I Wish You Wouldn't Be So Good to Me, Cap'n (or, Executive Compensation and Ass-Kicking)
At Postivie Sharing, Alex Kjerulf cites the lamest argument ever for astronomical executive compensation:
So paying someone else for your hard work will inspire you to work harder? GMAFB. Reminds me of some stupid asshole talking head I saw on CNBC at the beginning of the Iraq war who argued that "Americans" didn't want the extra weeks of vacaction time or the shorter work weeks enjoyed by Europeans, because "we" preferred to be able to build more carrier groups to advance "our" interests. Yeah, increasing my choco-rations from 30 to 20 grams a week is doubleplusgood, as long as I know "our boys" have another floating fortress at the Malabar front. What do you mean "we," paleface?
One of the commenters, JACH, wrote:
Of course. A corporate hierarchy substitutes administrative for market incentives. The producer doesn't internalize his productivity gains; the costs and benefits of change are artifically divorced from each other and assigned to different people, so that management gets the bonus for increased productivity and labor gets harder work for the same pay. As one of my coworkers jokingly told me recently, "anything is possible as long as you're not the one who has to do it." What's more, a wage worker accepting someone else's priorities and assignments is robbed of another intrinsic motivation: the innate satisfaction of using one's own skills and judgment in creative labor. The only possible alternative is to substitute extrinsic motivation, like not getting your ass kicked. The people at the top figure out new ways to get more output from fewer people, for lower wages, in order to increase their own bonuses and stock options. And those at the bottom, who know the most about how to rationally improve production, have absolutely no incentive to do so because they know it will just result in speedups and downsizing, and all the productivity gains will go to stockholders or management featherbedding.
One of the characters in Ursula LeGuin's The Dispossessed observed that the hierarchical, authoritarian culture of the military was absolutely necessary for an organization designed to force people to do inherently irrational things stuff that they couldn't be motivated to do through legitimate self-interest. A guerrilla army could operate with elected officers and decentralized organization, because its soldiers were carrying out a mission that was rational and meaningful from their individual standpoints--defending their own homes and communities. But an army whose mission is to visit death and destruction on foreign populations, or to turn its weapons against an insurrection by the local civilian population, can only be motivated (as PM Lawrence commented on an earlier post) by a fear of its own officers that's greater than the fear of the enemy.
The great majority of people are doing work that is utterly meaningless to them, that they have no control over, and in which their personal values and judgment are left at the door. A work shift is an eight- or twelve-hour chunk of their life that they surrender control of to be a puppet on somebody else's string, a piece of their life that they essentially flush down the toilet, in order to get the money they need to support their real lives in the outside world--i.e., the part of their lives where they are in control, where they are ends rather than means. So obviously, they can only be motivated by fear: a fear of unemployment, bankruptcy, and homelessness that outweighs the dread of the job itself.
The ugly truth is that your boss is probably overpaid–and it’s for your benefit, not his. Why? It might be because he isn’t being paid for the work he does but, rather, to inspire you. In other words, we work our socks off in underpaying jobs in the hope that one day we’ll win the rat race and become overpaid fat cats ourselves. Economists call this “tournament theory.”
So paying someone else for your hard work will inspire you to work harder? GMAFB. Reminds me of some stupid asshole talking head I saw on CNBC at the beginning of the Iraq war who argued that "Americans" didn't want the extra weeks of vacaction time or the shorter work weeks enjoyed by Europeans, because "we" preferred to be able to build more carrier groups to advance "our" interests. Yeah, increasing my choco-rations from 30 to 20 grams a week is doubleplusgood, as long as I know "our boys" have another floating fortress at the Malabar front. What do you mean "we," paleface?
One of the commenters, JACH, wrote:
There are many “corporate wisdom” phrases that seem more like a justification to how things are done than a real explanation. Here’s the last one I heard from a guy that has been manager for 20 years: “people don’t work if you’re not constantly kicking their ass.”
Of course. A corporate hierarchy substitutes administrative for market incentives. The producer doesn't internalize his productivity gains; the costs and benefits of change are artifically divorced from each other and assigned to different people, so that management gets the bonus for increased productivity and labor gets harder work for the same pay. As one of my coworkers jokingly told me recently, "anything is possible as long as you're not the one who has to do it." What's more, a wage worker accepting someone else's priorities and assignments is robbed of another intrinsic motivation: the innate satisfaction of using one's own skills and judgment in creative labor. The only possible alternative is to substitute extrinsic motivation, like not getting your ass kicked. The people at the top figure out new ways to get more output from fewer people, for lower wages, in order to increase their own bonuses and stock options. And those at the bottom, who know the most about how to rationally improve production, have absolutely no incentive to do so because they know it will just result in speedups and downsizing, and all the productivity gains will go to stockholders or management featherbedding.
One of the characters in Ursula LeGuin's The Dispossessed observed that the hierarchical, authoritarian culture of the military was absolutely necessary for an organization designed to force people to do inherently irrational things stuff that they couldn't be motivated to do through legitimate self-interest. A guerrilla army could operate with elected officers and decentralized organization, because its soldiers were carrying out a mission that was rational and meaningful from their individual standpoints--defending their own homes and communities. But an army whose mission is to visit death and destruction on foreign populations, or to turn its weapons against an insurrection by the local civilian population, can only be motivated (as PM Lawrence commented on an earlier post) by a fear of its own officers that's greater than the fear of the enemy.
