There's no exact formula, but imagine trying to design a boat without an understanding of fluid dynamics. They help give you an idea about what might work. Can you imagine being the head of a corporation and not understanding the theories behind something as simple as supply and demand? It would make the job of creating a vision for the company nearly impossible.
Sure, some idiot investors might want to see "pedigree" (which isn't quantifiable), but seeing that the person you're trusting with your investment has a solid understanding of business and economics has to instill some level of confidence. That's all beside the point, though. This is about education being applied to work which makes one more likely to succeed.
That's irrelevant. If one is successful and understands mathematical economics, whether or not one has a diploma, they are supporting my position.

I'd state that higher education facilities can quatify that. They tout how many of their graduates land at Fortune 500s. They actively ask exectuve management alumni to speak at the schools. There is very much a quantifiable measurement by the schools. It is one of the reasons why Ivy League graduates tend to have more CEOs across the board. I don't have time for a link at the moment.

I'm saying pedigree isn't quantifiable. I am mainly saying that being educated in economics is important in running a company, whether that means CEO or CFO.

which is neither here nor there, since big titted secretaries can also be a factor in the performance and bottom line of a company. :no:

again, we may want it to be a particular way but it doesn't mean that it actually works that way.

Good post Jinn, a nice summary.

Add Richard Branson to the uneducated ranks. The Body Shop lady too.

it's not so simple---there's an *enormous* body of information in sociology that indicates management hierarchies have little to do with the effective running of production---they're as much expressions of the ideology of organization, the type of organization assumed to be more effective---but it's not at all clear that vertically ordered hierarchies (bureaucracies) are even rational (from the viewpoint of effectively running an operation that is not itself---most organizations can run themselves----not necessarily well---but anyway)---even as they are rational internally---rational here meaning that they are effective systems of information fragmentation and transfer---within a bureaucracy, professional roles are defined such that the bits of information you recieve, process, and send along are internally consistent--they "fit"---but that doesn't mean there's a coherent relation between that information and the world.

but it sometimes appears that in this brave new world of neoliberalism, concern about such matters has been erased behind a quaint almost religious faith that everything fits with everything else, so a corporate bureaucracy is rational because it's private and only state bureaucracies are subject to the structural problems of bureaucracy in general because, well, the public sector (the state) is evil foul bad and nice corporations are entirely rational.

it's quaint.

Actually, Roachboy, it's less a political decision than a legal one. The Ben & Jerry's case that you raised is instructive. When Cohen and Greenberg were the private owners of the company, they had the choice to run the place as they liked. They could make hiring decisions, firing decisions, bonus decisions, raise decisions, acquisitions, divestittures, relcoation - you name it - precisely as they liked, because they owned the business and they didn't have anyone to answer to except themselves. If they felt it was important to keep their own comp down relative to those lower in the hierarchy, that was their choice. I'm sure the business benefitted from it in some way, or they did. Even if not, it was their buisness, they could make that choice.

Once you have public shareholders the calculus is very different. The board and officers are fiduciaries, which means their legal obligation is to act in the best interests of shareholders. There is a huge amount of literature about the degree (if any) to which corporate boards are required to account for other constituencies such as employees or the local community, and as it shakes out legally, they can account for those other constituencies if there is a corporate benefit that ultimately inures to the shareholders - call it enlightened self-interest.

Bear in mind that the typical shareholder is not a plutocrat. The typical shareholder is a pension fund. It has its own fiduciary obligations and its own funding targets. It has to get returns because retirees are depending on it. There are lots of other categories of shareholders, but if you drill down through the shareholder body, what you'll find as the common denominator is that they all want to or need to maximize returns (within the bounds of the law and ethics, of course). No corporate board has the right to ignore that, either legally or morally. If you want I can point you to some literature about why it makes economic sense to do this.

The bottom line is that the market for executive talent will dictate what executives are paid, and the market for other niches of talent will dictate what people in that niche are paid. Private companies will do as they please. Public companies cna't and won't. The money to pay execs isn't coming out of employees' pockets - it's coming out of shareholders' pockets.

