Salaries are a fixed cost, which by definition, means that there is a tenuous link between the money shelled out for salaries and that which is directly tied to productive output (variable, or per-unit costs). Thus, it seems reasonable to me to examine salaries and other administrative expenses when times are tough. Most of the time, large salaries have no objective justification; they’re a reflection of how much “experience,” “know-how,” or “people skills” are worth.
Here’s an example a little closer to home for me. I am earning a doctorate in a business college, where doctoral program graduates with degrees in management, marketing, accounting, and so on can command salaries in the low six figures. Why? Because they could be hired in industry based on their education level. But will being an expert in an arcane research area in, say, marketing translate into a justifiable half million dollar salary? Maybe, or maybe it will be irrelevant. The point is, it is very difficult to objectively justify the six-figure salaries of business graduates because there will be little linking them to measurable work. The company is paying for “expertise.” Thus, it makes sense that tough times result in a reevaluation of the worth of these unmeasurable constructs.
Congress could vote on November 1, 2010, to raise their salaries to any amount they wish, and come January 3, 2011, the 90% or so that are re-elected will receive their raise in a fully constitutional manner.
You’re just saying they broke the law, you aren’t saying they were overpaid. Nor are you correlating their avarice with the crimes they committed. It wasn’t like Enron was manipulating electricity prices to sent little old ladies to the poorhouse in order to use that money to put toward an altruistic purpose.
But since you’re not getting the point, which is that simply because someone receives a high compensation, it does not logically or ethically follow that the compensation is well justified.
Back to the case at hand, the president of the University of Washington pulls down $900,000. Lawrence Summers in 2005 made $575,000 and change. That the president of a public university has worked harder or smarter (on edit: or with more expertise) than the president of perhaps the most prestigious university in the world is laughable upon first glance, and how the UW president somehow deserves to take home about 40% more (including inflation adjustments) than the president of Harvard bears explaining, as does why he makes approximately twice the salary of the average public university president.
The compensation paid to the UW isn’t a paycheck handed down by an infallable, all-knowing God. While Washington is a good school, no doubt, at your place of business you would surely question why one clerk, salesman, vice president, or anyone else would be worth twice as much as his peer in any similar company.
It isn’t a matter of liberal vs. conservative, or rich vs. poor. It is simply a matter of common sense.
It’s more a matter of contract. A CEO type generally does not have the power to determine his own compensation. He negotiates with whoever hires him…board of directors, State College Board, whatever the mechanism may be. If they feel like they overpaid, they can offer less on the next contract, write a better contract with compensation tied to performance, or hire someone else. I’d take the gig for $200K + perks & bennies. I have zero experience running a college, but I could learn it pretty quick. For that amount of money, I’d be willing to move across the country and learn new stuff. Of course, if you’d rather have someone that actually knows what they’re doing, you might have to pay them enough to make it worth leaving whatever they’re doing now.
Again, the point you’re missing, and which I specifically raised in my last post, is that contract is negotiated by people as fallible as you and I. Just because two parties negotiated a contract they felt was good doesn’t mean it is fair to parties who are affected by one way or another by the contract, whether those people are students, stockholders, or the taxpayer.
In this case, UW tuition is rising at a very high rate and the president makes double what the average public university president makes. The students have every damn right to question whether the regents were fairly representing the students, faculty, staff, and taxpayer; or whether they were engaging in an “I’ll scratch your back, you scratch mine” sweetheart deal. Does nothing about this compensation package make you wonder, even a little bit, whether it is a good deal for anyone but the president?
And to everyone but Oakminster, am I not making my points clearly? Because it sure seems I’m repeating myself a lot to my respected opponent, and my points, which I think are simple, don’t seem to be making it across.
The remedy for the students, stockholders, or taxpayers is to vote in new representatives that will run things differently.
I’m not going to defend the guy at UW. He may be the greatest college president in the history of history. They may be the worst negotiators ever. I don’t know.
I cannot speak for Oakminster of course but to me it seems like he is arguing based on a strongly held philosophy that approaches religion in its fervor.
People claiming someone makes too much money can only be doing so because they are envious and too lazy to do what it takes to make that kind of money themselves. The system is fair, we all have a shot and it is just our own ability and drive that determine the outcome. Someone who makes a lot of money definitionally deserves it because someone is willing to pay them. If they do not deserve it the system will correct itself.
