The Instigator
wrichcirw
Pro (for)
Losing
19 Points
The Contender
Raisor
Con (against)
Winning
26 Points

Corporate CEOs in America Should Be Paid Less

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Post Voting Period
The voting period for this debate has ended.
after 11 votes the winner is...
Raisor
Voting Style: Open Point System: 7 Point
Started: 12/28/2012 Category: Economics
Updated: 4 years ago Status: Post Voting Period
Viewed: 10,966 times Debate No: 28703
Debate Rounds (5)
Comments (72)
Votes (11)

 

wrichcirw

Pro

I originally issued this challenge to Danielle, until I found out we were advocating the same side. I've since made this debate impossible to accept. If you are interested in debating CON for the resolution, please let me know in the comments section, thank you.

The subject matter deals with this forum topic:

$8.25 per hour vs. $8.75 million per year

http://debate.org...


The OP:

Bloomberg has this story up showcasing the chasm between workers and executive pay:

http://www.bloomberg.com......

The CEO of McDonalds is compared to a worker who grew up in a similar neighborhood, yet one person makes a ton of money while the other has to shuffle jobs just to get by.

Is this an appropriate state of affairs? Is it justifiable to pay someone enough to have them pay their rent, and little else, all the while the head honcho makes so much that the laborers who fuel the fast food industry profits "would need about a million hours of work -- or more than a century on the clock -- to earn the $8.75 million that McDonald"s, based in the Chicago suburb of Oak Brook, paid then- CEO Jim Skinner last year..."?


Discussion

During the discussion, innomen made the following assertion:

You are comparing two different things that aren't even in the same universe (hyperbole, not literally). The person who is cleaning off the table isn't held accountable daily to the stock price of a fortune 100 company, nor is he held responsible for past, present and future performance of this company, whose investment worth impacts thousands, if not millions of people, and should this performance slip, you can be sure that his job is on the line. He is responsible for the overall direction of this massive corporation, and the make up of its workforce. The very image of this company lies within the grasp of the CEO. To say that the guy behind the counter is the same, or should be considered in the same light as the CEO is beyond absurd, it's just ignorant to how things work in the corporate world.


My contention, especially from the perspective of an investor, is that CEOs simply do not deserve the mammoth pay packages that are being awarded today in corporate America. I am frankly surprised that anyone could possibly justify such outlandish pay scales, unless they were second in line for similar treatment.


The Resolution:

Corporate CEOs in America Should Be Paid Less

Pay can be salary, options, perks and benefits, golden parachutes, anything and everything associated with executive pay.

Corporate CEOs is self explanatory. However, for the sake of argument, to be consistent with the original forum topic, and to highlight the real pay disparities in corporate America, I will limit CEOs to only those working for S&P 500 companies.

Current or prior listing on the index is fine, but all arguments regarding CEOs of specific companies must be relevant during the time that their company was listed as part of the index. For example:

Palm, Inc., was spun off from 3Com Inc. (itself a S&P 500 company at the time), in March 2000, [1] and was subsequently listed on the S&P 500 in July 2000. [3] However, due to the dot-com bust and PALM's underperformance, PALM was subsequently delisted from the index in August 2002. [2] Therefore, CEO pay of PALM after August 2002 is irrelevant to this debate.

This measure is aimed to prevent comparisons between CEOs piloting defunct and failed corporations and their more robust and successful counterparts. This measure still fully allows for the possible argument that underpaid CEOs ruined a once-high-flying company due to lack of motivation.

As long as the debate focuses on well-known publicly traded companies, adhering to this stipulation should be easy and painless.

"Less" means less than they are today, by a non-trivial amount.

Burden of proof on this matter will be shared.


Rules:

Round 1 - discussion/acceptance only, no arguments.
Round 2/3/4 - arguments, counters, and rebuttals
Round 5 - closing statements, no new arguments or citations.

8,000 character limit, 3 days for responses, 1 week voting period.

I wish my opponent luck on this matter and look forward to an invigorating debate. Cheers.

[1] http://news.cnet.com...
[2] http://news.cnet.com...
[3] http://www.palminfocenter.com...
Raisor

Con

I accept this debate and the terms and conditions presented above.
Debate Round No. 1
wrichcirw

Pro

I thank my opponent for expressing interest in this debate.

Background

1) S&P 500 CEO pay


At 2:17 in this video, we learn that average pay for S&P 500 CEOs is $9.6 million for 2012.

2) Back to innomen's statement - I'm going to play some mad-libs here. I will underline what I've changed in his statement:

You are comparing two different things that aren't even in the same universe (hyperbole, not literally). The person who is cleaning off the table isn't held accountable daily to the America, nor is he held responsible for past, present and future performance of this country, whose economy impacts millions, if not billions of people, and should this performance slip, you can be sure that his job is on the line. He is responsible for the overall direction of this massive country, and the make up of its workforce [and corporations]. The very image of this country lies within the grasp of the PRESIDENT OF THE UNITED STATES (POTUS). To say that the guy behind the counter is the same, or should be considered in the same light as the POTUS is beyond absurd, it's just ignorant to how things work in America.

Compare this mad-lib to innomen's original statement in round #1. No question that a corporate CEO is responsible for much, but his responsibility pales in comparison to the POTUS, who is also responsible for ALL of America's corporate citizens as well. The POTUS's pay in 2012 is $400,000 [1], placing him in the top 1% of wage-earners in America. [2] He hasn't received a raise in 10 years. This is less than 5% of an average CEO's pay.

I will use our nation's Chief Executive as a benchmark for corporate CEO behavior and accountability, and then reference such behavior to their respective pay rates.

Arguments

These arguments are just the beginning.

The main question I want the audience to ask: Why is a CEO paid so much?

The typical answer is that top talent is expensive, and that in an environment where performance is everything, you must pay for that performance. Therefore, what the market will bear for CEOs is very high. I will now proceed to destroy this answer.

My primary argument:

The Shepherd is dead. The Wolves are Shepherding the Sheep.

Most current CEOs of S&P 500 companies did not found the company. They are stewards of the legacy left by greats like Henry Ford, Sam Walton, and Thomas Edison. These titans not only managed their respective companies, they were primary owners as well. They were the driving force behind the success of the company - they were the shepherds.

Agency theory [3] attempts to address this conundrum - upon the passing of the shepherd, how do you align the interest of the steward along the lines of the shareholder? Agency theory's solution has been via monetary compensation. Agency theory has failed. Instead of raising stewards, they have raised wolves. These wolves are now in charge of many S&P 500 companies.

Support

1) "Pay for Performance" is Broken

Management has existed for as long as companies have existed. Yet even today, the best and brightest in business simply cannot answer two basic questions regarding CEO pay: What is adequate pay? What is the benchmark for performance?

James Heskett, a senior faculty member at Harvard Business School (HBS), DOES NOT KNOW. He asks: "...awards can be made subject to performance, however it is measured, over longer periods of time. But what is the right length of time? How much of the total compensation should it involve?" [4] He has no answers.

He notes: "Longer-term incentives involve delays in compensation that may make a job much less attractive to managers with shorter-term needs or interests. On the other hand, it may serve as a way of sorting out managers with a longer-term view of the job." [4] By this logic, the longer the term measured for performance, the better for the company.

Warren Buffett, one of the world's most successful businessmen whose opinion typically trumps most in the field, has a simple and candid answer for the "right length of time": FOREVER. [5]

Yet, when looking over studies on executive pay, acute myopia is the norm. A recent exhaustive study on CEO pay highlighted the various long term incentive (LTI) packages inherent in CEO pay today. [6] Yet, ALL analysis cuts off at 3 years. There is cognitive dissonance in the business world in regards to defining "performance".

