The Cost of Talent: How Executives and Professionals Are Paid and How It Affects America
352
The Cost of Talent: How Executives and Professionals Are Paid and How It Affects America
352Paperback
-
PICK UP IN STORECheck Availability at Nearby Stores
Available within 2 business hours
Related collections and offers
Overview
As the American economy becomes more complex, the demand for able, highly educated people increases constantly with a steady growth of importance. But when considering the leverage of high pay and extravagant benefits, it is possible that talented individuals will be lost to the appeal of exaggerated compensation, putting the work that they are completing in danger.
Bok argues that compensation paid to top executives, lawyers, doctors, and economists does not offer a significant benefit, nor is there evidence that large bonuses and other financial incentives produce better work. Additionally, he presents the concept that the lucrative rewards of Wall Street, elite law firms, and medical specialties deprive poorly paid but vital teaching and public service professions of desperately needed talent.
The Cost of Talent asserts that America must enter a new period of national development by rethinking the values, motivations, and priorities that are reflected in our compensation practices in order to better serve the nation’s long-term interests.
Product Details
| ISBN-13: | 9780743236324 |
|---|---|
| Publisher: | Free Press |
| Publication date: | 01/15/2002 |
| Pages: | 352 |
| Sales rank: | 895,191 |
| Product dimensions: | 6.00(w) x 9.00(h) x 1.10(d) |
About the Author
Read an Excerpt
Chapter 1
THE ROLE OF COMPENSATION
In central California, migrant laborers stoop under a hot sun for hours on end picking fruits and vegetables for a few dollars a day. In Manhattan skyscrapers, scores of secretaries sit in long rows in large, windowless rooms typing letters at $500 a week. In Detroit factories, workers hurt by overseas competition operate machines for $14 an hour, substantially less than they earned a decade ago. In airplanes far above the earth, rows of business executives and lawyers take papers from their briefcases and start to prepare, at $200 or more per hour, for the negotiations that await them in Dallas, Los Angeles, or some other commercial center.
All of these people are working hard at tasks that are vital to maintaining our society and helping it to prosper. Yet each group earns a very different reward than the others. Why? Is there any convincing rationale to justify these wide variations in pay or are they simply the result of luck, convention, or arbitrary privilege?
JUSTIFYING THE DIFFERENCES
Differences in pay are ubiquitous. They go back to early civilization and extend worldwide to every kind of society and regime. Thinkers centuries ago undoubtedly puzzled over the reasons for these differences. Not until 1776, however, when Adam Smith produced his Wealth of Nations, did anyone succeed in offering a detailed, plausible explanation of why earnings varied so much among different kinds of occupations.
Smith is renowned for his analysis of how competitive markets channel the selfish desires of participants toward socially desirable ends. In the course of describing how competition rewarded different factors of production, he sought to explain why the law of supply and demand did not bring about equal wages for everyone. One might have thought, he mused, that anyone offering a wage above the normal level would quickly attract a host of laborers seeking the higher pay. This influx of workers would simultaneously allow the employer to reduce his wages while forcing other firms to raise theirs to keep the workers they needed. In this way, supply and demand would continuously force wage differences back to a common level. Yet one had only to look around to discover that no such equality existed. Why?
Smith gave several reasons to explain the persistent differences:
1. Some jobs are unusually dirty, disagreeable, or arduous to perform and thus require extra compensation to attract enough people to do the work. Coal mining and butchering were prominent examples in the England of Smith's day.
2. Other occupations carry greater risks of layoffs or unemployment. Employers must pay higher wages to compensate for these hazards. Seasonal jobs, such as construction work, are a case in point.
3. Some jobs require individuals to sacrifice income for a while to acquire special knowledge and skills. Such positions must pay above-average rates to induce enough people to incur the necessary training costs. Preparation of this kind is particularly important for the professions. As Smith put it, "Education in the ingenious arts and in the liberal professions is still more tedious and expensive. The pecuniary recompense, therefore, of painters and sculptors, of lawyers and physicians, ought to be much more liberal, and it is so accordingly."
