Surprising Symbiotes: Social Justice Promotes Corporate Greed

by Roger Bourke White Jr., copyright November 2011


The now-9,000-comment "Blogathon" on Linked-In continues, and it continues to stimulate my thinking. This latest insight came from thinking about a mystery brought up several times on the blog: Why do CEO's of big corporations get paid so much?

The simple answer I favor is: supply and demand. The boards and investors of these big corporations are willing to pay top dollar because it's hard to find someone who can do the job. There are few people who fit the qualifications and many big corporations looking for CEO's, so the bidding goes into the stratosphere.

But this answer is far from consensus on the blogathon: Others see the simple answer as uncontrolled corporate greed -- "The bosses can do this so they do do this. The boards, investors and workers are all whoosies compared to the CEO's."

This disagreement on something so basic is part of the mystery. It smacks of being part of a thinking blind spot. Figuring out why this difference of opinion exists was part of what produced the following insight.

The next step on the journey to insight was to ask the question, "Why is this a job so few people are qualified for?"

The Insight

This is a difficult job because it suffers greatly from The Curse of Being Important. There are a whole lot of people who care about what the CEO does, and those people are both quite vocal and quite influential in the corporation's course. This means the job is filled with a whole lot of people-grief. This is what makes it difficult and what narrows the qualified candidate field.

And one of the major contributors to that people grief is those demanding social justice -- fairness -- in how the corporation runs its affairs.

Social justice demands are different from business operations demands because they have no equivalent to the "bottom line" that business operations do -- there is no easy way to measure social justice success. Instead solving social justice issues is a work of art -- it's all about emotional response and it's all in the eye of the beholder.

This demand for artistry in the CEO performance skews the qualifications. Being a "people person" and a good persuader move up to top importance and displace technical expertise in the company's operations. The "engineer" comes in second to the "politician".

The somewhat surprising result of this is that these grief-tolerant, people-oriented, persuasive CEO's are also very good at persuading regulators and real politicians, and it pays off handsomely for them to do so.

What they persuade the regulators and politicians to do is raise barriers to entry into their business operational areas. They work on making it harder for other companies and individuals to compete on their turf. They often justify this by arguing the high barriers keep incompetents out and thus help the community. The clincher argument is, "And with these high barriers to entry in place, the corporation can do lots and lots of social justice. We can support unions, health care, charity, green... whatever."

Sounds nice, strokes emotions well, and the only visible flaw is it takes a superstar CEO to keep the parade moving forward smoothly, so this person gets paid like a rock star. That's a blemish, but it only picks up traction in times such as we are currently experiencing.

The Alternative

What is the alternative?

The alterative is for those concerned with social justice to be less concerned with fairness in income distribution and rights, and more concerned with fairness in the business and worker playing field. The social justice emotion must be taught to be concerned less with rights and more with barriers to entry. Social justice must mean advocating that in every style of business the barriers to entry should be low, and that the playing field should be simple, level, and transparent.

When the barriers to entry are low running a business becomes more about spending time and attention understanding customers and business operations and less about spending time and attention on understanding patronizing rules, regulators and politicians. This change happens because the whole business process gets simpler and more to the point.

How does more and better competition solve the social justice problems? How does this improve wealth distribution?

One of the first good consequences will be more businesses, as in, more business entities. If it is easier to get into a particular kind of business, there will be more businesses pursuing that trade or service. When this happens the role of the business CEO changes. Instead of the job being mostly about navigating rules and regulators, it becomes about business operations -- how to run the business more efficiently and how to please customers more effectively. This will change who is qualified to be a CEO by broadening the field tremendously. This will crash the demand for "superstar CEO's", which will crash the salaries paid.

This is the first way that changing what is considered important to bring about social justice will help bring more social justice.

The second way is that workers now have more choices. That classic worker fear, "The boss will replace me if I object to his orders." can be ameliorated by the comfort that, "There are many fish in the sea. I won't have a hard time finding a different company to work for." The boss's strangle hold is broken because there are a lot of bosses to choose from. Keep in mind, for this kind of security-in-choices to happen, both moving in and out of a job has to be a low barrier process. It's ironic, but the current intricate waltzes to both get in and out of a job favor boss control.

Changing worker-boss relations is the second way that changing what is considered important to bring about social justice will help bring more social justice.

The social justice downside of these changes -- the scary part -- is that business becomes even more dynamic. Businesses will rise and thrive, and fall by the wayside even faster than they do now. Having a job will be even less of a lifetime affair than it is now. This will be a very scary feeling for prescriptionists -- those who love things nice and settled.

It is another curiosity that the love of social justice is often closely coupled with a love of prescription -- people who feel more income equality is a good thing often feel that job status quo is also a good thing. And this emotion is something American unions of the 2010's have adapted well to protecting. Love of prescription seems to be one of the great attractions of a union environment.

The social justice upside is that businesses that fall by the wayside are being replaced by successful businesses. They are, in fact, usually being replaced as they peak and before they begin to fall. An example of this is the fast churning in high technology companies. If you regularly go to a high technology trade show, such as CES, you meet the same people in the industry year after year, but the companies they are working for will change constantly. The industry is good to these people, but it's an exciting roller coaster ride. It's a boom and bust environment. Growth will be big in the boom side, and the searching for the next big thing will be a scary time when the boom runs out.

What I'm recommending is this kind of dynamic environment that high tech experiences be spread to many more kinds of American employment. I'm suggesting that fields such as education and health care would benefit -- they would be more productive and more fun to work in.

And, the social justice would be higher. There would be more income equality because this environment would break the unholy alliance between good intentioned social justice seekers, prescriptive union bosses and government regulators, and grief-tolerant/people-skilled, "rock star" CEO's.

The heart of this change for the better is for social justice seekers to pay more attention to what their intentions are creating. They need to be aware that when they directly seek income equality and workers rights they are supporting rock star CEO's, monopolistic business practices, and status quo. What social justice seekers should be striving for is the environment where rock star CEO's are not in high demand. That environment happens when the playing field is simple and barriers to entry are low.

Update: This 8 Sep 12 Economist article, Bargain Bosses, discusses this topic of whether or not bosses are over paid, and concludes they usually aren't. And this 15 Sep 12 article, Pity the investment bankers, talks about the emotional gulf people feel between banker jobs and other kinds of jobs. "People thirst for vengeance. But the industry is already in retreat."

Update: This 25 Jan 13 WSJ Weekend Interview, Travis Kalanick: The Transportation Trustbuster: Travis Kalanick, co-founder of Uber, talks about how he's bringing limo service to the urban masses—and how he learned to beat the taxi cartel and city hall. by Andy Kessler, describes how much of a people person Uber founder, Travis Kalanick has to be to implement his disruptive technology ideas in a social environment heavily encrusted with "fairness" status quo regulations: the taxi and limo services in many cities.

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