Aristotle, CEO pay, Pursuing Full Potential and OWS

This blog is moving. Please bookmark the new url www.marthacarlin.com

I am currently taking a DU Enrichment Class "Channeling Aristotle: Cultivating a Virtuous Life in the 21st Century". Our discussion last week evolved around the "golden mean" and finding purpose in life. Aristotle believe that happiness lay in the pursuit of one's full potential and in maintaining a perfect balance between excess and deficit.

Mulling this over for the past week in light of the growing momentum with the Occupy Wall Street Movement (OWS) leads me to the hypothesis that much of what is wrong in our society today is the result of this lack of balance and current perceived lack of opportunity to reach full potential. If one thinks about the question of balance between excess and deficit this is the key issue in terms of anger toward Wall Street, CEO's and the demonized 1%. In general terms one might see these groups as organizations or people who have clearly erred to the side of excess. This is most certainly the case in some situations but without analyzing each individual or each corporation it is wrong to make that gross generalization.

I do think that the Boards of Directors and CEO's of our major corporations should take an honest look at whether or not our corporate leadership pay scales are erring to the excess and certainly out of balance. As a former high level executive, I often questioned whether or not the compensation structures were placing the proper value along the chain of production. While a good CEO is an absolutely critical factor in a company's success, I am not sure that the value is 20-100 times more valuable than the average worker inside the company who makes things happen everyday to get product or services to market. This was not the case 30 years ago but somehow our public company structures and a shortage of high level management leadership have made companies increasingly willing to shell out extremely high compensation packages to attract and retain these talented people. I would argue that some are not as talented as they have "sold themselves to be" and the market actually determines a lot of what happens with some companies. I am not arguing for the redistribution of wealth ( I am opposed to this), just consideration for where value is created in a company. What I am saying is we should reevaluate our compensation structures and understand the ratio of value creation inside our businesses. For example, in a small business during the start-up phase and owner might not take any salary and will only make money if the business makes money. He will ensure that his employees who make the day to day business run get paid first and foremost. Ultimately, if they grow the business together and are successful he can make a lot of money and his employees will also do well. This isn't always the case in corporate America. CEO's get high pay packages regardless of whether their companies are successful and then they often get large packages to "go away" when they aren't successful. I don't have any good suggestions on how to change this - perhaps a movement started by large institutional investors, some of which have started to question pay packages. Unfortunately, small investors have little voice in this as the percentage of retail investors in most major corporations is small. One thing to consider is the odd relationship between organized labor and large institutional investors. While it might seem that they are at odds, many of the Large Institutional Investors are actually the Pension Funds of Organized Labor. This is getting me off my point on the "golden mean" - perhaps a future blog post on that unseemly relationship.

What are some questions a Board of Directors might ask about compensation packages for corporate executives? What is the average pay of our employee base at certain levels of the company - newbies, middle management, senior management? How does that compare to what we are paying our CEO? What message are we sending our employees and shareholders with this pay package about value. How much more valuable is our CEO than our other employees? What is important to our CEO? Is it solely the compensation package and if so, is this the kind of person we want running our company? Could social media be used to produce campaigns to Boards of Directors and large shareholders pressing for these kinds of questions to be asked?

I don't know that I see Board Room's changing their perspectives to ask these kinds of questions without some significant pressure, but it would certainly be an approach that would put some focus on the "golden mean" in terms of balancing excess and deficit. Check out Compensation Standards website (the site won't allow a link insert) for more on this topic.

The next point of concern is in the pursuit of our full potential. I think that the line is a lot fuzzier on this one but I see that many young people feel they are being kept back from reaching their full potential. Aristotle's point is that working to achieve one's full potential or the pursuit of improving oneself along the spectrum of potential is the ultimate reward and purpose of life. Many young people graduating and entering the workforce are finding the job opportunities in their chosen fields are slim and none, thereby preventing them from working toward their full potential. While I can see this argument, I disagree. This may be true in the short term when it comes to economic potential but not in the long term in terms of human potential. While it may be easy for me to make this argument since I now pursue my human potential more rigorously than I pursue my economic potential, my reflections have led me to understand that my pursuit of economic potential kept me from even considering my human potential for many years. I actually led a much happier life when I was well below my economic potential, living in a 900 square foot house and saving little, if anything each month.