4. Some occupations, such as scientific research, violin playing, or professional athletics, need special intelligence or special skills. Because relatively few people possess these talents, the demand for their services often exceeds the supply, and the price they can charge increases accordingly.
5. Some occupations command higher incomes because the risk of failure is far greater than normal. Here, Smith uses the example of law. For every successful attorney (he claims), there will be twenty or more who fail to finish their legal studies and build a viable practice. Because the chances of success are so small, much larger rewards are needed to induce enough young people to undertake the long, arduous process of acquiring legal training and trying to establish a successful practice. In principle, Smith argues, "the counsellor of law who, perhaps near forty years of age, begins to make something by his profession, ought to receive the retribution, not only of his own so tedious and expensive education, but that of more than twenty others who are never likely to make anything by it." In fact, he asserts, the premium earned by successful professionals is usually much less than this amount because young people tend to take too little account of long-term risks and to overestimate their own chances of success.
6. Finally, Smith gave one last explanation for high professional earnings. In his words, "we trust our health to the physician, our fortune and sometimes our life and reputation to the lawyer and attorney. Such confidence could not be safely reposed in people of a very mean or low condition. Their reward must be such, therefore, as may give them that rank in society which so important a trust requires."
In the ensuing years, other reasons for differences in pay have come to light. Many workers have managed to obtain premium wages by forming a union or otherwise limiting the supply of their labor. Many others have been forced to accept lower pay because of their nationality, their gender, their religion, or their skin color. Still others have earned less than they might because they were ignorant of higher pay elsewhere or unwilling to leave their homes and neighborhoods to find more lucrative jobs in other communities. These reasons, however, complement Smith's theories; they do not weaken his explanations or contradict his insights.
Differing rates of pay have also appeared in Communist regimes for reasons similar to those put forward by Smith and his followers. Karl Marx may have envisaged a utopia that would operate on the principle "from each according to his abilities, to each according to his needs." In practice, however, the Communist world never behaved this way. Although pay differentials may have narrowed in countries such as Cuba or China, substantial disparities have remained. There is simply no other way to attract enough qualified, motivated workers to the more difficult, hazardous, disagreeable jobs that Communist and capitalist societies alike require.
Although Smith and his followers have done much to explain many of the differences in pay we see around us, they do not offer convincing reasons for the high compensation given to many professionals. For example, the work of lawyers, doctors, and business executives is hardly more arduous or disagreeable than that of ditchdiggers, garbage collectors, or many other low-paid occupations. On the contrary, many studies show that work in the learned professions is widely thought to be more interesting and desirable than in most other occupations. Some investigators have even found that most people consider the nonpecuniary attractions of professional work several times more valuable than the greater compensation that practitioners usually command. Hence, the differences in satisfaction of various kinds of work hardly justify paying professionals even more money. On the contrary, the most vexing moral question posed by professional and executive compensation is why so many people fortunate enough to hold the most interesting, prestigious jobs in society should earn many times the pay of those condemned to work that is much more boring and disagreeable.
The answer is surely not that executives and professionals must endure unusual hazards. Police officers, fire fighters, and truck drivers routinely face much greater physical danger than lawyers, doctors, and corporate executives. Even the odds of being fired or laid off are typically worse for blue-collar workers. It is rare for a physician to lose hospital privileges or for a law partner to be dismissed. Chief executives are not forced to leave as often as their workers, and when they are pushed out, most of them get golden parachutes or other kinds of severance pay, often running into millions of dollars, to ease the pain of losing their jobs.
There is likewise not much left of the heavy risk of failure Smith describes in speaking of aspiring lawyers and other professionals. Today, anyone admitted to medical school can count on living at least a comfortable, if not opulent, life. Graduates of law schools and business schools may not always fare quite so well, but even they face little danger of being unemployed or being forced to abandon their profession. Hence, one can scarcely describe these professions as a lottery in which a few winners deserve ample rewards for having survived against great odds.
