I was listening to NPR today about Obama's cap on executive compensation, and they had on a guy who ran a NYC Compensation Consulting Firm to talk about how many people would be affected by the $500K cap. A COMPENSATION CONSULTANT!! You're telling me he gets people to pay him to find out how much they should pay other people! Just like how the derivitive market made it possible for people to make money off of other peoples funny-money, this guy is making serious money because Wall St. fantasyland is so big that even the margins make people rich.
This epitomizes the mess on Wall Street and is a perfect example of why ordinary American's aren't a bit sympathetic to Wall Street Bankers who may have to tap into their savings to support the $10M bonus/lifestyle they've become accustomed to when their pay gets capped at $500K.
UPDATE: Fine, in response to VH1's defense of compensation consultants, I'd recommend going to glassdoor.com and post your salary online so the market can work accurately with data and without parasite consultants.
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3 comments:
Compensation consulting is a perfectly legitimate enterprise and I have actually thought about becoming a compensation analyst myself in the event that I am laid off from my present job. Most large corporations these days choose to have their compensation departments in house rather than bringing in an outside consulting firm, but compensation analysis serves an important function: knowing whether you are paying your workforce above, below, or at the market rate. Picture a scenario where there are two competing firms in Silicon Valley, let's say Google and Yahoo. All of the sudden, Yahoo finds out that all of their best software developers are leaving the company to go to Google. They later find out that Google is paying 20% higher salaries for the same job. This has a hugely detrimental effect to Yahoo's internet product and they lose market share to Google as a result. Yahoo might have been willing to accept a lesser profit margin on each software developer in order to retain that talent because of the value they created. Compensation consultants / analysts gather large amounts of data from salary surveys, and help firms to set compensation ranges at a range so they can gain competetive advantage on other firms. Some compensation consultants focus exclusively on executive compensation. While it may strike a fairness nerve, the fact is that there are some CEOs who deserve (in a market sense) what they make because of the profitability they create (due to increased sales, new ideas, better management, etc). It is important that companies know what other CEOs total compensation packages are so they don't risk losing these star performers to their competitors. Compensation consulting firms can provide that kind of valuable insight.
VH1
I don't know about the term "compensation consultant" but the practice of doing a market study to evaluate compensation to determine where you stand relative to other companies is perfectly good management practice. Maybe Lyceum needs to get a real job! :-)
Clearly just hoping everyone figures out to go to some "glass door" on the web and post their salary is not science. However, hiring a consultant to sample a particular work force and invite them to do just that, can be.
I don't know whether the "compensation consultant" on NPR was running a boondoggle or not, but the concept remains sound.
I prefer to the term "reality consultant" which is a job I already hold. Disregard my reality advice at your own peril.
On a separate note, I'm pretty sure "compensation" consultants are the root cause of which started my company trying to limit my pay.
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