Cover Image by Chris Strong
Sharing Insights on Business Education
The dean writes of his reluctance to share the recipe for the GSB’s surging success (“From the Dean: Gaining Competitive Advantage—By Asking More of Students,” Summer/Fall 2007). His reasons for overcoming this reluctance—it will be hard to imitate and it will reflect well on the GSB as a leader—miss the most important point. Business education, like all of higher education, is a public calling and public good regardless of the rivalry among schools and the way they are financed. The GSB has an absolute public obligation to share its insights into educational success just as it must share its research results. To think of the GSB only as a private firm is as wrong-headed as to think of students as customers. Indeed, the GSB’s highest calling is to shape the future of business education and research so that not just our students but students worldwide may benefit from its leadership.
Rob Prichard, ’71
Regarding “underpaid” CEOs (“Why CEOs Aren’t Overpaid,” Summer/Fall 2007), what about those who are paid large sums when dismissed for underperformance? While this was negotiated in the original contract on hiring (a bad idea), surely they are overpaid, as the package was based on the assumption that they would actually perform.
Geoff Miller, ’98 (XP-67)
Des Plaines, Illinois
Compensation Causes Inequity
In the article, “Why CEOs Aren’t Overpaid,” the criteria for the conclusion are narrowly focused on current economic effects. There are political and social effects as well, and these may be sufficiently negative as to more than offset the claimed positive economic effects. Economic power can be used to build political power, which is used to gain even more economic power. The inequity of a system that results in such a disparity of wealth can undermine the whole system.
Professor Kaplan is quoted as saying, “High CEO pay appears to be part of —not the cause of —the increase in economic inequity.…” The argument that others doing similar bad things can justify a practice is not persuasive. That these enormous incomes are large enough to create a class of heirs who can live in luxury for generations without working flies in the face of the idea that people should be compensated for their contribution to society.
I hope the GSB will take steps to include in its curriculum and attitude more consideration of the social responsibilities of business leaders and of faculty.
Milt Lauenstein, ’60 (XP-16)
Excessive Compensation Is Unacceptable
This is in response to “Why CEOs Aren’t Overpaid.” I disagree, probably because I would use a completely different (but admittedly undefined) standard for determining a proper upper limit for compensation. Kaplan claims that CEOs are “actually paid according to market value and performance.” I presume this means as some percentage of corporate profits or stock performance, which might be proper if not open-ended on the high side. Kaplan further allows “that while some abuses have occurred, typical CEO salaries have increased in line with … those of hedge fund, private equity, and venture capital investors; professional athletes and top-level attorneys.” Put another way: CEO salaries in line with outlandish salaries in other lines of work are perfectly OK. Nonsense! Remember how we used to complain to a parent who said “No” to us? “Gee, Mom and Dad, so-and-so’s parents let him do it.” Kaplan’s argument is the same as ours.
At 78, I confess to being old-fashioned, but it seems very wrong to pay CEOs tens of millions a year, probably plus other perks—amounts that would be difficult to spend even with a profligate lifestyle. Such compensations not only reward the CEO’s family, but ensure great wealth to generations of heirs. Further evidence of obscene excess are the “golden parachutes” given to badly failed CEOs.
To sum up, excessive CEO compensation has for years been a worsening normal habit, not at all an exception. I liken the boardroom to the U.S. Senate: a collegial club in which no member questions the excesses of another, and receives the same courtesy in return. Losers are the docile taxpayers and stockholders.
I was quite proud of my MBA in 1957, but the 50 years since have gradually lowered my opinion of the degree and business in general.
Bruce Tennant, ’57
Bluffton, South Carolina