The pay problem: CEO, quarterback, actor

“Whenever the topic of CEO pay comes up in public debate, it quickly devolves into a battle between free market capitalism and pseudo-socialist morality. This is a mistake. If we are to address this issue meaningfully, we need to move away from ideological extremes and consider the causes of the wide discrepancy between the pay-scale of CEOs and average workers (which currently stands at 379 times).”

What does the ratio between average workers and CEOs have to do with it?

S Sanghoee thinks We’re having the wrong debate on CEO pay. He thinks the issue is about conflicts of interest.

Why does the ‘issue’ of CEO pay come up as a concern so much more often than the pay of quarterbacks in the NFL or star actors? Why does a business star get such negative attention while stars in sports or entertainment appear to get a pass?

All three fields pay based on a gamble. The actor on the success of the movie in which he stars, the quarterback on the ability to win trophies, and the CEO on the value of the company stock. One of the clues to the problems with arguments about CEO pay is that they often just concentrate on the failures in this gamble. That is an argument based on misdirection and a lack of appropriate context. Such lack of integrity implies that it is indeed a more deep seated anti-capitalist bent based on personal feelings of envy that may be behind the point of view. This implication gains emphasis when assertions are made about conspiracies or power centers

“The other big weakness in our system is the propensity of companies and shareholders to accept the “divine right” of CEOs, which elevates them to monarch status and enables them to run their companies like private kingdoms rather than as trusts run for the sake of the owners.”

Companies fail if they don’t address problems and poor leadership can be one of those problems. Much like the coach who takes the star quarterback out of the line-up if he doesn’t perform, a successful business will toss the CEO if performance is lacking. Consider the recent history at HP, for example.

The presumption that one person’s pay should be related to another’s is the one to question. That denies the impact of the individual on his own personal choices about what he does as well as that person’s individual capabilities and talents. The assault on CEO pay is indeed a reflection of pseudo-socialist morality as it denies the role of an individual in favor of the commons. Been there, done that, why don’t people learn?

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