Tuesday, February 13, 2007

All the whinning about high salary of a CEO

I came accross a very interesting debate on the high salary (1 M) of Paul Levy, the CEO of a 100 B hospital in Boston. In a rare move of its kind, Paul has justified his salary and invited comments. As others, I am also impressed with his openness in such a political issue.

The major criticism are about the hospital marketing itself as non-profit, but using its size as the justification for 1 M salary of its CEO. Also, some people argue that a part of his salary could be better off being spent on acquiring additional resources for hospital.

I am actually just stepping out of school, and have seen very little of how economy and society operates. However, being an infant in the working class, impressed with the simplicity and democracy of a capitalistic economy, I find any opposition to his salary ridiculous, to say the least.

I completely endorse his salary. I think in a capitalist economy, salaries should be commensurate to the contribution of the individual. We need to pay as much as it is required to attract the most suitable talents.

Infact, unlinke some commenter, I dont even find anything wrong in athelets earning millions for just catching a ball. I dont think just because being a doctor is socially more noble than playing baseball, it deserves more respect and pay. If hospitals help people live longer life , entertainment helps people live happier life . In the end, what good is the longer life, if you werent not happy in those extra days.

As to someone trying to reframe the question, by saying we could pay Paul 0.5 M and spend the other 0.5 M in hiring extra nurses. Well, the thing is, Paul would perhaps move onto an organization that pays proportionate to his talent. Or may be wont strive so hard if not paid proportionate to his efforts. And therefore, this move might actually be counter productive. Its not a simple linear system, you see.

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