John Deere strike imminent?

[clone136]

The problem is coroprations and the like have divided the working class. Workers who dont have a union or retirement, health care, etc have pointed to the workers that do as the enemy, when in reality they should be fighting for those things, not taking it away from the people who have them.

We've been in race to the bottom since the 80s

 

[dosry5]

Probably my closest "work friend" found another job and threated to leave a few weeks ago.

Our bosses panicked to keep him.

Promotion
Significant salary boost (+25% or so)
More of an R&D role
Two entry-level hires to train up as assistants

He's pretty happy now. Strike while the iron is hot.

The other side of that coin is if the business/market goes south those who make the most can be easy targets for downsizing. Depending on your career field maybe that’s ok and it’s easy to move on. But I believe plenty of companies will remember who used their leverage when the the tables are turned.

 

[rpcyclone2013]

I get what you are saying and cannot adequately defend that type of CEO salary. But points to consider:
- I think you need a very talented individual to set the tone for the company. They make a lot a very strategic decisions that most of us would be less than qualified to make.
- I believe that most CEO's spend way more time on company business that the average employee. For a company like John Deere, that likely entails a lot of travel which, after X number of weeks on the road, is not 'fun'
- I think that Ben & Jerry's tried to hire a CEO a few years ago with lower than normal pay/incentives and they couldn't find anyone worthy to apply
- At some point the CEO salaries are like professional athletes - it isn't about what you make, but how that compares to the other CEOs and the ego that goes with it.
- Some of the reported salary is somewhat exaggerated - I can't speak to JD, but I presume that there is base salary, bonuses, and stock options that can be all rolled up into one giant number. I wish they would report out the buckets of those individuals for more transparency.
- The impact that a CEO of a company has on the company itself is way more than the impact of any give welder, CNC operator, driver, etc.

I don't believe that just anyone can be a CEO - education, experience, aptitude (and luck) all play into it. But, as I noted above, I cannot defend the current ratio of CEO:Laborer salaries.

Just to clarify one thing on your post - the numbers are broken out (at least for publicly traded companies). The CEO of JD had 1.2M of base salary, 6.9M of stock awards, 2.6M of option awards, 3.7M of non-equity comp, 835k of a pension value increase, and 310k of other compensation. It's on page 55 of their proxy statement: https://www.sec.gov/Archives/edgar/data/0000315189/000120677421000055/de3809451-def14a.htm#pp55

 

[Sigmapolis]

They should definitely be pushing for what they can get.

But I think there's also some delusion in trying to figure out how to recapture labor scenarios from the "good old days" (with some carryover into subsequent decades). Unless we're going to have another world war that simultaneously created decades-worth of unprecedented global rebuild demand meanwhile absolutely decimating industrial capacity outside of the US, it's probably never going to come close.

It wasn't just a lack of overseas competition. There was also a lack of domestic competition.

You forgot the part about all the formal and informal barriers put up against women and nonwhite workers. And the drastically lower rates of immigrant compared to the 19th Century and today.

Throw those in there and, yeah, white male labor becomes a lot more valuable. Great for white dudes. But not so great for anybody who wants to immigrate, isn't white, and isn't a man.

 

[AuH2O]

And with AI and machine learning gaining speed (rapidly) we're in a brave new world whether we want to believe it or not. The color of the collar won't make a difference. A new revolution is here.

Most days I'm sure my position will be obsolete in about 3-5 years.

I for one welcome our new nerd/AI overlords.

 

[Clonehomer]

The problem is coroprations and the like have divided the working class. Workers who dont have a union or retirement, health care, etc have pointed to the workers that do as the enemy, when in reality they should be fighting for those things, not taking it away from the people who have them.

We've been in race to the bottom since the 80s

What we should all be fighting for is to disconnect healthcare from employment. What you get for healthcare shouldn't matter if you're a blue collar or white collar worker.

 

[cyIclSoneU]

They should definitely be pushing for what they can get.

But I think there's also some delusion in trying to figure out how to recapture labor scenarios from the "good old days" (with some carryover into subsequent decades). Unless we're going to have another world war that simultaneously created decades-worth of unprecedented global rebuild demand meanwhile absolutely decimating industrial capacity outside of the US, it's probably never going to come close.