A more plausible reason why professionals earn more than factory workers is that they must go to the trouble and expense of acquiring a considerable amount of advanced training. Doctors and lawyers must complete years of education beyond college, and companies seem increasingly inclined to look for management trainees with M.B.A. degrees. This extra education costs a tidy sum in tuition and forgone earnings. But even that amount does not begin to offset the premiums earned by the most successful professionals. Average earnings for corporate executives, attorneys, and physicians yield higher-than-normal returns on the total investment in special training, and the best-paid professionals earn several times the average.
In addition to longer preparation, Adam Smith pointed to the special skills that highly successful professionals must exhibit in order to reach the top. Certainly, exceptional talents of some sort are required of anyone who becomes the head of a large company, a successful trial lawyer, or a leading heart surgeon. These abilities help to justify the healthy premiums such professionals enjoy over the salaries earned by the typical teacher or government attorney. But even the most generous allowance for special talent cannot explain why a CEO, a neurosurgeon, or a corporate lawyer can earn several times the salary of a university president, a Nobel prize winner, or a United States senator. Some other cause must plainly be at work.
Could the huge earnings of top private-sector professionals have something to do with the grave responsibilities they bear for the lives of patients, the welfare of clients and employees, or the incomes of tens of thousands of stockholders? Like the special talents just discussed, these responsibilities are impressive. Yet they are hardly weightier than those of a superintendent of schools for a major metropolis, or the head of a large government agency, not to mention the president of the United States. It is also unclear why greater responsibility should warrant more pay. True, it makes a job more difficult and important and hence seems to justify higher compensation. On the other hand, it also makes a position more attractive to many ambitious people and hence makes it less necessary to offer large rewards to attract qualified candidates.
In short, although Adam Smith gave many good reasons to explain why some workers earn more than others, his writings do not convincingly explain why professionals today are paid so much more than other types of workers or why some professionals receive much greater compensation than others. More than a century after The Wealth of Nations first appeared, however, several economists in different countries — Knut Wicksell in Sweden, Leon Walras in France, John Bates Clark in the United States, and Alfred Marshall in England — arrived independently at another insight that shed further light on these questions. Their idea has come to be known as the theory of marginal productivity.
The theory itself is mercifully simple, to the point of seeming self-evident. Employers will keep on hiring workers, and paying what it takes to attract them, until the cost of further hiring equals the price to be obtained from selling the extra output that the added employees make possible. In this way, employers will maximize their profits and workers will receive a wage equal to the market value of what they produce. No employees need toil for a lesser sum, because they are always free to leave a penny-pinching employer and find work elsewhere at the market rate. Conversely, no one will be paid more than the market rate or competitors will be able to undercut the price and force wages down to proper levels. Best of all, the wages and jobs that emerge from this process will be exactly the ones needed to attract the mix of skills required to produce the pattern of goods and services that the public most desires.
Even this simplified model helps to show how individuals with rare talents can command very high salaries. Monica Seles earns over a million dollars per year because no woman has the ability to beat her at tennis more than occasionally, and many people want to watch the best player compete. Michael Jackson takes home still greater sums because even more people want to hear him perform and can satisfy their desires thanks to television, discs, and cassettes. The rewards for such scarce talents dwarf the earnings of those who labor no less hard in factories and fields. But economists view these huge paychecks as legitimate, because the talented few are being paid only in accordance with how the public values their services.
The theory of marginal productivity, together with the insights of Adam Smith, seem to have persuaded the general public, as well as economists, that large differences in compensation are indispensable to progress and prosperity. Even philosophers strongly attracted to the ideal of economic equality acknowledge that marked disparities in pay are needed both to attract people to the occupations for which they are best suited and to induce them to acquire the skills and exert their best efforts at work for the ultimate benefit of the entire society. As Thomas Nagel puts it, "Perhaps there is some alternative method of using straightforward economic incentives in such a way that large economic inequalities do not develop from their operation; but no one has yet dreamed up such a system."
