Rewarded for Success, Mediocrity or Failure


Kevin Drum on the relation of executive pay to actual executive performance vs. the industry standards:

This, to me, has always been the smoking gun in conversations about executive pay. If corporate executives are really being paid for performance, they should be paid richly if their performance is significantly better than the competition and less if their performance is worse. They shouldn’t be paid richly if their performance merely matches the overall growth rate of their industry or the economy as a whole. For the most part, though, that’s exactly how they’ve been paid ever since the early 80s. Merely average performance drives outlandish pay increases, and the penalty for poor performance is almost nonexistent. Corporate executives, as a group, are wildly risk averse, and over the past few decades have mostly been paid simply for going along for the ride when the economy is doing well.

via Pay for Non-Performance | Mother Jones.

Unlike union laborers, teachers and federal employees, no one will ever challenge the pay, bonus and benefits packages awarded the captains of industry, because they “create jobs” (even when they slash jobs with massive layoffs to maintain revenue numbers).