And yes, there will always be some abusers - those people, like Dennis Kozlowski or Andy Fastow, should go to jail and be fined, big time.

thanks loquitur again, you state so elloquently what takes me many many posts to try to get across and only a small percentage of what I'm trying to say gets across.

I guess that's why you're in legal and I'm not ;)

interesting, loquitor---but i don't think it's that straightforward---for example there's a movement (kinda) to force corporations to shift from generating reports (annual reports for example) framed around shareholders and to replace that with the broader category of stakeholders. the driver is corporate social responsibility audits (regardless of they end up being functionally) and the goal of this is to pressure corporations to reframe annual report data around stakeholders as a way of forcing corporations to integrate impact assessments with financial reporting.

the point of mentioning that is mostly that the way annual reports are framed is a political choice in itself--and it's obviously a political matter to the extent that, say, questions regarding workers are reduced to a variable cost reported only in terms of its impact on shareholder profits.

the legal framework is interesting in that a miltonfreidman view of corporate activity would say that what's legal is what's ethical--and so from that viewpoint, the meaning of the legal relation that you spell out would be as you say it is---but it's increasingly clear that this no longer flies for alot of corporations and that they're being forced to rethink how the present themselves to themselves. which includes how they present themselves to shareholders.

you could also say that during the period from 1945-1970 (to pick an end date at random) what you outline was also the case, but the political situation was such that it was not acceptable for a corporation to only view its workforce in terms of it;s impact on shareholder profits--because in manufacturing (for example, because it fits) there was a quite strong union presence and institutions like collective bargaining were in place and the combined effect of the two was to force a much wider political framework into place that prevented workers being reduced conceptually to a drag on investor profits.

so what you describe is an expression of the political climate that's been dominant since the 1980s, really--which is holds that the legal relationship and the ethical relationship and the political situation are more or less the same. (in that the legal requirements and the political expression of what a corporation should do are close to identical).

this is the political context that's enabled the massive transfer of manufacturing jobs out of the united states, for example. you can't argue it's not a politics.

of course, at issue here, as it often turns out, is what information is and is not included in the debate. but i figure that since this started off as a debate about minimum wage levels, it's kinda interesting to find so many posts about ceo compensation in the same thread. i take that as a sign of the times.

actually, that's not quite accurate.

There have been movements to pry open the corporate machinery for pretty much as long as I have been alive. A lot of people who would like corps to act in the way they want corps to act have the fairly standard illusion that their own views are so reasonable that, if only the bad people in charge could be bypassed, the other people - here, shareholders - would go along with them.

It ain't so. Shareholders expect accountability from management. They own the company and they expect returns. The model of how the legal relations work has always been that way; what has changed in the last 30 years is, in the main, the degree of accountability and the mechanics for it. The biggest shareholders are now institutions, with their own clout and the ability to force management to pay attention to them.

At the risk of seeming hostal, let me quote some things for you that will give you an idea of why that not only is so but why it should be so and why it is a good thing that it is so. Compelling corps to account for nonshareholder constituencies erodes the premise for having corporations to begin with (which is to mobilize and aggregate resources for economic purposes).

First, Larry Summers:He was talking about Fannie Mae and Freddie Mac, but they are a paradigm of what a corporation with goals other than maximizing profit would look like. Here is more of his explanation:OK, that's one explanation. Here's another. I forget where I saw it, probably on Stephen Bainbridge's "Law and Business" blog (he's a law prof at UCLA, and it was via his blog that I found the Summers quote above). Shareholders pay for their shares (in theory, and over the long run in practice too) an amount that, in the market, is the discounted present value of the expected future cash flows of the company (discounted for time, risk and uncertainty). By introducing the interests of other constituencies into the corporation's decisionmaking, it increases the risk or uncertainty for the shareholders because the number of factors in the decision multiplies exponentially. What that means is that the shareholders will require greater returns for their investment in order to compensate them for the additional risk. That raises teh cost of capital to the company. By making capital more expensive, we depress growth rates and hinder economic growth. We also inhibit risk taking because there is already some additional risk built into the very fabric of the entreprise, which means that each additional quantum of risk is more costly.

