Tuesday, May 01, 2007

Quote of the Day

Is your employer poorer by the amount of money he pays you? Probably not, or you would never have been hired. Why then should we assume that a corporation or its customers are poorer by the amount paid to its chief executive officer?

~Thomas Sowell in his recent commentary Random Thoughts

6 Comments:

At 5/01/2007 10:25 AM, Anonymous Walt G. said...

C.E.O. compensation improves worker compensation, too.

One of the best bits of news, or worst bits of news, for the UAW bargaining committee was the announcement last week that GM’s C.E.O. compensation was “reduced” to twice what he made in 2005 (10 million dollars a year!)

What a stupid, stupid move for a company that was expecting concessions from their hourly workforce in the 2007 contract. As a UAW insider, I would like to thank everyone involved for being dealt a hand with four aces for upcoming negotiations, but that tied a lot of hands up. It can’t be explained by UAW representatives to the uninformed worker on the floor that concessions are necessary in the new globalized market now, and they can't get reelected for “giving in”, so the bargaining stance will have to change to “No Concessions.” You can’t have “give and take” bargaining when one side is getting all the “taking” while the other side is doing all the “giving.”

Bargaining strategies are already being changed over the C.E.O compensation announcement. The bar was raised substantially. Let’s hope any short-term gain does not lead to long-term bankruptcy.

 
At 5/02/2007 2:25 AM, Anonymous Anonymous said...

The CEO is paid whatever it takes to keep them from quitting and going to greener CEO pastures at other companies. If the CEO does not get the raise, are there other companies he could go to? Plenty.

Even GM gets all the concessions it asked for from the worker union, how many of the workers will quit to take jobs at other companies? None, because they will still be getting paid far in excess of their skill set.

As such, just from this information it sounds like the CEO raise was justified and the cuts in worker salary are equally justified.

 
At 5/02/2007 6:14 AM, Anonymous Walt G. said...

Anonymous,

You are probably technically correct. It is an apples and oranges comparison, but rational economic discussions don't always take place on the shop floor. After the UAW concessions in 1982, executive compensation was reinstated before the ink was dry on the "give back" contract. Most of the elected UAW officials who supported the concessionary contract were swept out of office during the next election by the new leaders whose slogan for the next contract and their election was “Restore Plus More in 84.”

Someone would have to be pretty naïve or uniformed about factory life to think executive pay is not an important bargaining issue. If you are ever in a GM factory, take a look at the employee bulletin boards for the Rick Wagoner (GM) and Steve Miller (Delphi) news articles and cartoons about their compensation. Those are posted by union voters. Here’s an apt analogy and cartoon fodder for executive compensation at the factory-floor level: Lending your brother-in-law money to keep his house from being foreclosed and finding out he took his family to Disneyworld with the money.

Elected union officials aspire to move up in the union, not to send the C.E.O. to Disneyworld, and not to return to the production lines. Possibly people are wrongly swayed by political rhetoric, but that’s political life for elected people and it’s not a clean profession. What would you do?

 
At 5/02/2007 10:05 AM, Anonymous Anonymous said...

I would shutdown the factory and move production either to a Right to Work state or to Mexico. If any workers wish to keep their jobs then they need to move with the factory.

There is no getting around CEO compensation; either we pay it or he quits. But artificially high union wages are driving up the cost of production for every American that buys a GM car. And it does not make moral sense for individuals earning $30k a year to pay more for a car in order to pay union workers earning $80+k a year even more. At the same time, such artificially high union wages are reducing employment at GM; it does not make moral sense for an unemployed auto-worker to remain without a job in order to pay union workers earning $80+k a year even more.

Unions get higher wages for their members, no question; but they do it at the expense of every other worker in the economy.

 
At 5/02/2007 11:12 AM, Anonymous Walt G. said...

I agree there are a lot of problems, and we are we are our own worst enemy a lot of times.

However, when executive pay is not tied to company performance a lot of questions will, and should, be asked. Questions like these:

How do record losses at a company in one year justify record CEO pay in the same year?

Can somebody else run the company better?

Can we ask our workers to sacrifice if we don't?

Do we want our workers to be part of the future or do we want to exit the country?

The answers to these questions can foretell if GM will be extant as a U.S. corporation in the future. Just remember: For every UAW jobs bank there exists a GM Fiat or Lopez blunder of equal proportion. Fingers can be pointed in both directions. Accordingly, the health of the corporation rests on both our shoulders.

 
At 5/02/2007 12:20 PM, Anonymous Anonymous said...

Agreed on most points. GM has made many horrible decisions and everyone suffers as a result. But it is their company and it was their decisions and no one will suffer more from the mistakes than themselves. But the Union side of the fiasco was not of their making; it was the result of government policy, which makes the blame fall on the voters of Michigan. Blame is not a communal enterprise, even if the GM managers had never made a single mistake the company would still be in trouble. So everyone should accept their own responsibility and act to fix it, starting with reforming the laws of the state.

 

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