Cap Saban’s salary?

Clearly no human is worth $3.9 million a year, and certainly not worth $400,000 in one day — the amount University of Alabama Coach Nick Saban reportedly received for winning the championship Thursday.

Anyone who wants to cap CEO salaries obviously would want to cap the salary of Saban.

Before you fire off the nasty email, I’m with you. For The University of Alabama, Saban was worth the money.

A ditch digger or a janitor or even a journalist may contribute as much effort to his or her job as Saban does to his. In a capitalist economy, though, the issue is not just effort. It’s value. The ditch-digger’s value to the economy is lower; thus his lower pay. Sadly, the same is true with journalists.

Capping salaries strikes at the heart of free enterprise. Capitalism rewards revenue-producing talent. Revenue-producing talent usually requires hard work — certainly that’s the case with Saban — but the issue is not hours clocked in, but success. Capitalism rewards those who can direct labor in productive directions.

The recent complaint about corporate CEOs is that many receive Saban-sized salaries even as their companies struggle. That’s a complaint with little merit. In a difficult economy, a small loss may be a great victory. Mere survival — of a company, its shareholders and its employees — may be a remarkable success.

If shareholders have a legitimate role in setting a CEO’s salary, government should have no control over the result. If there is a breach between the board of directors and the shareholders, the appropriate remedy is aimed at the breach, not the ultimate salary.

A significant caveat involves companies that survived as a result of taxpayer loans. One of President Obama’s more brilliant moves — one I initially criticized — was cutting CEO salaries and bonuses at companies that were beneficiaries of federal largess. A goal of such restrictions was to expedite the repayment of the federal dollars. Shareholders, or at least directors, recognized they could not retain talent with artificial salary caps. That is one of the main reasons the federal government has been so successful in recouping stimulus money given to lenders.

Cap Saban’s salary? Heck no. He was worth every penny. Stakeholders, not legislators or bureaucrats, need to decide what CEOs are worth.

Advertisements

Leave a comment

Filed under Free Market, Government regulation, wages

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s