Notwithstanding this consensus, the theory of marginal productivity is not entirely satisfactory in justifying the pay of successful professionals and executives. For one thing, the theory is based upon an earlier economy very different from the one we know today. In the nineteenth century, many industries were packed with small, competing firms employing workers who could see what they produced each week with their own hands. As time went on, however, simple forms of production gave way to much more complex operations and much larger enterprises. It became impossible to measure the output of individual employees, let alone be sure that the wages paid to additional workers equaled the value of the goods they produced. In a world crowded with technical knowledge and surfeited with information of all kinds, one could hardly assume that all producers and consumers were totally informed. Once industries came to be dominated by a few large companies (often bargaining with powerful unions), one could scarcely feel confident that wages would correspond closely with those that Marshall envisaged in markets served by scores of small, competing enterprises.
These changes not only called the older theories into question; they also undermined belief in a moral basis for the prevailing levels of compensation. One could tolerate vast differences in pay so long as they were considered necessary to produce the mix of talents, effort, and skills required to maximize the welfare of the entire society. But the more these differences came to be seen as affected by monopoly power, political influence, or consumer ignorance, the less one could assume they were exactly what the economy needed to promote everyone's welfare to the fullest.
Technology also weakened our faith in the theory of marginal productivity by pushing its logic to lengths that strained belief. In earlier generations, one could question a system in which business executives earned so much more than poets and philosophers. But there was at least an observable link between reward and talent, entrepreneurial success and social welfare. Today, what is one to make of a world in which modern communication allows Madonna to earn tens of millions of dollars, while a rock group, New Kids on the Block, with claims to enduring musical distinction that are tenuous at best, receives over one hundred million dollars in a single two-year period? Economists will respond that if we do not let the market decide matters of compensation, who will? Yet even if no better alternative comes to mind, thoughtful people will look upon the results, not with comprehension and respect, but with bewildered disbelief.
Efforts to justify compensation have been further weakened by changing perceptions of inequality in American society. From colonial times until World War II, most Americans clung to the view that all persons had an equal opportunity to succeed according to their abilities and efforts. From Poor Richard's Almanac to the Horatio Alger books, this message was constantly repeated and eagerly accepted by the public. As late as the 1930s, opinion polls could report that large majorities of the public answered yes to the question, "Do you feel that your child has as good a chance as any other to be President of the United States?"
In such a world, it was natural to look upon individuals with high salaries as fully deserving of their earnings. According to Francis Bowen, a nineteenth-century Harvard professor of practical ethics, "In a free and just commonwealth, property rushes from the idle and the imbecile, to the industrious, brave and persevering." Why shouldn't entrepreneurs reap a handsome reward if their success was simply the result of hard work and good character?
Fifty years of research in the social sciences have shaken the faith of many Americans that economic success is open to all on the same terms. Scholars have documented in ever greater detail the many reasons why all children do not begin school, still less their careers, with an equal capacity to succeed. Native intelligence, prenatal care, family support, nutrition, and a host of other forces combine to produce marked differences in ability and ambition at a very early age. Race, gender, family income, schooling, and community influences of all kinds continue to limit the chances of some while enhancing the prospects of others. In such a world, effort and character undoubtedly count for something, but it is hard to be as confident as before that the high salaries earned by so many doctors, lawyers, and business executives are simply rewards for the "industrious, brave and persevering."
In short, now that our perceptions of the world have changed so drastically, it is more difficult than it seemed a century ago to justify the vast differences in earnings we see all around us. That is the way the market works, apologists assure us. Yet more and more skeptics are unconvinced that the market produces ideal results or that the paychecks many leading professionals receive need be so large to achieve the greatest prosperity and well-being for the society as a whole.
