Are CEOs paid too much? Ruthless Criticism

Do CEOs get paid too much?

Who gets how much and why in the free market economy

None other than President Bush chastises the business leaders assembled on Wall Street for his 2007 State of the Economy speech. He leads the continuing public debate about whether CEOs are paid too much; of particular offensive are the “golden parachutes,” the compensation packages for dismissed executives. The President urges them to show restraint and suggests that this could be harmful to the whole nation.

An opportunity once again to pose a very interesting question; namely, whether someone rightly deserves what he earns. Sure, its only right that CEOs earn a lot, but haven’t these men – as opposed to the “employees” – gone too far? A strange indignation: one can ask this question only if one knows, on the one hand, that there is a big difference between “lower salary recipients” and “top executives,” but on the other hand, has discovered a common characteristic between the two that makes a comparison possible. The common characteristic is supposed to be that both are paid – although differently, but nevertheless – for their performance for the company where they are employed. And those who fuss over this question believe that pay must be a fair equivalent for the work they perform – but this is sometimes doubtful with CEOs, or to speak in the manner of distinguished commentators: “Where in the global economy does fair compensation end and self-interest begin?” Of course, a totally wrong question – because this question aims completely past the real relation between pay and performance. There is neither a connection between pay and performance, nor can managers and workers be compared by the fact that both are paid. The idea of fair performance pay is absurd.

The worker receives wages for the fact that he puts his ability to work at the disposal of a business. Then the results of his work belong to the employer. He is employed only on the condition that his work is profitable for the company, in other words: he creates more saleable commodity value for the company than he takes home in wages. The worker works for the equivalent value of his wages during only one part of his working day; the rest of the day, he works for the entrepreneur – for free. That is the fundamental contradiction between worker and capitalist. Because the entrepreneur constantly wants to augment the unpaid part of the working day at the expense of the paid working hours, with the consequence that he reduces the part of the working day during which the worker works for the value equivalent of his livelihood. How big one part of his working day is and how big the other part is, results from the struggle of two parties that represent irreconcilable interests. Wage laborers can augment the size of their income not by their performance, but at best by the pressure they can exert on the entrepreneur’s calculations by threatening to refuse to work. If today the unions believe they have gotten rid of this conflict through “social cooperation,” then that's just a lie and changes absolutely nothing in the fundamental relationship. Nothing in all this has anything to do with justice or a measurement of earnings by work performance. The performance for which the worker is paid necessarily consists of delivering an unpaid performance. This is the condition of his employment.

Executives are compensated according to entirely different principles: they are commissioned to perform the functions of the capitalist on behalf of and for the benefit of the shareholders. Their job is to make decisions about the work that others have to do, to check on the workers and make sure they meet the performance objectives that make the owners rich. Executives actually bear a “heavy responsibility,” namely to organize the appropriation of the unpaid work that the workforce has to execute. They get a substantial share of the profits that they rack up for the owners. They do not need to fight for it because the owners know how valuable they are for them. Participation in the firm's success not only orients towards already achieved, past successes; it can just as well be measured by the future success that the company aspires to under the auspices of the relevant CEO. A corporation that recruits a sinfully expensive reorganizer or brings a world famous executive on board shows how it sees its position in the competition and demonstrates its financial strength. The income of the CEO represents the size and aspirations to success of a corporation – and thereby is a means in their competition for credit and investors. It is appropriate to procure the self-confidence of the manager: he sees himself as a commander of production in the struggle for the market and ascribes the success of “his” company to himself and his outstanding personality – because, in the end, he's the one who “creates jobs and value”! This self-confidence demonstrates its truth when the CEO rises to his profession: only he can show the unscrupulous toughness and arrogance needed to forge out of such slack underlings the troops needed to conquer markets.

In the current debate about the size of their salaries, the task of the managers, i.e. ensuring the accumulation of as much unpaid work as possible, is in no way criticized. There is only griping about the amount of their income, and the government boss is even the spokesman for this discontent. It has not escaped President Bush that there is grumbling among the people about executive salaries, and he does not want to ignore it because the political competition – the Democrats – are scoring points with it.

The discontent stems from the fact that wealth is growing in the country and there is talk of a “boom,” but – and this is the reason for the discontent – it does not “tickle down,” but just the opposite – the astonishing observation is that “the poor get poorer and the rich get richer.” No real surprise if capitalism is alive and well! Bush intends to fight this discontent. Of course, the first step is not to demand wage increases upwards in the direction of manager income, but an appeal to the collected entrepreneurs for “corporate responsibility.” The low salaries are already under control, now the top earners’ should be as well. He does not want a law against exorbitant rewards which would go against the entrepreneurs' freedom and not be legal; instead, he asks them to show “transparency,” to exercise more modesty in enriching themselves:

“America's businesses have responsibilities here in America … A free and vibrant economy depends on public trust.”

The President along with all the other politicians makes only one request: against the reality of the executives' activity, which consists in nothing other than the enforcement of the company's interest against the interest of the workers, he sets the ideology of cooperation: we are all really working together in a common project. It is stupid if the managers, in their appearance and in their salaries which they themselves approve, act as if it is not so when they ostentatiously indicate the difference between themselves and their subordinates. Besides, the men and women managers should just make sure that the beautiful sheen of a common project does not get unnecessarily tarnished. There should be a little more decorum and modesty in the announced enrichment because otherwise one expects a little too much from the people’s sense of justice. Conversely, if the CEOs are a little more reasonable and promise improvement, they have contributed to this moral task and also satisfied this sense of justice. The President indicates how important this is:

"Global competition can also lead to hardships for our workers and their families... The fact is that income inequality is real; it's been rising for more than 25 years.”

Even though the indignant masses are not to be seen in the streets, the President shows by this statement how seriously he takes the discontent – and the joke is: this has now been fully taken care of. Even the supreme leader of the nation has told these business leaders that they now have to behave decently. And then the culmination:

“…the salaries and bonuses of CEOs should be based on their success at improving their companies and bringing value to their shareholders.”

The real scandal is only the CEOs who are not successful in the management of exploitation; their subordinates have not been pinched so that enough profitable effort has been extracted from them. When they are dismissed for this reason, they should not get too much money.

But do the discontented notice that actually the President has taken the occupation of the executive – to organize exploitation at the expense of the workers – fully from the line of fire and given it a perfect defense? In this sense, there is nothing more to criticize about a successful executive: he deserves what he earns for successfully increasing shareholder value; he makes a singular contribution to the “social well-being of our country.”

Anybody who is still nit-picking enough to keep calculating this only shows – crass social envy!