I agree, because capital is sufficiently skilled at exploiting labor in ways that it wasn’t back in 1950. And that bell can’t be un-rang; there will always be McKinsey and Wharton guys calling the shots now, short of a massive change in the economic legal structure.

 

[Tre4ISU]

True, it doesn't run itself. Deere needs welders, CNC operators, drivers, etc. All of these people bring a skill that the is critical to operating the company, same as managing and overseeing the company is a skill that the CEO brings.

As you say, $14.5M is a drop in the bucket for JD to pay someone with management skills. My question is again, why are those skill deemed so much more valuable than a welder or a machinist? What justifies a 240:1 pay ratio between the CEO and the base level employee?

Because they have to know about pretty much everything OR they have to be able to find the people to be in charge of different sectors of the business.

If the idea is that a corporation is shorting people on wages why would they not also short the CEO? The market must determine that that is a very important position that requires a certain amount of compensation. I don't think arguing that wage setters are willing to overpay one particular group but then not pay another group is particularly compelling. At the end of the day, I believe it's significantly easier to replace a welder than it is to replace a competent CEO. It must be, or CEOs wouldn't make what they make. JD isn't paying a guy $14.5 million just because they like him and want him to make ridiculous money. They're doing it because they think they have found the right guy to call all the shots company wide, or find the right people to call all those shots company wide.

 

[Sigmapolis]

The other side of that coin is if the business/market goes south those who make the most can be easy targets for downsizing. Depending on your career field maybe that’s ok and it’s easy to move on. But I believe plenty of companies will remember who used their leverage when the the tables are turned.

These are fair concerns, but I've been here five years and never seen a layoff.

The business unit I'm in has a small but extremely niche market. Consistently throws off enough profits and not reaching significant enough size for anybody really senior to worry much about it.

Having a virtual monopoly in a very bespoke market segment is a very good place to be.

We wanted to keep him because we're terrified we'd start missing some deadlines without him. But there's never been a "downturn" for us, and I doubt there would be, so all would be well.

We have told some people "it's not working out" and kind of hoped they'd take the hint and find a new job on their own, letting their residual employment here serve as a de facto severance. My bosses really don't like to fire or lay people off, though. They say it is detrimental to morale and productivity.

Even if there were... the guy would land on his feet in a growing sector. Not worried for him.

 

[ISUCyclones2015]

I'm pretty sure a welder would cry if they had to do the CEO's job for one day and I think the CEO would cry if he had to do a welders job.

They're totally different skillsets

 

[Cyclonepride]

If you guys think capitalism is exploitive, wait until you see the alternatives in action

 

[Tre4ISU]

I get what you are saying and cannot adequately defend that type of CEO salary. But points to consider:
- I think you need a very talented individual to set the tone for the company. They make a lot a very strategic decisions that most of us would be less than qualified to make.
- I believe that most CEO's spend way more time on company business that the average employee. For a company like John Deere, that likely entails a lot of travel which, after X number of weeks on the road, is not 'fun'
- I think that Ben & Jerry's tried to hire a CEO a few years ago with lower than normal pay/incentives and they couldn't find anyone worthy to apply
- At some point the CEO salaries are like professional athletes - it isn't about what you make, but how that compares to the other CEOs and the ego that goes with it.
- Some of the reported salary is somewhat exaggerated - I can't speak to JD, but I presume that there is base salary, bonuses, and stock options that can be all rolled up into one giant number. I wish they would report out the buckets of those individuals for more transparency.
- The impact that a CEO of a company has on the company itself is way more than the impact of any give welder, CNC operator, driver, etc.

I don't believe that just anyone can be a CEO - education, experience, aptitude (and luck) all play into it. But, as I noted above, I cannot defend the current ratio of CEO:Laborer salaries.

I don't think a lot of people understand the hours that an average CEO puts in. Most of them aren't really ever "off-duty." When a welder, for instance, leaves work, they're done for the day. That's not true for a CEO. Most of them are either always working or thinking about what they have going on. Is it all of them? Certainly not. Is it work THAT much more? Probably not but the market sets those salaries, not the shareholders. We can sit here and talk about how we'd do that job for so much less and we certainly would. The issue is that it's a company that's probably pulling in somewhere around $35-40 billion and putting someone not qualified would be much more expensive than paying $15 million to the right person, or what you think is the right person. They made 1.67 billion last quarter. Screwing around with a few million dollars on the guy calling all the shots is pretty risky.