MONEY AND THE CHOICE OF CAREERS
In Adam Smith's day, when most people lived at the edge of poverty, modest differences in wages must have had a potent effect on workers choosing their calling and deciding where to look for a job. For the past one hundred years, however, intellectuals have wondered whether money would gradually lose its power to affect behavior as more and more people grew prosperous enough that they no longer needed to worry about acquiring the necessities of life. Utopians, in particular, looked forward to a society so affluent that few individuals would care enough about what they were paid to be influenced in their choice of career. It was this thought that inspired Edward Bellamy in Looking Backward to conjure up a world in which everyone received equal rewards and worked only to serve the community.
Economists have never taken kindly to these imaginings. Thorstein Veblen, for example, offered a much more cynical assessment of the place of money in society. In contrast to Bellamy, Veblen noted how persistent the motives were for accumulating wealth and how enduring the human weaknesses were that underlay them. As he put it, in his characteristically ornate prose:
In the nature of the case, the desire for wealth can scarcely be satiated in any individual instance, and evidently a satiation of the average or general desire for wealth is out of the question. However widely, or equally, or 'fairly' it may be distributed, no general increase of the community's wealth can make any approach to satiating this need, the ground of which is the desire of everyone to exceed everyone else in the accumulation of goods. If, as is sometimes assumed, the incentive to accumulation were the want of subsistence or of physical comfort, then the aggregate economic wants of a community might conceivably be satisfied at some point in the advance of industrial efficiency; but since the struggle is substantially a race for reputability or the basis of an invidious comparison, no approach to a definitive attainment is possible.
The debate over the power of money has hardly ended. Some social scientists detect a new strain of postmaterialism in advanced societies, more common among young adults than among their parents and especially prevalent in affluent professional circles. Postmaterialists seem to pursue other aims than financial gain in their search for a meaningful life. They shun luxury and disdain material values. How deep these sentiments go, however, remains a puzzle; answers to questionnaires may not provide a valid index of people's innermost feelings when they are face-to-face with hard choices and dwindling incomes. Already, there are indications that the number of people expressing postmaterialist attitudes may have stopped growing and even begun to fall back under pressure from the economic slowdown that most Western economies have experienced in recent years.
For the foreseeable future, then, pecuniary ambitions seem likely to survive, if only because the uses of money are so numerous. The desire for wealth is neither static nor merely the outgrowth of a yearning for material goods. New appetites are constantly emerging under the stimulus of ingenious entrepreneurs and advertisers. Beyond possessions, money brings security and freedom from a host of petty worries. It often yields power, influence, and at least the illusion of popular esteem. It signals personal achievement and bolsters feelings of self-worth. For some, money is simply the best way of keeping score in an ambiguous world. For a miserly few, it is an end in itself, quite apart from anything it buys in the marketplace.
These multiple attractions have persuaded economists to stick with the premise that money is the primary motive in modern society and that differences in pay remain the principal force regulating the distribution of labor among the various occupations. Not that economists are unaware that there are other reasons for choosing a career. How else to explain the continuing supply of priests and social workers? But these motives, once acknowledged, are quickly brushed aside. "Other things being equal," economists maintain, the supply of labor in any occupation is determined by the income it promises to yield in comparison with prospective earnings in alternative callings.
While economists have continued to spin their theories, investigators in a neighboring discipline have offered a more complicated set of reasons for choosing one occupation over another. In study after study, when psychologists ask college seniors what they look for most in a job, money finishes far down the list. Typical of these findings are the results of a 1989 survey of over nine thousand seniors from a group of thirty selective private colleges and universities. For these students, the most important reasons for choosing a career were those having to do with the interest of the work involved — its intellectual challenge, the opportunities to be creative and exercise initiative. Next came aspects of the job relating to other human beings — the kinds of people that will be your colleagues, the freedom to live by your own ethical values, the chance to be helpful to others. Somewhat lower in importance were matters affecting freedom of choice — the opportunity to keep your options open, to have a flexible schedule, to be relatively free from supervision. Only after all these considerations did seniors value "high income potential." In a list of twenty-one separate factors, income rated fourteenth, surpassing only such items as "social recognition or status," "acceptability to my family," "not much pressure or stress," and "does not require an extended period of training beyond college."
