Thinking of the recent indictment of former Virginia governor Bob Mcdonnell and his wife Maureen on corruption charges I was intrigued to learn that although he was among the top 5 highest paid state governors in the US, his salary was $175000/year. Although it may seem adequate considering the salary earned by other top elected officials(President Obama makes $400,000/year) in the country but was that really adequate? I am not trying to justify his corruption, but the fact that a senior director in a corporation in Virginia probably makes the same or a bit more than the governor of Virginia, managing a budget which is probably a tiny fraction of Virginia’s economy.
I was comparing the size of Virginia’s economy to Honeywell. Virginia’s net worth as of 2013 is about $20 billion vs. Honeywell’s net worth of $13 billion; there is however no comparison in terms of size of Virgina’s economy and Honeywell. In 2012 Honeywell’s CEO David M Cote, who’s is 5th highest paid CEO in 2012 as per Forbes magazine, made $55.79 million. Although his base salary was $1.8 million he earned the remaining sum in bonuses and other incentives. In comparison, governor of Virginia’s compensation for 2012 looks like peanuts.
So what’s the comparison between publicly elected chief executive of a political entity and publicly traded for-profit corporation? First of all both are responsible for making high stake decisions for the organization/political entity they lead ,which can have far-reaching consequences for the shareholders/citizens of the political entity. Although there is a long-going debate over executive pay, without taking any side on that, I do acknowledge that to attract best people to run a corporation and to keep them solely focused on the affairs of the corporation it is necessary to pay them competitively. Majority of executive compensation is usually based on different performance benchmarks and is often paid using corporation’s stocks with lockout periods, this keeps the executives personally vested in the long term future of the corporation and aligns their personal financial interests with the interest of the corporation they are heading.
The kind of corruption we are seeing in politics at various levels of the government, doesn’t it make sense to start thinking of various branches of government as de-facto corporations, where citizens/voters are the shareholders and elected public officials as executives? The compensation of elected officials should be made proportionate to the size of the organization in terms of GDP/budget they will be making the decisions for, keeping a big chunk of their compensation tied to different performance benchmarks and having them vested in the long term future of the organization they are heading. This will not only attract, best and the brightest to these jobs it will also keep the corruption out of politics for the most part.
So what about the spirit of “public service” and “giving back” to the society by running and serving in public offices? I am not doubting the intentions of all the political leaders who have served or who are serving, but lets be honest; as humans we all have financial needs for ourselves and our families and often we are enticed by financial incentives. By compensating political executives/decision makers competitively we can keep them focused on their jobs and make it less likely for them to be persuaded by outside interest groups.