But again, it's the market setting the salaries, not the financials.

 

[qwerty]

For a large, publicly traded company like John Deere, what is it that the CEO does that makes them worth $14.5M a year? What part of their job justifies them being compensated 240x what the average employee does?

They don't have a direct hand in making any of the products that their company sells. They don't design new products, or develop new manufacturing techniques. So what is it about the person at the head of a company like John Deere that deems them so much more valuable then someone on the production floor?

While executive pay may be a bit high, do you fault them when companies give it to them? Do you complain about the pay of actors, athletes and stockbrokers? Lots of multi-millionaires in those groups. It could be argued that any of those highly compensated individuals are gross overpaid for the contribution to society they provide (that is a WHOLE other topic).

Personally, I don't begrudge anyone who can get paid. I may disagree with their pay but think whomever is giving out that pay should be scrutinized more than the one receiving it. It is human nature to take as much as the other guy is willing to give. Has anyone on this board EVER gone to their employer and said, I think you are paying me too much?

 

[Sousaclone]

Because they have to know about pretty much everything OR they have to be able to find the people to be in charge of different sectors of the business.

If the idea is that a corporation is shorting people on wages why would they not also short the CEO? The market must determine that that is a very important position that requires a certain amount of compensation. I don't think arguing that wage setters are willing to overpay one particular group but then not pay another group is particularly compelling. At the end of the day, I believe it's significantly easier to replace a welder than it is to replace a competent CEO. It must be, or CEOs wouldn't make what they make. JD isn't paying a guy $14.5 million just because they like him and want him to make ridiculous money. They're doing it because they think they have found the right guy to call all the shots company wide, or find the right people to call all those shots company wide.

Yeah.

The other thing is that the pay is very much risk vs reward. If a welder screws up a part or piece, it's a minor hiccup and is a $1000 loss (assuming they don't burn down the building or kill somebody). If the CEO decides to okay going after a new product line and it messes up it's a $10,000,000 screw up. I'd argue that responsibility in an organization increases almost exponentially as you go up the chain.

The other thing is while **** rolls down hill, problems and issues tend to roll uphill. Say JD has to shutdown a plant or product line. Who's making that decision and taking the heat for it? It should be the CEO. That proverbial welder doesn't have to make $15M decisions.

 

[Cyeedy]

Some pensions have been mismanaged. Underfunded and poor investments. But they also based pension liability on bad longevity assumptions.

But pensions are becoming dinosauers because of the risk they represent to business operations and investors when they become underfunded.

Much less risk to implement retirement plans where companies match a % of employee contributions and employees can track valuation. Then the boogie man becomes Wall Street and corporate greed vs. that companies mismanagement.

Companies do not want those liabilities on their balance sheet, simple as that. Pensions served their purpose of getting around barriers of entry into the markets. Those barriers simply do not exist anymore.

 

[Brandon]

Yeah.

The other thing is that the pay is very much risk vs reward. If a welder screws up a part or piece, it's a minor hiccup and is a $1000 loss (assuming they don't burn down the building or kill somebody). If the CEO decides to okay going after a new product line and it messes up it's a $10,000,000 screw up. I'd argue that responsibility in an organization increases almost exponentially as you go up the chain.

The other thing is while **** rolls down hill, problems and issues tend to roll uphill. Say JD has to shutdown a plant or product line. Who's making that decision and taking the heat for it? It should be the CEO. That proverbial welder doesn't have to make $15M decisions.

Not true about welders. I used to be certified in 3G and 4G, you make a mistake and have a knife plate not correctly welded that is a hell of a lawsuit.

 

[AuH2O]

I agree, because capital is sufficiently skilled at exploiting labor in ways that it wasn’t back in 1950. And that bell can’t be un-rang; there will always be McKinsey and Wharton guys calling the shots now, short of a massive change in the economic legal structure.