Such findings, repeated many times for many kinds of college students, appeared to cast doubt on the power of money to shape career choices, at least among the highly educated. If these results were correct, economists would have to revise their theories. Employers would be well advised to rethink their approach to recruitment. Law firms, corporations, and government agencies would do better emphasizing challenging work with interesting colleagues instead of talking so much about their starting salaries and earnings potential.
Rather than debate their differences, psychologists and economists continued for years to plough their respective fields in seeming indifference to one another. Psychologists deplored the economists' philistine preoccupation with money. Economists scoffed at the naïveté of supposing that answers to surveys could reveal the true values of students. For them, as Frank Hubbard wrote, "When a fellow says it hain't the money but the principle of the thing, it's the money."
In 1972, however, a Harvard economist, Richard Freeman, sought to reconcile the two bodies of work. Freeman acknowledged that most students were motivated primarily by reasons other than money and that many of them would stick with their chosen career regardless of any conceivable change in the earnings offered. Based on his own student surveys, however, he insisted that income was at least one relevant consideration for most and the principal factor for a significant minority (perhaps 15 percent). In particular, he found that many students were torn among several career possibilities and that money could be a decisive factor in making up their minds. From this evidence, Freeman concluded that compensation was significant for enough college seniors that it performed its classic function of altering the flows of students from one profession to another to adjust to the shifting needs of society.
With the aid of these findings, Freeman was able to make predictions about the number of students who would graduate as physicists, engineers, and Ph.D.s of all kinds, predictions that differed significantly from those of other scholars in the field. By and large, his forecasts proved more accurate than the conventional estimates. Since his findings first appeared in print, similar work by other scholars has lent added support to his thesis.
In the years that followed, circumstances have changed in ways that would appear to make compensation even more powerful in affecting students' career choices. Undergraduates seem to have become much more materialistic. According to a well-known annual survey, the number of freshmen who regard "being very well off financially" as a "very important" goal rose from 40 percent in 1970 to 75 percent in 1990. Thanks to college placement offices, undergraduates also have much better information about prospective earnings in different professions, which they can use in their quest for financial security. In addition, because of the federal government's financial aid programs, student loans have grown tremendously over the past twenty years, and more and more seniors are graduating with substantial debts. To those with large sums to repay, earning good money ought to seem much more important than it did to their parents.
Despite these recent trends, neither mounting debts nor creeping materialism has settled the argument over how students choose their life's work. University officials deeply involved with the career decisions of students continue to act as though financial considerations were of distinctly minor importance. When applications to medical schools dropped sharply in the early 1980s, admissions officers attributed the slump to worries about malpractice suits and mounting regulations and red tape; they pointed to surveys showing that surprising numbers of doctors would no longer recommend that their own children become doctors. When applications to law schools surged unexpectedly in the late 1980s, admissions deans linked the increase to the rise of television shows such as "L.A. Law." When college seniors turned away from Ph.D. programs in the 1970s, professors insisted that it was not lagging salaries but the fear of not being able to find an academic job that prompted their students to look for other careers. Buttressing these opinions, surveys continued to pile up showing that when it came to choosing a vocation, college seniors still placed a high income very low in their list of considerations.
Apart from these discordant voices, economists themselves are not entirely clear about important details of their theory of career choice. Exactly what kinds of comparisons are students supposed to make? Between related occupations such as law and business? Between going to professional school and starting work? And what calculations do students make? Do they look simply at starting salaries or do they look at projected earnings over a lifetime? If it is the latter, as some economists seem to claim, are college seniors really capable of making the kinds of sophisticated projections described in the scholarly journals? Amid these doubts, the role of compensation in determining career choice continues to provoke disagreement.
