“High Income I” – or “Many Employees = Much Money!”

Currently, people get more and more thoughtful and start asking strange questions, such as:

Is it justifiable that the director of a company earns a hundred times as much as his employees?

BMW wants a link between the director’s wages and the general income development. And at Siemens, the managing director wants to let the stake holders vote on how high his income should be.

In the 1960-ies, the APO got excited about Heinrich Nordhoff, who was VW managing director for several decades, earning twenty times as much as the common VW employee. Today, you read of yearly managerial incomes in the double-digit millions, which means occasionally about the factor 100 or 200 or even more.

Politicians, too, demand that super incomes should be limited, either by law or voluntarily. I really wonder how that is supposed to work?

But let us talk business: high managerial income is only possible in very huge firms. The only way for a director to get 10 million per year is if, for example, 100,000 employees earn an extra 100 Euros each. That does not sound like too much. Now take a middle-size enterprise with, let us say, 100 employees, and you get 10,000 Euros extra per year for the boss. 100 million Euros, however, is a sum that is no longer mentally conceivable for normal people when thinking in terms of money.

Do we need huge enterprises at all? Do mergers in general only bring disadvantages for the customers and (allegedly) advantages for the enterprise? Huge concerns have to meet operational goals. It goes without saying that they do not use their powerful position on the market for anything other than their own interests. Forget about the interests of the customers or some social system.

No huge company has only its own strength to thank for its size. The central factor for expansion is always the (speculative) capital market. As a general rule, huge concerns have always developed inorganically (by buying other enterprises with outside capital) or by collecting small enterprises (such as in the USA in 1929 with free capital before the world-wide economic crisis).

The necessity of huge concerns is probably only one of the modern lies we keep telling ourselves. Small enterprises work a lot better and more efficient. Gigantism is not a good concept. I believe in small, regional and de-centralized systems co-operating as partners and creating great things together.

RMD
(Translated by EG)

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