In other words, forcing the corporation to include the interests of nonshareholder constituencies in its decisionmaking will have the effect of hurting those very consituencies, because it hamstrings the corporation as an economic entity. The shareholders are flexible and can put their money elsewhere but the employees and neighbors can't do that. They are best served by having a healthy prosperous company that can pay good salaries and keep its streetfront clean - and, not incidentally, purchase goodwill by contributing to the local PAL or YMCA, or sponsoring the PBS show.

Am I being clear? or is my barrister's opacity coming through?
-----Added 30/7/2008 at 11 : 16 : 31-----
Oh yes, and there is another consideration as well, this one also in Bainbridge: In other words, increasing the number of consituencies increases the opportunities for corruption. (This is standard libertarian argument, by the way - as you can see, it applies to all kinds of authority structures, not just government.)

I have come back to this thread again and again. I have come armed with postings but found that my thoughts are already here, usually empathetic with the roachboy. Last night I constructed a post and lost it when my internet went off.

This thread is filled with facts, opinions, litanies, and emotions, all very well spelled out and catagorized. However, it remains that there are many people who have great great great sums of money and holdings, and many more people who are struggling. There is something very wrong and of course it is distribution. This is true.

It is? How so?

When an immigrant with a few dollars in their pocket can come to this country and work and somehow build up enough money to "make it" according to others, how is it wrong and about how distribution is wrong?

When an illegal immigrant comes here with nothing in their pocket and has a better lifestyle here than in their home country how is distribution broken?

It is simple fact of spending less than you earn. More often than not people aren't interested in living a meager lifestyle in return for the future financial security. Instead they blame it on the system.

What about the many people who live a meager lifestyle and don't have future financial security?

girldetective has a point.

Your immigrant example is the exception, not the rule.

I think you could argue that distribution is broken because so much personal wealth is locked up in assets and savings.

Yes, you should spend less than you earn, but you should also not treat life like it's a monopoly game. He who dies with the most toys does not win, and their progeny usually end up as spoiled under-achievers.

As far as immigrants achieving, yes, if you have desire and drive, you will achieve. This country has enough slackers so that there's achievement available for anybody who wants it. My two most successful friends from college were brothers who grew up in a squatter's row house. Coming from no or little means can really inspire people to achieve, as long as they also have the character needed for the task.

The problem is, the corporations of this country have proven that they would be more than happy to employ 8 year olds, sell bad milk, create exploding cars etc. in order to save a buck. That's why we have laws and regulations. The minimum wage has been criminally low for too long. Every time this comes up, we hear about how business knows what's good for business, and how chaos will reign if we raise it.

The anarchy hasn't happened yet.

loquitor: interesting---i don't have time to spell this out more at the moment, so i'll just outline a couple counter-arguments.

a. for a corporation to operate at all it has to take account of its impact on its surroundings. one explanation for attempts to change reporting processes is that an emphasis on shareholder returns in reporting has demonstrated itself to not be adequate.
from a shareholder viewpoint, not only financial but brand considerations could very easily lead one to think that more comprehensive information, based on a wider range of inputs, provides more comprehensive information about corporate performance and so results in better business decisions. potentially.
underneath this, there's no reason to assume, as a freidman type might, that rational action only happens when one's money is on the line. nor is the flipside claim, that anything except profit generation runs beyond the competences of investors, a coherent viewpoint.

b. the argument that more inputs from more people opens up possibilities for more corruption is strange--it seems like an argument against public offerings of stock as much as one against a shift into stakeholder-based reporting.

by the way, notice how working people disappear again?
why is that?

RB, the argument I'm making is that shareholder interest, properly understood, includes considerations of other constituencies because such consideration is in shareholder interests. It's similar to what I wrote elsewhere about my law firm treating its employees well - we do that because it's in our interest to do that. That breaks down if you say that other constituencies have a claim that trumps the interests of shareholders.

