This week’s Economist features a survey on executive pay that basically argues that, while there have been excesses, executive pay is generally awarded in a fair and legal way. The crux of the matter, as presented, is that executives earn less in pay than they add to the value of the company. More specifically, they add more than the most qualified person willing to work for less could.
At one point, the article holds up Robert Nardelli from Home Depot as an example. When he left the company, he got a severance package of $200 million. Even if his performance did earn more than that from the company, I think a case can be made that it is fundamentally unjust for one human being to have that much money. It enormously outstrips the needs a person could possibly have, and it is awarded in a world where millions domestically and billions around the world live in poverty. While emotionally satisfying, that argument may be fallacious: poverty alleviation is not the alternative usage for this money, and there isn’t a fixed amount of the money in the world to be distributed to one thing or another. It is at least logically possible that the economic contributions of chief executives do generate societal benefits.
Is the marginal value versus marginal cost perspective really the right way to evaluate executive pay? The degree to which the public tends to view such people as little better than venomous snakes suggests that the idea clashes with general moral intuitions. (Personally, I don’t think that venomous snakes belong in the category of things to which moral judgments can be applied; they are like large falling stones.) Of course, that doesn’t advance argument very far on the matter of what could or should be done about it. As discussed before, the problem is not that inequality is inherently morally problematic, but rather that it seems impossible that the differences between one human being and another could justify such excessive differences in payment. Furthermore, the reasons for which any such differences might exist are largely the product of chance.