The premise is that the highest compensation draws the best players. That may be true in athletics, where the measurables are easy to define. But even in athletics, a top player's compensation is no guarantee of the team's success - and what we're looking for in business and finance is team success - aka success of the enterprise.
We want good teams - with good stewardship. We want longevity - to see them in the playoffs every year. We want a good farm system, and good coaches. We want foresight, vision, prudence and aggressiveness - all in balance.
Overcompensated players across the spectrum of commerce and finance have taken large numbers of vital enterprises down. The main driver for sub-par performance and risky behavior has been - you guessed it - increased compensation. We've created incentives for increased compensation, which in turn creates incentives for risk-taking. If the risk-taking fails, we pay anyway. Meanwhile, across the economy we overpay for mediocrity.
Win, lose or draw they get paid. They talk a good game: "We love it. We'd do it anyway." but they're the first, with compliant boards and shareholders, to isolate vast sums of money (beyond compensation, including items like country clubs, executive jets, limousines and chauffers). They're treated and act like rock stars.
That treatment comes right out of the shareholder's - and now the public's - pockets. In 99 cases out of 100 it provides no provable benefit that couldn't be achieved by someone earning 10 or 20 times less.
The star culture is embedded in our society: the big-name player. We all want big-name players, but the real performers are one in ten thousand, or worse. The visionaries, the successful entrepreneurs never prejudice the success of their enterprises by the effect of their compensation: enterprise first, compensation second. But few of these "stars" started anything. They're just hired help in companies whose existence predates them, and will continue after they're gone - if they don't wreck the company, as many have.
Superstars: there's not enough to go around, and there never was.
We've bought into a statistical myth, the overpaid beneficiaries of which are the other 9,999 in 10,000.
Bottom line: don't believe there's no one coming up who couldn't do a better job for far, far less. There always is.
Jim |
