Should America Outsource Some CEO Positions ?
About the Author: I also write under the names Rudi Stettner and Magdeburger Joe. My home websites are rudistettner.com and magdeburgerjoe.com. Through my writing I like to promote a "labour conservative " social outlook as well as my eclectic tastes and interests Read more from this authorOne of the factors in the fall of communism was the complete disconnect between productivity and rewards. There was complete security for failing employees and failing businesses. An old Soviet era gag line was “They pretend to pay us, and we pretend to work.”
In most cases, heavy government subsidies were coupled with a kleptocratic ethic and under the table set of connections to get scarce goods and services.
Workers in the free world are bound by considerations of productivity. Under-productive workers will quickly find themselves unemployed.
Corporate executives on the other hand earn obscenely high salaries that they collect even when they are laying off employees. The gross disparity between the wages of an average worker and of a corporate executive set Americans apart from their Japanese counterparts. An article in today’s New York Times reports as follows.
“Executives here earn about 12 times more than the average worker, a gap that has grown gradually since stock options were introduced in 1997. By contrast, American executives earn 180 times more than their employees, a gap that has more than quadrupled since 1980, according to East West Consulting.”
New York Times Article on executive pay.
European public opinion has been squarely against excessive pay packages for top executives even when they are heading companies that are doing well. The Economist in their June 12, 2008, issue report that most European companies link executive bonuses to corporate achievement. This plays out far differently than the proliferation of “golden parachutes” that have dotted the American corporate landscape.
“Most importantly, European companies appear to be more determined than American ones to link pay to performance. “Firms in Europe have tended to put more stringent conditions on long-term incentive awards than in America,” says Richard Bednarek, global director of executive remuneration for Hay Group. In America grants of shares are often not tied to performance, whereas European firms generally attach performance criteria to any grant of shares, typically depending on a comparison with a peer group. Such schemes often do not pay out at all, says Mr Bednarek. Dan Vasella, boss of Novartis, a Swiss pharmaceutical giant, and a favourite target of pay activists, earned SFr17m ($14m) in 2007, down 33% from 2006, because he missed his targets.” The Economist 6/12/08.
Such a productivity oriented approach is unheard of in America. The graph at the bottom of this page from the same article compares European corporate salaries with American boardroom pay.
The issue of corporate pay and its link to corporate performance is long overdue. Executives that have led their companies to bankruptcy now stand to collect bonuses that resemble good sized Lotto jackpots. They have no incentive not to lengthen their swath of destruction across the corporate landscape. The question on everyone’s mind is whether or not these corporate misfits should be prosecuted. Any bailout should leave this question open.
Outsourcing of jobs has been the bane of the American worker. Even those who trained to be computer programmers are finding their jobs outsourced overseas to people who are paid less than America’s minimum wage.
Perhaps we should outsource the jobs of failing corporate chief executives to other countries that have saner corporate pay scales. I expect that such a step would be fought with vigour by America’s corporate gangster elite. Almost certainly they would suddenly discover the idea of buying and hiring Americans that fell upon their deaf ears for so many years when at stake were only the jobs of American workers.
There is going to be a massive corporate bailout by taxpayers. This must be done and sooner rather than later. But because we are saving these troubled corporations, they owe us big time. We have a right to call them on the carpet and take harsh corrective measures.
The corporate gangsters have good news and bad news coming their way. The good news is that we will save them. The bad news is that they are going to find out what it was like all these years working for them.
I’m going to disagree, though not enthusiastically. My general feelings are that this sort of a disparity would naturally fix itself if left to its own. Shareholders, during a situation like this, will likely start to demand accountability where they were lenient before. I’m not disagreeing enthusiastically because, given the current situation, that has failed to happen so far. I do think it’s a shame that shareholders feel so impotent that they almost never take any sort of action, but rely upon the government instead.
Okay, so they aren’t shareholders, but here’s a group that took matters into their own hands….
“CEO murdered by mob of sacked Indian workers”
I guess that kind of works in opposition to my point, huh?