To fire 5 people in the past year, U.S. corporations spent $66 million. I would love to be paid over $10 million to do a bad job. What kind of an incentive is that to do a good job? And these are numbers after the financial crisis. Imagine what severance packages looked like before the crisis, when there was a lot more money floating around the financial sector. In 2000, at the height of the stock market bubble, pay for the top 10% of corporate executives was 700 times greater than the average worker’s pay – earning over $55 million a year. Well, maybe it’d not that different since not much has changed since the crisis. Following the massive bailouts of the banks, Wall Street firms paid $18 billion in bonuses in 2008. NYTimes: Executive Pay Now they are wondering why people are camping out in Liberty Plaza on Wall Street for the past 12 days with lots of signs. I'm wondering why there aren't more protests around the country.
The argument for the obscenely high pay rates is that the corporations and banks needed highly skilled people who will produce amazing profits that the whole country will benefit from. Obviously, something went very wrong as the whole country is suffering from the mess these star executives made and they are still getting rewarded. Dan Airley, a professor of behavioral economics at Duke University, has done some tests to measure the impact of huge bonuses as an incentive. In his experiments he found that more pay increases a workers output if they are doing manual labor but not if there is cognitive skill or creativity involved. In this case, the bigger bonuses are counterproductive because of the high levels of stress that they cause.