The corruption argument is simple: when the goals of the company are simple and discrete, the grounds on which decisions can be justified are far fewer, and there are fewer opportunities for manipulation of the machinery in favor of the decisionmakers and at the expense of the beneficiaries. The more goals there and the more interests to serve, the more opportunity there is for cloaking self-interested decisions, and the more opportunities there are for corruption. Try to imagine the type of lobbying that goes on in state legislatures, and transpose that to the corporate boardroom. That's what I"m getting at.

this statement is pretty choice. labour class is equal to cattle or a pile of coal you can shovel into your locomotive. "even cheap Mexican labour " ?? wtf is that ? is a Mexican usually assumed to be worth less than other humans ? or is it management incapable to direct them in a way that get's the most value from them ?

doesn't this suggest that labour is NOT replaceable ? that maybe the skills of the hands have value ? that what is learned in the school of hard knocks is valuable ?

the deskilling of labor is one of the main processes that define capitalist organization. so in the context of capitalism, working people are interchangeable--it's one of the many dehumanizing features of this type of organization of production. deskilling also extends--and increasingly so---into "management"--with computers functioning as a prime enabling device. you could say that deskilling is generalized in the context of large-scale capitalist organizations. to switch rhetorical registers for a sec, that's why it's as fucked up as it is in so many ways.

of course if you want to see in this form of organization some type of mirror of an image you have of natural hierarchy, you'll be inclined to substitute dream-imagery for the effects of this organization and will see in the abstract image "manager" someone who retains a coherent skill set.

in some regions within a given economic sector (those related to software development, say) folk do operate with a discrete skill set on a more-or-less craft basis: but these are exceptions.

it turns out that folk who occupy such positions tend to imagine the entire world in the image of themselves, projecting it laterally to fashion a sense of social distinction, above to project some imaginary ladder they aspire to climb, and below to create a sense of social distance from the lesser beings below. but this is a psychological positioning, not a description of the capitalist order.

maybe that's why working folk who try to get by on minimum wage keep disappearing from this thread even---we are communicating across a medium access to which is class specific to a great extent and so it is a theater of class or status performance and for the performance of status anxieties at the same time.

the cynicism hasn't started yet, btw---it starts when you move from the above to thinking about motives for keeping wages low in these imaginary worlds animated by status anxiety.....no reason to go there when you can do it for yourself.

This is interesting. I pay my dues (taxes) and I vote for my leaders. However, there has been no referendum re minimum wage put forth that I have seen. I wonder what would happen if there was and the populace was educated in the aspects of capitalism, moral/social responsibility, and the effects of miminimum wage?

Yes.
Why is that?

I have some ideas.

RB, that's just wrong. The story of increasing productivity (which is pretty much an imperative in capitalism) is the story of increasing specialization - which in turn means nonfungibility of labor. Unskilled labor commands low wages for a reason, precisely because the lower the skill level the greater the fungibility.

Extra! Extra! Exxon just released their profit for the last 3 mos = 11.6 billion. This was less than Wall Street expected.

*

Fed minimum wage as of today = $6.55.

As of 2006, Exxon's corporate documents filed with the SEC revealed their CEO's retirement deal and his $51.1 million paycheck in 2005. It was equivalent to $141,000 a day, nearly $6,000 an hour. I dont have figures for current CEO compensation.

*

Extra Extra!!!!! Investors are doing well in some sectors and markets!

Yep if you're got any oil holdings it's great!!! I'm glad that I have some in my portfolio! I can share in some of the wealth that the CEO has generated.

Lesson: Don't be an unskilled, uneducated worker, if you must save some money and invest it in stocks and bonds, not this frivilous "I'm going to invest in a computer..." kind of statement. Words and actions are important. Instead of squandering money on depreciating items and services, save your money even if it's $100 every year. Get in the habit of paying yourself first and and saving money.

