Two conversations about compensation

Posted by Marc Hodak on September 8, 2009 under Collectivist instinct, History, Reporting on pay | Read the First Comment

People reading the news may be forgiven for thinking that we are having a kind of national conversation about executive compensation.  In fact, we are having two conversations.  One of them is about corporate governance.  The other is about wealth redistribution by non-market means.  Both of them sound like they’re about compensation because the word is used often in the story, but they are different.

Take this item headlined:  Warning: Pay Gap Between CEOs and Workers Will Keep Growing

This is nominally about compensation.  It has the words “CEO” and “pay” in it.  In fact, this is a story about a study released by the Institute of Policy Studies, which is a progressive organization dedicated to revamping society along socialistic lines.  They simply hate the idea that some people make a lot more than others.  Governance is simply a side show for them:

Governance problems do need to be resolved,” notes IPS Director John Cavanagh. “But unless we also address more fundamental questions – about the overall size of executive pay, about the gap between the rewards that executives and workers are receiving – the executive pay bubble will most likely continue to inflate.

But.  It’s about the size of pay.  A colleague of Cavanagh wrote:

Shareholders have no reason to begrudge executives like these their fortunes. But the rest of us do.

For IPS, it’s not about the shareholders.  It’s about social justice, which is code for democratizing pay.  I get to vote on how much you make, and you get to vote on how much I make, regardless of how we “vote” in our revealed preferences via the market place.

What annoys me about this is not the nominal aims of the progressives.  I too would prefer a world with less extreme distributions of income.  What annoys me is that this sentiment is not really about income–it’s about state power versus market power–it’s simply reported as if it’s about income.