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CEO pay explained

Wed., June 4, 2014

Although it doesn’t fit with the headline, one of the major reasons CEO pay is so high is because of consolidation of companies. If two $10 billion companies merge, one CEO and a lot of associated management lose their jobs.

Since it is somewhat harder to manage a $20 billion company than a $10 billion one, a significant raise can be paid to the survivor while still seeing a reduction in the percentage of profits being paid to the CEO. This is in the shareholders’ best interests, so they approve.

If the labor force would propose producing the same goods with less people they could negotiate higher pay. This does not happen because union management’s best interests are to maximize the number of laborers and the dues they pay.

William Rust

Wallace

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