Not surprisingly, this myopia results in poor performance. Dan Ariely, a professor of behavioral economics at the Sloan business school at MIT, notes that "Financial rewards are a double-edged sword. They provide motivation to work well, but they also cause stress and preoccupation with the reward that can actually hurt performance." [7]

Daniel Pink explains why. His recent book with accompanying speech at TED earned him recognition at HBS as one of the top 50 thinkers in management philosophy for 2011. [8] His explanation is simple: "As long as the task involve[s] only mechanical skill...the higher the pay, the better the performance." [9, at 9:40]


One reason why HBS's Prof. Heskett could not determine neither pay nor performance for a CEO is that the job is anything BUT mechanical skill. It requires extreme out-of-the-box thinking - Pink's candle problem [9, entire presentation] - meaning that each and every situation is entirely different and totally unpredictable. Thus, it is impossible to fully incentivize via pay, because it is less relevant to addressing the real wants and needs of a CEO.

Instead, Pink showcases "extrinsic" vs. "intrinsic" motivation. Extrinsic motivation is monetary compensation - how business has been done. Intrinsic motivation is his eureka moment:

Autonomy
Mastery
Purpose
[9, 12:40]

People want control over their work environment, the opportunity to master their work, and to know that their work serves a higher purpose. This is an extremely powerful motivator. More importantly, it is intuitive, and perfect for out-of-the-box thinking.

Now think about the shepherds, like Warren Buffett and Steve Jobs. These men thrived in environments that had all three elements of Pink's intrinsic motivation. Buffett was paid $100,000 in 2011. [10] Steve Jobs was paid $1 annually from 1997-2011. One Dollar. [11]

Now think of the President of the United States. No matter what your politics may be, it is clear to everyone that the POTUS also enjoys autonomy, mastery, and purpose at his job. The POTUS's track record is better than any American company...236 years of torrid growth and expansion without a single bankruptcy. Recall that the POTUS's pay is 5% of the average S&P 500 CEO pay.

I have cited the best and brightest minds in business today, and have highlighted the problems faced with pay and performance. Later, I will proffer a solution to this conundrum, while further advancing my argument.

My opponent has the unenviable task of arguing that corporate CEOs are justified in their pay, or are even underpaid, that the wolves which I will define later have not devoured enough sheep. I wish my opponent luck in this endeavor.


[1] http://www.gpo.gov...
[2] http://www.economist.com...
[3] http://www.investopedia.com...
[4] http://hbswk.hbs.edu...
[5] http://www.mcgrawhill.ca...
[6] http://www.farient.com...
(requires email for access)
[7] http://www.nytimes.com...
[8] http://hbr.org...
[9] http://www.ted.com...
[10] http://www.bloomberg.com...
[11] http://www.redmondpie.com...
Raisor

Con

I will negate the resolution “CEOs in America Should Be Paid Less” by defending the status quo system of CEO pay.

Framework:
1. In advocating for a change from the Status Quo, Pro needs to advocate for a real world mechanism to uphold the Resolution.
a. It is impossible to evaluate hypothetical resolution with no real world mechanism. Decisions are hard because of the complications that come with implementing and acting on them- when we talk about systems of wealth distribution the way systems ACTUALLY function is central to the issue-will it be cost effective or violate rights? These are questions that cannot be answered without knowing implementation.
b. Without a real world mechanism this debate becomes about a fantasy world. Pro could propose we decrease CEO pay using a machine that converts salaries into world peace- yes that would prove the resolution true, but only in a fictional sense. We are arguing about the real world, Pro must propose a real world mechanism.
2. The “should” in the Resolution implies a normative evaluation. I maintain that the right to self-ownership and freedom entails fundamental property rights. Any proposal by Pro which violates the right to freedom is unethical and therefore does not uphold the resolution. These rights are fundamental and thus come before any other ethical considerations.

VOTE CON:
Pro has failed to meet these framework criteria; he has not explained how CEO salaries should be decreased. I had every reason to expect him to do so, as the thread he linked in his challenge was full of policies, which he suggested, such as progressive taxes that would decrease the amount CEOs make. Pro alluded to mentioning a “solution” in his opening speech-bringing your central advocacy out in the second round is extremely UNFAIR as it means I had to go my entire opening round without knowing what we would actually debate about.

Pro’s Case:

1) Wolves and Sheep

Pro offers no warrant to the claim that CEO’s are bad stewards of the companies they own. This claim can be ignored since it is without evidence.

Additionally, it is patently false. Look at the history of the S&P500 and it is clear that companies continue to do very well (note: the graph is on a log scale):

2) Pay for Performance
a. Non sequitur- it only shows that high performance is motivated by things other than money. Even if this is true, it does not offer any justification for cutting pay. Is Pro really maintaining that because high-performers are motivated by “purpose,” we shouldn’t pay them?
b. Pay can be awarded as more than just a motivator. I may be motivated by purpose and autonomy, but if I get a job offer from two companies the benefits offered will be a major factor in my decision. Pay is used to attract and retain talent, it can also be used as a reward

3) Obama’s Paycheck

Using the POTUS salary as a benchmark to compare CEO salaries is arbitrary and unjustified.

a. The argument implies that if the POTUS salary was raised to $50 million, suddenly CEO salaries become more reasonable.

b. POTUS salary is set by the U.S. government; it is not subject to free market demands.
c. The POTUS position doesn’t have to attract talent through compensation- Obama didn’t have to fend off presidential offers from France with a better benefit package.

4) Why is a CEO paid so much?


a. Because the Board of Directors decided to pay them that much.

Why did the Board of Directors at each individual S&P 500 firm decide on the particular salary and benefits they give their CEO? Only be investigating each CEO, Board of Directors, and company could you answer that question. Determining benefits is hard. At play are competing interests and a wide range of economic and political factors. CEO pay isn’t decided en masse, each benefit package is an individual decision. If Pro thinks this question will decide this debate, he needs to show how each individual pay decision was unjustified.

b.
The question Pro proposes suggests that CEO’s need to answer somehow for the money they are making, that CEO’s need to face the American people and justify the paycheck they take home. The simple fact is the only people CEO’s need to justify their pay to are the people who actually pay their salaries. If a company wants to pay a CEO an incredible amount of money just for the title of having highest-paid CEO, that is within their right to do so.


c.
Pro offers no explanation for how this question relates to justifying a decrease on CEO pay. Let us say that most CEOs get paid “too much money” (whatever that means). So what? Pro gives no reason why paying people too much provides a compelling reason to impose a pay restriction. Let’s say I have a neighborhood child shovel my driveway then pay him “too much” by giving him $100; am I violating a normative criteria?


d.
Pro offers no mechanism for evaluating what the “right” pay is for CEO’s-even if we accept that CEOs who make “too much” ought to be paid less, Pro offers no way to evaluate if they are actually making “too much.” Who gets to decide what the new CEO salary? If Pro doesn’t think CEOs are worth their pay he can start his own company and pay them what he thinks is fair.

5) Pro offers no reason to decrease CEO pay. So what if the POTUS gets paid less? So what if performance is not motivated by pay? So what if some CEOs choose a salary of $1? None of these are compelling normative reasons to artificially impose a constraint on the salary of CEO’s. I contend that most of my opponent’s argument is just him talking about how he doesn’t like how much CEOs are paid.

Con’s Case:

My position is to support the status quo in which CEO pay is determined freely by businesses.

1) This is the only real world option in this debate, so it wins by default.

2) My position is consistent is consistent with respect for an individual’s freedom and right to property. Any position my opponent takes must necessarily infringe the right to property by restricting how that property may be used in the act of compensation. Per my framework, violations of freedom must be considered before any other issues; I should win this debate on this alone.

3) My position avoids the ethical ambiguity of Pro’s position. It is therefore more coherent and reasonable and should be preferred. Pro’s position requires an assessment to be made of every single CEO paycheck to determine if it is “too much.” His position requires some definition of what a CEO “ought” to be paid. As long as Pro fails to answer these questions his position is untenable, while my position makes these questions irrelevant.

4) Only the free market can determine the value of a CEO.

a. Each pay decision is different based on the needs of the company, the financial means of the company, the ability of the CEO, the market value of the position. Only individuals faced with the specifics of their situation can make reasonable decisions.


b. Compensation decisions involve risk and assessments of intangibles; the result of a compensation negotiation is therefore dependent on the individuals involved. Whether a Board of directors is risk-averse or desperate for a change in leadership will impact negotiations and the final outcome of CEO pay.


