The salaries of big bosses and football players, as it is, should not shock anyone

Thursday, October 20 In RTL antennas, columnist François Lenglet launched into a chronicle opposing the anger of Patrick Pouyanné and the cheering of soccer player Karim Benzema. On the one hand, the 5.9 million euros a year the TotalEnergies boss earns is seen by many as theft and exploitation, while on the other hand, the recent Ballon d’Or winner remains popular and applauded despite his 10 million euros a year. .

For Lenglet, this is incomprehensible: “Employers’ wages shock public opinion, but footballer’s wages don’t fluctuate much higher.” The explanation he is trying to provide is not at all clear. Between TotalEnergies, a company with a turnover of 14 billion euros in 2021, and a spin-off of more than 9 billion for all Big 5 professionals, the economic results do not pass here (they are similar). clubs (England, Spain, Italy, Germany, France).

No, it could only be explained by personal effort: we will admit that the footballer, and the sportsman in general, should be paid very well, because his reward will be directly from his work, his contributions and his earnings. social or symbolic capital passed down through inheritance or socialization would make efforts to get there without the aid of any outside influence. The footballer would succeed on his own. Therefore, his salary would be completely logical and legal.

As for business leaders, public opinion would perhaps wrongly judge that they would be there only by force of chance, transmission, social determinism. Unlike the best athletes, they didn’t work hard enough to succeed, they simply benefited from what they learned through their heritage and social position. In other words, listening to François Lenglet, we would accept personal effort, self-transcendence, inner work, but reject social determinism.

This is apparently admirable and acceptable. However, this is not really the correct answer, and the RTL editor’s analysis is subject to the test of facts.

The first thing that is important is to be able to explain the salaries, whether they are paid to the big bosses or to the players. Lenglet believes that in France “A boss’s wealth is not legally recognized” would bear great social responsibility. On the contrary, it will be the last for the player “reduced” but even so, his wealth would be acceptable.

Here we contrast the two uses of agents between a boss who creates jobs and economic activities and an athlete who produces nothing but goals. However, the utility versus trade-off value decision explains exactly why footballers’ salaries would be reasonable compared to managers’ salaries.

Value in use versus exchange value

We must return to economic theory and fundamental authors. According to David Ricardo, the author of the book Principles of political economy and taxationPublished in 1817, utility cannot be the basis of value because it is essential and, as the name suggests, useful.

“Utility is not the measure of exchange value, although it is absolutely essential to it, exposes the economist. If an object were of no use, or, in other words, if we could not make it serve our pleasure or gain some advantage, it would have no exchange value, no matter how much work was required to obtain it.”

In other words, a useful good must be available because it is necessary, therefore infinitely reproducible, and can be sold at a reasonable price. Conversely, a useless commodity will be sold at a high price because it is useless. Among the classics is the metaphor of water and diamonds, where, despite the obvious utility value of water, it will be important, accessible and affordable. Conversely, a diamond, a useless and obsolete item, would be rare, unattainable, unattainable, expensive.

If we turn to the salary issue, then we will have useless, rare players. Neymar, Mbappe, Messi or Benzema will be useless and cannot be repeated forever. Regardless of the training or education provided, they will be unique. As a result, they would be expensive and few clubs would be able to afford them. Their value will be determined only by market logic, by the meeting between rare supply and abundant and successful demand.

On the contrary, managers will be able to manage useful, important for the proper functioning of the company, investment projects and huge development plans. According to classical theory, they should receive a premium inversely proportional to this high value in use. Because they are so important, they can be endlessly replicated, trained in many great schools, and bring the most recognized knowledge and skills. Given their strong utility, we should even set a low wage.

A commitment to transparency as an explanation

So why are they paid so well? Why should big bosses offer an average of €7.4 million per year in bonuses, when it is less than €51,000 for heads of VSEs and SMEs? This discrepancy, which may indeed shock the French, is simply explained by the perverse effect of transparency applied to listed companies.

Indeed, since 2001, the law has required listed companies to publish the salaries of their managers. This led to a veritable arms race, accelerating wage inflation.

According to economist Frederic Frere, professor at ESCP, “as soon as the reward is publicit becomes a measure of the value of leaders and therefore matters. […] When a listed company appoints a new manager and decides to pay him less than his predecessor, everyone knows it and we will conclude that he is not as competent as the company he replaces. Similarly, if a company executive is paid less than the average for his industry, everyone knows it and we will conclude that he is not among the most talented.

“Managers’ compensation is instrumented. It becomes both a measuring tool and a mechanism of influence., he concludes. We don’t pay more because the manager creates jobs and runs a very large company, we pay more than the competition and to show that the new manager can convince shareholders with a higher salary.

This should perhaps shock the French. It’s not that Patrick Pouyanné won €5.9 million, but his prize is out of touch with standard economic realities. Conversely, few people will care about the €10 million Karim Benzema collects, as he will only get what the market wants to pay him, regardless of whether it is beneficial to society or not.

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