This sounds like a discussion of pirates I heard on the radio the other morning. It was about how pirates of a few hundred years ago had a very good idea of democracy, and how to ensure that the captain didn't become too far removed from the crew (though like all such systems, it was far from perfect).
It went something like this:
Captains get elected, and they get elected on cycles. At any point, if people are dissatisfied with the captain, they can overthrow them and reelect a new one (though not during chases or battles).
The bit that rings home with this article though, is that the captain generally had to eat with the crew members. If any one of the crew members decided they liked the captains meal better then theirs, the captain would have to swap.
Apparently, this helped to ensure some humbleness in the captain. Even though they called the shots, they were not this mystical being that nobody saw, interacted with, or felt out of touch with.
I think the tying of the presidents salary to that of his cleaners is a good example of this. He still gets to be the boss man, but can do it without being too far removed from the rest of the population of workers.
The economist Peter Leeson did a whole book around that, called The Invisible Hook[1]. I haven't read it, but the Econtalk podcast with the author[2] was interesting.
That said, I don't think this measure will be nearly as successful as the pirates'. I'd rather see the executive body be elected by the workers, as in the Mondragon corporation[3].
Well there you go. Now that you've mentioned The Invisible Hook, it occurs to me that this is what they were talking about on the radio. Thanks for the link.
Keep in mind that pirate crews were shareholders in the venture, and only got paid a cut of the booty if there even was any booty. This is quite unlike how cleaning staff are paid.
It is also unlike how administrative and executive staff are paid. Sure, exec positions often (though not always) have some performance-related bonuses. However, those are normally on top of a base salary that is already rather ridiculous if you're really honest with yourself.
Unlike in those pirates' case, there's simply no way an executive might walk away with a zero outcome (let alone a negative one). So the two are not at all comparable, and executives ought to be treated like janitors (or vice versa).
The way executive income tends to be structured today does follow some logic that makes sense internal to the framework in which it exists. Once you step outside of that framework, however, it's pretty clear that a sane design of society based on almost any reasonably notion of distributive justice would not accept this structure.
That's if you're looking just at compensation. However, a exec can make one decision that can save / make a company millions or billions of dollars. In that perspective, a few million dollar salary seems like a bargain.
A secretary is not often in the same position.
It's just like selling a product. If you base it off "cost" - you set yourself in a hole to start with. But, if you base it off the value you can create / save, then you have leverage to make more money.
"a exec can make one decision that can save / make a company millions or billions of dollars. In that perspective, a few million dollar salary seems like a bargain."
That's only true if there's nobody else who could perform equally well for a lower price.
Problem is how to assess that. To play safe, boards typically go for 'proven' winners (where 'proven' may mean 'got lucky a few times when a 50:50 or even bad decision won the jackpot due to an earthquake/economic turmoil/...).
Those 'proven' winners typically have inflated egos (it's hard not to think you're brilliant if everything you do turns into gold), and start thinking they are worth more than they are.
In a sense, there's a dissimilar similarity with salaries for sportsmen who play offensive vs ones who play defense. The former score, the later blunder, and that is reflected in their egos and their salaries. Nobody knows who is more decisive in making the team win matches.
And yes, the above is just an opinion. AFAIK, there is no good way to measure whether exec A is better than exec B for job C.
However, a exec can make one decision that can save / make a company millions or billions of dollars.
I understand how the current situation is justified. Two questions though:
1. How much of that is down to the skill of the exec? A sibling comment addressed this problem as well: If there are many people who have roughly the same likeliness-of-success, but comparatively much fewer positions for such people to fill, then income basically becomes a lottery. Lotteries are not a basis for a system that achieves distributive justice.
2. Taking an additional step back, how reasonable is it to have people in such powerful positions in the first place? After centuries (actually, millenia) of experience, we decided that by and large, concentrating too much power into few hands is a bad idea in politics. Especially with large corporations, where the boundary between political and business positions becomes rather fuzzy, it is reasonable to ask whether the same lessons apply there as well?
Funny, I never thought I would see my alma mater on the front page of Hacker News.