5) Restricting CEO pay takes away the ability for companies to make leadership decisions. Capping CEO pay means that a company in desperate need of new leadership wouldn’t have the means to attract a new CEO through extremely competitive benefit packages. It also means that if a sitting CEO was considering leaving, companies could not adjust benefits to retain talent. Note that this is bad from an economic point of view, but it also demonstrates exactly how Pro infringes on freedom and must be absolutely rejected.

6) My position allows for the possibility of some decrease in CEO pay. If a Board determines its CEO is not worth the money, they can cut benefits. Note I am still Negating the resolution with this position- my position is the status quo in which most CEOs will get a raise next year.

Debate Round No. 2
wrichcirw

Pro

Although I again thank my opponent for his interest in this debate, I cannot thank him for submitting a well-sourced or well-substantiated case.

His wholly unresearched opinion will have to contend with the best and brightest in corporate America.

- CON's statements in quoted italics.

- Sources continued from Round #2

I will address four issues before continuing with my argument:

1) Shareholders value their rights to freedom and property more than any corporate CEO, who is merely the steward for shareholder interests. What I will demonstrate by the end of this round is that the CEO has impinged on SHAREHOLDER RIGHTS AND FREEDOMS by failing in his/her fiduciary responsibilities - BY THIS ALONE, CEOs SHOULD HAVE THEIR PAY LOWERED BY A NON-TRIVIAL AMOUNT.

2) To say that the Chief Executive Officer of America is an "arbitrary and unjustified" benchmark is insulting. The POTUS has MORE EXECUTIVE DUTIES AND RESPONSIBILITIES than any corporate CEO. That he is a public official is irrelevant - all Presidents CHOSE to run for office over other occupations and faced stiff competition, and they did not do it for the pay.

3) To ANY extent that "[CON's] position allows for the possibility of some decrease in CEO pay," and that such a position is a more optimal outcome, my opponent summarily concedes his case and declares me the winner of this debate.

4) CON complains that "[CON] had to go [his] entire opening round without knowing what we would actually debate about." CON either failed to read the resolution, or fails to comprehend that he has HIS OWN BURDEN OF PROOF - to either advocate the status quo or that CEOs are underpaid. HIS CASE IS COMPLETELY UNSUBSTANTIATED AND UNSOURCED. (hereafter, UandU)


My opponent has asserted that he bases his case on UandU "reality". The following will highlight what this reality is.


Arguments

1) Pay for Performance (P4P) is Broken (con't)

a) CON leads with an UandU chart that doesn't quantify anything, only shows a haphazard and nebulous rise in the S&P 500, and seems to be non-current by 5 years. IT DOES NOT DEPICT THE FINANCIAL CATASTROPHE OF 2008 AND IS DECEIVING.

I will instead show concrete, QUANTIFIED proof that P4P is broken. CON's UandU chart, even without the 2008 catastrophe, demonstrates a dramatic tapering off of S&P 500 performance over the past 12 years. This tapering off has coincided with skyrocketing CEO pay.

Keep in mind that performance is defined by Total Shareholder Return (TSR) [6], [10]. TSR from 2000-2011 for the S&P 500 was 29.4%, annualized, ONLY 2.5%. [15] CEO pay during this period rose by AT LEAST 100%, annualized, AT LEAST 8.3%. [16], [video in round #2]. The CEO is clearly failing in their fiduciary responsibilities to the shareholder, as TSR underperformance correlates with skyrocketing CEO pay. P4P is broken. This correlation is cancerous.

The wolves are eagerly devouring the flock. This MUST end.


b) CON's UandU chart also fails to separate the few remaining shepherds from the wolves. I will demonstrate with the two shepherds I've already proffered:


Warren Buffett - CEO of Berkshire Hathaway (BRKA), active 1965-present
Pay: $100,000
Annual BRKA TSR: 19.8%
S&P 500 TSR: 9.2%

Steve Jobs - Founder and CEO of Apple Computing (AAPL), active 1997-2011
Pay: $1.00
Annual AAPL TSR: 19.87%
S&P 500 TSR: 7.49%

(stock TSR sourced from Google Finance and [15], S&P 500 TSR sourced from [15])

Shepherds tend to outperform stewards. Without shepherds like these, S&P 500 performance across the board would be EVEN LOWER. These shepherds embody Autonomy, Mastery, and Purpose, and they don't do it for short term pay.


c) CON asks the strawman question "because high-performers are motivated by “purpose,” we shouldn’t pay them?" This is a perfect segway into my proposal:

i) Of course we should pay them, but only to a certain extent. Maslow demonstrated that something as base as monetary compensation at best only fulfills biological, physiological, safety, and esteem needs - all lower-order needs. [12]

ii) Autonomy, Mastery, and ESPECIALLY Purpose, on the other hand, ALL fulfill higher-order needs - cognitive, aesthetic, self-actualization, and transcendence. [12]

This is why CON's UandU assertion that "The POTUS position doesn’t have to attract talent through compensation" is actually true, as a paycheck only motivates to a certain extent before becoming a detriment to job performance.

PROPOSAL

I propose that the current pay structure for CEOs be wholly replaced with a completely stock-based compensation system. A large lump-sum of restricted, dividend-yielding stock would be set aside in escrow and amortized over a 20 year period. The CEO's salary would consist of the cash from dividends. Perks like the corporate jet and pension would remain the same. The first-year compensation would be less than current stock packages - it would be reset back to 2000 levels plus 29.4%, adjusted for inflation, to account for 12 years of underperformance. After 20 years, the CEO receives the stock in full.

This instills a greater PURPOSE onto CEOs, because it FULLY aligns their interests to those of the shareholder. It COMPELS them to make decisions that affect TSR over as long a period as possible. It INCENTIVIZES them to excel at long-term decision making - if they do well, this kind of package may far outweigh total compensation currently received by CEOs AT A FAR LESS COST TO THE SHAREHOLDER. Finally, the CEO would fulfill his/her fiduciary responsibilities to the shareholder, one which (s)he is failing currently. Agency theory would succeed upon implementation.

Roberto Goizueta (video) is the model for this proposal - unlike most CEOs, he kept his stock grants/options - he held 99% of his wealth in Coca Cola stock [13] and became a billionaire through sheer management genius - Autonomy, Mastery, Purpose. The company grew from $4.3 billion to $150 billion during his 16 year tenure. [14] Truly a great steward.



This is not legislation. My proposal would be voluntarily instituted by corporate America on terms dictated by shareholders, more than likely during CEO succession. I have already demonstrated that this SHOULD occur in order to align CEO interests with shareholder interests.

I am now out of room; I will proffer an example next round.


d) Finally, CON asks "Let us say that most CEOs get paid “too much money”... So what?" CON implies that no one gets hurt. This is categorically false. The SHAREHOLDER gets hurt. The SHAREHOLDER, who via the board of directors HIRES and PAYS the CEO, and can FIRE the CEO, DEMANDS PERFORMANCE, i.e. TOTAL SHAREHOLDER RETURN. To the extent that P4P is broken and agency theory has failed is the extent that SHAREHOLDERS ARE OVERPAYING FOR CEOs. By this logic alone, along with my above arguments as support, I already have achieved burden of proof that CEOs should be paid less by a non-trivial amount, if not summarily fired from their jobs.

PRO and CON are in agreement that "The simple fact is the only people CEO’s need to justify their pay to are the people who actually pay their salaries."


CON has not contested ANY of my critique of P4P. P4P is broken, and CEOs are overpaid. If they are overpaid, they should be paid less.

I will continue to forward arguments next round.


[12] http://www.maslowshierarchyofneeds.net...
[13] http://money.cnn.com...
[14] http://articles.latimes.com...
[15] http://www.berkshirehathaway.com...
(page 2)
[16] http://www.vanderbilt.edu...
(page 75, figure 1)
(as of yet unused sources):
[17] http://www.forbes.com...
[18] http://usatoday30.usatoday.com...
[19] http://www.nbcnews.com...

