Free Market for CEOs

December 23, 2008

How about applying “free market” principles to the executive class? Building on the theme of executive busting, Dean Baker at Beat the Press hammers home some good points about the MSM’s disregard for “free market” principles when it comes to the CEO class.

An important piece of evidence (not mentioned in the article) suggesting otherwise is that companies outside of the United States seem to have no difficulty attracting highly qualified executives even though their pay is generally an order of magnitude lower than in the United States. This fact suggests that the problem is unique to the institutions of the United States, rather than anything that is intrinsic to the market for top executives.

While it is possible that efforts to limit executive compensation failed because it is intrinsically difficult to limit executive compensation, it is also possible that these efforts failed because the politicians who designed them did not really want to crack down on executive compensation. While high CEO pay packages are very unpopular politically, top executives are important sources of campaign contributions and political support for politicians.

Maybe we need to start off-shoring our executives or add top management positions to the H1-B Visa program. I’m thinking there are plenty of Chinese and Indian managers who could do at least as good a job as our current lot. American business would save hundreds of billions, over time, maybe enough recover the damage done by the departing failed billionaires.

As an added bonus the off-shore CEOs would be able to understand their customer support call center staff.

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