On Tuesday the New York Times ran a story on salaries at Goldman. Not suprising, managing partners at the firm make a LOT of money. Partner managing directors make a base salary of $600,000 a year and get a 15% share of the annual bonus pool, which last year meant an extra $8.6 million each. The base salary is apparently three times that of other managing directors at Goldman and comparable firms. What I found interesting were the comments made about the story, because they suggested that people have radically different ideas about what constitutes "excessive" compensation. (And I think this difference suggests why it has been difficult to pin down the solution to excessive compensation).
On the one hand were people who appeared to define "excessive" only in relation to a person's output or perceived output. For these people, there was some debate about whether Goldman partners merited a salary so far above that of others both in their firm and at other firms. However, there appeared to be general agreement not only that it is appropriate for people in executive level positions to get paid salaries many times more than other employees, but also that lofty salaries give such employees something for which to strive. In other words, high levels of compensation reflect the attainment of the American dream--signaling to everyone that if you work hard, you will get the pot at the end of the rainbow.
On the other hand were people who appeared to define "excessive" as it relates to other employees more generally. These people seemed dissatisfied with the salary gap itself, arguing that there should at least be an equitable distribution within the company itself, if not within society more broadly.
To be sure, these two stances sound like a broader debate about wealth distribution. But it seemed to me that a person's position on that debate has a huge impact on how they define "excessive compensation" and the ways to remedy it. For example, was the public outraged by the fact that Ovitz was given $140 million for less than two years work, or was the public outraged by the fact that he was given such a salary and his work product did not appear to merit the pay? I think there were strands of both--yet they reflect two different views of appropriate compensation packages.
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1. Posted by Brock on February 15, 2007 @ 16:11 | Permalink
That's funny. I didn't realize that building wealth and taking a cut was a "problem" that needed "solving." Have these managers done something illegal to get this salary? Have they stolen it? Or used unconsciounable pressure tactics or some kind of monopoly position to force other people to give them the money?
Why, exactly, do we need a "solution" at all? What have these people done "wrong" that we need to take their salaries away from them?
2. Posted by Jake on February 15, 2007 @ 20:04 | Permalink
Oh, come on. Ordinary people can ask why some persons accumulate far more wealth than they can ever imagine consuming. That does not make the ordinary people who ask such questions bad people, nor should it subject them to snide ridicule. Nor are academics, like Prof. Fairfax, who ask such questions bad people. These questions are worth asking.
3. Posted by Brock on February 16, 2007 @ 5:20 | Permalink
There's certainly nothing wrong with asking how people accumulate wealth, and I never said I thought Prof. Fairfax is a bad person. I was questioning the premise behind the post. The post jumps right to needing a "solution" to "excessive" compensation, and looking for ways to go about "remedying it", without making the argument that there is a problem at all. I'd like to know what she thinks the problem is.
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