High pay packages and restricted competition

The Economist appears to be defending high pay packages for company bosses in this article about the current focus of criticism.  The argument is that $52 million is justified by performance but one has to ask if this performance is based on the skills of the chief executive and if so what skills.

The general rule is that firms make profits by getting governments to pass legislation which restricts competition.shokunin_businessman

I don’t know much about the health care industry (the firm is McKesson, a big American wholesaler of drugs and other health-care supplies) but this industry involves a lot of emotions in that many people will use a lot of purchasing power in the hope of living an extra two years – possibly in a nursing home.  It is also an industry that depends upon patents for its profits.

It is not clear to me that this firm is making huge profits because of the skills of its boss.  Maybe the smartest thing this guy did was to get into the health care industry.

I am also wondering about the ethics and morality of a firm (or industry) that uses patents to exploit people’s emotions to make excessive profits.  But what the heck, some of the points in this post probably apply to a lot of other industries.

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One Response

  1. I would like address the main point of this argument first (executive salaries): I do believe that a company that works together succeeds together; also, the success of a company can be attributed to this very notion; therefore, excessive executive pay is not only unjustified, but is unreasonable.

    The secondary argument is equally (if not more) important than the first: I believe that many of the government sponsored businesses are preventing competition from flourishing; thereby, pulling industries and markets out of equilibrium.

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