The Cost of Talent: How Executives and Professionals are Paid and How It Affects America
In 1992, the 1,059 partners in ten of New York’s largest law firms averaged $957,000 as their shares of their firms’ profits. Some physicians affiliated with the country’s leading medical schools received incomes exceeding $1 million. Executives did even better. Among fifty companies recently examined by Fortune magazine, each compensated its leading executive in excess of $5 million, rising to $11 million at Philip Morris and $15 million at General Electric. Corporate salaries are commonly augmented by stock awards. The current chairman of Coca-Cola, for example, has already amassed a portfolio of more than $300 million.
Derek Bok, who recently retired after twenty-two years as president of Harvard, is concerned over “the acquisitive, self-centered goals reflected in our compensation practices.” He uses phrases like “undeserved income” and “unwarranted wealth” to characterize the stipends of all too many executives and professionals. While The Cost of Talent is a highly opinionated book, it also contains much valuable information, historical as well as current, about what can be earned in law and medicine, business, and public service, as well as in teaching in schools and colleges.
Whether we look at surgeons or casual laborers, the same question arises: What is an appropriate wage for the services they provide? Needless to say, we all have opinions about our own and others’ incomes. Most usually, these often tend to be reactive ones, stirred on hearing of payments we feel are too high or too low. But after that, it is by no means easy to set up universal standards for determining what a just wage would be. Dozens of factors intervene, from competitive considerations to notions of need and worth and equity. These ambiguities are illustrated throughout Bok’s book. For example, he uses the term “earnings” freely, even when describing payments he deplores. Yet when we speak of money as having been earned we often mean that the amount is merited. Even calling a figure “merited” can be equivocal, since it can express moral approbation or refer to a market valuation. It soon emerges that Bok tends to think incomes should be set by the market. So when he refers to some salaries as “undeserved,” he is commenting as an analyst, suggesting that society could get the same kind or quality of work for less than it is currently being billed for.
As I have noted, doctors can make more than $1 million. But such incomes are not earned in an open medical market, since few patients can pay the high current charges or fees from their own pockets. Bok shows how the rest of us have been subsidizing some physicians, owing to “the willingness of the government and private insurance plans to approve their fees and reimburse them accordingly.” Until recently, doctors have got virtually all they demanded from the repayment system, not least because no price was deemed too high for professionals who “save lives.” Yet this deference is waning, in part because fewer people have a …