Raisor

Con

VOTE CON ON FRAMEWORK.

1.Pro offers no arguments to dispute my framework, so it should be accepted wholestock.

2.Pro presents a policy proposal mid-debate. This is unfair to Con and destroys the quality of the debate- vote Con to enforce fairness.
a.ACTUAL ABUSE: In my opening speech I claimed that con presenting a plan in the second speech is unfair because I do not know what to argue against and will waste my speech time. Pro spikes out of my arguments about primacy of freedom by making his plan "voluntary"-essentially meaning I wasted time in the first round making an argument that doesn't apply BECAUSE I DIDN'T KNOW PRO's PROPOSAL.
b.If Pro is allowed to shift his advocacy mid-debate, he could just advocate a different proposal every round making him a moving target. You wouldn't vote for Con if I waited until the last round to state my advocacy.
c.At the very least vote Con on conduct- however I should get full ballot.

3.Pro"s proposal is not real world. This is also unfair and makes this debate about a pointless fantasy world.
a.There is no way every S&P 500 company would simultaneously agree to pay their CEOs based on the same program. Even if they did, it would only be a matter of time before one company wanted a new CEO desperately enough they would just break the agreement- that's how competition works.
b.The plan is ILLEGAL in the U.S., since it is wage-fixing and violates anti-trust laws. My first source details explicitly how companies that merely collect information on competitiors wages were found in violation- explicitly agreeing to a wage system across the S&P violates U.S. law [1].
c.If we are allowed to advocate fantasy world solutions then I advocate the following: CEO salaries should be RAISED and all CEOs should donate all money beyond 6ok to Oxfam and the Gates foundation. This plan feeds Africa and cures the continent of disease as hundreds of millions in aid stream in annually.
d.Pro had tons of real world plans to choose from- the thread he links in his challenge is full of ones he himself suggested.

4.Pro's plan is a pay restructuring NOT a pay cut. Pro himself says "this kind of package may far outweigh total compensation currently received." This is a double-bind: either Pro's plan is successful and CEOs get rich (meaning he doesn't uphold the Resolution) or Pro"s plan does result in CEO paycuts showing his plan fails to help company performance.
These Issues are not nit-picking. I have clear examples of unfair tactics in this round. If you don't vote Con on fairness don't complain when you are treated unfairly in your next debate. The community must uphold standards of discourse to keep debates fair and educational.

Pro's R3 (his #'s)
1)Overpaid CEOs are not a violation of shareholder's rights. They can sell stock or get the Board to fire the CEO whenever they want.

2)Pro doesn't address my 3 objections to POTUS salary as benchmark: a) implies legitimacy of CEO pay could be changed by raising POTUS pay b)POTUS pay not subject to free market and he actually proves my c) people don't run for president "for the pay," but CEOs DO choose their employers based on pay.

3)Pro says in his point 4) that I can defend the status quo- this is exactly what I am doing. I am just pointing out that if CEOs perform poorly Boards will cut pay. My position is Boards should make their own decisions.
4)Defending the status quo is comparative. How do I prove the status quo is better than a non-existent advocacy? Also note the following unrefuted benefits of the status quo, all of which apply to Pro's fantasy world plan.
a.Squo is only real world option.
b.My position avoids ethical ambiguity
c.My unrefuted argument for why only free market solves.
d.Restricts ability to make leadership decisions.
Let me also point out that my arguments are analytical and aren't making fact claims, hence no evidence.

Pro's R3 (part 2)
1.My chart shows that S&P is growing healthily, a point which you concede to. The claim that CEOs are "devouring the sheep" is a STRONG claim that needs to be substantiated with evidence of pervasive predatory behavior to the detriment of shareholders.
a)Analogy: I watch a flock of 100 sheep for you in exchange for 1 sheep payment. At the end of the year you have 129 sheep (29% increase). If I ask for another sheep as payment (100% raise) would call me a "wolf?"
Pay doesn't have to match growth for it to be fair an earned, Pro offers no reason why we should adhere to this standard. Markets decide the value of a CEO- let the companies evaluate whether company performance warrants a raise rather than impose some arbitrary across the board pay cut.
b&c) Pro doesn't address my arguments- CEOs can be motivated by Autonomy and still have pay be an important economic factor. Pay is used to attract and retain talent, pay is used simply as a reward or sign of good will and appreciation. The fact that a few CEOs prefer to get paid less doesn't mean we should pay EVERYONE less.
d)Pro has shown that shareholders are receiving average returns of 2.5%- how does this show CEOs are hurting shareholders? Pro has not offered any quantitative analysis of how his plan changes returns and has no evidence that returns will increase from 2.5%.

Con's case:
1)Pro's plan is just another form of P4P- it rests on the assumption that tying returns to growth will boost CEO performance. His entire critique of P4P undermines his plan. If P4P is really broken then pay is irrelevant to performance and talking about restructuring pay for performance reasons is nonsensical.
2)Pro's plan does not account for job hopping. If a CEO leaves a company, does she keep the full stock package? Or does he forfeit some or all of the stock option? Either way, the plan offers no deterrent for a CEO to "jump ship" if he thinks the company is headed for rough waters- he can just move to a new company and get a more promising portfolio.
In the Squo, companies can offer pay increases to retain talent if CEOs are thinking of moving to a new company. There is no flexibility for retention in Pro's plan. This also hurts freedom.
3)Even if P4P is broken, it still makes sense to talk about pay in terms of COMPETITION. A CEO may be motivated by Autonomy while choosing his employer based on salary.
a.Pro's plan unfairly hurts companies currently performing poorly. A company with a downward trending stock will never be able to attract a top tier CEO to turn the tides on their company. Hurts freedom.
b.This underlines the infeasibility of this plan- as soon a failing company had their back against the wall they would increase CEO benefits to remain competitive.
4)Pro's plan makes being a CEO extremely risky. Imagine your entire livelihood is tied to the performance of one stock, which you cannot sell for 20 years. Even a star CEO is subject to market volatility and uncertainty. Only individuals who are already so well-off they know they will never need another payday would accept; Pro's plan unfairly bars a huge portion of the population from the option of accepting a CEO position.
5)Extend my 4) from R2: Free Markets are only way to determine CEO salary. Pro never addresses my points that salary decision are too situation specific to set broad policy on, or that only individuals can make decisions about what they are willing to pay.
6)Pro's plan is incredibly unjust- it makes current CEOs responsible for the performance of a company 12 years ago, many CEOs weren"t even running their company 12 years ago. Additionally, companies would have to violate benefits contracts to enact the plan. The Squo is more fair- it pays CEOs what they were promised when they signed on.
Summary:

The biggest issue in this debate is (unfortunately) framework. Pro is running a fantasy plan he kept secret- vote for the only option that is realistic and consistent throughout the debate: status quo. Or vote for the Magic Oxfam plan.

[1] http://www.astronsolutions.net...
Debate Round No. 3
wrichcirw

Pro

I will lead with a reminder, more arguments, and rebut CON's allegations.

- Sources con't from Round #2, #3
- CON's statement's in quoted italics


Why is this issue important?

I want to remind voters that performance in corporate America is of paramount importance.

If a burger flipper does not perform, then your burger tastes bad, and you expect the burger flipper to get fired eventually.

If CEOs do not perform, THE AMERICAN ECONOMY SINKS INTO RECESSION, IF NOT DEPRESSION, and you expect shareholders to fire CEOs - you certainly WOULD NOT EXPECT THEIR SALARIES TO CONTINUE TO RISE. [15], [16]

If Wall Street CEOs specificially (many of which are S&P 500 companies) do not perform, IT RESULTS IN AN APOCALYPSE, TALK ABOUT THE END OF DAYS, A COST OF UP TO $12.8 TRILLION IN LOST PRODUCTIVITY IN AMERICA, TO SAY NOTHING ABOUT GLOBAL LOST PRODUCTION, [20] AND A CRIPPLING RECESSION/DEPRESSION IN WHICH AFTER OVER 4 YEARS WE ARE STILL MIRED.