MOTIVATING EMPLOYEES
Controversy has also been simmering over how effective money is in persuading people to work harder. With relentless consistency, economists have insisted that economic rewards are a powerful tool not only for influencing career choices but also for determining how hard individuals work and what they try to achieve. A whole industry of consultants has grown up to advise employers about bonuses, piece-rate plans, and ever more elaborate schemes to link pay and performance. Corporate executives receive hundreds of thousands, even millions of dollars in bonuses and stock options on the theory that money will motivate them to work more effectively.
This view seems plausible enough at first blush. But dissenting voices have not been hard to find. In that classic of management texts, The Functions of the Executive, Chester Barnard observed that "the unaided power of material incentives...is exceedingly limited." During the years that followed, many psychologists voiced the same opinion. So did W. Edwards Deming, father of "total quality management" and guru to many of the Japanese industrialists who built great global enterprises.
According to these critics, human beings, especially in the professions, are motivated more by the intrinsic interest of their work and the opinions of their colleagues than by crass material rewards. Most of the psychologists were influenced by the work of Abraham Maslow, who claimed that human beings had a hierarchy of needs and that once their basic material requirements of comfort and well-being were assured, they responded to other concerns such as self-fulfillment and personal growth. A slightly different approach was used by Frederick Hertzberg, who took to asking employees what incidents had pleased them most and provoked them most in their working experience. Repeatedly, he found that inadequate wages were a cause of discontent that could be relieved only temporarily by a raise in pay but that moments of achievement, mastery, and recognition were much more likely to account for employees' lasting satisfaction with their work.
In yet another challenge to the conventional economic wisdom, Mark Lepper and other experimental psychologists began to raise further questions about the effects of monetary rewards. When investigators paid children to perform a challenging and absorbing task, their enthusiasm for the work diminished as soon as the payments stopped. In some way, money seemed to snuff out spontaneous interest. Other psychologists claimed that financial rewards undermined young people's creativity as well. Such findings created suspicion that paying employees for performing well might somehow stunt other qualities important to their life and work.
After decades of debate and experience, then, much controversy remains over the role of compensation in our society. The complexities of our modern economy cast doubt on whether theories of competitive labor markets drawn from a simpler age can justify the earnings of successful professionals. Experts still differ over how important compensation is in influencing college students deciding on their careers. Psychologists and economists disagree over what monetary rewards can do to motivate people to work more effectively.
In recent years, these issues have taken on renewed importance. In the face of widespread poverty and deprivation, and with money to address these problems in such short supply, one cannot read about the soaring incomes of so many executives and professionals without wondering whether these vast earnings could be better used to help meet urgent human needs. With so many successful students flocking to management consulting organizations and corporate law firms, one has to ask whether money has become too dominant in shaping the career choices of talented undergraduates — and whether the nation is being disserved as a result. As the economy sputters and dissatisfaction grows over the performance of our schools, our companies, our universities, and our health care system, one cannot help but take an interest in whether bonuses, merit pay, stock options, and similar devices can induce professionals and executives to work more effectively. To explore these questions adequately, we need to move from theory to experience and observe how the compensation of executives and professionals has changed over the years and what effects these changes have had on the behavior of the recipients.
Copyright © 1993 by Derek Bok
Table of Contents
PrefaceIntroduction
PART I
1. The Role of Compensation
2. The Rise of the Professions
3. What Happened After 1970
4. The 1970s and 1980s in Perspective
PART II
5. Corporate Executives
6. Doctors
7. Lawyers
8. University Professors
9. Teachers
10. Federal Officials
PART III
11. Summing Up
12. The Impact of Values
13. Searching for Remedies
Notes
Index