2/8/09
Sometimes you have to take a look at the way Americans think, and cringe. The current apologia circulating the business world was laid out in Roy C. Smith's essay in the Wall Street Journal, effectively saying this: the public may bemoan the crazy-ass salaries and bonuses garnered by execs and CEOs of financial institutions, but if we didn't pay them so much, we would lose their considerable talents. In other words, these people are worth millions upon millions in compensation because failing to pay them threatens America's economy.
I suppose you know where I, Angry McLeftypants, am going with this: Smith's idea is mired in such unwavering BULLSHIT that I'm actually tempted to call it poppycock. Let's break it down, shall we?
1. First off, aren't these irreplaceably talented motherfuckers the ones that got us into this quagmire in the first place? How can anyone, with a straight face, say that the higher-ups at Lehmann Brothers are worth more than the GNP of Belize? If we've learned anything in the last decade, it's that Everyone's Faking It Except Ear, Nose and Throat Doctors. It's also apparent that the culture of exorbitant bonuses has not ultimately done these big companies any favors. John Thain spent $35K on a commode - all kidding aside, how exactly did that help Merrill Lynch?
2. Second of all, I get the principle: if you have more responsibility, you get paid more. As recently as 1990, CEOs received, on average, 85 times what a normal worker received - about like it is in other countries. But by 2005, that number had jumped to 411. That's goddamn insane.
Our country truly came into its own after WWII, an expansion and growth unsurpassed in modern history. And it all happened with a low, ethical, morally-sound pay gap between workers and execs. Now Roy C. Smith is telling us it can't be done unless we lavish manna at the feet of CEOs? To paraphrase the Squirrel Nut Zippers, if it's good enough for Grandpa, it's bloody well good enough for us.
A humongous pay gap undermines morale, ruins the hierarchy, and actually makes companies perform worse. My heroes? Dan James and the folks at silverorange. Hugely successful company, some of the biggest clients on the Web... and Dan, the CEO, makes the same salary as his newest, youngest code writer. Genius. Those guys engender cult-like respect, and rightly so.
3. Here's the most important thing: if our best and brightest don't choose to go to Wall Street because billions of dollars aren't being offered anymore... isn't that good news? Take it from me - I've seen the greatest minds of my generation... well, I've seen the greatest minds of my generation smoke a lot of pot and waste the years 1990-1997. But the other greatest minds of my generation could have gone into science or medicine, but the allure of banking $$$ was too much for anyone to deny.
These people could have discovered an alternative energy source ten years ago, and we'd already be off gas. One in particular was a chemist who was working on the Genome Project. Another was processing an industrial chimney scrubber that never saw the light of day. In EVERY CASE, the Wall Street headhunters found them in grad school - or on a summer internship - and they were whisked away. Don't blame them; they were 22. What would YOU have done?
I posit this: Roy C. Smith is so myopic about Wall Street bonuses that he can't see what others might: if it weren't for the gadzillions of dollars thrown around lower Manhattan over the last 20 years, there would have been a cancer vaccine.
Posted by Ian Williams at February 8, 2009 11:04 PMIf I hear another conservative whine that Obama is going soci alist on us for proposing a cap on *some* executive pay packages (only those who work for the companies that put us in this economic pickle and have their hands out for assistance like good little commies themselves), I am gonna CUT A BITCH.
And that's not something we grannies say too often. (Well, actually, this crazy granny does. But you get my drift.)
You make a great point. We need to teach our kids to eschew the notion that one's paycheck is representative of his value.
Does anyone have any thoughts on tying the tech explosion of the 90s to the explosion of executive salaries? Did it start then as a way to keep bankers/etc from jumping ship?
to your posit: that assumes that the minds that have been chasing dollars on Wall Street are infinitely smarter than the minds in the medical research field. Or, that the medical world (including biotech companies) is low paying? Hmmmm. I agree that the money-to-value ratio on Wall Street has gotten gross, but i don't know if we can assume the street was draining all the legitimate talent in America.
I have a degree in Chemistry and I program computers because science jobs don't pay as well.
I get paid more than most PhD's that are doing real science. That is why I do it.
So yes, the money on Wall Street was draining talent from other endevours.
Everyone's Faking It Except Ear, Nose and Throat Doctors is my new mantra.
Love that "If it's good enough for grandpa" stuff. What, like Jim Crow? But I take the point about ridiculous executive salaries.
A few weeks ago I watched this "inside report" on American Airlines. I forget which network - might have been CBS - spent a week with AA viewing all levels of the business and interviewing the CEO, other management, heads of the different labor unions (pilots, flight attendants, maintenance, etc). Overall people put on a pretty good face for the camera and claimed a lot of satisfaction with working for AA, but the one thing they openly admitted is a source of major conflict is executive compensation. The technical people in particular spoke at greatest length about it, explaining that they felt that their efforts directly resulted in changes which increased revenue for the airline - but the financial rewards went to the executives and not their specific division management team or staff who conceived and implemented those improvements. All of the labor union heads said it's the single biggest challenge to employee morale.