Compare this to Goizueta, a CEO/steward who got it right. He came to America with $40 and 100 shares of Coca Cola stock (KO), and became a billionaire. KO is now known around the world - every time I pop a can open it brings a smile to my face. :D
[13] (video)

KO has not suffered from the 2008 financial catastrophe - it has continued to grow. [21] The foundation Goizueta laid was THAT STRONG.

The difference is HOW Goizueta was PAID TO PERFORM.

Bottom line - at the CEO level, PERFORMANCE IS EVERYTHING, not only to the shareholder but to America at large as well.

This point coincidentally answers CON's cynical question: "Let us say that most CEOs get paid “too much money”... So what?"



Arguments

Recall from round #2:

Why is a CEO paid so much?

...top talent is expensive...in an environment where performance is everything, you must pay for that performance. Therefore, what the market will bear for CEOs is very high.


2) What the Market Will Bear (WtMWB) for CEOs is Broken

Briefly, but powerfully:

USC's Prof. Lawler:

a) "CEOs rarely move from one company to another, and when they do, they are usually less successful than internal candidates." [17] This is an issue of lack of Mastery.

b) "Some members of corporate boards have an even greater self-interest in making sure that the compensation of the CEO continues to go up, up, and up. They are the CEOs of other companies." [17]

CEOs DETERMINE WtMWB FOR CEOs - THEY ARE DETERMINING THEIR OWN PAY. THIS IS THE DEFINITION OF DYSFUNCTIONALITY. NO WONDER THEY ARE PAID SO MUCH. To the extent that this happens AT ALL, is another non-trivial extent that CEOs are overpaid, and should be paid less.

THE WOLVES ARE SHEPHERDING THE SHEEP. This is easily "STRONG" enough for CON.


Does the POTUS set his own pay? No, Congress does. [1]

The solution to this is simple. It requires legislation. Simply forbid anyone in the C-suite from sitting on compensation committees of any publicly traded company. Then the problem will solve itself.

I have demonstrated that competition, i.e. a market for CEOs, is a myth. I have further demonstrated that corporate boards suffer from chronic dysfunctionality regarding CEO pay, and that this requires a legislative solution.


Rebuttal


Thankfully CON's statements are not substantive, leaving me more room to further my argument.

1. I have addressed ALL of CON's framework - shareholder freedoms are paramount, REALITY CONFIRMS THAT CEOs ARE OVERPAID (uncontested by CON), and my proposal is seeped in a real-world scenario.

2. What is more unfair to me is that CON has not presented a case, but only UandU allegations and opinions. CON continues to fail to realize he has BURDEN OF PROOF (BoP).

3. My proposal IS real world and FULLY LEGAL. It is as realistic and LEGAL for shareholders to make a plan for CEO pay and then implement it, as it is for a customer to plan to drive up to McDonald's (MCD), and then order a Big Mac.

4. CON alleges that "Pro's plan is a pay restructuring NOT a pay cut," and quotes me (my emphasis) "this kind of package MAY far outweigh total compensation currently received."

It IS a pay cut. Allow me to demonstrate with our MCD CEO:

PROPOSAL EXAMPLE

Instead of $8.75 mil, reduce to roughly $6 million (2000 level plus 29.4%)
Initial stock package of $50 mil, 20 year amortization - given to CEO after 20 years.
Assume generous 5% dividend: $2.5 mil cash. (adjust for inflation annually)
Yearly stock amortization: $2.5 mil.
$1 mil in perks, etc..

Keep in mind that this is still a very large sum of money for any one person, yet is still a substantial pay cut.

This proposal fixes this issue of overpaying CEOs for underperformance. If the CEO achieves the anemic 2.5% S&P 500 TSR since 2000 over 20 years, the $50 mil would be worth $81.93 mil. At the 9.2% S&P 500 historical TSR, the $50 mil would be worth $290.68 mil. If he achieves Jobs' 19.87% TSR, the $50 mil would be worth $1.876 BILLION, well above the status quo. This does not include cash payouts. Regardless, the total cost to the company would be $50 mil, amortized over 20 years, plus cash payouts. Most importantly, shareholders would also benefit from the stock's rise. Agency theory succeeds. P4P is fixed.

This is how Buffett, Jobs, and Goizueta did it. Why deviate from such a path, unless the CEO is determining his/her own pay.

Again, PERFORMANCE IS EVERYTHING.

If instead of this plan we continue with the status quo, the CEO would continue to receive AT LEAST 8.3% pay increases on their $8.75 mil over 20 years - they would pocket $415.50 mil, even if they ran the company to the ground (assuming all cash). They would receive $40 mil on the last year ALONE.


5) I will now address CON's UandU "case" (which is nothing more than a rebuttal, i.e. zero BoP) and thereby expand on my proposal:

- CON is correct that my plan "is just another form of P4P." It FIXES current P4P, which is currently BROKEN.

- "If a CEO leaves a company, does she keep the full stock package?" This is the power behind the amortization. The CEO will receive ONLY the amortized stock upon departure. If the CEO left on bad terms and performed poorly, so will the stock. This fixes P4P, which currently rewards CEOs for failure.

- There is no flexibility for retention in Pro's plan." The flexibility is inherent in the stock's price.

- "Pro's plan makes being a CEO extremely risky." “Risk comes from not knowing what you're doing" - Warren Buffett.
[22] Better to get these "risky" CEOs out now before they wreck the company.

- "Free Markets are only way to determine CEO salary." My proposal is a free market solution.

- "...the thread he links...is full of [plans] he himself suggested." Blatant falsehood. CON is destroying his own credibility here.

- "Even if P4P is broken, it still makes sense to talk about pay in terms of COMPETITION." NO IT DOES NOT.
  • Competition for CEOs is a MYTH. [17]
  • There is no substitute for high-performance - the rewards are THAT SUBSTANTIAL. No competitor can offer stock belonging to a high-performance company. For example, Pepsi could not offer KO to Goizueta. PALM could not offer AAPL to Steve Jobs. The initial package is substantial - it fully links the CEO's PURPOSE to that of the shareholder. If the stock is not enough to entice a CEO to stay, then most likely the CEO does not know how to perform at the company (missing Mastery, possibly Autonomy), and should be let go regardless.
    • What if the POTUS thought about leaving America for a leading position in another country? Absolutely ridiculous - he doesn't speak Austrian (2nd video). The POTUS is appointed by voters just like how the CEO is appointed by shareholders.



There is MUCH more but I am out of room.

P4P is broken. WtMWB is broken. CEOs SHOULD BE PAID LESS.



(sources [18], [19] unused)
[20] http://finance.yahoo.com...
[21] http://finviz.com...
[22] http://www.goodreads.com...

Raisor

Con

1)CEO pay is strongly tied to company performance. Note his sources all come from blogs and editorials while mine in R4 are economic studies.
a)CEO salaries are not to blame for the 2008 collapse. It is common knowledge that the collapse was due to a large number of factors, most importantly the collapse of the housing bubble, practices in the financial sector, etc. Notice Pro offers no evidence to support this claim.
b)2010 study prove boards fire CEOs for poor performance [2]
“We find that boards aggressively fire CEOs for poor performance…In the first five years of tenure, CEOs who perform in the bottom quintile are 42 percentage points more likely to depart than CEOs in the top quintile. This spread increases to more than 70 percentage points for firms with high quality boards… Our results, based on a new empirical approach, are significantly stronger than in prior research… board quality is associated with higher stock returns following performance declines, suggesting that strong boards are more effective at dealing with negative performance shocks.”
c)Economic study shows SP500 held its own and is recovering from 2008[1]
“The Wall Street Journal [reported] that S&P 500 firms have weathered the financial crisis surprisingly well, with revenues up and debt levels down since 2007.This performance also is consistent with reports that U.S. companies hold large amounts of cash in 2011… Median margins increased from 1993 to 2007. They increased again, to their highest level in the period, from 2007 to 2011. Net debt declined from 1993 to 2005, increased from 2005 to 2008, and has declined to 2006 levels in 2011. Cash holdings have generally increased from 1993 to 2009”
d)Economic study shows CEO pay tracks market performance[1]. Note this same trend can be seen in Pro’s R2 Equilar video.

