Columnists
Watch The Apple Barrel
T. SHER SINGH
DAILY FIX
May 19, 2012
If there’s one thing we have learned - particularly during the George W. Bush years and the ones that followed - is that paying corporate CEO’s foolishly exorbitant salaries and bonuses doesn’t get you any better quality of management.
Or an honest executive.
Or a stronger company.
Or, a man or woman who, even if unable to make a profit for the employer (“because of the economy“), at least doesn’t steer the corporation into ruin or bankruptcy.
But, have we truly learned the lesson?
We’re still paying senior executives - almost all of whom have merely proved themselves marginally competent, at best - tens of millions of dollars. Some, we are learning, are raking up hundreds of millions of dollars.
There’s nothing wrong with making oodles of money, as long as one earns one's keep. And one doesn't earn an 8- and 9-figure income by NOT performing corporate miracles.
If you can’t walk on water, wherefore the adulation?
I thought capitalism was meant to be a free market where merit would rise to the top, and pull-up the rest of society in the process.
What we have now, in the current manifestation of capitalism, is banditry and highway robbery. By a handful, at the expense of the rest of humanity.
I don’t think uncontrolled greed - uncoupled with performance - was meant to be a necessary ingredient of capitalism or a free market.
True, citizens have every right and freedom to amass personal wealth until they can’t move or breathe under its sheer weight. But, like all rights, that right too is meaningless if not defined by reasonable limits.
After all, even Free Speech is limited, as are Freedom of the Press and Freedom of Religion, aren’t they. Why must the Right to Untrammelled Greed then have no trammel? Is it more sacrosanct?
If not, why not limit the freedom to stuff the nation’s and the world’s wealth in your personal and private coffers?
The challenge, no doubt, is in doing it without going the communist or socialist route. After all, we want to continue to encourage enterprise and investment.
And we don’t want to get the Republicans and Conservatives - those perennial sentinels of society’s values (Why does the spectre of Newt Gingrich’s face immediately come to mind?) - suffering coronaries over the world turning ’liberal’ or ‘socialist’ or even ’communist’, do we?
Here’s a modest 2-step guide … totally open to improvement.
* The income of the head of any company should not exceed an amount 20, or 50 - oh, why not, let’s say 100! - yes, a 100 times that of the person on the lowest rung of the ladder in the same organization.
That is, for example, the CEO of XYZ Inc. may draw an income of 3 million dollars every year if the lowest worker in its factories and offices earns $30,000.
Now, this isn’t meant to put any kind of cap on Mr CEO’s income because, after all, his personal needs, for some inexplicable reason that ordinary souls like you and me simply can’t understand, may require more cash in hand than $3 million every year.
Fine and dandy.
He can increase the lowest worker’s salary to $40,000 - which will also mean he, Mr CEO, has to make the company perform in order to do this. THEN, his own salary automatically increases to 4 million dollars. So on so forth …
He was hired to guide the company into higher profits, not to guide his own salary higher and higher. What I mean is, the increase in his compensation is a result, not the raison d’etre, of his role in the company.
[I should add at this juncture that when I first started formulating this idea, I was locked into the figure of 20 times the lowest salary. I thought it reflected the fact that no human could possible do 20 times the work, in quality or quantity, as any other in the very same organization that he runs. Surely, the bottom rung worker is doing his job well and meaningfully and productively, because he remains employed and is being paid a salary! But then, I’ve looked around me and noted the burgeoning needs of human greed, and heard all the brilliant arguments in favour of feeding it liberally. So, I’ve been generous and upped the multiple to 100.]
* No rank in any company should be given remuneration which is more than double the amount made by the level immediately beneath it.
Thus it would be okay for a President to be paid $20 million per annum, as long as each Vice-President gets $10 million each per annum.
Am I right in assuming that while the corporate board had sought and hired the Great Performer, it wasn’t looking for nincompoops to man the next level of management? And, wouldn’t you agree, the next level is merely preparatory for the top position, and therefore requires similar qualities, even though they may not be yet ripe?
Of course, with the salaries I have cited here so generously, the lowest worker will have his salary adjusted accordingly! After all, he’s doing the actual work that has been so brilliantly envisioned and strategized by the kahunas.
* * * * *
Are such limits and guidelines enforceable?
Yes, they are. The law in each of the civilized and progressive countries already imposes and enforces limits in many situations.
For example, it puts limits on amounts that can be sought or awarded in certain insurance claims.
Another example: it also puts limits to lawsuits against government officials.
There are countless areas of this ilk. None of those limits have been found to infringe any rights or freedoms. And if and when they have, they have been over-ruled by legislation.
Many will ask: Will our top corporate talent flee the country for greener pastures?
I don’t think so.
Who dares suggest that a salary of several million dollars will not attract the crème de la crème?
All we will lose is a bunch of obscenely greedy and dismally incompetent executives.
The bottom line: it is time for our politicians to deal with this real issue.
If we don’t do something now, it’ll be the top of the barrel, not the bottom, which will have all the rotten apples!
Conversation about this article
1: Baljit Singh Pelia (Los Angeles, California, U.S.A.), May 19, 2012, 12:27 PM.
Senior professional executives are solicited globally and sought by entities through an open and aggressive recruitment process. After approval and negotiations, the compensation as well as designations are annointed by the board of directors of the hiring entity or institution. Labor compensation, on the other hand, is artificially protected by the national and regional wage limits set by politicians/ governments or negotiated by unions and management and further by controlled immigration, thereby defeating and side stepping the concept of supply and demand so fundamental to the capitalist economy. So respectfully, I disagree with the basis of your concept.
2: Sangat Singh (Kuala Lumpur, Malaysia), May 19, 2012, 1:43 PM.
I can't lay a hand on my copy of the book "Maverick", by Richardo Semlar that lays buried in some mountain of books. But I remember it vividly that it eminently dealt with the "Barrel of Apples". It is a breathless account of when a 19 year old heir was handed a company to run. With no experience at all, he set out in a boyish manner and tore down the walls and the rules. He abolished the dress code and regulations, got rid of paperwork and titles, starting with his own. Instead of CEO, he gave himself the appellation of "counselor" and created a consultative democracy where the employees set their own salaries and work hours and no parking spots were reserved for anyone. They even voted on managerial candidates, appraised and evaluated them. Sounds crazy but it worked. On the brink of bankruptcy in 1980, Semco achieved revenues of $34 million in 1993 - and $160 million in 2000. I am not sure if it is still setting up new goal posts.