That ability or tendency to push to squeeze everything you can out of a worker has been present since the industrial revolution, and has evolved to match markets and laws at all times. Businesses weren't less sophisticated or have any more pro-worker tendencies than they do now. That's just fantasy. The completely unprecedented supply constraints and demand explosion just limited the level to which workers can be "exploited." Being exploited in those market conditions for a white guy meant supporting a middle-class family while delivering INCREDIBLE value and fueling unprecedented growth in the US economy.

The conditions for workers in the "good old days" are simply a factor of totally unprecedented leverage that we never came close to approaching before and will never approach again. All the other factors people throw out are just noise, usually to push some sort of political point.

Right now workers have the most leverage they have had in a LONG time. People should use it!

 

[Tri4Cy]

For a large, publicly traded company like John Deere, what is it that the CEO does that makes them worth $14.5M a year? What part of their job justifies them being compensated 240x what the average employee does?

They don't have a direct hand in making any of the products that their company sells. They don't design new products, or develop new manufacturing techniques. So what is it about the person at the head of a company like John Deere that deems them so much more valuable then someone on the production floor?

As someone who used to work in manufacturing, then went to college, got a degree, started at bottom rung of the corporate ladder and worked my way up. I can tell you that in my personal experience, being a leader of people is infinitely more difficult than doing a task. I'll never forget the first time I was given a leadership role in a project and went back to my boss after a 30 minute meeting and told him I didn't want it anymore lol. It wasn't until I started leading teams and taking a larger roll in running a business that I could relate to CEO type positions and have more understanding of what they do and why they get paid the way they do.

Simply, they get paid to drive stock value. It's as simple as that. Let's pick on Deere. There are 310M shares of the company on the market. I believe the CEO comp was stated at $14M last year. Simple math would suggest that each share paid about $0.05 to the CEO to drive stock value. The stock price is currently around $330 per share. Which means share holders are investing 0.015% of each share into a person who is heavily incented to drive the price of their stock up. IF that CEO is able to make changes that resulted in a modest 5% growth of share price then those share holders potentially saw a $16.50 return on their investment of $0.05. Worth it? I think so.

It's also important that just because the CEO gets paid X doesn't mean what the janitor does is any less valuable. Deere wouldn't be a company without the people on the line. It'll be up to leadership to decide the best course of action to make sure the best decisions are made on what's fair comp to hit their goals and what they can afford to lose. I don't envy anyone in either of those positions.

 

[cyfan21]

I am more tolerant of the disability insurance elements of Social Security than I am the old age income elements of it. You could have the former without the latter very easily and only need to collect a fraction of 12.4% of your income that the system currently collects from workers and employers.

That being said, disability insurance was a financial product that people bought before Social Security came into existence. Why not mandate employers have to buy disability insurance for their employees based on the actuarial risk of the work? After all, a bank won't give you a loan for a home without insurance on it and you can't drive a car on the road without insurance, so why not for having employees, too?

Plus, Social Security's version of disability insurance is higher cost than it needs to be. The product could be cheaper if the "insurance company" (really SSA) was investing at a 5% return instead of a 0% return like it is. So there's even an inefficient cost for the program beneficiaries baked into that aspect of it.



I do think this is a fair and good faith concern.

But suggesting a compromise...

Still collect the money. But make the default an S&P 500 index fund and not U.S. bonds.

Long-term real rate of return more like 5-8% instead of 0%.

My father never received any Social Security because he had railroad retirement instead. And the Railroad Retirement Board works like SS -- mandatory contribution of a certain share of your income -- but then it invests the money on behalf of beneficiaries to generate a return. The RRB something like a 6.5% return on his savings throughout his lifetime, which was worth (to give vague ranges out of modesty) something between $500,000 and $1 MM once he reached the typical retirement age.

There's a reason the RRB (and the railroad unions) have resisted being folded into Social Security and demanded their separate system remain separate for decades. They have smart accountants and attorneys that have told them how much better their special system is than general SS.

I agree with a lot that you said, but I disagree that employers should be mandated to pay for employees disability insurance.

 

[Rabbuk]

I guess my thought is to the people saying the CEO drives millions of dollars of value every year will get to see how much value union workers provide in comparison. Both in stock price and in loss of revenue. We will get a chance to see what a CEO without workers is worth.