Now some of you will say, "But Cynthetiq, how on earth can someone save money when they only get paid minimum wage?" Well, it's really quite simple, they somehow figure it out. They move to where the opportunity is better for them. They get skills that pay better. Last year overseas Filipino workers in the United Arab Emirates alone remitted $.5 billion last year and sent back an estimated $15 billion last year, Mexico reached an all time high of $23.98 billion last year. Understand what the remittances mean, they SAVED money and sent it back to their homeland. They still had to house, feed, and transport themselves to and from a job.

You reap what you sow.

explain to me, loquitor, how to disentangle specialization and deskilling please.

Reuters, 04/10/08:

Exxon also disclosed the 17 shareholder proposals that will be presented at its annual meeting on May 28, all of which the company suggested shareholders vote against.

Those included seven proposals about the company's environmental policies and impact and three proposals on Exxon's executive compensation.

And the best part is that the shareholders get to vote on the proposals. A number of votes are required in order to pass the resolution so it isn't as simple as a majority wins.

You may not like it, but there you are. Be a stockholder. Even one share gives you one vote as to the direction of the company. OneShare.com has a listing of stocks you can purchase Exxon-Mobile for $168 and it comes in a nice frame.

But you're really getting very far far away from a minimum wage discussion...

it's becoming funnier and funnier that the just can't keep the working people in the picture

Isn't specialization an increase in skill? at least in a specific area? I'm mystified as to why you asked this. Is it your contention that we should be raising our own food, making our own clothes and building our own homes, as our ancestors did 10,000 years ago? that was nonspecialized skill but I'm not sure it's such a good idea.

Actually lots of investors are workers. Many people who have 401(k), 403(b),457, traditional IRA, and Roth IRA should be quite interested in the performance of stock markets and sectors. Union members have a vested interest in the stock market. The working man has a very big stake in this. Minimum wage earner? Maybe not initially. I recall reading about these things when I was making $4.35/hr. and knowing that when I had the opporunity I would take it. I would seize it. And low and behold when the time came to actually put money into a 401(k) that was matched up to 6% by my employer.... I did nothing with it.

I was 23 at the time, retirement is far away. Did I save any money? No, not at all, why? Because I wanted those new shiney gadgets, games, clothes, and dinners. I have nothing from that period in time to show for it save for a few tshirts that are very thread bare.

But again, people will cry out,"That's good for you Cynthetiq, but what about those other people out there... it's not about pulling yourself up by your bootstraps." You are right, it isn't ALWAYS about pulling yourself up by your bootstraps, but I guarantee that if you did the simplest things as exampled by http://www.tfproject.org/tfp/tilted-...frugality.html you'd find you're slowly ahead of the game.

Again, I'll cite that there are people who've come to this country with little to nothing but some skills and determination and they seem to as a collective send BILLIONS of dollars back to their homeland.

specialization is complicated, loquitor, because it changes with the type of work---what holds the various definitions together is the fragmentation of tasks, fragmentation of information. routinization of a small task. repetition. repetition repetition. loss of control over work. in skilled areas, it is a diminuition of range, but can be ambiguous as to outcome--at semi-skilled and unskilled areas, specialization is in the main the logic of the assembly line.

in academic work, the main obvious symptom that can be linked to the above is the fragmentation of information--but the social position retains considerable autonomy at the level of skills within that---shot through with other problems that are institution-specific.

lawyering--i dunno, like alot of activities, the index of the extent to which your organization is capitalist in its organization is a matter of scale.

and it does not follow from posing a critique of a particular capitalist practice or form that the idea is shake the etch-a-sketch and send all those sand particles zipping backward in time to some lot as 10th century peasant.

