How Much Should A Company Pay For Innovators?
So far, IBM has invested hundreds of millions of dollars in R&D to create autonomic capabilities in more than 500 product features for upwards of 100 products and services. This includes the technology driving IBM’s Blue Gene/L supercomputer and “self-healing” features that now come standard in the company’s system management software.
Assuming these technologies take off and become widely implemented and in the process make millions of dollars for IBM, how much do you think the guys in charge of organizing and developing these technologies should be paid?
Several weeks ago over at Personal Responsibility Darwin censored capitalism for it excess when a CEO was given his golden parachute after he lost the company many millions of dollars. This CEO no doubt signed on to work for this company in part because of the lucrative retirement package. Darwin was outraged that someone that lost some much for a company should be given such a generous retirement package. This was problematic for capitalism because it should punish the CEO and not reward him he argued.
But now lets consider the main leaders at IBM working on this technology. Should IBM give them lucrative retirement packages as means to keep them happy working on this technology for IBM. If IBM keeps them on board and they end up making millions for the company will Darwin also argue that this is an example of capitalism failure?
Proper Free Markets don’t place value judgment on decision making. It lets each individual make its own decisions. The price for this freedom is that the markets do not assist those that make bad Market decisions. In this way we see that under the hood of a Free Market beats the heart of a libertarian. Markets, like libertarians and liberals, don’t morally condemn you decisions, but like libertarians and conservatives, markets are comfortable leaving you alone with your consequences for bad decision making.
November 11th, 2007 at 7:54 pm
Pft, you make value judgments just as often as a everyone else does. Your judgments just happen to be in accord with the judgments made by a free market. Or are you saying that your statements about how capitalism is the most effective system for rewarding people who are ‘valuable to society’ do not involve value judgments on your part?
I don’t think it’s a problem to make value judgments, but I do think it is hyperbole for you to suggest that libertarians do not.
November 12th, 2007 at 3:55 am
Could you explain your point a little better? I tottaly don’t understand how you’re countering my argument. Especially since I ws arguing that he wasn’t punished for making bad decisions, whereas your final sentence was ” markets are comfortable leaving you alone with your consequences for bad decision making”.
November 12th, 2007 at 11:05 am
The point of this post, which admittedly was not well articulated, was that the flip side to an incompetent CEO being given a golden parachute is a company that fails to keep an highly profitable CEO because another company offers him a better golden parachute.
In either case, the markets are not aiming to make moral statements. They are simply serving as indicators of what works and what does not. You criticism relies heavily on a moral argument. Punishment implies wrong doing which can only be determined by morality. Markets make no statements about wrong doing they only inform agents about what works and what doesn’t.
This is what makes the markets libertarian. Libertarians don’t make moral statements. I should be clear here given Dan’s criticism. Libertarians don’t wish to force their moral evaluations on people via the state. That is to say libertarians don’t wish to use the state to punish those that go against their own moral evaluations. Libertarians and markets are neutral when it comes to moral valuations of what people do.
The more charitable variation of your argument is to say that by punishment you mean to say that the CEO was not given the proper signal regarding his incompetence at the company. However, the markets sent a strong and immediate signal by forcing him to retire once the full extent of his incompetence was understood by the board. This is precisely how you want the market to operate.
It really feels like you think this guys should be punished or at least capitalism has a problem because it does not punish CEO in these instances. However, its not entirely clear how you would go about punishing this CEO. I’m sure when he was brought in his contract had a golden parachute built into it. To punish him by taking that golden parachute away would be breach of contract. Failure to honor contracts seems to be more problematic for capitalism than failure to punish certain agents for so-called wrong doing.