There are hundreds and hundreds of academic articles in law, finance, economics, business, and other social sciences discussing the issue of executive compensation broadly and down to the smallest detail. There are none — actually, one working paper in draft form on one issue — that I can find on the issue of how much and how union bosses are paid. There are scattered news reports here and there, but nothing systematic. This is shocking. The problems are the same — agency costs and the potential for self-serving behavior — as in the corporate context. Although the amounts are likely lower than for CEOs, the agency costs may be higher. I’m working on trying to make some progress on these issues, but the lack of data may make them tough to get at.
Part of the problem may be a lack of disclosure. Although CEOs (and the other top corporate managers) must disclose every penny of pay, the same is generally not true for union chiefs. The Department of Labor collects some data — although a recent Obama Administration order reduces the amount unions must disclose — but it pales in comparison with what we know about CEO pay. There are occasionally news stories describing allegedly exorbitant union pay, but it is hard to know whether these are outliers or part of a troubling pattern. In addition, if we don’t know how much leaders are paid, how are union members supposed to know or get answers to these questions?
Are union bosses paid for performance? How much do they make compared with the average union worker? How much do they make compared with foreign equivalents? (I had two librarians in law and business scour libraries and online sources for two days, and they couldn’t find any data on foreign union pay. If anyone knows any sources, please let me know.) Is the way union leaders are paid efficient or better explained by agency costs?
Stay tuned for some preliminary answers. For now, if anyone has recommendations on where I can find good data for foreign union leaders or has ideas on how to approach these issues, let me know. I’m eager to hear what you have to say.
RSS - Posts
You might call this the agency-cost problem of the “separation of membership and control.” If a corporation’s total compensation for all executives gets to a certain point in excess of the competitive market equilibrium level, ceteris paribus, a takeover will be triggered. No such mechanism exists for a membership organization since the votes cannot be bought and sold (and a profit realized) in an open market. The periodic voting process is subject to vastly higher transactions costs to displace inefficient incumbents than is an overt market. True, we have regulated takeovers to the extent that the trigger point for a takeover, and therefore the total compensation of managers, is much higher than it was in the pre-regulatory era, but the mechanism still operates, whereas nothing comparable even exists for unions. And since unions are not-for-profit organizations, one can be certain that the efficiency-induced search for leadership (a market for union managers) will be significantly attenuated in the union vis-a vis the corporation. As in politics generally, characteristics of candidates other than managerial efficiency will tend to prevail. And yes, to the obvious objection, I do believe that an open and competitive market for votes would give us better results than does the pure election process.
This information may be easier to get for the public unions since the pension data should be accessible.
Below is a link that outlines the salary for the head of the New Jersey Education Association, it doesn’t show the deferred compensation. Keep in mind some of the union bosses also get state pensions.
Link:
http://www.northjersey.com/news/85754237_The_NJEA_vs__Governor_Christie__two_powerhouses_doing__battle.html
I’ve long wondered about this issue but didn’t pursue it due to an apparent lack of data. Do union boss wages increase with successful labor negotiations? Do their wages increase with successful minimum wage lobbying efforts? Many union contract pay scales are benchmarked to minimum wage, meaning increases in min wage automatically increase union wages (no, union support for min wage has nothing to do with altruism for the unfortunate minimum wage workers).
Relatedly (and perhaps more readily available?), do union dues increase proportionally with increases in union contract wages? How much of the gain in negotiations is appropriated by the union?
What is your point, Matt? The issue isn’t important because it is smaller in magnitude than another potential problem? If the $500 million is justifiable (a big if) and a $500,000 per year union boss contract isn’t, should we pretend the latter isn’t a problem because of the former? Would it be a defense to a CEO’s pay to say that movie actor X or entrepreneur Y or NBA star Z made more? I’m not trying to compare CEO and union-boss pay; I’m trying to understand the issues about the latter.
Silly question. Do you ask how much mafia bosses get paid. Of course not, it’s bad for your health. Union bosses are in the same category. Much easier pick on guys whose MO is not beating the &%$@# out of people who go around asking questions about things they are not supposed to know about. Capish?
Are there union bosses who pull in $500 million annually?