===============================================
cyn---it's really hard to know whether when you write these things you do it for the pleasure of repeating the horatio alger story or if there's something else: what your position most clearly comes down to is that story-line and capitalism is its necessary
background.

so you define your main character----the perky abstraction "the guy who shows up here with 2 bucks"---and you endow your perky abstraction with every petit bourgeois virtue---you make vague reference to the narrative pattern of pilgrims progress---and so the adequately virtuous perky abstraction was able to reach the promised land because endowed with every petit bourgeois value. and so the context that enables the rise of the righteous to the promised land must be rational, otherwise it would not favor the perky righteous abstraction's trajectory. and because the existing order is "demonstrated" in this circular manner to be rational--because it favors the outcomes that you say it favors---then is must necessarily be legitimate.

because in the end what is real is rational because it can't be otherwise.

once motoring about in the bourgeois promised land, your perky abstraction can be linked to other features like pension funds in order to effectively claim--not argue, but claim---that the Moral Order of the Capitalist Universe which you demonstrated through the stories of your perky abstraction holds Benefits and Financial Redemption for all who are possessed of Adequate Virtue.

there's really nothing to be said about these horatio alger stories.
they can be based on "real life" but their appeal as stories has to be intuitive---they either seem to signify or they're just stories. if they don't signify for you who reads them, there's really nothing to say---that's a nice story. it might be well written, it might not be. it might have been fun to read, it might not have been.

but these nice stories are not arguments. they aren't about argument at all. they're just nice stories.

I don't claim for it to be legitimate, I'm stating that it's in the realm of possibility because there are people that it has happened to in better odds and greater numbers than those who have won the lottery in all 50 states combined. I'd even extrapolate based on the remittances that it's not endemic to the US, but anywhere that there is the ability for someone to fairly setup a business get employment, from street food vendor to white collar worker.

So while many of these other people who read "stories" how people are being put down by the man in various states of skills, dress, and nationalities, there are other stories of men in various state of skills, dress, and nantionalities, that do make a better life for themselves and their families. Just in remittances alone, it's almost $40 billion dollars last year, there's no documentation to show how much they keep for themselves.

ok, but there's a trick in the story: you effectively counsel that people adapt themselves practically to whatever their situation happens to be. if you "live within your means" you constrain your actions so they correspond to the limits symmetrical with a particular social position. that position can be determined by any social arrangement, it doesn't matter which. if you constrain your actions in this way and live within them, you adopt a set of practices---which, repeated, are rituals---and you live within them--you repeat them---so you operate in a pascal-mode: in the wager, the problem is that someone does not believe there is a god. the other voice tells that someone: figure the odds: probability will show you that it's only reasonable to bet there is a god. that someone figures the odds and arrives at this conclusion. but, that someone says, i am so constructed that i cannot believe. well, the other voice says, you have to act like you believe--adopt the rituals, condition the flesh, control the desires--and eventually this will work on your as things work on animals---you'll condition yourself--and once you condition yourself, you'll forget you don't believe.

what comes through in the stories, then, is an argument that what is proper is that one "know one's place" and condition oneself into accepting that place---this is an interpretation of the emphasis you place on "living within your means"----and that those who do not know and stay in their proper place are Problems. they violate the moral code that, somehow, gets imputed to the overall system when the fact of the matter is that this sense of moral code follows from conditions that your perky abstraction imposes on him or herself.

so the argument you present is an argument that capitalism represents a moral order.

i don't buy it.

i think that's a better way of saying what i was trying to say above.
i'm still not sure it's clear because it is early in the morning and i am still drinking that consciousness-trigger we collectively name coffee.

actually, it doesn't require that anyone believe anything. The idea of belief, means something to the akin of trying to see the fairy man hiding in the clouds. No, there's no fairy man here. It's simple, you can SEE that this has happened to people. There's not wait for death to find out if there's god or afterlife.

It's simple, if you don't spend $1 today and everyday, after 20 days you have $20. You can not believe it if you like, but if you try it, you'll see you'll have $20. If $1 is too much, you can even try it with less, $.50, $.25, $.10, $.01. After 20 days you'll have 20 times more. It's really rather simple. There's no laws, economic theories, intellicutal discussions of poverty, captitalistic versus socialisitc discussions. It's simple fact.

In fact, you can even stop at the first day, today I didn't spend $1. That's $1 more than what I would have had if I normallly would have spent all the money in my pocket.

You aren't praying to have money to buy that larger than 1 paycheck item. You can even see it in the old idea of layaway in department stores. Lay away with no credit, no interest. It was paid for in installments, no different than actively saving for no reason.