Educated Guesswork: March 2004 Archives:
Is Kristoff’s problem that the CEOs are being paid more than is efficient or that their pay is somehow unfair regardless of whether it’s efficient. The main thrust of the argument is the former, but the invocation of athletes and movie stars suggests the latter. As far as I know there is a free market for athletes (and probably movie stars). It’s not as if the boards of sports teams are packed with athletes voting themselves high salaries. Does Kristoff have any data to suggest otherwise or is he just offended that they’re making so much money?
Interesting. I think it’s safe to say that the market for athletes and movie stars has some limits (athletes have more constrained careers, based on their age, movie stars likewise, based on their appeal). Meanwhile, business executives can stay in the game until they come out of their offices feet first.
Also, entertainers (to conflate the two categories) get paid based on how many butts they put in the seats, whether it be at the stadium or the local multiplex, or units of some commodity they sell. Determining if there’s been an over- or under-valuation is quite simple.
I agree that many of the execs make far too much and that their pay is rarely tied to performance. Shareholders and boards don’t vote for them the same way they do for the movies they watch or music they buy.
What if they did? We see too much emphasis on the short-term as it is . . . .