Executive compensation: what do you DO for your money?

The late, great Peter Drucker had a core question that he would ask workers and management when beginning to analyze a company: what do you do for your money? Drucker (who was incredibly influential in turning the Japanese car companies profitable) found that many, many people were unable to cogently answer that question, usually saying things like, "I go to meetings," or "I'm in charge of the blah-blah."

Drucker's viewpoint, after a long life of examining large companies, was that executive compensation should be, at most, 20 times greater than the compensation for the lowest paid worker. Obviously the exact number is subject to argument, but the important part is acceptance of the fact that what a CEO actually contributes to a company is worth much less than the hundreds-of-times the average worker's salary that they (in general) currently earn.

Even worse, executive pay is often not based upon performance -- consider the K-mart CEO who ran the company as it ground its way down over several years, all the way into bankruptcy, who resigned after the bankruptcy and received millions and millions in a golden parachute because he was "not fired for cause." And was able to turn around and get another CEO job right away. Or the recent AIG bonuses, in the hundreds of millions, going to the executives in the division responsible for AIG's de facto destruction, a heavy contributor to the current economic crisis.

In this article ( http://tinyurl.com/cxuhey ) the government appointed chairman of AIG makes use of the "We cannot attract and retain the best and the brightest talent to lead and staff the A.I.G. businesses" argument. A common argument for outrageous executive compensation, the "reward to attract and retain" argument is, quite frankly, bullshit. (As the former CEO of Dupont once put it.) Yes, you must reward people for their work, but concentrating such rewards on executives (and to such outrageous levels) is simply part of the incestuous relationship between executives and boards and large scale stockholders. If you allow people to vote themselves obscene and dangerous amounts of bread and circuses, guess what? You'll get obscene and dangerous amounts of bread and circuses.

The same executives who outsource jobs overseas (sacrificing quality for short term labor savings -- and as a veteran in a Fortune 500 tech company I know what I'm talking about here, I worked with overseas programmers on a daily basis) don't seem likely, anytime soon, to turn that same logic on themselves. Why not outsource the CEO positions to CEO candidates in places like South America? Maybe the quality won't be as high, but they will surely be cheaper!

I do not know if the stimulus package will work. My macroeconomics courses instilled in me a healthy skepticism in the ability of a government to control something as fluid as a national or global economy. I do, however, know that the power to limit the power of executives is basically currently in the hands of the executives. The whole reason for a corporation is to evade responsibility, and those who attain the highest levels of corporate leadership are infused with that ethic.

Kipling's Gods of the Copybook Headings have spoken again, and the ONLY way to gain control of the runaway accumulation of power in corporations is through government limits. NOT government control (such as instituted by the Republicans in response to the crisis, and continued now by the Democrats), but by limits. Why are there game laws limiting the type and quantity of game you can gather? To create a sustainable ecosystem, to prevent, in a broad manner, the tragedy of the commons. Our economic ecosystem is in need of such limits, without them people are just too damned selfish, stupid and shortsighted to avoid periodic catastrophe.