Critical analysis of American’s CEO’s paycheck (blog)

Donald Rumsfeld, US Defense secretary 2002 while responding to the press questions about the situation in Afghanistan said, “There are known unknowns. There are things we know that we know. There are known unknowns. That is to say, there are things that we don’t know. But there are also unknown unknowns. There are things we do not know we don’t know”. Think twice! what does this mean to you? The answer is simple-the fundamental problem is not lack of information, but our limited ability to process it!

In the US today, the average CEO compensation is 300-400 times the average worker compensation (wages and benefits). The high inequality is behind the poorest health indicators and worse crime statistics of the US today. The goal of life is not to have our lives mean something to ourselves. The goal of life is to have our lives mean something to others. The American CEO is paid around 10 times more than their predecessors of the 1960s-moreover, the latter ran companies that were much more successful in relative terms than today’s American companies. Since they are paid 300 times more than the average worker-they should then add 300 times more value to the company! I know you may disagree with me while reading this but…….. If someone does not have the productivity to justify her high pay, market forces will soon ensure that she is sacked! The ratio of American CEO to average worker compensation used to be in the region of 30 to 40 to 1 in 1960s and 70s. This ratio has grown at a paid rate since the early 1980s reaching around 100 to 1 in the early 1990s and rising to 300 – 400 to 1 by the 2000s-yet the average hourly wage for the US workers in 2007 dollars rose from $18.90 in 1972 to 21.34 in 2006 according to EPI.

The view that what the CEO does is the only thing that matters for the organizational performance. Shareholders may be the owners of the company … but as the most mobile of the shareholders, they often care the least about the long term future of the company.   According to EPI (2000), Swiss and Germany CEOs were paid respectively 64 percent and 55 percent respectively of what their American counterpart received. The Swedish and the Dutch were paid only around 44 percent and 40 percent respectively of the American CEOs pay. Japanese CEOs only a paltry 25 percent wages in Japan and European countries are basically at the same level as those in the US. Swiss worker & the German worker get higher wages. (130 percent and 106 percent of the US wage respectively). Despite this, the American CEO is running companies that are no better, and frequently worse, than their Japanese or European competitors.

As Bebchuk and Fried (2000) states, “When Mattel CEO Jill Barad resigned under fire in 2000, the board forgave $4m loan, gave her additional 3.3m in cash to cover the taxes for forgiveness of another loan and allowed her invested options to rest automatically .She also received her benefits under her employment agreement which included a termination payment of $26.4million and retirement benefits exceeding $700,000 per year. 

It will take long to eliminate wrong managerial compensation practices in US. It is a very common clever device that when anyone has attained the summit of greatness, he kicks away the ladder by which he has climbed up, in order to deprive others of the means of climbing up after him. Company departments should be designed to reward trust, solidarity, honesty and cooperation among their members. You can close one eye in the room full of darkness and ask yourself, can it be possible? Managerial classes In the US have become of the fat pay-check; they have been getting over the last few decades. They have come to control the boardrooms, through interlocking directorship and manipulation of information that they provide to independent directors, and as a result, few board of directors’ question the level and the structure of executive pay set by the CEO. Good companies are run on trust and loyalty, rather than suspicion and self seeking. The managerial classes have gained enormous influence over the political sphere, including the supposedly center-left party. 

Today, the reality is that winners are being picked all the time both by the government and the private sector, but the most successful ones tend to be done in joint efforts between the two. For instance, the Korean economic miracle was the result of a clever and pragmatic mixture of market incentives and state directions.  The US economy needs indicative planning which involves the government setting some broad targets concerning key economic variables-working with, not against private sector. We can, and should, change the rules of the stock market and the corporate governance system in order to restrain excessive executive pay in limited liability companies. There is need to impose the Korean policy of state support of new industries and services-regularly report on some key aspects to their businesses. The government picking winner strategy which was mostly successful in Japan is also highly welcome. During the deliberation councils in Japan, government officials and business leaders would regularly exchange information through formal channels in the presence of the third party observers from academia and the media. We deliberately restrict our freedom of choice in order to reduce the range and the complexity of the problems that we have to deal with. Again, we can think about this!

