Kent Pitman

Kent Pitman
Location
New England, USA
Title
Philosopher, Technologist, Writer
Bio
I've been using the net in various roles—technical, social, and political—for the last 30 years. I'm disappointed that most forums don't pay for good writing and I'm ever in search of forums that do. (I've not seen any Tippem money, that's for sure.) And I worry some that our posting here for free could one day put paid writers in Closed Salon out of work. See my personal home page for more about me.

MY RECENT POSTS

DECEMBER 9, 2008 3:28AM

Diss Proportional Salaries

Rate: 10 Flag

This post is, in part, a response to Saturn Smith's
Let Them Have Bonuses?

The problem isn't the executive pay is out of proportion, it's actually that it's in proportion.

Suppose you make $10/hr and you ask for a raise. Do you ask for $20/hr increase? You might like that, but if someone's paying you $10/hr, you're not going to get an increase that's twice your base pay unless you've done something well outside your job description. And anyway, usually we'd call that a promotion, not a raise. Lots of places these days target maybe a 1% or 2% raise (that is, something like $0.10/hr or $0.20/hr) though there have been days when 5% or 10% (that is, $0.50/hr or $1.00/hr).

But what about someone who's making $10,000,000 per year. Well, you guessed it, the answer is proportional. That person's not looking for the same $0.50/hr or $1.0/hr raise, but instead a proportional raise. Something like 5% or 10% of the base pay, or $500,000/yr or even $1,000,000/yr. Now that's more like it.

You see? Not out of proportion but in proportion. So basically, the amount of that person's raise (not even the base amount) would buy a lot of employee salaries.

But why the proportion? Well, mostly because it makes things easy to talk about. No one wants to talk about numbers like $10,001,000 per year. Once you're making $10,000,000/yr, do you think you even care about an extra $1,000? I'm guessing not.

And it gets worse, because when I offer you a job at my company and you could make $10,000,000 somewhere else, will I make the offer sweeter by offering you $10,001,000? I'm guessing not again, for the same reason.

So isn't that really the problem right there? A problem not of disproportionality but of proportionality? That people are getting to salaries so high that they can't even feel normal amounts of money any more? Money that would mean a great deal to most of us?

It seems that when you already make more money than everyone else, it takes more to keep motivating you. Something seems wrong about that. Why is that when we see an unmotivated poor person, we say, “forget it, let's not hire him,” but when we see an unmotivated rich person, we say, “obviously we're just not offering him enough”?


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I think you've mostly gotten it right.
Kent

I see this as class warfare. And I'm reporting for duty. :) The MSM will never talk about it because they are part of the problem. We are ruled and policed by a leadership of celebrity. These people believe they are above us. Way above us.
I agree with you. Boss and I get the same percentage raise every year. His works out to be a little more
I believe I am the 'unmotivated poor'. It's quite depressing. Tomorrow, I will test this theory by laying on the floor by my desk and see if they throw money at me.
Most likely I will have eight more hours in the day at home to read OS.
WCD, I'm not against salaries being different, just against them being different by factors bigger than say, 10 or 12, certainly not more than 20. If the highest paid worker wants $1M and can get everyone else in the company to, say, $100K, that works for me. But if the lowest paid worker is making $20K and the highest $1M, there's something wrong there. Even just $1K would make a huge difference to someone making $20K and not even be missed by the guy making $1M. Seems like this kind of thing happens all the time.
That's basically the gist of the problem. The rich are obscenely rich and the poor obscenely so. The species called the middle class is being systematically wiped out.
Kent I couldn't agree more. The distressing thing for me is that the reduction in taxes on these rediculous salaries has encouraged them to increase exponentially. I just can't swallow the rich telling me that decreasing the taxes on the rich is good for everyone.
Kent,

Your 'twist' on the semantics is dead on, buddy. 'Unregulated' capitalism, or more accurately CORPORATISM, does not work. Period.

rated, of course...
But WHY does the boss deserve to make that much more than the worker?
There's an old Three Stooges gag in which one is counting out a stack of high-denomination bills: "20, 40, 60--hey, what's a 5 doing in here?" and he crumples it up and throws it away. And then of course they all dive for it. Wall Street CEOs apparently don't get the latter part of this joke.
Kent, masterful explanation of salaries and raises; but doesn’t this just show that the status quo will never change under this system?

What we need is a pay – raise system based on merit and results.
I will add one point here: CEO's should get more money. Why? They are taking on responsiblity for managing the company.
Aside from the fact that corporate C.E.Os, CFOs, and whatever else "Chiefs" are granting each other MILLIONS in bonuses when their companies are failing and their workers are laid off , salaries reduced and benifits pulled, what about the investor?
If you've a 401k or any retirement vehicle, to see these theives vote themselves pay hikes while your portfolio sinks into the abyss is beyond maddening..it's almost reason enough to "go postal".
The disparity between the upper and lower ends of the economic scale has been widening since the Reagan days. The truth in the old axiom "the rich get richer...etc" has never been more telling than today.
And the latest tactic is to compare the poor here to the poor in Darfur. Be grateful with what you have and just shut the F**K UP.
But hopefuly the new administration will be able to keep the lid on the communal cookie jar and we will all be able to share in the bounty rather than be relegated to the crumbs and scraps fallen from the economic table.
"Here's your zero bonus, Mr. Thain. Be happy we're not in Japan, where you'd be expected to commit ritual suicide."
suzyishere,

I'm not sure if you intended your comment as ironic or not, but my hope is for irony.

The CEO of GM made $22 million last year for running his company so well that it will be bankrupt by the end of this year without an infusion of cash from you and me. I recall in 1986 my outrage when the CEO of Time-Warner was awarded a $10 million bonus the same month the company laid off 40,000 workers.

It takes no particular expertise to run a company into the ground, just to mask the fact that that's what you're doing. Any of us here at OS could have done at least as well as Wagoner un running GM. So could any of the employees of GM, its parts supppliers or dealerships. Most would have done it a damn sight better.

Workers generate the wealth, line managers help, but by the time you get to the executive suites of giant corporations, those guys (almost exclusively guys) don't do squat to earn their money. Oh, sure, we all could google a few stories of CEOs who do miracle work, but they are news exactly because that is so unusual.

Remember -- dog bites man is not news. Man bites dog -- THAT is news.
Rated - for provoking some really good comments. The obscene growth in the ratio of top-level salaries to bottom-level ones in this country over the last several decades is an outrage! No wonder our economy is in the toilet.
I've long been amazed at the disconnect between the entrepreneurial world and the corporate world. Startups go to great pains to find CEOs who are so passionate about the product and opportunity that they'll work for below-market pay.

Corporations do exactly the opposite. They look for CEOs who demand a seven-figure compensation package as the minimum necessary for them to walk in the door. Utterly bizarre.
Stever, I think there is a structural difference between startups and existing corporations. They say that the CEO who works well for a startup often doesn't for a stable company. So it's not impossible that there should be some differences between such scenarios, but I agree with you that it really requires someone to stand up and justify that this is one of those differences and that these practices incentivize anything other than the fleecing of the average worker or even the stockholder. It might seem that the stockholders are aligned with a CEO who has lots of stock, but ironically the other stockholders might be more committed to the company than the CEO, who may just be interested in cashing out. Some stockholders just want to cash out, too, but they're not as well-informed about the company. And some stockholders are investing because of the old, antiquated notion (that now almost flags one as a chump) that they care about the product or the industry and want to see it do well.