Salary schedule

By Tony Staley
Compass Editor

Pres. George W. Bush took many Americans by surprise last week when he made headlines for questioning the compensation packages of executives at some of the country's major companies.

In a speech Jan. 31 on Wall Street, the President called on businesses to "step up to their responsibilities." He told boards of directors that "They need to pay attention to the executive-compensation packages that you approve. You need to show the world that America's businesses are a model of transparency and good corporate governance."

The President also noted a growing "income inequality" gap between rich and poor Americans that has been "rising for more than 25 years."

It's hard to tell if the President is entirely dissatisfied with the executive-compensation packages. He said the "salaries and bonuses of CEOs should be based on their success at improving their companies and bringing value to their shareholders." That could mean "no one is worth some of these larger packages." Or it could mean "if the company is registering record profits and stock prices, the executives are worth every penny."

And his comment about the growing income gap was followed by this explanation, "The reason is clear: We have an economy that increasingly rewards education and skills because of that education."

While there's no doubt that education plays a key role, it doesn't completely explain the growing income gap between the wealthiest Americans and the middle class.

Last year, after-tax income for families making more than $1 million a year grew by 6% because of federal tax cuts, while after-tax income for families making $40,000 to $75,000 rose about 2.5%, the Tax Policy Center of the Urban Institute and the Brookings Institution reported.

Meanwhile, big shareholder groups - pension funds, for example - are pushing to give shareholders a voice in setting executive-compensation packages.

Investors from overseas are also speaking out about companies that pay executives up to 400 times what the firm's average employee earns. But as Stephen Davis, a fellow at the Yale School of Management, told Renee Montagne of National Public Radio, the concern is mainly that corporations that are underperforming should not be rewarding their executives for sub-par results.

The difference largely comes down to whether we look to justice or market forces for the answer. The former would seek more equality in compensation; the latter would seek balance between the corporation's bottom line and the executive's pay. The Gospels speak of real justice, but increasingly markets are speaking louder and they seem to have the ear of, if not the nation, at least the nation's policymakers.