The CEO's explanation was that AA uses a business model common among corporations of that size. He said that executive compensation is directly related to prosperity - when revenues and stock prices go up, executive compensation and bonuses go up as well. I think I'm paraphrasing that correctly.
Of course, he didn't discuss what happens when revenues and stock prices go down. By that logic, it seems pretty straightforward to me that a company on the verge of collapse and accepting federal assistance couldn't easily justify using those dollars to pay its executives these huge salaries/bonuses that we often read about.
On a different topic, I just finished reading Paul Krugman's (2008 Nobel prize in econ) book, The Return of Depression Economics and the Crisis of 2008. A very interesting read.
If the banksters are so rich, why ain't they smart?
My problem with CEO responsibility, is the absence of accountability. Funny how people make different decisions when they've got some skin in the game.
"Well, nobody is going to risk the liability of leading a corporation, if they are held accountable and suffer financial consequences for not delivering profit."
Try and sell that to American business owners, who can't fly to D.C. when they run out of money. Time to say goodbye to childish ways.
The salary cap applies to companies taking money from the current bailout bill.
I am asking this because I do not know the answer. Does the salary cap apply to Fannie and Freddie execs????
http://www.guardian.co.uk/commentisfree/2008/jul/21/housingmarket.economy
I am glad that Obama is finally doing what companies and their boards should have done long ago on their own (think "own lots of Tyco shares purchased at $55 ps).
Let me get this out of the way first, since it is most important. Did you read the article in Friday's Weekend Journal titled "Why Carolina Owns College Hoops"? Read it here:
http://online.wsj.com/article/SB123388634925655277.htmlI also read Roy Smith's essay, and felt it was bullshit. My former investment banker husband had a different take on it. The compensation is not about responsibility, but creating value for shareholders, blah blah blah. It's a commission based business, and they deserve their share. Very few of the bankers dealt with mortgage-backed securities, so why should they all suffer because of the mistakes of a few. (Ummm...because their companies failed??) He sees both sides of this argument, but I know he's wrong!
On this we agree. I actually cheered when Obama announced the pay cap. It's about time. Those companies need people who will actually run them, not people who will run them into the ground and take their $83 million bonus because the "deserve" it. While I recognize that this is just their pay and there will be compensation elsewhere, there has needed to be some common sense re-introduced into this madness.
maybe we should just make sure the bailout money is spread out to all welfare recipients equally and kind of even things out so everyone gets what they deserve for the hard work they do - i-bankers, single moms, etc.
Rebecca, that headline is misleading, don't you think? Should read "Why North Carolina Owns College Hoops." And good gravy, I doubt the average Joe would want to ride a bike from Chapel Hill to Wake Forest! LOL! Determined, indeed!
Oh, and have y'all heard about the documentary that's going to air on HBO about the Carolina-dook rivalry. My sister and BIL got an advanced copy of it and said it was great.
http://sportsillustrated.cnn.com/2008/writers/richard_deitsch/06/22/media.623/
http://blogs.newsobserver.com/sportsmedia/hbos-duke-unc-documentary
1. I'm not so sure about the ENTs. Ask anyone with chronic sinus infectionsw. I'd say everyone is faking it. Not a bad thing. Creativity is another name for successful faking.
2. If, across the board, we put some limit on CEO salaries, where would they have to go to make more money?
I'm not saying I'm in favor of laws capping salaries. That not really the sort of thing you want to legislate in a free society. Would we cap what an actor can make on a movie? What Bon Jovi can charge for a show?
I do think that there should be some social opprobrium attached to making tens of millions of dollars to run a company into the ground. I'm looking at you, Carly Fiorina. There should be a daily column in every newspaper and on every website, along the lines of "THIS ASSHAT JUST LAID OFF 5000 WORKERS, AND COLLECTED 2MIL IN BONUSES. HERE'S HIS HOME ADDRESS AND A COUPON FOR A DOZEN ROTTEN EGGS."
I'm with Kent. Not sure about ENTs either.
Lots of surgeries done for no good reason - except maybe to pay off the beach house.
i think the only time people are proposing outright caps on salary is when the government taxes people and then proceeds to spend that money (our money) to prop up a private company.
there is no reason to prop up a private company except to take care of the well being of citizens, the government doesn't have an investment profit motive in this transaction.
so, since we are going around spending money to help people out, i think there are a lot of other people who are equally deserving of a share of government money, and at the top of my list are the single moms on welfare. those Greenwich executives on corporate welfare don't even make page 1 of the list.
JJE: I agree the headline is misleading, but the addition of the word North doesn't really clear it up. Imagine how Dook and Wake fans feel about that headline! It should read "Why North Carolina Universities Own College Hoops".
He not busy being born is busy dying. -Bob Dylan
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