Sunday, June 19, 2011

Two Newspaper articles prompt the question "when is enough, enough"

The Washington Post has a nice piece (that relies on a study by Jon Bakija, Adam Cole and Bradley T. Heim) about how executive compensation has been the principal driver behind the increasingly unequal income distribution in the United States.  It uses Dean Foods as a nice case study---the current CEO (who apparently runs the company well) makes ten times the income of the CEO from the 1970s (who also ran the company well).  One reason for the difference is that Kenneth Douglas, the 70s era CEO, turned down pay-raises, arguing that it if he made more than is $1 million per year, it would be bad for morale.

Immediately after reading this article, I read another in the Milwaukee Journal-Sentinel about the search to replace Biddy Martin as chancellor at the University of Wisconsin-Madison.  In that article, Jan Greenwood, a presidential search consultant is quoted:

UW-Madison "is a phenomenal university" with world-class status, said Jan Greenwood, a presidential search consultant.
But, "Wisconsin, at this point in its history, is one of the states that is having severe challenges because of compensation issues," she added.

Martin made $437,000 per year plus benefits plus a fully staffed large house.  One can live very well in Madison for $437,000 plus a house.  That is enough to take nice vacations, eat out wherever one wishes, and drive a nice car.  It is probably even enough for owning a boat or small plane if such things really mattered to someone.

Maybe my problem is that I am a homer--I got my Ph.D. in economics at Madison and then was on the business school faculty there for twelve years.  The place does have some serious issues, but is also quite extraordinary.  Getting to run it while being paid enough to enjoy lots of consumption seems like a pretty good deal to me.