Economic Idea and Suggestion

We have a problem in earnings disparity that, it seems, the market is not able to resolve on its own, but that nonetheless is bad for the country.

I believe strongly in the private sector, but just as regulation would have prevented the current financial meltdown, this kind of regulation – which is not capping pay, just forcing the private sector to be reasonable when we ALL know it’s gone ‘way past reasonable in the past few decades ($500,000,000 to Michael Milliken for ONE year?) – would help to ameliorate seriously ridiculous earnings disparity. This would be good for our Republic.

This certainly is a place where we as a nation can do better. And I’d rather leave the market free within limits, allowing it to choose how it wants to pay, than leave it to Government to set salaries. Within my lifetime an educated man would have felt shame at paying his people 1,000 or 10,000 times less than he was making. Unfortunately that concept has left our society. Having the government set salaries for high earners is not within the confines of the Constitution, and immoral. And it will NOT help those at the lower end, regardless.

This proposal would – should – get bipartisan support, is easy to enact, would rein-in a serious problem, not cost anyone their livelihood or mansion, probably would forestall or eliminate some level of unionization, and not put the government in charge of setting salaries.

PROPOSAL

Allow companies to pay their executives whatever they want. But no person in the company can be compensated more than 100X the lowest-earner in the company – including contractors. (All forms of comp would need to be covered, and all forms of employees or contractors to that company, as well.)

If someone wants to pay their CEO $50M, fine – then the lowest-paid person would be paid $500,000. Perhaps, instead, the CEO ought to be earning $5M and the lowest-paid employee, $50K. Why is that unreasonable?

Wouldn’t you rather have the market work on fairness and pay than leaving it to the Congress, or the President and his czars? With the exception of this multiplier – all else is left to the market to work out.

Is it a perfect answer? No. Is this a perfect world? No. Is 100X the best answer? I don’t know; seems a reasonable place to start.

This would, of course, cause Boards to re-think seriously ridiculous compensation. No matter the issue, no one is worth $50M to run a company. Heck in the 1980s and 1990s the CEOs of IBM only made about $5M – and managed the largest tech R&D on the planet, a sales, research and tech force of over 200,000, which caused enormous increases in productivity nationally – and internationally. When Gerstner took over he made about $12M. If IBM could get that kind of talent for $5-12M, then anyone can. (Full disclosure – I have worked for IBM twice, in both sales and global services, and even been laid off by them.)

Salaries and options and deferred compensation in excess of several million are just people playing ‘mine’s bigger than yours;’ no one needs that kind of comp and it just fuels class envy, ridiculous overspending, and unionization, which hurts ALL of us – and most especially those in unions. (The drag unions cause on the market is felt more by low-earners than high-earners, and union membership normally ranks in the low-earner category.)

I know it’s called the private sector, and I know it’s supposed to be a free market. Fact is – it isn’t as free as we pretend it is, intelligent regulation in most instances has helped, and the disparity in incomes between folks who VOTE is a real problem, and one that can be addressed easily and quickly, with absolute minimal intervention by the government.

This is a good proposal that likely would draw bipartisan support.

The Right is supposed to be, and within my adult lifetime has been, that party of ideas. Here’s one.

About Alex Scipio

About Alex Scipio: Alex moved out of the People's Republic of California to the Free State of Arizona, finally tiring of the lack of the Bill of Rights, the overgrown idiocracy, and the catering to non-Americans & welfare recipients. He still wonders how America got from Truman, Eisenhower, and Daniel Patrick Moynihan to the Liberal and Conservative extremes so badly managing America today. And, yes, islam DOES need to be annihilated. And doing what he can to get folks away from the extremes of political life.
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