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Sunday, May 4, 2014

THE MYTH OF THE OVERPAID CEO IN AMERICA

When you work whether as an employee or self-employed, you are the CEO  of your own firm, one which lacks employees. Your product is your expressed skills through time, which everyone should know as work. 



As I explained in WHY IS THE ECONOMY SO HORRIBLE? BECAUSE ACADEMIA ECONOMICS IS FAKE, the entirety of trade, or commerce, or real economics ties up with two words — property and profit. Without profit from effort, anyone would lack buying power to buy anything else. Without property, no one can trade. Only when property gets created, can trade arise between two persons. 

Though most think of property as things possessed, property always has meant the right of ownership and never the thing owned.  The name for property put to making stuff is called capital. The name for property put to purchase and sale for cash and credit is wealth. 

Your labor is your capital, which you use to make work, which is your wealth. Property in your work is what you trade in a purchase and sale of trade. You sell your work and you buy wages. Thus work is wealth, that is property you no longer desire and wages are wealth that you desire.

Your costs to produce and sell your work are what you spend to buy living space, whether as rent or mortgage paid to another, as well as what you spend to buy electric, heat, food, fitness, which is maintenance paid for your capital, which is yourself and medicine, which is repair paid for your capital, which is yourself.

Your income is your revenue. After you pay your expenses, you arrive at gross profit. 

Politicians have given themselves a right to share in your gross profit and have imposed a duty upon you to let them share in your profit, even though they have not invested in you. They call their share of your profit, taxes.

After politicians have swiped their take of your gross profit, you are left with net profit, which is your net income. The ratio of your net income to income is your personal analog to After Taxes Potential Return to Capitalists.

After Taxes Potential Return to Capitalists is the cash and bank credit remaining after everyone has been paid, including extortion owed politicians who then pay off all those who are free but who refuse to work in exchange for votes and thus power.

Triggered by their uncontrolled envy, many have been indoctrinated into believe that CEOs of the largest firms are overpaid. Unlike welfare freeloaders, wage earners and the self-employed, CEOs think with much bigger numbers and on grander scales.

Without CEOs, there would be no one to steer ships, to coordinate the putting to work thousands of skilled and semi-skilled wage seekers, who would be living as bare subsistence savages absent CEOs and capitalists who back those CEOS. Somewhere in their lives, those who would grow up to be CEOs discovered their chances to earn would be substantively higher than those who merely sell work for wages or sell work as the self-employed.

The executive list and pay data comes from the AFL-CIO, a unionized labor organization, which has every reason to overstate the pay numbers. The firm financials come from Google Finance. The data year is 2012.

For the list, in 2012, the average CEO  pay was US$29.6 million. CEO pay constituted 1.1% of revenues, on average. The After Taxes Potential Return to Capitalists was 9.25, on average.

Were some of these CEOs overpaid? Sure! However, that is only so relative to other CEOs who delivered much more return to capitalists for much less outlay.

Stay tuned because upcoming I shall show how academician egghead Thomas Piketty is oh so wrong.

Oh and have you ever noticed that the laborer, regardless of whether having no skills or highly technical skills, never seeks to offer his skills in a purchase and sale for wages to other poor laborers like himself?

Instead, the laborer always seeks someone who by being bolder and with more vision knows how to amplify with capital the efforts of the laborer and in so doing, lifts the laborer from bare subsistence savagery.