The good, analytically-minded folks at Unbiased America (a worthwhile Facebook page to follow if you’ve a libertarian inclination) assembled some data that compares the top 100 CEOs in the world with the top 100 professional athletes. Their results? The CEOs earn 0.04% of company revenues (their company revenues), while the athletes earn 2.2% of the TOTAL sports industry revenues.
The redistributionists among us routinely decry CEO compensation, and routinely assert that it’s unjust that a CEO makes 300 times what their workers make. Setting aside a few sneaky elements in this assertion that they don’t want you to know, including the fact that they’re only looking at a few hundred individuals (i.e. the biggest companies) rather than the quarter million people who hold the title or equivalent position in America, and the fact that redistributing their pay wouldn’t make a hill-of-beans difference either to their workers or to the tax base, lets focus on what the CEO multiple really is: an emotional ploy to support their demands that government be given more power over the private economy, and a deflection from the real source of harm and economic problem: our politicians.
CEOs make great bogeymen. They’re usually staid-looking white men with $400 haircuts and $4000 suits, traveling in black town cars or SUVs with packs of assistants, and generally removed from the public eye. Pop culture loves to present evil, immoral, ruthless billionaires as the bad guys in its offerings, further inculcating a bias against the people who have shepherded the large bulk of what makes your life good, easy, convenient, and prosperous.
Contrast these bad guys with pro athletes. Unlike CEOs, pro athletes are hero figures, to adults and children alike. Even the “bad boys” have their own followings, and many secretly or not-so-secretly admire even the outlandish behaviors that some exhibit. Meanwhile…
They earn a much bigger share of their companies’s (aka teams’) revenues than CEOs. Those companies (aka teams) employ many thousands of non-athletes, whose incomes are a tiny fraction of theirs.
Their nine figure contracts are supported by ten figure extortions (e.g. stadium and arena subsidies and credits) of taxpayers held hostage by teams’ fan bases who don’t care about the fleecing of their fellows.
They are one misstep (i.e. career-ending injury) from being of absolutely zero use to their employers, saddling those employers with a financial albatross that will diminish the product and harm the employer’s ability to generate revenue.
They are typically, by the time they get their big, multiyear contract, peaking in skill. Or, they will peak in skill well before the end of that contract, making it likely that their employer will receive diminishing work product in latter years.
Many are notoriously inefficient with the money they make. Rather than putting that money to productive use, as many wealthy people do when they invest it prudently, common is the pro athlete who blows millions on swag and entourages. It’s their money, they are free to use it as they wish, but if we are judging, which is what the CEO bit is about, we should judge the whole picture.
They also may lose their skill sets prematurely, and end up being of such little benefit to their teams that they get benched or released.
And, to what end? Professional sports is a valued product, but it is, at the end of the day, just entertainment. Pro sports provide pleasure and leisure, and that’s of great value to many people, but they are ephemeral, and nothing they do adds to humanity’s continued improvement in living standards. Yes, the same is true for many companies (much of what we consume is entertainment), but it’s not true for all companies. Medicine, transportation, agriculture, and countless other industries actually advance our living standards in meaningful ways.
Furthermore, sports feeds our ingrained tribalism, and tribalism is at the root of many political divides (and worse). It sustains the illusion of “us” and “other.” Yes, this is a core element of human nature, but there are elements of human nature that are detrimental to the modern societies we’ve developed to advance the human condition.
I’m not deriding sports, or pro athletes. I enjoy rooting for my teams, and I don’t begrudge the athletes getting as much money as they can. I do deride the government monopoly protections and taxpayer largesse handed out by our feckless politicians, but I put the blame for all that on the pols, not on the athletes (or owners).
Ditto for CEOs. When there’s blame to be assigned for taxpayer bailouts, that blame lands on the people who have the power to hand them out, the people who can but don’t say “No” to the requests for largesse.
A similar argument can be made regarding top entertainers, e.g. movie stars and musical performers. The top earners draw 8 figure incomes to provide entertainment. Obviously, there’s a market for this entertainment, and I don’t begrudge anyone making as much as he or she can in a free and competitive market. But, if someone vilifies CEOs for “keeping too much,” he should apply the same standard to everyone else who makes that much money. Not doing so reveals the real agenda, which is to make an emotional argument, rather than a logical one, in order to convince others to grant coercive power to him or to those he supports. At the core here are the politicians. With a handful of exceptions, they are a contemptible lot, using the coercive power of government and spending our money for selfish reasons. Athletes, entertainers, CEOs… they all rely on our choices and good will – when they’re not rent-seeking from the politicians, that is. But, again – it is the politicians who have the ultimate power, and therefore it is the politicians who should draw our ire.
I don’t intend here to present a blanket defense of CEOs or of big business. As in all such things, they should be judged as individuals and individual entities. CEOs and other big-money corporate types are hired to do something difficult: make decisions of large financial import. The superb movie Margin Call, about a Wall Street firm facing an existential crisis, features a CEO named John Tuld, (reportedly a mashup of Merrill Lynch’s John Thain and Lehman Brothers’ Dick Fuld). Tuld informs a young analyst of his role in the company.
Do you care to know why I’m in this chair with you all? I mean, why I earn the big bucks… I’m here for one reason and one reason alone. I’m here to guess what the music might do a week, a month, a year from now. That’s it. Nothing more.
That’s not easy. People at a certain level of business get paid to make decisions that others cannot make as well. In this they are no different than professional athletes. How many baseball fans have gotten angry at a superstar who let an easy fastball sneak by him, or who didn’t come through in the clutch, and screamed at the television “I could have hit that!!” Could they, really? There’s a reason the pros get so much money. If there was a larger pool of talent at that level, they wouldn’t get paid nearly as much. Market forces are relentless that way. Same with corporate leaders. Sure, they work to leverage as much as they can out of the system they work within, and that includes “golden parachutes” and guaranteed money, but how are they any different in that than pro athletes, who routinely take contracts that will include their declining years?
If you’ve been swayed by the ‘CEOs make too much’ gambit, I urge you to rethink it. In terms of comparisons to athletes, in and of itself, and, finally, in terms of individuals. Do you have billionaires that you like? That, by dint of their support for your preferred policies, don’t draw your ire, even though they might be the worst cronyists or the biggest zero-sum predators? Yes, there are scumbag CEOs out there, just as there are scumbag athletes, entertainers, and other rich people, and it’s perfectly fine to deem them as such. But, barring criminal behavior, we’ve neither right nor moral standing to demand their millions be forcibly diminished.
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I don’t know where you live, but where I live there is complaining about athlete’s salaries all the time. It is rare that I hear someone complain about CEO salaries. Not sure that the comparison in Unbiased America is valid. It compares one individual’s share of the revenues with the share of a group of workers. And, not just any group, the most important group of the whole operation. The sine quo non of the business.