2) a. It is irrelevant how often CEOs move or how well they perform after moving. Simply having the ability to attract and retain talent is critical to running a company. If even one company was unable to replace their current CEO because of Pro’s plan, it would be a gross infringement on individual autonomy. Moreover, the facts Pro cites should be used to inform Board decisions in CEO salary negotiation, not to mandate a straight-jacketing pay structure.
b. Cross apply my 1b) argument that Boards hold CEOs accountable and 1d) that CEO pay keeps pace with markets.
c. Study shows that retired CEOs on company Boards helps companies in times of crisis by coming out of retirement[3]. Additionally, reference my 1b) evidence that strong Boards help companies recover after poor performance. It is good that CEOs are on Boards:
“These former CEOs continue to have an impact on their firms. The tenure of their successors is shorter. After extremely poor firm performance under their successors, they frequently come out of retirement and return to the CEO position. When they do so, their firms do as well as industry and past performance matched firms.”
Companies should have the freedom to weigh the costs and benefits of having CEOs on the Board.
d. Pro has yet to show how CEOs are “wolves.” Refer to my 1c) evidence that SP500 has held its own through the recession, Pro’s source [15] which shows 2.9% annual growth. Every piece of evidence in this round demonstrates the long-term success of the SP500.

Pro’s Rebut

1,3,4)
a. Pro has offered no evidence that his position is real world- I defy him to find one example of 500 companies agreeing to implement identical benefits systems.
b. Pro ignores my R3 evidence that a multi-company wage fix violates anti-trust laws and is illegal.
c. Pro ignores that companies would break the pay structure agreement as soon as it benefited them.
d. Pro does not address my proven in-round abuse that he spiked out of my opening arguments, wasting my speech time.
e. Pro changes his advocacy AGAIN in R4 by advocating for prohibitions on Board membership. Remember when I said he was a moving target?
f. Prohibiting Board membership has nothing to do with the Resolution. Maybe it’s a good idea, but it is not a pay cut and so is not a reason to vote Pro.
g. Pro has simply failed to uphold the Resolution. He conceded in R3 that his plan may increase CEO pay. The Resolution is “Corporate CEOs in America should be paid less” NOT “Corporate CEOs in America should be paid maybe less but maybe a little more.”
2) And 5) See Con’s case.

Con’s Case:
1) I uphold my BoP by proving that the Squo is comparatively preferable to Pro’s advocacy. I have listed a number of comparative advantages, the most important of which is that Pro’s case violates freedom and autonomy while Squo does not.

2) Pro’s example demonstrates that his solution is NOT free market. It applies a rigid formula to CEO pay. Note the arbitrariness of Pro’s formula- why go to 2000 levels rather than 1999 or 1960? These are all arbitrary values Pro expects to be suitable for every CEO of 500 different companies. This one-size fits all advocacy doesn’t take into account the many variables that determine a CEO’s value, as I mentioned in my R2.


3) Pro’s example demonstrates how his proposal infringes on autonomy. Recall my opening argument that individual preference is crucial to determining CEO salary. Boards can be more or less risk averse, more or less willing to give shares of the company as benefits, same with CEOs- Pro takes the individual control out of salary negotiation- this violation of freedom is a prima facie reason to reject Pro in favor of Squo.


4) Squo doesn’t infringe on shareholder freedom because shareholders overwhelmingly approve of CEO performance[1]

“The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 mandated that all firms with more than $75 million in publicly-traded stock hold an advisory…shareholder vote on the compensation of the top five executives…these votes in 2011 overwhelmingly favored existing pay policies. Equilar reported that only 38 of 2,252 companies or fewer than 2% received less than a majority of favorable votes. Over 98% received majority support.”

5) Pro advocates legislating that CEOs cannot hold Board positions. This is a clear violation of freedom and autonomy. Note that Pro has conceded that freedom comes first in evaluating advocacy.

6) Recall my R3 argument that only individuals who know they will never need another paycheck would accept a CEO position. This point went unaddressed. Pro creates a system in which only the most risk-preferring or wealthy individuals could be a CEO. Prefer the more open society of Pro.


7) Pro offers no comparative advantages. His best claim is that his proposal more closely ties CEO pay to company performance, yet he offers a huge argument that says that performance is not motivated by money but by mastery etc. Note his P4P critique is very explicit that motivation comes from things other than money. I concede P4P- money is not a good way to motivate performance. For this reason Pro’s plan offers no advantage- he is just offering another faulty way of trying to motivate performance with pay.


8) P4P Critique does not offer a reason to reject Squo. I rely only on the claim that individuals who want to do good work want to do it while getting paid the best salary they can receive.


Finally, please vote on framework. If you don’t vote on Framework it means you are allowing fantasy world plans, and then you should vote for my proposal to increase average CEO pay to 10 million and have them all donate their income to Gates and Oxfam. That’s 500x10 mil= 5 billion annually to fighting world hunger, disease, building libraries. Since P4P is broken according to Pro, CEO performance won’t change. The Magic Gates plan is the best plan in this round because when the only limit is your imagination debate gets silly.

[1] http://papers.ssrn.com...
[2] http://www.stanford.edu...
[3] http://www.scu.edu...
Debate Round No. 4
wrichcirw

Pro



Kumbaya song!! (video)

First of all, I want to thank CON for the opportunity to debate this topic. His determined and tenacious approach has certainly contributed to making this debate interesting, I hope audiences can agree.

I also want to make public two things:

1) PRO and CON have agreed to a 4,000 character limit for our closing statements,
2) We welcome discussion of this topic, both via public (comments) or private (PM) means.

And now that this kumbaya moment has passed, I will return to our scheduled program of annihilating each other's cases. My 4,000 characters begin:


CON HAS UNDERHANDEDLY BROUGHT SOME SEMBLANCE OF A CASE IN ROUND #4, AND BY DOING SO HAS DODGED THE DEBATE. HE HAD THREE FULL ROUNDS TO BRING FORTH AN ACTUAL CASE, AND FAILED TO DO SO UNTIL I COULD NOT RESPOND. SINCE ROUND #5 IS FOR CLOSING ONLY, I CANNOT ARGUE AGAINST HIS ALLEGATIONS NO MATTER HOW MUCH I QUESTION THE INTEGRITY OF HIS PRIMARY SOURCE. HE KNEW HOW WEAK HIS CASE WAS, AND SAVED ITS FLIMSY BASIS FROM ANY REAL CRITICISM. DO NOT TAKE ANY OF HIS ROUND #4 ARGUMENTS AS UNCONTESTED. CON HAS NOT MET ANY BURDEN OF PROOF.

MY ARGUMENTS HAVE WITHSTOOD THREE ROUNDS OF CROSS-EXAMINATION. IT IS UNFAIR THAT CON'S MAIN ARGUMENT WITHSTAND NONE.

Furthermore, CON has left uncontested that CEOs are determining their own pay. It does not take a Harvard MBA to conclude that CEOs are thus overpaid, and should be paid less. ANY instance of this, TO SAY NOTHING ABOUT IT BEING SYSTEMIC, is enough to affirm the resolution.

BY THIS ALONE I HAVE WON THE DEBATE.

---

The Wolves are Shepherding the Sheep.


I have gone to great lengths to describe HOW and WHY corporate CEOs are paid their lavish compensation.

1) I have demonstrated that the best CEOs are typically shepherds that embody

Autonomy - usually a given
Mastery - they know the company and product - there is no real "market for CEOs", except from within the company
Purpose - MY PROPOSAL ALIGNS CEO PURPOSE TO THAT OF THE SHAREHOLDER


2) I have posed two questions to audiences:

- Why is this issue important?