Of course the real world works absolutely nothing like that at all. The above is the bullshit line Americans are fed from Day #1. That lie is simply revealed by noting the whole population cannot make that kind of money. Assume, hypothetically, everyone in the US is precisely as smart and driven and talented as the UW president (whatever that means). The whole population cannot be university presidents. More, at the end of the day someone needs to dig ditches and pick up the garbage and answer phones and empty septic tanks and so on.
And yet you say “Self-Entitled little shits [who are complaining about the salary of their university’s president] need a good swift kick in the ass.”
You’re saying that they have no right to complain, but they should work to get someone else to represent their interests. Talk out of both sides of your mouth much?
Of course they have the right to complain. It’s in the very First Amendment. They do not have the right to unilaterally alter the terms of contracts, nor are they entitled to spend other people’s money. They have the right to vote for candidates of their choice for positions that can do those things.
It seems to me that in a big picture way the big problem with all these high paid authority figures is that their compensation seems to have risen faster than they should have with inflation. This would be fine if they were also raising increasing amounts of funds faster than inflation, but has this really shown to be true? Someone gave the example of how a president paid 1m who can raise 100m is well worth their raise over the 100k/50m competitor. Again, this makes perfect sense, but surely the school would be able to cut tuition by some percentage as a reflection of this- has this happened anywhere? Like others have said, is there really any proof that the cheaper president couldn’t raise that money to begin with?
The anger stems more from the fact that all of the extra financial investment hasn’t even paid off. It’s the same resentment people have for banks and other financial giants who dropped the ball while paying for “the best” to steer them correctly. It’s not a special skill to cash big checks, cheerlead the people writing them and look the other way when bad news crosses your desk. University presidents are as guilty of this as any other CEO, except lots of universities are paid for at least partly by states, which leads to a lot of general resentment.
While the presidents and his deans are enjoying raises ,they are fighting the university workers to cut jobs and wages. They are grabbing the big bucks while sitting on workers salaries. It does cause resentment. http://www.encyclopedia.com/doc/1P2-20866525.html
Whoever said everyone was supposed to make large sums of money? The American capitalist ideal (if you want to call it that) is that the more skilled you are and the harder and smarter you work, the more you will achieve and the more you will be compensated.
The reality is that not everyone has the same opportunities to learn the skills they need to be successful. And not everyone has the same capacity to learn those skills.
So even in the most fair meritocracy, there are going to be well-intentioned but perhaps unintentionally incompetant people at the bottom. So the question (which I don’t have an answer for) is how do you provide support for those people without creating disincentives for people who don’t qualify for support because they do too good a job?
I wonder if everyone in the US were precisely as smart and driven and talented as the UW president (whatever that means), would there be a shortage of low-level jobs as these people pursue more intellectual and stimulating interests leading to greater technological efficiency? Or would there be a surplus of high educated disgrunted ditch-diggers?
Not sure what you are on about. We have abundant evidence of people at the highest levels of business making metric shitloads of money while simultaneously torpedoing the world economy and suffering no ill effects because of it. Even more…not only no ill effects but continuing to prosper. They are still pulling in scads of cash for themselves while the people they had a fiduciary responsibility too see their life savings evaporate.
Clearly, irrefutably, performance is NOT tied to compensation.
In theory I am all for paying a person who pulls in $100 million for their company a substantial wage. But when they lose $1 billion they STILL pull in a substantial wage!
The UW president is earning the second highest wage for a public university president, he has cut jobs, cut programs and raised tuition 28% over two years. People have lost their jobs, students are forced out due to inability to pay the new tuition and we should not only praise but reward the person overseeing this?
Ok, granted there are fiscal realities in the current economy that he and the university are susceptible to and are beyond his control. Nevertheless, if he is such a hotshot that can command double the average salary of a public university president then I’d think he should be pulling rabbits out of his hat. But he isn’t. He is probably competent but I see no genius evinced here.
I think it is well known that boards of directors and executives are in an incestuous relationship. Sweetheart deals all around. Compare executive pay versus average salary in their company and you will find US executives way, way way (and way again) beyond the norm in the rest of the world.
I agree. Compensation for CEOs has boiled down to a heads they win, tails we lose set of circular reasoning. If the company is doing well, then the CEO should be rewarded. If the company is doing poorly, then they need to invest the money to get the best leadership possible.
I have yet to hear anyone in business explain the circumstances under which CEO salaries should go down.