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Ask a simple question…

In response to my post on obscenely high buyout packages for CEO’s, Mark of Section15 (after converting the 210 US million dollar payout to Home Depot’s CEO to Canadian dollars) asks the following simple question:

It’s mind boggling. How can anyone be worth that much?

Simple Answer: No one is.

This has been Scott’s edition of “Ask a simple question, get a simple answer”.

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17 comments to Ask a simple question…

  • lrC

    If you’re talking about wages, you should be talking about “fairness”, not “justice”.

  • Good post, Joseph. I think our differences here have more to do with the difficulties of arguing through intermitend blocks of text on the internet.

  • My original intent was simply to point out the deeper potential of the question:

    It’s mind boggling. How can anyone be worth that much?

  • We have quantitative measures here; B is not “Subject A deserves more than subject B = false,” it’s “Subject A’s compensation ought to be 7000 times greater than that of subject B = False.”

    (Of course, 210 million is a bonus, not a salary. That doesn’t change the fact that the compensation of CEOs generally is comically inappropriate, notably in cases of mediocrity and failure.)

    I think you’ve strained Aaron’s argument more than vice-versa. Everyone is probably quite securely in their respective rockers, just a question of definitions.

  • You’ve made it pretty clear that your concern isn’t the amount of money that is being renumerated, per say, but rather the respective amounts… which means that you’re not just talking about wages. You are making a comparison. Comparisons require standards… Let me explain what’s happening here.

    Subject A = $210,000,000
    Subject B = $30,000

    1. Subject A makes more than Subject B = true
    2. Subject A deserves more than Subject B = false

    You’re asserting that 1 is true and 2 is false. In fact I agree with you… I have said several already that I do take issue with the rampant income disparity in the world. However, for 2 to be true logic dictates that there is a standard by which a person’s compensation is “earned.” (See below…)

    As I said before there are only two types of standards: objective and subjective. The “market” is an inherently subjective one, and as such I believe it is the morally preferable one, even if the market can in some cases over/undervalue someone or something.

    We’re not talking about differentiating between human lives, we’re talking about wages.

    This is the crux of my problem. We both agree that the CEO makes too much money nowadays… but you are suggesting that he is making too much money because a construction worker only makes X. That is a fallacious argument unless there is either some sort of absolute value of work that we can apply to both, or the market is demonstrably over/undervaluing one or the other. Given that you dismissed the market as “unjust” as opposed to making an economic analysis you are clearly choosing the former… and the assumed “absolute value of work” is in fact an exercise in differentiating between human lives.

    That or I could have finally gone off my rocker… it is increasingly hard to tell.

  • “…your willingness to measure a human being’s individual worth based on your own standards…”

    You have to be kidding me. We’re talking about wages.

    “I believe quite firmly that all human life is inherently valuable, and that no man is qualified to assign absolute value to it”

    Me too, but we’re talking about wages.

    “I believe that it is wrong to for one man to imply some sort of objective standard with which to differentiate between human lives.”

    We’re not talking about differentiating between human lives, we’re talking about wages.

    So I’m wondering, if it is so repugnant for me to judge what a person should or should not be earning, why is it perfectly acceptable for the market to do so?

  • If Adam Smith can do it, so can we. Saying that a stock broker is not 500,000 times more valuable than a construction worker is “morally repugnant”? I smell an affective red herring…

    I’m not sure which is more alarming, your willingness to measure a human being’s individual worth based on your own standards, or your arrogance in attempting to dismiss my argument as some sort of intellectual tactic.

    I believe quite firmly that all human life is inherently valuable, and that no man is qualified to assign absolute value to it (hence my opposition to the death penalty.) I believe that it is wrong to for one man to imply some sort of objective standard with which to differentiate between human lives. That is where the moral repugnancy lies… although I’m sure you can find a way to reconfigure that sentiment as well.

  • “To do so implies a rational standard by which we can measure a person’s value, and I find that idea completely morally repugnant.”

    If Adam Smith can do it, so can we. Saying that a stock broker is not 500,000 times more valuable than a construction worker is “morally repugnant”? I smell an affective red herring…

  • Therein lies the problem… I agree that salaries don’t make much sense.

    Where I disagree with Aaron (and your lauding of his argument) is that the market is somehow “unjust.” To do so implies a rational standard by which we can measure a person’s value, and I find that idea completely morally repugnant.

  • I don’t think your argument was repackaged, or for that matter even disagreed with; what differed was merely the conclusion. Yes, market forces determine CEO salaries – no, those salaries don’t make much sense in any other context, be it justice, relative contribution to shareholders or society, comparison with other employees’ compensation, etc.

    Noone proposed a magic solution for what appear to be gross and peculiar outcomes of the market in this regard – any attempt to do so would have to be very well thought out indeed.

  • Gee, it must be easy to refute people when you can simply repackage their argument, making it simpler and less intellectually intricate than the speaker’s intent. My hat is off to you both.

  • Aaron: Either comparison is valid, they’re just different. To my mind, the MMPs salaries – before and after – seem sensible and inoffensive. Conversely, the gap between the most overpaid and the most underpaid is a very striking comparison, in terms of ‘odious in one’s nostrils.’ I agree that both the minimum wage and the wages of MMPs are more obviously the purview of government fiat, of course.

    Very astute observation in reply to Joseph, by the way. Heath & Potter (and Ignatieff) have written quite astutely along those lines. It’s tragic that politics so often seems divided between those with irrational faith in the unerring grace of free markets and those with a romantic antipathy for one of mankind’s most brilliant organizational developments.

  • Jason: Politicians determine both their own salaries and the minimum wage. They don’t determine corporate salaries. Thus the better comparison.

    Joseph: The free market does countless wonderful things. No other institution ever devised by man has generated so much wealth and benefitted so many. But one thing that it doesn’t do is create justice. And I’m sorry, but the fact that a stock broker pushing buttons makes 500,000 times more money than a back-breaking construction worker is simply not just.

  • The fact is that a person’s value is determined by whatever market it is being sold.

    In medicine, a body’s worth is about $20 (discounting the black market of course), in professional sports it’s worth considerable more, and in the executive market the prices are obscene…

    Personally I don’t get this “they’re not worth that much” attitude at all. To me that implies that there is an objective standard by which we can (or should) measure a person’s worth; and that doesn’t sit well with me at all. If some sucker is willing to pay that much, then there may be an economic problem, but to suggest that the problem lies in how we measure someone’s value is simplistic.

    We can measure someone’s value objectively (and as such reduce humanity to nothing but funky pieces of meat) or subjectively by the “market,” and in the latter case someone is worth whatever they can get.

  • Why?

    I don’t necessarily want to get the class war started, but the inflation of executive compensation does seem to be a more egregious phenomenon than the MPP raise, which was 22-grand to bring them up to a salary that’s still 5 figures for a full time job.

    I don’t have a big problem with that, and that’s coming from someone with an annual income of less than the the raise itself. There is, it seems to me, a legitimate argument for paying Ontario’s parliamentarians at least enough as people in the professions. I don’t think they really needed the last raise to achieve that, but at least they’re in a sensible ballpark; it might clash with some people’s ideals to think that Ontario’s cabinet could be headhunted for a song, but parliamentarians are people too, and if they’re badly paid, you’re asking all but the independently wealthy to choose between civics and family.

    Now, what argument is there for the unspendable fortunes handed to every schmuck that runs a company into the ground? I guess at least it discourages them from running for office?

  • I don’t disagree. But if you are looking for a contrast to the miniscule hike in the minimum wage, I’d suggest you use the 25% pay increase Ontario politicians have just received instead of people from the private sector.

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