Friday, November 4, 2011

Should Executive Compensation Be Tied To Job Creation?

On a visit to an Occupy encampment you will come across dilettantes who have come for the party like atmosphere, anarchists, and levelers. However, you will also come across some people that have been driven to the Occupy movement due to overwhelming frustration at the seeming hopelessness of their job hunting efforts. (Of course, I live in Illinois, and my advice to the unemployed would be to find a low unemployment rate state in which to go job hunting, but that is another story). While the OWS movement has been over hyped, the level of desperation of many of those searching for jobs suggest the potential for additional anarchistic actions in the future.

Sweeping the issues of income inequality and job creation under the carpet could come back to haunt corporate boardrooms. The potential for OWS to become dangerous was illustrated by Occupy Seattle's attempt at a Robespierre moment when they attempted a citizens arrest of Jamie Dimon.

Income inequality is an issue that seems unlikely to go away. Heck, even the two most highly visible targets of the protesters, Jamie Dimon and former Bush administration economic advisor Greg Mankiw, have expressed concern about income inequality.

According to Dimon, "America has become more inequitable in the last 10 or 20 years. That's a fact. I don't personally think that's a good thing." Ironically, the subject of the class that 8% of the Mankiw's Harvard students walked out on was income inequality.

If the job situation continues to deteriorate, corporate boardrooms could come under siege. The proposed millionaires tax and the attempt to seize Jamie Dimon could simply be the tip of the iceberg. Stirring up anger about corporate executive hauling in huge salaries while millions cannot find jobs is an incredibly powerful populist message.

Thus, tying executive compensation to job creation may be merited in order to: 1) defend the corporation from attacks; 2) serve as good public relations, 3) addresses the issue of income inequality, and 4) make a contribution to job growth that America must engender if we want to avoid someday becoming as broke as Greece.

Many will object to this proposal because rewarding job creation takes away from a primary focus on increasing shareholder value. However, in my opinion if America does not find a solution to the bubbling anger of frustrated job seekers, it is not that big a leap to assume that the one type of job that will experience growth is that of bodyguard. Tying executive compensation to job creation might even reduce the likelihood of highly paid executives having the bulls eyes of anarchists on their backs every time an article about their compensation is published.

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