Management Bonuses Ruthless Criticism

Management Bonuses

How a brake on capital's top officials making a killing makes the exploitation of wage dependent labor power look a lot more fair

[Translated from the weekly radio analysis of GegenStandpunkt, November 17, 2009]

BMW really does plan to link its managers’ salaries to the wages of its workforce so that the “divide in the company” won’t continue to widen. As the Frankfurter Allgemeine puts it, the workers from now on would even determine the amount of management salaries. No way! Merely annual “profit sharing” according to their remunerations, which are well known to be extremely different in size, is supposed to constitute the same for all – from workers on the production line to high level managers. And special regulations remain the same for the salaries of the Board of Directors anyway. But right away the Suddeutsche Zeitung, in view of the current public indignation about management bonuses, celebrates this as an “important signal” for rebuilding the peoples’ shaken sense of justice.

The nice image of a company as one boat in which we all sit – some rowing, others, thanks to their higher education and smartness, steering the firm through the perils of competition – is supposed to mirror the fact that top managers earn many times what workers earn as the most self-evident truth. If managers, however, get a hefty bonus while wages are shrinking or layoffs are taking place, it is nowadays customary to moan that this hurts the average worker's sense of justice. Those who believe in the idyllic picture of a boat in which we all sit should, however, take a minute to get the difference straight between what a manager does as opposed to a worker.

Of course, any worker really knows that managers somehow belong to the employer’s side. And he knows as well that they and their sub-representatives more often than not make life hard for him by organizing constant pressure on the job. But somehow they just work so that the factory runs, right? The clearly contrasting content of a worker’s performance on the one side and that of a manager on the other side is, however, covered up if only the amount of remuneration is compared – thereby raising questions of justice. Then one has already been taken in by the illusion that a wage-payment is the remuneration for work done, in which the different usefulness of this work for the company is expressed. And anyone intent on seeing the matter this way readily sets him- or herself up as an ideal supervisor of the company, being outraged that this or that manager gets much too much in respect to his usefulness for the greater good of the company. This is also the standpoint of the unions. On the Board of a company, where they have a say and are responsible for executives’ pay [Translator's note: in Germany, works councils representing workers are often appointed to Boards of Directors] they discuss in all earnestness the question whether top managers ought to get twenty or thirty times as much as the normal wage of a worker or whether it might be better to strive for “in-house solutions for a firm or an industry.”

Whatever the debates taking place, one question is definitely excluded: to capital, what kind of performance is it that is worth so many times the average worker's wage as the high “performance-based compensation” of the managers? Workers get their wages for putting their labor power at the disposal of a company. What they have to do in detail, how, at what pace and intensity – that is all none of their business, but faces them in the form of instructions from their superiors as well as in the working conditions, machines and other materials of work that a company exposes them to for exerting their labor power – that’s why, in the ideology of the market economy, capitalists are called employers. The workers completely have to give themselves up to them in order to earn the bare necessities of their living. Whether they are allowed to work at all depends solely on whether their work is profitable for a company. And their work is all the more profitable the more saleable value in commodities they produce in comparison to the wages they take home. Hence, a worker works for the equivalent of his wages merely in one part of his labor time, while he works for the rest of the day for the company – for nothing. That is the basic antagonism between worker and capitalist. The wage of a worker, while being his means of living, is above all a cost factor for the company, and in particular one that can be reduced in relation to the exerted labor power. Because an entrepreneur constantly wants to increase the unpaid part of the working day at the expense of the paid labor time, that is, at the expense of a worker’s living. The performance for which he pays a worker consists solely in making him hand in as much unpaid performance as possible. That is the condition for his employment. The ongoing normality for a worker is therefore an increase of the productivity and intensity of his work; that is, the exertion of his labor power, which is constantly pursued by the company through its managers. The company determines how much performance in what time it demands it from him. His performance is not his means to get more wages, his wages are, to the contrary, the company’s means to extract more unpaid labor from him. Hence, how large the paid and unpaid part of his working day turns out to be is the necessary result of the fight of both parties. Laborers can at best increase the amount of their income by the pressure they are able to exert on a company’s calculations by threatening to refuse to work.

With that, the employees directly conflict with the managers. The latter’s task, after all, is to execute the functions of capital in a company for the benefit of the owners of capital. Whether more unpaid labor is exerted from the wage dependent employees or whether an entire line of production is, for instance, shifted to low wage countries and the local workforce laid off – the main thing is an increase in profit and thus the value of a company. For the latter is determined by the yield that the invested capital returns. The higher the yield, the more the company is worth in comparison to other capital investments. The secret of their “creation of value” consists in exactly this performance, about which they are all so proud – from the head of Deutsche Bank, Mr. Ackermann, down to the last department head – and for which they pocket a handsome share in such increases in value – the bigger the capital for whose accumulation they are “responsible,” the better.

And this connection then also takes an immediate turn-around: a capitalist corporation represents its size and its claim for success through the income of its top managers. So the latter is, on its part, another means in the competition for credit and investors. A company that can't afford to compete with top payment for top managers is suspected of little expectations in increase in value.

Because this is so, there is no “restriction on the payment of the Board of Directors and income of managers.” The “law on the appropriateness of the payment of the Board,” released in July 2009, demands exactly what is expressed in its title: payments of the Board of Directors that are appropriate in that they are adapted to the “sustainability of the profit” made. And because this is so, BMW has passed its wonderful new regulation on the share in profits. Of course, the workers are not made richer by a small supplement as a percentage for having been permitted to render outstanding service to the company’s profit by lots of labor for little wages. But in exchange they can now take to heart that any claims for making their life a bit more endurable by increased wages and shorter working hours are being held responsible for the profit and thus the next share in profits. This is obviously meant to foster understanding for managers and their hard work in enforcing an optimal exploitation of labor. The managers for sure won’t get poorer by the standardized percentage in the share in profits. But their earnings are now defined as appropriate by the formula that goes for workers as well. They get the same supplement in percentage for their umpteen times higher salary for enforcing the making of profits by reducing the cost of labor.

The sense of justice is satisfied in this way. It consists in the cynicism that an equal percentage point treats the rather different payments of workers and managers equally, namely as contributions to the company’s purpose. One is kindly requested to forget that it is this purpose, namely the company’s profit, for which workers and managers are paid so differently.

The fans of capitalism are enthusiastic: their opinion is obviously that a more just exploitation is much more bearable than an unjust one – for the workers…