I think this makes a lot of simple sense.<p>Say you are a service company.<p>You have 20 employees, and one manager. The manager makes twice as much as the employees, because customarily managers make more than their subordinates.<p>In a small business, the manager is the owner, and his salary is twice as much as the average worker.<p>Now say you are a bigger business, and you have multiple outlets in the region. Your regional manager manages 20 outlet managers, the 20 managers each manage 20 employees. Your regional manager makes twice as much as the outlet managers because managers make more than their subordinates.<p>Now say you are a national business, and you have 20 regions each with 20 outlets per region. Your national manager manages 20 regional managers. Your national manager gets paid twice as much as the regional managers.<p>And say you're an international business, and you have a presence in 20 countries each with multiple regions with multiple outlets. You manage all of the national managers, and so you get paid twice as much as them.<p>The small business has a situation where the business owner makes twice as much as the employees.<p>The international business has a situation where the top of the management chain makes 32 times as much as the employees.<p>That's using a really simplified model, but the larger the business, the more layers of management will likely exist, and we have a system where management expects to get proportionally more money than those they manage. That's discounting any human or sociological factors that might contribute.<p>I think the biggest change that could correct this issue would be to do away with the idea that your boss makes more money that you is just a given.
There is one piece of received wisdom in this article which is particularly problematic: "But managing a multinational firm such as Walmart requires a different—and much rarer—set of skills than that required to run a corner store."<p>This is simply not true. Executive skill is very highly overrated. There is no "magic" these overpaid executives have that uniquely enables them to run large companies. This received wisdom probably comes from the efficient-market hypothesis, in the sense that if executives are paid so highly it must be that there skills are amazing and valuable. This need not be true. It may very well be due to a mix of cronyism, posturing, and self-promotion.<p>Let's end this nonsense of executives being the crème de la crème of intellectual superiority.
Well. If the average size of firms has gone up so has market concentration. Market concentration brings market power, market power brings arrangements that favor those who hold that power.<p>In general, markets with low concentration are defined by competition while markets with high concentration are defined by power. For measures of concentration see the HHI or the concentration ratios.<p>[0] - <a href="http://en.wikipedia.org/wiki/Herfindahl_index" rel="nofollow">http://en.wikipedia.org/wiki/Herfindahl_index</a>
[1] - <a href="http://en.wikipedia.org/wiki/Concentration_ratio" rel="nofollow">http://en.wikipedia.org/wiki/Concentration_ratio</a>
I've wondered if 401k plans and IRAs have held back small businesses because people could have spent the money to start their own businesses; it is horribly difficult to beat an S&P 500 index fund, but the popularity of those funds mean a lot of people are spraying money at them.
Someone from the top 5% is more likely to hold their a wealth in equities, then the Average Joe from of the 50%. The top percentiles may be paid more, but they are likely to make far more in the long term on their investments anyways.<p>In this sense inequality is unavoidable fact of life. Much the same as some people are gifted with genes making them more likely winners in a long distance running contest. Unequal but hardly unfair as long as a fulfilling life is possible regardless of such deficiencies. The problem should be phrased in terms of opportunities and social mobility, instead of inequality.
I often wonder if the world would be a better or worse place if (somehow) companies were limited to something like 5,000 employees. Is there a threshold which allows diversity and efficiency but restricts dominance?
Well duh... is it really a surprise that the consolidation of wealth and the consolidation of firms owned by the wealthy is correlated? Next you're going to try to tell me that this is correlated to their undue influence over the political system...<p>It is ironic that a publication owned by the Rothschild family is espousing these views.