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Thursday, November 10, 2011

David Brooks, "The Inequality Map": Why Does No One Begrudge the Baseball Star His Due?

David Brooks has written another provocative New York Times op-ed, entitled "The Inequality Map" (http://www.nytimes.com/2011/11/11/opinion/the-inequality-map.html?_r=1&ref=opinion), which posits that certain kinds of inequality are acceptable in America, while others are deemed reprehensible. Regarding income inequality, Brooks writes:

"Income inequality is acceptable. If you are a star baseball player, it is socially acceptable to sell your services for $25 million per year (after all, you have to do what’s best for your family). If you are a star C.E.O., it’s no longer quite polite to receive an $18 million compensation package, but everybody who can still does it."

So why is it acceptable, even in hard economic times, that a star baseball player receives $25 million? Maybe, if he plays well, and if the team makes it to the World Series, everyone in that city, no matter whatever sorrows they are experiencing at home or at the job, has at least one reason to feel good about himself of herself. Moreover, it's all transparent: the homerun hitter might be making $25 million; however, if his stats fail to justify that remuneration, he will be on a plane or train to another city, which will presumably pay him significantly less.

What about CEOs? Surely, there are those who have created products, jobs and dividends for investors, and who are not begrudged their salaries, e.g. Steve Jobs and Bill Gates. On the other hand, there are those CEOs who regard their salary packages and perquisites as a matter of entitlement in both better and worse times. Market share and profitability might slide, and thousands of jobs might be eliminated, but the CEO stays on with the same wages, notwithstanding the fact that his or her errors have cost others their livelihoods. Sure, the board of directors might ultimately wake up and show the CEO the door with a golden handshake, but this will only irk aggrieved employees and shareholders even more.

Bottom line, it's all a matter of transparency regarding productivity. Everyone knows that if the homerun hitter fails to produce, he'll be on his way out. Moreover, the homerun hitter's stats are available on the sports page for everyone to see. Many CEOs, however, are insulated from such scrutiny, and they continue to draw their inflated salaries notwithstanding mediocre or substandard performance, which makes no one happy.

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