Practical definition: Overpaid

Posted by Marc Hodak on December 26, 2007 under Executive compensation | 2 Comments to Read

I came across this survey showing that most employees, including senior executives, consider CEOs “overpaid.” Nevermind this survey’s schlock statistical methods; the question that immediately came to mind for me was whether the question itself made any epistemological sense. Consider this definition:

Overpaid: Any person receiving a wage in civilized society.

Consider the perspective of people making far less than American employees. To someone struggling in the third world, anyone living an American middle class lifestyle by doing, say, electronic filing from their cushioned chair might be considered overpaid. We can’t ask our dead great-grandparents who tried to pull survival from the ground what they would think, but is it far-fetched to consider that they might regard their progeny pushing paper in cubicles, or Big Macs out of a drive-thru windows, as “overpaid?”

Yet innumerable articles continue to be based on the premise that CEOs are “overpaid.” Sure, one might argue that certain individuals are “overpaid” based on how they get their pay, e.g., cheating or stealing. But that’s not what this question is asking, nor is it the premise behind so much jaw-boning about the subject of CEO pay. No, this survey was simply pulling a subjective response from an uninformed audience, and the press was simply reflecting this response back to them in the guise of informing them. This study’s authors and the media, then, become a critically passive route by which useless information gets processed–kind of like intestines that push along the crap with the nutrients, failing to sort them for the nourishment of the body.