Mon 29 Mar 2004
Jerry Useem ‘93 has an article on (excessive) CEO pay. He notes that :
If the market for CEO talent is based on artificial scarcity, it also suffers from a serious information problem. For a winner-take-all society to work, you need a reliable way of knowing who the winners are. In baseball that’s easy: A player cannot claim to have hit 60 home runs last season when, in fact, he hit 16. In the movies, there’s the incorruptible accountant of box-office returns. In business, however, it’s remarkably difficult to assess how much an executive has contributed to an organization’s success — which, after all, depends on a host of external factors and the input of hundreds if not thousands of employees.
Williams College, as an institution, probably benefits from excessive pay for CEO’s and other senior executives in business since so many generous alums do so well in the business world.
It is also worth noting that much of what Useem says about CEO pay also applies to the pay of senior executives in academia, as ephblog occasionally points out.
March 29th, 2004 at 1:40 pm
Capitalism is amoral. To describe CEO pay as “excessive” is an appeal to emotion. I believe it was Kennan who, while writing about international affairs, urged people to avoid the “histrionics of morality.” The same applies to capitalism, in my opinion.
March 31st, 2004 at 2:50 pm
What kind of rubbish is that — “capitalism is amoral”? Isn’t it just a convenient aphorism, to trot out at times to justify the unconscionable? “Pay no attention to that man behind the curtain; capitalism is amoral!!”
“Capitalism” may be amoral, but CEOs can ignore neither morality nor emotion, particularly when morality and emotion drive public opinion, which in turn can drive profit margins. At least some Disney shareholders may have been motivated by morality and emotion when they dissed Michael Eisner . . . but “capitalism” appeared to sit by and do nothing to protect him.
Even if one wants to keep economic analysis truly antiseptic, I think that one must acknowledge that morality and emotion are elements in society that have economic consequences — consequences that must be accounted for even in the “amoral” world of capitalism.
March 31st, 2004 at 4:45 pm
George–Is there an argument in there? I’m not sure what your position is.