Green Disease

"G-R
E-E-D
G-R
E-E-D
It's a disease and they're all green
It emanates from their being
Satiation with occupation
Like weeds with dead leaves
Stealing life from what's beneath
Will they have more
Still they take more.

-"Green Disease", Pearl Jam

Guess who recommended that CEO pay be limited to 20 times the pay of lowest-paid worker in the company?

Not Marx. Not Lenin. Not Mao. Not Fidel.

Hint: Fortune Magazine says he was "justly lauded as the greatest management thinker and writer of all time."

Yes, Peter Drucker, who passed away November 11th, made this "radical" recommendation. I'm sure all those business friendly, anti-regulation "free market" proponents who line up to feed at the public trough for subsidies and tax breaks would find such a recommendation appallingly un-American, unpatriotic, and terrorist friendly, which only means that it is a good idea.

Why? Let's begin here.

At most companies, compensation issues are being left to corporate boards, which are hiding behind the notion that "independent" directors can objectively assess their CEO's performance. (A lot of good such independence did in the past -- recall that Enron's board was also largely comprised of "independent" directors like the dean of the Stanford Business School.)

In reality, the CEO pay game is a kind of merry-go-round of interlocking boards who hire kiss-up consultants to tell their compensation committees that their CEO is just like every kid in Lake Wobegon -- above average and ergo deserving of above average pay.

[...]

Today's executives are increasingly receiving all kinds of "stealth compensation" in the form of pensions, reloaded options, plane junkets, etc. Often it all comes out of the hide of investors. A new study by The Corporate Library suggests that in 2003 the top five executives at each U.S. public company received compensation that on average amounted to 10.3% of their employer's profit, up from 4.8% in 1993.

As you can see, the executive compensation system in this country is one giant conflict of interest. I approve my pal's comp. You approve his comp. He approves mine.

That's why CEO pay now averages 431 times that of the lowest paid worker. 431 is slightly greater than 20, even when you use fuzzy math.

Thanks to Peter Drucker (and Warren Buffett, too), criticizing that fact doesn't make you a radical. It makes you an advocate of common sense compensation for executives, for the benefit of shareholders and employees.

Time for a little rabble-rousing, I think.

Green Disease