Performance in corporate America is of paramount importance. One CEO is responsible for his/her company, ALL CEOs are responsible for the American economy. If they perform well, America does well. If they do not, we will ALL suffer.

Incentivizing performance properly is thus a paramount concern.


- Why is a CEO paid so much?

The typical answer is that top talent is expensive, and that in an environment where performance is everything, you must pay for that performance. Therefore, what the market will bear for CEOs is very high.

3) CEOs are currently PAID TO FAIL, NOT TO PERFORM. S&P 500 Total Shareholder Return (TSR) was a paltry 2.5% annually from 2000-2012, while CEO pay MORE THAN DOUBLED in the same period IRREGARDLESS, OR EVEN CONSIDERING CON'S FAULTY ALLEGATIONS OF RAMPANT CEO FIRINGS.

Therefore, Pay for Performance is Broken.


4) CEOs SET THEIR OWN SALARIES. CEOs sit on boards, boards determine CEO pay. Self explanatory.

Therefore, What the Market Will Bear for CEOs is broken.


5) I have floated a REAL-WORLD, FREE MARKET, and LEGAL proposal to provide an example of these wrongs, and how to fix them. This proposal aligns CEO interests to that of the shareholder. It emulates best practices from successful stewards like Goizueta, and the shepherds themselves, like Buffett and Jobs.

Such a proposal would attract only the best CEOs for the company. The initial stock package is substantial, yet amortized over time in order to minimize the cost to the company, and to give the CEO LONG TERM INCENTIVE to perform at the company. If the CEO performs well, NO OTHER COMPANY would be able to match the offer. If the CEO performs poorly, then he/she should be let go, NOT PAID FOR RETENTION AS CON ADVOCATES.

This proposal gives CEOs a greater PURPOSE beyond their otherwise myopic focus on the next paycheck. It would align initial pay to reflect the past 12 years of the wolves devouring the sheep, and would thus represent a substantial pay cut. It is up to the shareholders whether or not they like the plan -regardless, I have given compelling reasons for its enactment.

6) I have contrasted the Chief Executive Officer of America to highlight atrocious CEO behavior. The POTUS does not set his own pay, does not think about jumping ship for a "competitor", and has a long history of performance -- and is not overpaid.

7) I have cited some of the best thinkers in the field - from HBS, MIT, USC. I have cited 100 years of behavioral psychology. My case is substantial:

CEOS ARE OVERPAID. THEREFORE THEY SHOULD BE PAID LESS. VOTE PRO.

Raisor

Con

Housekeeping:
It is totally legit for me to bring in new evidence in R4 since Pro has time to respond. Pro could have weighed my evidence against his or pointed out flaws in my evidence without offering new arguments. New arguments are fair in all but the last round. If it really bothers a judge to see new stuff in R4, then discount my evidence a little- however my evidence stands on academic research and is so much stronger that it is still better than Pro"s.

Overview:
Shared burden of Proof means that Con must actively show why judges should vote for Con. I do this via comparative advantages my advocacy has over Pro"s. Pro has not disputed that preserving freedom is the primary value. The Comparative Advantages I have demonstrated are:

1)Squo is only real world option
2)Only Squo protects freedom. Con restricts what companies are allowed to pay their employees and in R4 restricts who is allowed to be on Boards. Pro makes CEO pay so risky that only the already wealthy could accept. Squo protects open access of position.
3)Squo optimizes company flexibility in attracting/retaining talent. By inhibiting this, Pro hurts freedom and market performance.
4)Squo uses only fair way to determine value of labor- free market. Pro unfairly relies on arbitrary definitions of "too much pay." Pro"s straight-jacket formula also removes autonomy in setting salary.
5)Every piece of evidence in this round shows SP500 expanding and performing well, even after 2008. This shows Squo is economically desirable.

In contrast, Pro offers no clear advantages. The closest thing to a comparative advantage is claiming that his plan will motivate CEO performance better, but HIS OWN P4P argument claims that monetary incentives don"t improve performance. Moreover, he offers no justified benchmark for how much is "too much" despite CEO pay tracking SP500 performance, Boards regularly firing CEOs for poor performance, and 98% shareholder approval of CEO pay. Even ignoring Squo comparative advantages, Pro fails to offer a compelling reason to vote Pro.

Framework is a baseline evaluation of whether or not the content of an advocacy should be evaluated or whether it should be dismissed outright. For example, if I argued "the U.S. should replace airlines with teleportation" you would automatically dismiss my proposal, no matter what economic benefits I could prove, because the proposal is impossible, i.e. not real world. Additionally, arguments which are unfair and make productive debates impossible ought to be ignored on grounds of performative contradiction- we all expect fair and educational debates and so we must uphold them. At the least vote conduct. Framework must be evaluated BEFORE considering any other issues.

Pro has failed to meet the test of Framework:
a)Advocacy is not real-world, S&P companies would never agree to the same pay structure; even if they did the agreement would fall apart rapidly. Pro offers no examples of comparable real world agreements.
b)Advocacy violates anti-trust laws and is illegal. I support this with evidence in R3, Pro does not.
c)Pro unfairly shifts his advocacy. He only introduced his plan in R3 round and then ADDED A NEW PLAN IN R4.
If you don"t vote on Framework it means you are allowing fantasy world plans, and then you should vote for my Magic Gates plan. Pro hasn"t argues against this at all- this plan has all the benefits of the status quo AND results in 5 billion annual revenue to charity. This plan is way better than Pro"s advocacy to cut CEO pay on the offchance shareholder revenue improves (which it wouldn"t).

Finally, Pro has simply failed to uphold his own BoP by conceding in R3 that his plan may increase CEO pay.

VOTE ON FRAMEWORK, VOTE AGAINST FANTASY SOLUTIONS. OR VOTE FOR THE FANTASY OF RAISING CEO SALARY FOR CHARITY OVER THE FANTASY OF RESTRUCTURING CEO PAY FOR SHAREHOLDER BENEFIT.
Debate Round No. 5
72 comments have been posted on this debate. Showing 1 through 10 records.
Posted by Agarsfriend 4 years ago
Agarsfriend
Sad that the voting period has ended, I would have voted Pro for sure
Posted by RoyLatham 4 years ago
RoyLatham
I think rule 5 is fine, and if your opponent accepts the challenge, he's obliged to comply.
Posted by wrichcirw 4 years ago
wrichcirw
"There is no site rule about new arguments in the last round, so unless there is something in the challenge it's up to the individual voter."

Yeah, before I posted my final round, I asked people on my friends list who were online at the time whether or not I would get dinged for this. They pointed straight to what I wrote in round #1:

"Round 5 - closing statements, no new arguments or citations. "

All of them recommended that I do not post rebuttals in the final round, which was my gut feeling from this to begin with.
Posted by wrichcirw 4 years ago
wrichcirw
I also want to quote from the debate as to why the proposal floated in the debate IS a pay cut:

"Instead of $8.75 mil, reduce to roughly $6 million (2000 level plus 29.4%)"

"If the CEO achieves the anemic 2.5% S&P 500 TSR since 2000 over 20 years, the $50 mil would be worth $81.93 mil."

"If instead of this plan we continue with the status quo, the CEO would continue to receive AT LEAST 8.3% pay increases on their $8.75 mil over 20 years - they would pocket $415.50 mil, even if they ran the company to the ground (assuming all cash). They would receive $40 mil on the last year ALONE."

This is clearly a pay cut from the status quo. IF this motivates CEOs to perform to at the very least historical S&P 500 standards, then their pay -- linked to performance -- will go up IN THE FUTURE, DESPITE THE PAY CUT:

"At the 9.2% S&P 500 historical TSR, the $50 mil would be worth $290.68 mil. "

This is STILL a substantial pay cut from the status quo.

ONLY IF the CEO performs to the likes of Buffett or Jobs would they get pay substantially higher than the status quo:

"If he achieves Jobs' 19.87% TSR, the $50 mil would be worth $1.876 BILLION, well above the status quo."

