This table recently generated huge interest on my blog:
I just wanted to add my own perspective. To me value is created by the people who do the base level work in an organization: the assembly line workers, the miners, the nurses, the teachers, the police on the beat, the soldiers, the farmers, the peasants, whoever. And their work is made possible by creative folk who invent better ways to work, who create value add businesses and who run large organizations.
There may well be a moral rationale for these organizers to earn a bit more, some multiple of the base level worker as we need lots of ideas, lots of incentive to organize value add work. I have done base level work and I have organized base level work so it became more productive. Where it becomes immoral in my view is where the ratio between value add worker and CEO is insanely high. And indeed where the CEO pay is not guided by any moral or even market rationale but is set by crony capitalism: CEOs sitting on each other compensation committees and awarding each other massive pay and bonuses. With little or no input from shareholders, let alone the rest of the workforce. Similarly, in the Finance sector, huge salaries are generated that have no relation to value add in the real economy.
The moral outrage generated by some huge multiples as indicated in the table above for the US is profoundly de-stabilizing for a society and potentially rocks the essential social contract that value add is rewarded and proportionality should exist. So even without any particular theory of politics, I suggest that a healthy society does not have massive ratios from top to bottom. But I go further: great organizations’ leaders see themselves as servant-leaders whose job is to ensure that the value adders, the designers etc are in the best place to add value without obstacles. They serve the bottom value adding layer not the other way round. And the middle management/supervisor layers serve the same purpose: the pyramid is inverted and in this view, very high pay ratios are dysfunctional, cut counter to the idea of servant-leader and we end up in the cynical world of the TV show ‘The Office’