Occupy Wall Street 311 R.
(photo credit: REUTERS/Shannon Stapleton )
“Male and female are the distinctions of nature, good and bad the distinctions
of Heaven; but how a race of men came into the world so exalted above the rest,
and distinguished like some new species, is worth inquiring into, and whether
they are the means of happiness or of misery to mankind.” – Thomas Paine
back I received an email inviting me – as the owner of a tiny slice of Verizon –
to vote on a double handful of proposals for its upcoming shareholders’
Mostly I abstained (having – for instance – no clue about
this-or-that proposed board member). On a couple of issues I approved the
Then there was the shareholder proposal to place
certain limits on the compensation that could be offered to Verizon’s top
Predictably, the board opposed the measure.
reasons fell somewhere short of coherence, but included the classic, “the
compensation opportunities provided to Verizon’s senior executives should be
competitive with Verizon’s peer companies.”
This would make sense were
there an insufficient pool of applicants who could successfully run Verizon or
any of its peers.
JPOST VIDEOS THAT MIGHT INTEREST YOU:
Verizon would then have to compete with those peers to
attract and retain one of these applicants. I would call that situation
“imaginary” – except that I can’t even imagine it.
Let’s examine some of
the things that would have to be true to make such a situation real:
company’s top executives account, to a significant degree, for its success. (I
can see how this idea would be attractive to conspiracy theorists and those with
a visceral respect for authority. By the same token I find it as likely as the
Illuminati really running the world or the secretary of education determining
the outcome of my child’s schooling).
• The effect these executives have
on a company’s success is deliberate. (If their decisions are crucial, but they
make them by tossing coins, we can hire a coin-tosser for considerably less.);
One can recognize which people are likely to take the actions that are likely to
increase the chance of success;
• The pool of these people is small enough,
relative to the number of companies wanting to hire them, to bid their price up.
Together with the previous item, this means that our ability to evaluate people
for executive ability is so fine that we can be confident in our decision to pay
twenty times as much to a candidate on our short list as we would pay anyone who
didn’t make the cut (the very idea of a small pool that can command huge
salaries assumes that the salary spectrum is not continuous);
• The difference
in salary couldn’t be used in ways that are more likely to enhance the chance of
success. That is to say, the $10 million executive is innately worth more than
twenty $500,000 executives, and more than 500 line workers.
think the items on the list range from the improbable to the wildly improbable,
but I could be wrong. Compensation committees, though, should be pretty darned
confident that all the above are true before spending millions on an executive.
Remember, we’re in a bottom-line, no-nonsense, dog-eat-dog business.
else could we justify sending hundreds of jobs overseas? For whatever my shares
are worth, I’d frankly rather not have such people making decisions about my
Now, I’ve heard some subscribers to the “heroic” theory of
executives compare them to sports stars and industrialists, but all they really
have in common are their incomes, which is rather circular.
players demonstrate ability in an artificially narrow domain, where the
connection between hitting a home run and winning a game is obvious. Similarly,
the sales of golf clubs with Tiger Woods’ signature can easily be compared to
others, so the value of his endorsement, too, is
Industrialists’ incomes aren’t determined by committee;
whatever their competence, they make their money by selling things that are
In short, people who make these comparisons are confusing the
issue of income disparity with the issue of executive compensation.
needn’t subscribe to the belief that no one should be super-rich to see that
there’s no business sense in paying multi-million-dollar salaries to top
Initiatives to legislate salary caps are currently somewhat
in vogue. I’m not in favor of such legislation, any more than I favor the
government stepping in to prevent other stupid behavior. Freedom includes the
freedom to err. (Also, I don’t assume the people implementing such policies to
be any more competent that the ones they’re overseeing.) But the idea that there
exists this natural aristocracy of top executives is as repugnant as it is
unsupported, and I for one intend to keep voting my few shares in that
direction.The writer is a veteran software professional, educational
activist and sometime entrepreneur. He blogs at
Join Jerusalem Post Premium Plus now for just $5 and upgrade your experience with an ads-free website and exclusive content. Click here>>