``Edwin.

My great grand parents;Ms&Mrs peter Muterere

Peter muterere was born in 1878 In Mpororo( present day Rukungiri district). He was a grandson of a pastoralist. He never went to school but he liked trade and business in general so much!.

During the period of slave trade, he worked as a tour guide and interpreter to the foreign traders. He used to go to Congo specifically to get gold and diamond minerals (Before Uganda was founded).

He later got married and gave birth to three girls. He  continued with his business as usual –but along the way, he spent some few months away in Congo,coming back, he found his family of three girls and one wife were taken away by natural disaster. He did not establish the cause of their death.  Don't stay where you are tolerated, go where you are CELEBRATED!  Life is way too awesome to waste time worrying about someone who doesn't treat you right!.  It was from this incident that Mzee peter Muterere left Mpororo and settled in Igara, Bushenyi. He later got married to a beautiful girl called samari –produced eight boys and one girl. My Dad ( Rwampororo) born in 1935, was the second last of the family.Rwampororo also produced 8 boys and one girl myself being the second last born. I have come to understand that things don’t happen by accident!.

Mzee Muterere later,  established a large coffee plantation under the guidance of the colonialist. He never abandoned his cows –being the only person in the region supplying milk to the population. He managed to educate his sons living behind his only daughter since girls were not allowed to go to school at the time.His sons set up a big construction company (Harambe builders and constructors limited)which won a big deal from the government to construct all sub-county headquarters in western Uganda.

They can take away your glitter but they will never take away your sparkle. When Uganda got its independence from the British (1962), courageous Muterere was so over excited and decided to official wed his wife samari-remember the last born 1938).  His boys organized for him a very beautiful wedding ceremony. He late died during Idd Amin’s regime in 1976 at the age of 98 years living behind a very big family. His wife later died in 1982 at the age of 101 years.Fearless Muterere left one word to all his family members behind, "Never Trust a woman" If you ask me how long I'll be your friend? My answer will be, I don't know, 'cause I really don't know which one is longer. FOREVER or ALWAYS? .Peter Muterere has always been my friend and am proud of him.

How nature can infleunce your ethics

Ethics based on utility according to the Greeks is called telos for ‘end result’. Nature has placed mankind under the governance of two sovereign masters, pain and pleasure. It is for them alone to point out what we ought to do, as well to determine what we shall do. On the one hand the standard of right and wrong, on the other the chain of causes and effects, are fastened to their throne. They govern us in all we do, in all we say, in all we think; every effort we make to throw off our subjection, will serve but to demonstrate and confirm it. In words a man may pretend to abjure their empire; but in reality he will remain subject to it all the while. The principle of utility recognizes this subjection, and assumes it for the foundation of that system, the object of which is to rear the fabric of felicity by the hands of reason and of law. Systems which attempt to question it, deal in sound instead of sense, in caprice instead of reason, in darkness instead of light………….

By the principle of utility is meant that principle which approves or disapproves of every action whatsoever, according to the tendency which it appears to have augment or diminish the happiness of the party whose interest is in question; or, what is the same thing in other words, to promote or oppose happiness. I say of every action whatsoever, and therefore not only of every action of a private individual, but of every measure of government…………..the mirror reflects reality, but it is also the perfect tool for deception; When you mirror your enemies, doing exactly as they do, they cannot figure out your strategy. The mirror effect mocks and humiliates them, making them overreact. By holding up a mirror to their psyches, you seduce them with the illusion that you share their values; by holding up a mirror to their actions, you teach them a lesson. Few can resist the power of the mirror effect.

Of an action that is conformable to the principle of utility one may always say either that it is one that ought to be done, or at least that it is not one that ought not to be done. One may say also, that it is right it should be done; at least that it is not wrong it should be done: that it is right action, at least that it is not wrong action. When thus interpreted , the words ought and the right and the wrong, and others of that stamp, have a meaning; when otherwise they have none.