well - no wonder the tuitions have sky rocketed - but the schools will get paid.

They can't resist the money - but the quality of real education and work preparation has gone down.

We are badly in need of a shakeout and back to the basics of education.

[DTEJD1997]

The average person is more likely to need to hire an attorney than to need to hire a CEO. 

But an attorney makes at least 10x what the average person makes.

I see that as a bigger social problem.

An attorney makes at least 10x what the average person makes? 

What planet are you on, how do I get there?

Most attorneys are broke.  Most attorneys have mortgage sized+ student loans to pay back.  The job market is terrible (a lot of young attorneys never get a job). 

In the Michigan market...you can hire teeming HORDES of attorneys for about $40k a year.  A few years ago, it was even worse than that.

About the top 10% or so of attorneys make OK money....but the vast majority do not.  It is a very bi-nomial distribution....The top makes good money...very little in the middle AND HORDES of attorneys making very little $.

Why are there some many lawsuits against the law skools?  Why is there so much substance abuse & mental illness in the profession?  Why are there so many websites on the interwebs RAILING against law skools and the profession?

Why are there so many articles about what a mess law skools are in?  Please see:

https://www.theatlantic.com/magazine/archive/2014/09/the-law-school-scam/375069/


The idea that becoming an attorney is a pathway to a middle class standard of living is a wide spread myth.

[stahleyp]

clutch and cubs,

I agree. Before the government got involved, college costs were significantly lower than today. One would think that with larger enrollments, colleges costs would decrease over time. After all, it doesn't cost much more to have 30 students or 40 students in a class. There needs to be some level of accountability. I admire the government wanting to make college more affordable but there needs to be restraints.

Eric, I think your recent encounters with attorneys is affecting your feelings towards them. I don't blame you for that though!

Cigar,

I think I know the underlying causes. And they both stem from government involvement. I think it was in the 90s when the executive pay was required to be disclosed. After that, everyone had a benchmark. As it is with active investors, everyone tries to beat the benchmark (even though most fail!) but still want to be rewarded. I figure it's hard to get the genie back in the bottle so one needs to look at ways to try to make things proper. If a CEO is going to be paid a massive amount of money then they need to be taking some downside too (firing is not downside if you walk away with $100 million for failing).  And the college issue I talked about above.

[LC]

Paul,

The two issues you describe are significant and I plan to contribute if value can be added but, while doing research/thinking, before asking how the government could "solve" the issues, perhaps reasonable to use inversion and try to define the underlying causes or driving forces behind the two phenomena?

Agreed - the underlying causes need to be addressed.

With tuition it is twofold IMHO: (1) inability to discharge or modify the  loan in bankruptcy, and (2) no skin in the game from the college.

With CEO salary also twofold: (1) lack of true metrics to determine CEO impact. This is likely unsolveable but I believe can be improved. And (2) lack of shareholder power to enforce controls on management. Shareholder base is too out-of-touch and slow to respond because they are usually poorly informed and no close enough to the business.  This results in poor pay incentive structure (cash bonuses, clawbacks) and poor oversight over management behavior.

To address these, I believe tuition loans should be modified in bankruptcy after a period of time (7 years?). Colleges should be forced to retain a % of the loan amount.

CEO pay I agree with the original poster - tying it to median employee pay will probably get us 80% there. Better incentive structure will get another 10-15%.

[ERICOPOLY]

Eric, I think your recent encounters with attorneys is affecting your feelings towards them. I don't blame you for that though!

My Sacramento divorce attorney charges a crippling $450 per hour.  It is the going rate.