A few things about the current situation. For various reasons, including mistakes made by the last president, the college was severely under-enrolled in this years freshman class. This is the cause of the major financial problems the college is facing and caused the previous president to ask the Board of Trustees not to renew his contract. The current president is an interim president and the college is currently conducting a search for a permanent replacement.
From what I have heard the current search is not going well. They are having a heard time finding suitable candidates that want to face the challenges the college is currently facing, which includes an underpaid faculty. I can't help but think that this will make it even harder to recruit a suitable candidate. I know several of the professors involved with this (I still live near the campus) and I know their hearts are in the right place and they want what is best for the college. I also know many of them disdain administrators and people with money. Especially people with money.
I will be following this with interest to see how this plays out.
The thing that would make sense would be to base it off the academic staff's salaries. But I suppose the idea of a college with decent working conditions for the faculty would be too utopian.
Or perhaps the average salary of non-administrative and non-exec workers.
And 10x seems like an arbitrary (and large) multiplier. What justifies it? What does the president of a University do that adds that much value to a University? I remember ours made over $300k and all he did was go to parties thrown by wealthy Alums, give public speeches, and otherwise be a politician at council meetings.
By comparison, entry level IT there was $30k, "programming" was $40-50k, and senior in either was capped at $55k essentially. And IIRC, the professor salaries were similarly pathetic. I never understood how a public University justifies paying an administrator (something like a glorified answering machine that can make Excel spreadsheets) double what it pays someone who builds and maintains the infrastructure the school needs to function. Especially when the latter often must wear 10+ hats and train themselves on their own time just so they can do the job adequately.
For a small arm of a large federated public University?
The vast majority of income to the University was from public funding, tuition, and sales on campus. He was never involved in working with state legislation to try to get us more funding -- that happened at a higher level in the University system. The large independent contributions happen regardless, and had mostly happened before his time (you know, buying a new building for the University and having it named after you).
The President was so far divorced from students that almost nobody could actually recognize him. He wasn't the reason anyone attended the school. Every alum I know has never heard of him outside of public speaking engagements. Every faculty member and staff member on campus I talked to (and I worked there for 3 years, it was a small University) had almost 0 interaction with him.
How is he fundraising, and who is he selling what to?
I saw absolutely 0 justification that he was earning the salary of 1 sanitary worker, let alone 5x the highest amount they paid any skilled worker on campus.
you'd be amazed at how much return-on-investment the president gets by going to parties thrown by wealthy alumni. the underlying malaise is that the college typically relies on donations from said alumni to an unhealthy extent, but given that it's pretty much one of the president's duties to go charm money out of them.
Putting aside the fact that the budget for that particular small public state funded University didn't require more than the public funding and tuition, that premise seems odd.
If the justification for someone's salary is "they make us that much money", then why would the University refuse to compensate an IT worker who demonstrably saved the school $50,000+ a year by having extraordinary skills for their position?
Or why can't there be Alumni relations staff that only exist to cater to Alumni and extract as many donations as possible? Why does it make sense that the President would do that?
Does Obama, to make a stretch comparison, raise all democratic party donations himself? It seems a silly thought. And if he did, would it justify giving him a salary of some outrageous number, just so long as we point out that he raises more money than he costs? Say, $20,000,000/yr salary and he brings in $90,000,000?
I'm all for profit sharing, but that brings up an even bigger question: why is there only a single person in the University being given the option of profit sharing? In a place where raises didn't happen for nigh on 10 years straight and bonuses were unheard of, if you could generate more value for the University than your cost, in multiplicity, you should see part of it. It's not OK to do that for the independently wealthy white man running the University with a base salary of $300,000, allowances upwards of $250,000 and a paid-for home while keeping the guy making $40,000/yr who just kept you from needing to buy $100,000 in software and consulting from seeing a single additional penny. It's completely unfair and there isn't any valid justification I can imagine would ever be presented to explain it.
i'm not arguing that the president deserves an outrageous salary, i was simply pointing out that "attending parties thrown by wealthy alumni" was not an example of his taking the money and not doing his job, even though it may seem so on the surface.
