Organization: Computer Science Department,  Stanford University.
Newsgroups: bit.listserv.politics
Date:         Fri, 11 Dec 1992 15:50:49 -0800
From:         Andy Freeman <andy@SAIL.STANFORD.EDU>
Subject: Re: charts and other implements of torture part II

>>Paying executives a lot is necessarily bad management?  Or, is O'Andy
>>claiming that lowering executive pay will result in better executives?
>
>Compensating executives out of proportion to the value of their
>work is poor management. Rewarding failure is poor management.

That's all well and good, but either O'Andy is ducking the question
or he's equating "out of proportion" with "a lot".  His choice.

>Increasing compensation for executives while cutting pay for workers
>when the productivity of workers is increasing is poor management IMHO.

Really?  What if the cause for the increasing productivity is
MANAGEMENT activity.  More stuff, lower costs - most people think
that's "good".  Does O'Andy disagree?

>>Suppose we have two managers, both equally skilled.  In O'Andy-land,
>>neither can be paid what they're worth - their compensation is tied to
>>some arbitrary index.
>
>I didn't say that they *couldn't* be paid more; I said that the
>company couldn't *write off* in excess of a certain amount.

Yup, and marijuana isn't banned at the federal level, it is just
heavily taxed.

What social good justifies this extra tax?

>>One happens to have a lot of money, so she can
>>buy a lot of stock in the company she works for and benefit from any
>>stock price increase resulting from her skills.  The other doesn't
>>have a lot of money, so she only gets her salary.  Is this good?  Or,
>>does O'Andy have a stock-option loophole in his plan?
>
>Presumably the person with money can invest it anywhere and will
>put it wherever it will receive the largest return regardless of
>whether it is through her own skill at management or her/her broker's
>skill at investment. If she chooses to invest it in her own company
>regardless of the return, she is merely placing it where she feels
>that she is getting the most value for her investment. (there may
>be some intangible value associated with investment in her own
>company, even if the direct return is lower than another investment
>might provide) This is an irrelevant argument.

No, it isn't.  O'Andy wants to cap the salaries of poor but skilled
managers.  He doesn't want to admit that, but ....

>>How do we determine the appropriate ratio of managers to workers?
>>(What's a worker anyway?)  Does it depend on the company or is it
>>industry-wide?
>
>Industry wide, they will naturally be somewhat arbitrary, but,
>in general it should not be difficult to come up with an average
>ratio of management/supervisors/workers.

So?  Why is the AVERAGE "correct"?  Why should it be tax-advantaged?

It looks like O'Andy is confusing coming up with a number with coming
up with a number that has the relevant properties.

>A worker is a non-supervisory person whose labor creates or adds
>economic value.

That's a rather useless definition in many high-tech occupations.  In
many cases, the "supervisors" are the low-paid employees.

Moreover, is the appropriate salary for a supervisor correlated with
the number of people supervised?  (In some cases, I'd argue that
the more people supervised, the more valuable the supervisor while
in others, the fewer the better.)

Why does O'Andy want to use measures other than "bottom line"?  That
is a direct measure of the effectiveness of an organization in
translating inputs to outputs.  What does he want from GM besides
decent cars at a low price?  Why isn't he willing to pay for those
other things?

>>So?  Sensible people with positive incomes will double their debt to
>>double their income.  (In some cases, it may even make sense to triple
>>the debt to double the income.)
>
>Sensible people also exploit the rewritten chapter 11 rules that limit
>the market's discipline of those who acquire debt too freely, making
>the corporate bankruptcy business a major growth industry in the 80's.

Huh?

-andy
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