But beyond this, he said, the real value-add is being in the office every day, promoting the right company culture and getting the best out of his employees. By planning strategy and shaping the culture, executives like Bruce play an enormous role in the success or failure of their company.
Nor does Bruce fit the caricature of executives as ruthless men happy to cheat workers. By running Heritage efficiently, Bruce helps to provide every one of his 100-odd employees with sustainable income. He pays for employees’ health care and subsidizes the health care of their families. He personally funded a health-care savings account for employees, out of his pocket, for 2 years. When it comes to promoting ethics in Heritage, Bruce, like many executives who never make the news because they play by the rules, leads by example.
But what if all this is true and executives are still overpaid? In his book The Roaring Nineties, Joseph Stiglitz argues that the system is rigged to overpay executives. CEOs are friends with board members, who approve their compensation packages; both conspire to enrich themselves and rob the company.
But that’s empirically not the case. “Compensation packages are determined by compensation committees,” says Bruce; not by the board. The “committees are controlled by independent directors with no financial loyalty to management.” The board votes on the packages the committees present, but its total influence is limited.
But to the extent that boards do influence executives, Bruce points out that shareholders own his company. ”The boardroom works for them, not for the CEO.” He drew parallels to elected officials: shareholders, like voters, have ultimate authority to fire a board member (or Congressman). “The process is highly democratic.”
That said, some executives are probably paid beyond their value; but often here government is the cause, not the solution. The 2008 TARP bailouts gave $432 billion to distressed companies like AIG and Citigroup. This money helped Citigroup to pay its executives $12.5 million in bonuses, subsidizing leaders who failed. Lucrative government contracts also reward executives better at networking with Congress than producing value. CGI Federal, the company behind the botched Healthcare.gov rollout, brought in $950 million in government contracts in 2012. Michael Roach, current president and CEO, receives over $6 million per year.
Most executives refute the caricature of executives as fat-cat do-nothings. Some are, admittedly, corrupt or bad at their jobs. They tend to get fired. But for the career CEOs routinely paid more than they’re worth, government is generally the problem. If people are serious about bringing executive compensation in line with executive value, the solution is fewer government handouts and bailouts, not an arbitrary maximum wage.
Julian Adorney is a Young Voices Advocate and is majoring in English and Advertising at the University of Colorado at Boulder. Julian’s written for the Foundation for Economic Education, the Ludwig von Mises Institute, Junior Scholastic magazine, and Speak Liberty Now.
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