According to this site[1], the salaries of their academic staff is already significantly higher than the average. Do you have information that says otherwise?
Story I heard a long time ago. Possibly an urban legend.
Professor at a university in the US wins the Nobel Prize for research in chemistry. The university see this as a way to get publicity.
The president calls a press conference to announce this. He congratulates the professor and asks if there is anything the university could do to better support chemistry and scientific research and produce more Nobel Laureates.
Administrators want to be paid a % of revenues. This model is incosistent with academic tenure. So, they will never be linked as long as college presidents are glorified funraisers.
Firing and contracting out are the type of actions someone at many companies would take faced with equity requirements. The type of organizations that actually put equity requirements in place by choice are not going to do those things (any sensible auditor would not allow "contractors" to fake follow the rules).
When rules on equity are put in place for political reasons (say to pretend bailout for too-big-to-fail banking executives) then all sorts of not actually following the rules will be done. Those organizations normally have no interest in equity they are run by kleptocrats and the kleptocrats will just do things you suggest and act like those things matter (pretend that if the job is done by a contractor that means the job doesn't count...).
I don't actually think 10 times the lowest pay makes much sense. But the choice of this of being run by the kleptocrats in control of most treasuries today I would accept this 10 times rule. It isn't that I think it is a good rule, I just feel it would be less horrible than the kleptocracy mentality in place now.
It is not about basing his salary on that of the cleaners. It is about having a limit on the range of salaries in the organization and the cleaners happen to have the lowest there. The idea is that the extra profits should be shared by all the employees and not collected by the top executives.
As to why they wouldn't just leave, well let them. You could hire better faculty members and you will have a sparkly clean university that can attract better students. Your research/teaching statistics go up and you can pick more funding. At some point other universities will follow your example and administrator salaries will normalize.
Not going to happen though .... more likely they will outsource the cleaning so that the president can earn 10x the salary of the IT stuff. Then they will probably outsource IT as well ...
I suppose most well-functioning organizations that implemented this rule for employees would soon have a cleaning staff made entirely of contract workers. Metric met; root issue no longer our problem.
No, because human dignity. The market somehow works but it isn't fair. To take an extreme example, imagine how the Chinese people work their asses off for peanuts in order to get us iPhones.
What has the salary of the president got to do with the salary of the cleaners? It is only coincidence that the cleaners are employees on the books. What about the people who make the textbooks they read, or the iPhones they use?
Inequality is important, but it is a society-wide issue. Reducing inequality within a company is a meaningless goal.
There is already a very effective way of reducing inequality, which has the advantage of being completely even handed. It's called income tax.
Controlling costs is also good in itself, but that is a separate issue. Running an entire university is a position of great importance, and the salaries mentioned seem in line with this level of responsibility. (Not that people deserve more money because they have more responsibility. The point is that these position require the best people, who will demand higher salaries).
This is a good way to get a mediocre president. If I'm the best at what I do, I'm going to go where I am valued the most (and it is reflected in my paycheck).
Alternatively, the cleaning staff will become very well paid. Unfortunately, something like this is very specific, so it is likely that, while the cleaning staff will get a bump in pay, any increases in cost will be offset by decreases elsewhere. Like to food staff. Or professors. Or to scholarships.
Being combative and sneering about people worse off from him is stefan_kendall's schtick (both here and on Twitter), so I was sort of hoping to actually get an answer.
It went something like this:
Captains get elected, and they get elected on cycles. At any point, if people are dissatisfied with the captain, they can overthrow them and reelect a new one (though not during chases or battles).
The bit that rings home with this article though, is that the captain generally had to eat with the crew members. If any one of the crew members decided they liked the captains meal better then theirs, the captain would have to swap.
Apparently, this helped to ensure some humbleness in the captain. Even though they called the shots, they were not this mystical being that nobody saw, interacted with, or felt out of touch with.
I think the tying of the presidents salary to that of his cleaners is a good example of this. He still gets to be the boss man, but can do it without being too far removed from the rest of the population of workers.