But in the last few weeks, hoping to reruffle some feathers, Derek Bok, the former president of Harvard, has gone on the hustings with his new book, “The Cost of Talent: How Executives and Professionals Are Paid and How It Affects America.” His answer to that question: salary gaps do more than rub people the wrong way. They send the wrong message about what is important; they inspire more people to design stock derivatives than to teach math, and they jeopardize democracy by weakening faith in the economic system. His remedy: a top-to-bottom rethinking of who makes what and why.
Bok should be an ideal man for this mission. He handled plenty of controversy at Harvard (including a battle with secretaries who wanted higher pay) and he has influence and credibility. Unfortunately, he’s unlikely to rekindle this debate, let alone prompt action. This is partly Bok’s fault; he often seems to be a caricature of the distant academic, generating less passion about his own topic than Frank Perdue does about chicken skin. When Charlie Gibson of “Good Morning America” asked for Bok’s solutions to the problem, he sound-bit: “countervailing forces.”
Even a media master, though, would have trouble moving society off the dime on this issue. Sure, every American wants to know why her surgeon, boss or brother-in-law makes so damn much money. And salary gaps have widened. In 1954, Bok had the choice of a law job at $4,200 and a teaching job just a few hundred less. Now those jobs pay about $65,000 and $16,000.
But as with many other social dislocations, there’s no easy fix. Embarrassing publicity has some impact but fades fast. Bok’s policy proposals–such as steeply progressive income taxes–have political suicide written all over them. And Bok isn’t ready to leave this to the market. His book, which might have been subtitled “Kill All the Economists,” is most refreshing as it debunks simplistic notions of how markets regulate pay. CEOs aren’t paid top dollar because the market demands it, says Bok, but because directors protect each other and avoid risk. Nor is Bok impressed with the latest wave in pay theory–incentives. Merit pay for teachers fails, he says, because measuring their “output” is more complex than reading test scores, and performance rests more on intangibles such as peer support. In the comer office, stock options haven’t ensured profit.
Pay is set by values as much as economics, Bok concludes. The ’80s were marked by an overweening belief in the power of a single business leader; that attitude–not a shortage of executives–may explain why CEOs made 100 times the pay of an average worker in 1990, up from 43 times in 1960.
But if values are the crux of the matter, change will be tough. Bok ends up exhorting politicians, CEOs and lawyers to scrutinize their own consciences–and act. He will be lucky if they just read the book.
