Weekly Wire
Memphis Flyer The Unfriendly Skies

AUGUST 31, 1998:  If you’re looking for someplace to relax Saturday afternoon, don’t go anywhere near Memphis International Airport. Barring a last-minute settlement, the pilots of Northwest Airlines will strike this weekend, playing havoc with the travel plans of thousands of Memphians.

Northwest’s management claims that its pilots’ wage demands seriously jeopardize the company’s financial future. The pilots contend that top executives aren’t shooting straight, ignoring wage/benefits promises made during the dark days of the early 1990s, choosing instead to line their own pockets with the proceeds of the company’s now-record earnings. It’s an ugly scene, particularly in Northwest hub cities like Memphis. But the Northwest dispute may have repercussions throughout corporate America in the future.

This is a fabulous time to be the CEO of a Fortune 500 company. Thanks to a sizzling stock market that has paid little heed to traditional price/earnings ratios, top executives at Fortune 500 companies have, over the past five years, seen their businesses double and triple in value. As company valuations and profitability have skyrocketed, so too have management compensation packages. Between salaries, stock options, and bonuses, corporate America’s “best and brightest” are pulling down gargantuan incomes. Sanford Weil, for example, CEO of the Travelers Group, earned $227 million last year. Ray Irani of Occidental Petroleum earned $102 million in 1997; Andy Grove at Intel $52 million; John Dasburg at Northwest a mere $7 million.

Most of us would be thrilled to make the six-figure incomes commanded by major-airline pilots. In the current feud, Northwest management makes a convincing argument that its pilots are motivated, not by a sense of fairness, but by good old-fashioned greed. But that’s a bit like the pot calling the kettle black. Top executives at Northwest and other Fortune 500 companies are earning, quite literally, more money than they can count. The question naturally arises: Just what is fair executive compensation, anyway?

Throughout American business history, the answer to the last question has almost always been “whatever the market will bear.” To put it more bluntly, corporate America is built around the concept that the “best and brightest” take as much as they can possibly get away with taking.

But perhaps this Darwinian system won’t work so well in the future. For years now, progressive companies have been stressing the importance of teamwork, of concern for one’s customers, of empathy for one’s workplace peers. We’ve all seen, for example, “the people of Northwest Airlines” videos. Such team-building concepts and strategies can be found in the pages of virtually every American company’s employee manual.

But such cheerleading is starting to ring hollow all across America when the rewards for achievement are so unevenly divided. With executive compensation levels in the stratosphere, American workers must be wondering whether they’re wearing the same uniforms as their top brass.

As long as the stock market continues its incredible bull run, the American work force will probably just go about its business, happy that good times have brought good things to Americans at virtually every economic level. But there may be hell to pay in the future. At some point, those same workers are going to demand that the theories preached by “progressive” management be put into practice. The big question raised by the impending Northwest strike – namely, just how should a business’ profit pie be sliced? – is one that other Fortune 500 companies will be forced to reckon with in the not-too-distant future.

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