Solidarity in Action

Moneybox
A blog about business and economics.
Jan. 26 2012 1:12 PM

Solidarity in Action

I don't think anyone's going to be surprised to learn that the Richie Riches gathered at Davos don't think there should be a legislative cap on CEO pay. But it's worth surprising ourself about this for the moment.

Think, after all, about the arenas of American life in which we do cap compensation—professional football and basketball. These sports are organized into two tiers. In both tiers what you have is the owners of football and basketball franchises selling tickets, food, and television contracts for a profit and paying general managers, coaches, and athletic directors generously. But in upper-tier football and basketball there are caps on how much the teams are allowed to pay their players. In lower-tier football and basketaball, the compensation cap is set at $0 and they make a pretense that it's an "amateur" activity even though everyone except the players is pulling in six or seven figure salaries. In both the football and basketball cases you have debates about the wisdom, ethics, propriety, and even legality of forming cartels that conspire together to underpay a significant element of the workforce. But in both cases nobody is surprised to learn that the owners of the franchises, are strongly in favor of being allowed to form an anti-labor cartel.

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So why is it that the owners of America's firms, don't spend time agitating for the creation of a legal framework that would cap CEO salaries? There are reasons, of course, but a lot of it comes down to solidarity.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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