Are We Compensating Effort Instead Of Achievement?

NPR radio programming is a wonderful source for news and commentary that is otherwise left out by mass media news reporting.  While out driving on Monday, April 5th, I was listening to NPR’s Marketplace.  They conducted an interview with the author of a recent study released by Northeastern University entitled “The Unprecedented Rising Tide of Corporate Profits and the Simultaneous Ebbing of Labor Compensation – Gainers and Losers from the National Economic Recovery in 2002 and 2003.”  During the interview, the study’s author, Andrew Sum said:

“In no other recovery from a post-World War II recession did corporate profits ever account for as much as 20 percent of the growth in national income. And at no time did corporate profits ever increase by a greater amount than labor compensation This is the first time we’ve ever had a case where two years into [the current economic] recovery, corporate profits got a larger share of the growth of national income than labor did.”

This is just another indication of a very alarming trend that I’ve written about on several occasions; overpaid orchestra executives –  Overpaid Executive Martyrs, The Executive Shuffle, and Lack Of Interest.   How does a study about for-profit industries relate to the non profit world of orchestra administration?  Because a common rationale used by an orchestra’s executive board is that they have to continue raising compensation for their executives with salaries as close to their for-profit counterparts as possible. If they didn’t, they wouldn’t be able to attract a high enough caliber of manager to successfully run the organization. Mr. Sum’s study illustrates that there were three areas among corporate profits that benefited from this huge increase of profit share: enhanced profits, lower product prices, and increase executive compensation.

It’s that last point that catches up with orchestras.  By attempting to “keep up” with the for-profit sector, the salaries of orchestra executives have increased by a larger percentage than ever before.  On an industry wide average, executive compensation has kept pace with the for-profit sector, right through the middle of the largest financial crises the orchestra business has experienced since the great depression.  Doesn’t this strike anyone else as bad timing?  Executive board members have been so browbeaten about having to compensate their executives that they’ve seemingly forgotten that they are also required to demand results from them.

Tune in tomorrow where you’ll find a chart listing the executive director salaries compared to the base musician salaries from 44 of the top ICSOM orchestras, Thursday will feature the same information from the top ROPA orchestras.  I think you’ll find the data “enlightening”.