Even in this final instance it is a pay cut. Why? Because their pay got cut. IN THE FUTURE, after 20 years of performance, their pay rose to emulate performance. HOWEVER, THEY STILL SUFFERED AN INITIAL PAY CUT DUE TO THE PROPOSAL. ONLY AFTER BEING PROPERLY MOTIVATED DID CEOs ACHIEVE HIGHER PAY.

To me this is clear as day from how my proposal was worded despite several voters and CON himself arguing that it was a pay increase. I don't want to emasculate anyone over this because I understand that I was not even done stating half of my initial argument by the end of round #4.
Posted by wrichcirw 4 years ago
wrichcirw
Dimon's salary is not a bonus.

I understand Wall Street bonuses work as you say they do. That's why I do not consider them affirming the resolution. Regardless, in Wall Street, the trend is that you get hit when you do not perform. Having TSR increase by 29.4% while CEO pay increases by well over 100% points to a trend contrary to what we observe here on Wall Street.

I specifically didn't go into Wall Street in detail precisely because they do operate largely on a pay-to-perform basis. However, this is not true for a lot of corporate America.

" Your whole argument is that there is no competitive market setting compensation, because the rich board members act to protect well-paid execs so they are immune from competition."

No. I wasn't able to get into the board in detail. First of all, the board member are not innately rich, they are enriched by their board seat, as evidenced by professors like Steve Kaplan who derive a salary larger than his actual job from sitting on boards. Board members like this are essentially bribed and paid for by CEOs who appoint them in lieu of shareholder apathy.

IDEALLY, board members are large shareholders and thus rich, but I specifically say that "this is no longer a reality in corporate America, as individual shareholders typically hold so little of a company's stock that their position and thus motivation is a tiny fraction of what it ostensibly should be."

"There has been something of trend for the top performers to start their own companies, where they take all the risks and get all the rewards."

I agree this is an excellent trend.
Posted by RoyLatham 4 years ago
RoyLatham
There is no site rule about new arguments in the last round, so unless there is something in the challenge it's up to the individual voter.

I think the idea is that Instigator gets to rebut the new arguments made in the previous round in the last round, otherwise they would be unanswered. Then he gives his map of the debate in which he attempt to show that his arguments were not properly rebutted by his opponent. In the last round, the Instigator cannot introduce new arguments, but only rebut old ones.

The Contender cannot introduce new arguments or new rebuttals in the final round, because his opponent has no opportunity to respond. The contender gives his map of the debate, showing what he thinks were inadequate responses.
Posted by RoyLatham 4 years ago
RoyLatham
Both the bloomberg.com videos are contrary to your claim. Bonuses are based upon performance, so if profits are down pay is cut automatically. Jobs are cut when profits are down. Both show the market for high-priced talent is working just fine. Your whole argument is that there is no competitive market setting compensation, because the rich board members act to protect well-paid execs so they are immune from competition. There has been something of trend for the top performers to start their own companies, where they take all the risks and get all the rewards.
Posted by wrichcirw 4 years ago
wrichcirw
This alone doesn't necessarily affirm the resolution, but it does seem that Wall Street agrees that top talent should indeed be paid less, and that performance is to blame:

http://www.bloomberg.com...
http://www.bloomberg.com...

Boards and shareholders are doing something similar to my proposal, i.e. cutting pay.
Posted by wrichcirw 4 years ago
wrichcirw
This is a problem with this website. No one has any real idea what "convention" to actually use.

Most people consider a "closing comment" round to be just that - can't address arguments brought up during the debate, strictly closing.
Posted by Raisor 4 years ago
Raisor
Why would you not be able to address R4 during R5?

I think you misunderstand the convention of "no new arguments in the final round"
11 votes have been placed for this debate. Showing 1 through 10 records.
Vote Placed by F-16_Fighting_Falcon 4 years ago
F-16_Fighting_Falcon
wrichcirwRaisorTied
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Reasons for voting decision: Comments
Vote Placed by RoyLatham 4 years ago
RoyLatham
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Reasons for voting decision: Pro agrees that only shareholders need to be satisfied with the CEO's pay. Shareholders have valid mechanisms for expressing their dissaisfaction, by direct resolutions, voting for board members, and accepting a buyout. Plenty of CEOs are booted for not earning their keep. That settles the debate. I think rock stars are overpaid, beaude I wouldn't pay $250 to see some guy jump around with a guitar. But my opinion doesn't count; it's entirely up to audience. CEOs are like that.
Vote Placed by drafterman 4 years ago
drafterman
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Reasons for voting decision: My main issue with this debate is the meta discussion regarding what this debate should have been about. There is a difference between arguing that some outcome should happen, regardless of the methods to achieve it, and arguing the merits of a specific method. Con attempted to argue that this debate was about the latter, when there is no clear indication that it was. Pro presented no specific method in the resolution, so there shouldn't have been any expectation of one by Con. Then, Con complains when Pro provides an example method (in response to Con's demand!) when the structure of the debate is such that arguments in rounds 2-4 are perfectly fine. Con got exactly the debate he accepted, and complained about it.
Vote Placed by innomen 4 years ago
innomen
wrichcirwRaisorTied
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Reasons for voting decision: RFP to follow in comments...
Vote Placed by thett3 4 years ago
thett3
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Reasons for voting decision: The debate kind of dragged down into an argument about whether the squo is desirable--which is what, IMO, the debate SHOULD HAVE been about, but Cons framework was conceded, and Pro did present a real world plan so I have to vote on that, and in that case its a clear Con win. Again, it would've been a lot closer if it was about the sqou being good, but it isnt. I read the entire debate, but after Con's R3 statement "Pro's plan is a pay restructuring NOT a pay cut. Pro himself says "this kind of package may far outweigh total compensation currently received." This is a double-bind: either Pro's plan is successful and CEOs get rich (meaning he doesn't uphold the Resolution) or Pro"s plan does result in CEO paycuts showing his plan fails to help company performance." I could already tell the ballot would likely flow to Con. Even if I take Pros plan as resolutional, the args. about it harming struggling companies and keeping normal people from being CEO's would still carry the round.
Vote Placed by royalpaladin 4 years ago
royalpaladin
wrichcirwRaisorTied
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Reasons for voting decision: I didn't like Con's theory shell, but Pro dropped it after it was presented, so I have to evaluate the round according to that standard. I agree that nobody is ever going to adopt such a framework-companies have absolutely no incentive to, as Con notes, because they have to attract and retain talent, and high salaries are the mechanism through which they do this. I also bought that Pro contradicts his own case when he claims that his plan will increase total payout for the CEO. The stock freezing disad works as well. I didn't think that Pro's case really was in line with his plan; he offers a massive monetary incentive for performance while claiming that monetary incentives are bad. Pro did not even get offense from his discussion of shareholders. Shareholders are not being harmed if the company is not functioning at max capacity because nobody is coercing them to hold stock. They can easily sell the stock, as Con noted, if they do not feel their payout is high enough. Clear Con win.
Vote Placed by Greyparrot 4 years ago
Greyparrot
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Reasons for voting decision: Wow- I thought this debate was silly enough with the completely unsubstantiated "CEOs are Wolves" argument; but that whole comparison between the Potus and a CEO was just way out there.
Vote Placed by dylancatlow 4 years ago
dylancatlow
wrichcirwRaisorTied
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Reasons for voting decision: Pro made no valid arguments. Waving your hands "or hand" in the air and making a lot of noise is not an argument. A CEO's salary is determined by supply and demand, at least it should be. He listed Warren Buffet and Steve Jobs as 'success stories' of low-paid CEO's working. These men each have made billions. Any salary would be a drop in the bucket.
Vote Placed by tmar19652 4 years ago
tmar19652
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Reasons for voting decision: raisor tried to shift the bop and only had less substantiated sources.
Vote Placed by 1dustpelt 4 years ago
1dustpelt
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Reasons for voting decision: steve ballmer should be fired