Corporate CEOs in America Should Be Paid Less

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 Rebut1,3,4)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...