Am I missing something or is it pure greed?

[PaulW2]

There's another aspect to it as well though. What most would like is a really good pension and public services but not to pay for it just the same as they want high wages but low prices. Most I think realise the disconnect but if someone comes along and says they can provide it people are in quite large numbers going to vote for them.
It's the same as thinking you can buy on finance and the finance company is a sort of charitable foundation that doesn't need to run at a profit

This works equally for the institutions.

For example water companies that have a monopoly and want to pay themselves (executives) very well as well as their owners (shareholders) while spending little on maintenance and getting customers to pay for it.

Or financial institutions that like to package bad debt together with good debt and pretend it's all hunky dory so they can continue to make money (the 2008 financial crisis). The list of scandals surrounding financial institutions is long.

When our rivers and coasts are choked in sewage, or when our entire global economy teeters on the brink, these things are systemically dangerous.

They happen because the people responsible are still people and if you let them they will try to skew the game to give themselves a free lunch.

The answer to this is regulation. Individual punters will just live, and do the best they can, in the world that results.

 

[The Wino]

This works equally for the institutions.

For example water companies that have a monopoly and want to pay themselves (executives) very well as well as their owners (shareholders) while spending little on maintenance and getting customers to pay for it.

Or financial institutions that like to package bad debt together with good debt and pretend it's all hunky dory so they can continue to make money (the 2008 financial crisis). The list of scandals surrounding financial institutions is long.

When our rivers and coasts are choked in sewage, or when our entire global economy teeters on the brink, these things are systemically dangerous.

They happen because the people responsible are still people and if you let them they will try to skew the game to give themselves a free lunch.

The answer to this is regulation. Individual punters will just live, and do the best they can, in the world that results.

Im a little in two minds about the water companies. I'm not so sure the execs actually get paid a lot more than people in similar sized industries or that shareholders get a lot better returns. What I am sure about is however they were run and owned with a lot of Victorian infrastructure prices we're either going to rise a lot or taxation was going to fund them but people were sold an idea of cheap bills if they were privately owned. Where will it go now if regulations say that water companies won't pay any dividends until water quality targets are met who would invest.

 

[PaulW2]

Im a little in two minds about the water companies. I'm not so sure the execs actually get paid a lot more than people in similar sized industries or that shareholders get a lot better returns. What I am sure about is however they were run and owned with a lot of Victorian infrastructure prices we're either going to rise a lot or taxation was going to fund them but people were sold an idea of cheap bills if they were privately owned. Where will it go now if regulations say that water companies won't pay any dividends until water quality targets are met who would invest.

They are dividend stocks and they try to maintain dividend levels in order not to disappoint shareholders.

Why are there shareholders at all? Because it's been privatised.

Why has it been privatised? Because we were persuaded to believe certain things.

Do other people also believe these things? It seems not as religiously as we do. While some privatisation is fairly common it is reportedly only in England, Chile and some states in the US that there is full privatisation of water supply and sanitation.

 

[PaulW2]

They are dividend stocks and they try to maintain dividend levels in order not to disappoint shareholders.

Why are there shareholders at all? Because it's been privatised.

Why has it been privatised? Because we were persuaded to believe certain things.

Do other people also believe these things? It seems not as religiously as we do. While some privatisation is fairly common it is reportedly only in England, Chile and some states in the US that there is full privatisation of water supply and sanitation.

Furthermore...

Because they are in the listed market the entire industry of advisers and consultants benchmark the executive team of these institutions against listed companies.

Which means that you are now in the universe of FTSE-equivalent short and long term incentives, share-based plans and the like.

The last give or take 30 years (really since the Greenbury report of 1995) has seen a continuous ratcheting of unintended consequences. In short: your pay must be performance-based (reader, it got added on top). Then it must also be long term (added). Must be share-based (added). And must entail holding periods (added). And the ratios need to be more skewed towards long term (added).

So there has been huge ratcheting of listed company executive pay over the decades. This is not meant as a criticism, just an observation.

Where does this not happen? Pretty much anywhere else. Academia, research, scientific institutes, the NHS, teaching, the public sector generally.

Only by privatising has it been moved into an environment where executive pay has entered the treadmill of that domain.

And now they will argue by saying "if you don't pay them properly they won't work here". But that is inverting the order of things. None of the places listed above work on these principles. And it doesn't work that way in many other countries. So it would be an incorrect premise to accept for the debate.

 

[The Wino]

Furthermore...

Because they are in the listed market the entire industry of advisers and consultants benchmark the executive team of these institutions against listed companies.

Which means that you are now in the universe of FTSE-equivalent short and long term incentives, share-based plans and the like.

The last give or take 30 years (really since the Greenbury report of 1995) has seen a continuous ratcheting of unintended consequences. In short: your pay must be performance-based (reader, it got added on top). Then it must also be long term (added). Must be share-based (added). And must entail holding periods (added). And the ratios need to be more skewed towards long term (added).

So there has been huge ratcheting of listed company executive pay over the decades. This is not meant as a criticism, just an observation.

Where does this not happen? Pretty much anywhere else. Academia, research, scientific institutes, the NHS, teaching, the public sector generally.

Only by privatising has it been moved into an environment where executive pay has entered the treadmill of that domain.

And now they will argue by saying "if you don't pay them properly they won't work here". But that is inverting the order of things. None of the places listed above work on these principles. And it doesn't work that way in many other countries. So it would be an incorrect premise to accept for the debate.

On the last bit it always seems to me that there's a common view that people who earn a lot need to be paid a lot or they will go somewhere else at the bottom of the scale the same people seem to think the opposite. I think there does need to be a significant difference between what you get for a no or low skill job compared to one that takes many years of studying or training but sometimes the difference gets ridiculous.

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[PaulW2]

On the last bit it always seems to me that there's a common view that people who earn a lot need to be paid a lot or they will go somewhere else at the bottom of the scale the same people seem to think the opposite. I think there does need to be a significant difference between what you get for a no or low skill job compared to one that takes many years of studying or training but sometimes the difference gets ridiculous.

It is quite an interesting area to look into.

We're sometimes told to accept the massive ratcheting of recent decades as if it's the natural order of things. But it hasn't worked that way historically. And it isn't that way even today if you do a proper cross-country comparison. And per the examples above it doesn't work that way even in the UK outside the specific environment we're talking about.

So it's entirely contingent. A consequence of how the very particular system has worked.

The "they will go work elsewhere" argument doesn't really stand up to scrutiny if you look at the stats of how many top execs really go on to be top execs elsewhere.

But I have worked with some who really drank the kool-aid and nothing would have dissuaded them. So there's a very strong cultural effect too.

And when they get these committees of the great and the good to look at it (as they did some years ago) these committees largely produce incoherent nonsense. But because they're the great and the good they do it with enormous self-regard and smugness.