Money often gets in the way of achieving happiness and full potential. Its a lack of understanding when enough is actually enough that has led us down this path. Its not something that is even discussed in education. I do understand that this is easy for me to say because I have enough. But I think as a society we should begin to discuss and think about how much IS really enough. As our population ages there will be fewer and fewer people working, if the expectation is that the few will provide for the many then we are going to have to adjust our expectations. As this group of young people age and enter the role of provider, twenty years out they are going to see that the current system of expectation cannot be sustained.

Running in circles of the economically well off I have often seen a sad emptiness in the singular pursuit of more money, more notoriety, more of everything. I think some, if not most, of these folks do reach a point where they begin to understand that more money and more stuff is not going to make them happy. I did.

Let's get back to the point at hand for the disenfranchised. Are some of these people pursuing their full potential, absolutely, but many are not. While some of this is certainly due to current economic circumstances, I propose that much of it is not. It is because we are focused on the wrong things-both the rich, the middle class and the economically least well off. Of course it makes quite a bit of difference how the demographics split out in the 99% between various generations as to what the issues are. I find many people during these tough economic times finding ways to pursue happiness and fulfillment with less and starting to understand that all the stuff was getting in the way. This generation of graduates (roughly 9.9% of the population currently falls in to this category) are having a hard time finding the starting jobs that were available when I began my career but their expectations are quite different than mine were starting out. The growing up years of America's middle class in the last 15-20 years have been very different than those of 30-40 years ago and this has set expectations much higher for our youth. A comment I read by Rachel Marsden strikes a chord here, "there is no greater motivator than discomfort".

The economic reality of today is that people need to be flexible-fast learners, creative, aggressive promoters (of themselves), and very tech savvy. These are skills that some have and some don't. It would be interesting to see what percentage of the 9.9% have these skills and what percentage don't and need to learn them. My point is that most can gain these skills and in so doing are moving along the spectrum of pursuing their full potential. It is in looking at each experience; whether it is a part time job, contract work, volunteer work, or getting more education ; and how that experience is moving them along the spectrum of potential that is fulfilling and adds to the "economic resume potential" down the road.

We are moving to an economy that is no longer going to be one of the long term employer (more on that later). I know more and more people who are working contract, part time, piecemeal. While this may not be ideal, it is the economic reality of the global economy. Opportunities will not be the same as they have been in the past. More often than in the past, we will have to create our own opportunities. This involves a great deal of creativity and initiative (innovation) - some people are born with more of these skills but they can be acquired through practice. Initiative really means figuring out how to make it happen, whether it is a business or getting an education. Take a look at Steve Jobs - he picked up bottles and cans for money to feed himself in the early years. He sought education in usual ways, auditing classes he didn't pay for. There are ways to obtain skills and education that don't involve paying for college if you don't have the money. Getting someone to recognize this sort of self education is another matter but falls in the category of self promotion. Pursuing potential through reading and seeking knowledge at the public library is one place to start. If you want some inspiration on self education read this http://bit.ly/oWbze8 . Talk about someone with lack of opportunity - if this doesn't change your perspective on initiative and self education nothing will.

I think that arguing about all the injustice in the US, while it may raise awareness to some of the issues, it doesn't solve the individual's problem or certainly address most of the issues of inequality. For more thoughts on inequality read the Money Illusion Blog entry on the Varieties of Inequality. Expecting someone else to solve it for you, whether that is government or someone else, isn't going to work either. Harnessing the creative forces of our full potential is what is going to solve the problem - individually and for the economy as a whole.