Finito la Commedia

Updated: Has “executive” become synonymous with “parasite”?

America IS the Evil Empire

The following is a message sent to NPR’s Marketplace. They were requesting public comments to help them decide what to cover during election season.

What local or national issue do you find yourself talking about with friends and colleagues?
My friends, colleagues, and I are very concerned about executive pay. It seems to me that what has traditionally kept excessive executive pay in check was that the board of directors had to justify their actions to stockholders, some of whom were very active, owners of large blocks of stocks, or members of the board themselves.
As stock ownership has become more diffuse through the rise in popularity of mutual funds and 401(k) plans, whose managers  may not have the same proprietary interest or motivation to challenge directors’ actions, a power vacuum has arisen in the check against boards of directors.
I am an attorney (non-practicing) and business professional and, honestly, it is hard for me for me to think of anything a CEO or other executive could possibly do that would justify salaries in the multi-millions, especially when that is just the base rate of pay. I understand that many boards feel they must offer “competitive” compensation if they are to retain the most talented leadership, and since other companies are willing to pay these rates, the most competitive industries must do so in order to compete.
I think they are wrong. I think that the compensation for any employee, top to bottom, must relate to that person’s actual ability to increase profitability or maintain value.
Are there CEO’s who are capable of single-handedly producing even one cent more for their company than their multi-million dollar salary? I challenge anyone to show me that an executive’s work routinely, every year, brings in more than his or her cost.
I could probably name five people right now who I sincerely believe could competently head even the most complex and competitive companies – and who would be happy (in the abstract) to do so for…say…one million a year? Obviously, such people are aware of their value, and their compensation is the primary measure of their prestige and their company’s commitment to them. In principle, however, I’d wager that even most highly paid executives know they are not producing more than their cost; that they gain no more life satisfaction with $50 million per year than they would with $1 million; and that the whole situation is ridiculous.
Add to the argument that companies are reducing wages (either in hard dollars or by failure to keep up with inflation), laying off workers, closing divisions, outsourcing, and facing strikes. Add to that the recent national employee satisfaction surveys that showed employees across the nation are getting fed up with working more, harder, and more efficiently, and not receiving any benefit from it. Add to that the shrinking middle class (the existence of which, I believe, is the root of American prosperity).
Has executive become synonymous with parasite?

Who, if anyone, is addressing this issue at the local or state level?
The only people I ever see dealing with this are journalists (very occasionally, and in no depth) and, surprisingly, personal injury lawyers in their advocacy against tort reform.

Describe a solution to this issue that you would propose.
As I am trained as an attorney, my most familiar solution is to make or enforce laws, and I’m not sure that’s the best solution. I think changing corporate culture to hold board members accountable for their wasteful spending would be good, in addition to holding executives responsible for proving – quantitatively – that they are more valuable to the company than they cost.
If I were to make laws, I would propose three:
1) For corporations, make it per se mismanagement, enforceable by shareholder lawsuits, to pay any highly paid employee more than they produce in profitability or value. Make the board prove in real, verifiable numbers in their annual report.
2) Tie layoffs to management’s pay. For example, bankruptcy courts could (and may, I don’t know) require harsh reductions in executive/management pay before reorganization or debt discharge — and backdate this. In bankruptcy or not, if lower-paid employees are taking pay cuts or losing their jobs, management should lose just as much or more, because it is their job, more than the lower level employees’ to make the company profitable in the first place.
3) It should be illegal to contract for a “golden parachute” that would pay an executive a large severance even if fired for cause or malfeasance.

Hurray! I'm almost famous!Update:

Marketplace was interested enough in my comment that a reporter called me for more information. Ultimately, I didn’t make the cut for their “What’s Your Issue?” series, but I was thrilled to have earned that much attention!


2 Comments so far
Leave a comment

Congratulations on you straight from the shoulder letters to both senators. Bumper sticker: REMEMBER MAHER ARAR

I am thrilled for you that your message to NPR was considered. It was excellent. I hear rumblings from people about the disgust that they feel towards big business and, of course, towards Congress and the administration. There have been a surprising number of suggestions that the two-party system is hopeless. Too many people hurt too much. Very little trust in big government/business. Thanks for speaking out.

Comment by Susan Reynolds

good project 🙂
senks 🙂

Comment by FreeStoring

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: