Limiting what people can be paid

2013

I found this story hard to be believe, but it is true. Recently the Swiss voted on a law that would limit executive pay to no more than 12 times the lowest paid workers. That means if the lowest paid worker earned $20,000 a year the CEO could be paid no more than $240,000.

Would you take on the stress and responsibility of running a large corporation for $240,000 a year? If you say yes, you don’t have a clue I’m afraid.

But wait, just raise the lower worker to $50,000 (regardless of the value of the job or skill and training required to do it), that should take care of the problem … along with raising the cost of goods and services and making the companies non-competitive on the world market.

Voters in Switzerland overwhelmingly rejected the proposed law, but the scary part is that there were any people who thought it a good idea.

The bulk of executive compensation is not salaries, but various stock awards based largely on performance of the individual and the organization. Bill Gates did not become a billionaire because of a high salary, but because he built something and benefited along with thousands of other people from the value of the company.

Having managed executive compensation plans I can attest to the fact they are far from perfect and often provide the wrong incentives. However, they do not detract from other workers, but more so from stockholders.

We have and are being conditioned in recent years to blame the top for the ills of the bottom. That’s like saying it was the fault of the winning team that the other team lost. Did the losers to the National Champions of a sport or a Olympic Gold Medalist lose because the winners won or did the fact winners worked harder, had more skill or were just lucky and cleaver have something to do with the outcome?

There are many factors affecting the income gap, many far beyond one governments control. However, what other people earn is not one of them.