Wednesday, December 29, 2010

Executive Hubris or Business as Usual?

Image by Beau B
Thirty-six of the University of California’s highest paid executives are demanding tens of millions of dollars in increased retirement benefits, at a time when they are raising tuition and cutting benefits for their lowest paid employees, and they are threatening to sue UC if they refuse to go along.

UC bosses presently only earn retirement benefits on salaries up to $245,000. Those earning more than this want all of it covered, which could raise their benefits to over $300,000 per year. This poses a problem for the UC system, which is trying to cut a $21 billion pension obligation by reducing benefits. If the top bosses’ demands are met, it would add an additional $5.5 million per year to pension costs, plus $51 million in retroactive benefits, while their legal challenge could cost the university millions more.

Moral Obligation to Pay Executives Bloated Retirement Benefits
“We believe it is the University’s legal, ethical and moral obligation” to increase the benefits, they argued in a letter to the regents. In 1999, the regents agreed to lift the cap, but never implemented the policy due to financial difficulties. The top bosses also argued that they signed on with UC in good faith because of the promised increase in benefits, when they could have chosen to work elsewhere. However, the same could be said for custodians and gardeners, who are being threatened with large cuts in retirement benefits, as well as teachers and researchers, many of whom also chose UC over other potential employers because of promised benefits packages that are now being stripped away. And what about students who chose UC and made financial plans accordingly, only to have those plans undermined by unpredictable tuition hikes? (Tuition is now $11,000 per year, compared with $3429 in 2000, while it was only $1200 back in the 1980s).

Apparently, salaries over $400,000 are insufficient for these spendthrifts to survive in California, as they were also receiving additional compensation in the form of secret bonuses and perks. It is hypocritical to accuse the regents of being unethical for reneging on a promise to raise the pension cap, while they were beneficiaries of illegal and corrupts payment schemes.

Hubris, or Business as Usual?
While it may seem the epitome of hubris for wealthy executives to demand retirement benefits worth 5-10 times what most of us earn when actually working full-time, and then call it a moral obligation, it is actually just business as usual. Wall Street bankers and investors demanded government bail-outs and then paid themselves big bonuses. Corporations and rich individuals demanded tax breaks for themselves, while crying for cuts to Medicare, social security and education. Why should UC executives be denied a similar trip to the trough?

Morality, ethics and legality are simply tools that are effectively exploited by bosses to achieve their objectives. What is moral for them is what is right, even if it results in unmoral consequences for their underlings. What is ethical and legal for them now, is what is valid, regardless of past (or present, but as yet undisclosed) unethical or illegal behavior. They are the ones who define what is moral, ethical and legal, and therefore the ones who benefit most from them. And when their moral and ethical arguments fail to persuade, they resort to extortion, as they are presently doing, by threatening expensive legal challenges that UC cannot afford to resist.

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