Overcompensation

George Reisman remains a very articulate Author, as this latest Post so clearly expresses. He shares the flaw, though, of many Conservative Writers; the intent to vilify Those who do not agree with their economic agenda. His spite currently has turned on the New York Times in accusations that the Paper is using the Class Warfare Card. Reisman himself links to some previous attempts to discredit the Newspaper. It is not mentioned by Reisman or the NYTimes, but the issue is the overcompensation of Business leadership in the American economy.

Compensation is supposed to incite all Labor to greater and more creative efforts to further the interests of their Employers. This all well and good; but is it? Or more precisely, what happens when Business leadership effectively captures the ability to set their own Pay Packages? The NYTimes article states that the five largest Wall Street firms

expected to award an estimated $36 billion to $44 billion worth of bonuses to their 173,000 employees, an average of between $208,000 and $254,000, "with the bulk of the gains accruing to the top 1,000 or so highest-paid managers."

which Reisman felt compelled to restate. Now here is the thing: No one doubts that either the Paper or Reisman is wrong on the numbers. Reisman does not even attack the estimate by the Paper that the bulk of the Bonuses would go to the top 1000 highest-paid managers. Reisman and the Times also add numeral middle Fifth Income range of averaging $56,200 in 2004. No one mentions that the averaged Bonuses of the firms was some 4 times the averaged Income of the middle Fifth Income range in 2004. It leads One to speculate how high Salaries average at these Wall Street firms, and how much of the Bonuses go to the upper 1000 managers of these firms.

It would be beneficial if I had researched the average Salary of the 172,000 Employees at the Wall Street firms. I must state my belief that at least half of these Employees belonged to the middle Fifth Income bracket or less, and almost none of the 172,000 lower Employees exceeded $200,000 per year in Salary, though they live in a very high-Rent area. All of these lower-ranked Employees will feel immensely grateful for a Bonus range from $5-30k, which I believe the vast majority will receive. Whatever the Bonus range is for these Employees, I believe this to be the normal range for Bonus compensation to incite active performance from Employees engaged in such work.

Why does upper-Management require such additional wealth to achieve active performance. There is the Incentive to rise to the Top to gain such Salaries and Bonuses; but is not rising dependent more upon the old practice of Kiss-Ass, rather than upon superior performance. Most of upper Management might be replaced, if their Jobs depended upon superior performance (check the Pay packages of even major CEOs who are fired). This Free-For-All of upper management grabbing the Cash might have to be constrained by some Federal regulation. I would pass legislation stating all Business labor can be divided into Five segments set by the national Income divisions normally used, and no Business can get Tax exemption for Salary or Bonuses which is more than double the previous Income bracket, with Bonuses no greater than 5 times the Bonuses given to the lowest Employee bracket in the firm. lgl