The great majority of people are doing work that is utterly meaningless to them, that they have no control over, and in which their personal values and judgment are left at the door. A work shift is an eight- or twelve-hour chunk of their life that they surrender control of to be a puppet on somebody else's string, a piece of their life that they essentially flush down the toilet, in order to get the money they need to support their real lives in the outside world--i.e., the part of their lives where they are in control, where they are ends rather than means. So obviously, they can only be motivated by fear: a fear of unemployment, bankruptcy, and homelessness that outweighs the dread of the job itself.
posted by Kevin Carson | 2:22 PM
12 Comments:
But mainstream economics textbooks and mainstream economists like Posner, Becker, and Bryan Caplan all say that the wage-system is a result of suppply-and-demand, self-interest, and the free market. So there.
Yeah, I hear the labor system in the Nazi death camps was the result of supply-and-demand and the free market. It MUST have been a free market because, after all, it made money for Krupp and I.G. Farben.
Wasn't Posner the guy I linked to a while back on worker cooperatives, who dismissed them because worker-owners didn't have the same "long time horizons" as conventional managers? Yeah, that's right--the long time horizons of those guys who milk their enterprises to inflate the quarterly balance sheet, so they can get promoted out of the operation just before it goes bankrupt.
Caplan is especially frustrating. He wrote the Anarchist Theory FAQ, which seemed to at least take a sympathetic view of Tucker and the other socialist-individuals, despite being written from an an-cap point of view. But when I questioned Caplan on a discussion list about some arguments raised by the individualists and assorted 20th century decentralists, he responded dismissively: "maybe they were just a bunch of cranks."
Setting aside other factors, executive compensation has grown wildly only recently. And that growth is directly traceable to stupid tax policies. In 1993, Clinton and the Democratic Congress passed punitive rules against corporations that paid their CEOs more than $1m/yr. Of course, that's not going to stop corporations from trying to attract the best CEOs, so they simply switched compensation to stock options. Those stock options, even after the Bust of 2000, were impressively valuable, and so executive compensation has risen dramatically. Social democrats have trumpeted this as dog-eat-dog, grubby-hands-rubbing, robber-baron-capitalist, laissez-faire evil. But really, it's just the inevitable result of their stupid/evil/ridiculous/actually-brilliant (?) politics of envy.
Oddly enough, a policy designed to soak the rich ended up making them richer. Funny, that.
- Josh
Well theoretically if you tax the rich *enough* it will solve the problem. Of course I don't expect the rich to stand still for that.
Kevin, you'll love this one: Sun Microsystems' executives are getting huge raises even though the company is losing money. Here's the article at the Register.
"In other words, we work our socks off in underpaying jobs in the hope that one day we’ll win the rat race and become overpaid fat cats ourselves. Economists call this “tournament theory.”"
I'd think that instead it would lead to a situation explained by another theory entirely: that of "learned helplessness".
reisman's ghost: those people also call the wage system "freedom" (freedom is wage-slavery).
One of the characters in Ursula LeGuin's The Dispossessed observed that the hierarchical, authoritarian culture of the military was absolutely necessary for an organization designed to force people to do inherently irrational things stuff that they couldn't be motivated to do through legitimate self-interest.
No kidding. Every account I've read of the Spanish Civil War mentions that the anarchist militias were great at defending their own areas, but sucked at offense.
If that isn't one of the single greatest arguments ever made in favour of anarchism, I don't know what is.
KC, you misread wjat I was citing. I wasn't talking about motivation but about discipline. If you read (say) what George Washington had to put up with, you can see the difference. Or, see how the Turks motivated irregulars with a share of loot but couldn't get them disciplined.
The thing is, disciplined troops do as they are told, but ones that are merely motivated do as they think fit - which, even if they are similarly motivated, doesn't always amount to acting in concert with other troops under an overall tactical plan.
By the way, my ISP problems are over, at least for the moment, and my pages are accessible again (e.g., the index is here).
>>The thing is, disciplined troops do as they are told, but ones that are merely motivated do as they think fit
Or in other words, the first will murder civilians and run death camps if you ask them to, whereas the later might object.
Which explains the reason why the military is organized this way in imperialist countries.
Josh,
I think the main form of compensation referred to in the original story was good old-fashioned salaries. And salaries alone have ballooned several hundred percent in real terms while wages have remained stagnant. The very idea that the people who make those huge salaries are "the best" at anything, or that their compensation has anything to do with productivity, was discussed by Alex Kjerulf as a semi-religious delusion. I think the culture of log-rolling between directors and senior management is the main factor.
Presto,
Nice article. Scott Adams' blog listed "Hey, our stock would have tanked EVEN WORSE without my huge salary" as one of the things a weasel might say.
PML,
Thanks for clarifying, and congrats on your site being back up. I think LeGuin's point also goes back to some kinds of warfare requiring more central coordination--more discipline--than others.
Matthew and anon,
Interestingly, that's one of the concerns the anti-federalists had in seeking to restrict deployment of state militias outside the state. They figured soldiers would be likely to have qualms about putting down civilian insurrections in other states, and that the new regime would therefore police the continental empire by shuffling militias around.
Reading the original post, I see no evidence that either Kjerulf or Harford understands why executive compensation has ballooned recently.
- Josh
This looks like the flipside of ACORN's argument for not paying their workers minimum wage so that (paraphrasing from their court brief) "they maintain class consciousness and a sense of brotherhood with the people for whom they are working".
What is the exchange rate between inspiration, consciousness, brotherhood, and bread these days?
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