[IMC-Editorial] Op-Ed: NYSE Chairman Should Have Kept His Earnings

[The Ayn Rand Institute]

Dear Editor, 

Please consider this Op-Ed submission from the Ayn Rand Institute. For
your convenience, you can download it from:
http://www.aynrand.org/medialink/nysechairman.shtml


NYSE Chairman Should Have Kept His Money--and Been Proud of It

It is time to recognize the moral right of businessmen to the fruits
of their work

By Edwin A. Locke

One year ago Jack Welch, who as CEO of General Electric created $400
billion in stockholder wealth, faced a storm of public protest over
his retirement benefits, which were worth a modest $2.5 million a
year. Welch caved in and renounced the benefits. Now Richard Grasso,
chairman of the New York Stock Exchange, has followed Welch's lead,
forgoing $48 million. Evidently neither man believed he had the moral
right to the wealth he had earned.

Grasso's cave-in followed a public uproar, including the wrath of many
in Wall Street and Washington, over the fact that he was awarded
$139.5 million in accumulated pay for his 36 years at the exchange,
the last eight as chairman. His salary, bonus and retirement payments
were reasonably comparable to those of CEOs at other top financial
institutions. Calls for him to give back the money and resign
abounded--never mind that Grasso had earned every penny of his
compensation by displaying exceptional leadership. As CEO of the
exchange, he had helped to grow the exchange, upgraded its technology,
and led it through a recovery from the 9/11 attack.

What reasons were given as to why Grasso should surrender his payout?
Some complained that his compensation was above the median (or 50th
percentile) for his peer group of CEOs. But this is a rationalization.
Half of all CEOs earn more than the median; so why not Grasso, if his
work merits it? To those who protested Grasso's income, however, merit
and ability are irrelevant.

Adding to the clamor against Grasso was the chairman of the Securities
and Exchange Commission, William Donaldson. He complained that because
of Grasso's compensation package, the SEC was finding it more
difficult to persuade private companies to lower the pay levels of
CEOs. But as long as there is no fraud involved, CEO pay should be
none of the government's concern. The government has no right to
interfere in the running of privately owned businesses. But the SEC
evidently is on a moral crusade to level down the salaries of all
CEOs.

What can explain the desire to induce guilt in successful CEOs and to
reduce their pay? It is the egalitarian remnants of Marxism. Though
Communism has fallen, the premises of Marxism persist in our culture.
According to Marxism, real wealth is earned by brute labor and
therefore profits earned by managers and CEOs are assumed to be stolen
rather than earned. Marxism evades the true source of wealth: human
intelligence.

Morally, the Marxist view holds that no individual has a right to his
own personal gain; all must work self-sacrificially for the sake of
the group, the state, society: from each according to his abilities,
to each according to his needs. This inverted morality punishes
success and rewards indolence. Regardless of people's differences in
ability and effort, on this view, the more able must sacrifice
themselves--they must be forced to give up their "surplus"
earnings--for the sake of the less able and productive.

Modern capitalists--from the 19th century to the present, from John D.
Rockefeller to Bill Gates--are hated because they became wealthy while
other people, who were less able and less productive, did not. Ayn
Rand described this hatred for achievement as hatred of the good for
being the good. It is businessmen who have created wealth on a scale
unprecedented in the history of the world and who have elevated
America and the rest of the free world from a state of rural poverty
to that of an advanced industrial civilization. But the more
successful businessmen have been, the more they have been hated and
the more virulently they have been attacked by government regulators
and intellectuals.

Wealthy capitalists are partly forgiven for being rich provided they
give most, if not all, of their money away. They are never given
credit, praise or recognition for having created the wealth in the
first place.

It is an abomination to persecute the able and productive or to
penalize them for their achievements. It is time that we rejected
Marxism and all of its premises. It is time we recognized that while
men are equal in their political and legal rights, they are not equal
in their motivation and ability and thus will not be equal in their
success.

We must renounce the notion that men must work for the sake of others
and declare that all individuals have a moral right to the fruits of
their work--Richard Grasso included.
______________________________________________________________________________

Edwin A. Locke, a Professor Emeritus of management at the University
of Maryland at College Park, is a senior writer for the Ayn Rand
Institute (www.aynrand.org) in Irvine, Calif. The Institute promotes
Objectivism, the philosophy of Ayn Rand, author of Atlas Shrugged and
The Fountainhead. Send comments to reaction at aynrand.org

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