Thursday, November 03, 2011

An Occupy Wall Street discussion question

This is a message board exercise students in Principles of Microeconomics have to do this weekend.  They will have read Chapter 7 of Good Intentions entitled "How Did Ben & Jerry Get So Rich?"

This chapter deals with CEO compensation.  Many people are outraged that CEOs earn so much more than the average worker. You have likely seen the news coverage of Occupy Wall Street and similar groups protesting this, among other things. 
In 2005, the median annual salary for a CEO of a Fortune 500 company (the largest 500 companies in the U.S.) was $6.7 million.  The median salary of a factory worker was $29,544. Some people think this is unfair.  
Tom Brady, quarterback of the New England Patriots earned $18 million in 2010, while his current wife also earns somewhere around $15 million as a model. Peyton Manning's contract was set to pay him about $23 million this year to QB the Colts (and will still pay him most of that even though he hasn't played a single game due to an injury). 

1. Chapter 4 of Good Intentions discussed how workers are paid according to their productivity-- classical labor theory says workers should be paid according to the marginal product of their labor--about as much as they add value to the overall economy.  Do you think the median Fortune 500 CEO is 227 times more productive than the median factory worker?  Is Tom Brady 609 times more productive?  Is Peton Manning 778 times more productive?

2. Why do you think the media and politicians focus on salary and bonsuses for CEOs and not athletes? 

3. The NFL is a government-granted monopoly, it is exempt from antitrust legislation. Most CEOs and factory workers work for companies competing globally. How do you think this affects the salaries above? 

1 comment: said...

HA! Pro athletes are a joke. Even more of a joke are the rulers of athletics like the chairman of the NBA or whatever his title he has. Anyways . . .

Back to CEOs what about those who opt not to be paid by their companies except for stock shares/options? What about former presidents who make a killing giving speeches while still receiving their life long salary? not sure I contributed to the discussion here :)