In short, in my spare time I have been working on a screen play that’s tentatively called “A Meaningful Life” about a young law student who has spent too much of her time acquiring and not enough time giving until something happens that changes her world view. On Tom’s page, I have inserted a scene from my draft screen play about a discussion Alicia (the main character) has in her law school corporations class with her law professor and another law student. This scene brings together the work that we do here at TFI and my life as a law professor.
Alicia makes it to Corporations class late, and as she walks in Professor Joseph Markham begins to focus his lecture on the corporate form and management compensation. Professor Markham is relatively young, about 35 years old, and of the professors at UCLA he is one of the most liked. A hard worker, very smart and dresses casual, he is approachable, friendly and humble in spite of all his success as a lawyer and in academics.
(Prof. Markham) Well I thought before we finish up today, I would take the liberty of raising an issue that has been in the news lately and maybe something that, as future lawyers and policy makers, you might want to give some thought to. Let me hit you with an interesting fact: In the United States today, CEOs of many of our largest corporations make, on the average, at least 300 times more in annual income than their average lower level employee makes annually.
Markham looks around the classroom. – No response – Markham continues,
(Professor Markham) Well let me mention something else, the highest paid CEO in the United States received $80 million in salary alone last year.
Markham pauses. (Professor Markham) Does it bother any of you that CEOs, who under corporation law have a fiduciary obligation of loyalty and care to shareholders, end up making this much money? Money that comes out of corporate profits, if there are any profits, and money that is way out of sync with what average workers in American get paid. On the other hand, what if the corporation in question made a profit of $5 billion that year over its previous year and its board was convinced that much of that rise in profits was due to the CEO’s unique talents and work ethic, would that making a difference in your thinking?
Eric Messer, a normally quiet 2L, raises his hand.
(Eric) I think that no amount of expertise or work a CEO does can justify the fact that one person in a company is able to make $150 million a year. It just isn’t right. And it frustrates me that CEOs and managers feel no shame in receiving such excessive compensation when there are people literally starving in the street outside their doors. I think there should be a higher burden placed on CEOs to justify their compensation. In fact, maybe we should have laws that limit compensation to no more than 50 times the annual compensation of their lowest paid full time employees. That would still give them a six figure salary and I think that’s reasonable and balanced.
Alicia was checking her Facebook, but Eric’s comment caught her attention. Alicia can’t help but think about how hard her mother has worked helping corporations and CEOs, the long hours she works every day, and Alicia believes that but for some CEOs and entrepreneurs, certain corporations and the jobs they have created may not exist at all. Alicia raises her hand.
(Alicia) Professor Markham, I don’t think we are in a position to evaluate the performance of managers and whether or not they deserve their compensation. Look at where we live. Celebrities in Hollywood make just as much, if not more, than what CEOs make. It’s not their fault that there are poor and hungry people in the world. These managers have worked hard to build up their skills and expertise, and if a particular company decides to pay them so much, its because they likely deserve it.
Alicia is surprised at the intensity of her own voice and wonders if perhaps she did feel a bit guilty or defensive about all she has and what she has grown up with.
(Professor Markham continues) So Ms. Griffin, let’s assume for arguments sake that the CEO pay was approved by a unbiased and neutral Board of Directors, and at least on its face, the level of executive compensation raises no eyebrows among board members, should then the compensation be legal, or maybe more to the point, morally acceptable?
(Alicia) If the law runs a mock morally, then it’s up to a legislature of one kind or another, to change the law, but in the United States, people have never set a limit on salaries, instead, salaries are set by market forces and what like people receive for the same services. Morality is not part of the equation.
(Eric Messer chimes in) That doesn’t make sense. If morality was not part of the equation, we would not have child labor laws, minimum wage laws, and maybe we would still be living off the backs of slaves. The truth is that if corporations were left to their own devices, there is no telling how many more employees would be exploited for the sake of profit. In the same way as it would be unjust to pay people very little for the work they do, it should also be unjust to pay the privileged few on the top too much, whether they be CEOs, celebrities or athletes. Do you know that at last count, the 400 richest people in the United States together controlled as much wealth as 190,000,000 Americans who live at the bottom of our income ladder? There is no good reason for a country as rich as ours to have these vast disparities in the lives led by our rich and our poor.
(Alicia) Mr. Messer needs to get real. People get ahead and are rewarded because of their brains, because of supply and demand, because of their ingenuity and for taking risks. People need to be rewarded for their success in life. If we don’t reward them, few people would do anything at all.
The bell rings.
(Professor Markham) Alicia, can I catch you for a moment.
(Alicia) Sure. I’ll be right with you Professor Markham.
Alicia walks out of the classroom with Professor Markham and down the hallway towards the law school library. In the process, a conversation ensues.