1 December 2021. Pay | Sondheim
The best CEO-average pay ratio is lower than you think. Trying to understand the magic of Sondheinm.
Welcome to Just Two Things, which I try to publish daily, five days a week. Some links may also appear on my blog from time to time. Links to the main articles are in cross-heads as well as the story.
#1: The best CEO-lowest paid worker pay ratio is less than you think
Obviously CEO pay rates have ballooned over the last three decades, even when it became harder in many industries to achieve growth by anything other than acquisitions or financial engineering.
Corporate Rebels has a short piece on this.
The piece starts with a conversation with a CEO, who thinks he remembers one of the Corporate Rebel team saying to him
if you ask employees what they think [about pay ratios], the usual response is in the order of 6 to 8 times. Is my memory accurate?
Well, we’ll come back to that.
In the mid 1970s Peter Drucker, the management academic, said that the maximum ratio ought to be no more than 25-to-1, although he later scaled that back to 20-to-1. Drucker’s rationale was that higher ratios caused falling morale and employee resentment.
Since then, of course, the ratio has ballooned—it’s now more than 200-to-1. And in the United States it’s more like 350-to-1.
It turns out that the CEO’s memory was correct; a pair of Harvard academics have done the research, interviewing people in a number of countries with high wage gaps:
Estimated pay ratios were not the only thing the researchers asked their respondents about—they also asked them to share what they thought the ideal pay ratio for CEOs and their employees should be.
The results are telling. Where the estimated pay ratio across all respondents was reported to be 10-to1, the same group of people reported an ideal pay ratio of 4.6-to-1.
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It turns out that there are some interesting exceptions to this, however.
For example, at the Basque ner Group, there is a rule is that the highest-earning 10% can earn no more than 2.3 times the salary of the lowest-earning 10%. This might sound extreme, but these outliers believe that lower pay gaps are not only fairer for all people involved, they also believe that lower pay gaps are better for the success of their business.
And there’s research to support this belief as well. Research published by Mohan, Norton & Despandé in 2015 found that when customers were aware of the size of pay gaps in businesses, they were more likely to by from companies with smaller pay gaps than larger ones.
One note from me here: When companies were first required to publish their directors’ pay, in the 1990s, the group that recommended it believed that disclosure would keep high CEO pay in check through social disapproval. At least, that’s what they said in hindsight.
The opposite happened: it fuelled a status-driven race to the top as remuneration committees took published rates as a competitive yardstick. (And—given the small circles in which executive and non-executive directors revolve, they likely helped their own remuneration quite nicely as well).
It’s possible that this is now starting to turn. But I wouldn’t bet on it just yet.
#2: Trying to understand the magic of Sondheim
I’d been hoping that by now someone would have done the wide-ranging and magisterial piece, after Stephen Sondheim’s death was announced at the weekend, locating him in the history of the theatre musical and explaining his impact. But if they have, I haven’t seen it. So I’m going to try to piece some of it together from the articles that I have seen.
(Stephen Sondheim in 1976. Public domain via Wikipedia)
Some of this is about his personal characteristics, some about cultural timing.
Learning
Sondheim was close to the Hammerstein family, and was to some extent was mentored by Oscar Hammerstein, after he became friends with Oscar’s son Jamie. So he was steeped in some of the great traditions of the American musical. Jay Nordlinger mused on this in The New Criterion:
When I was young, I read the memoirs of Pablo Casals: Joys and Sorrows. I’m going from memory, but I think he said something like this: “When I look at the fisherman kids, on the wharves of Barcelona—deprived of an education, made to work from early boyhood—I think, ‘Which of them is Mozart? Which is Beethoven? How much talent is going undetected and undeveloped?’”
“Hogwash,” I thought. “None of those fisherman kids is a Mozart or a Beethoven. Talent will out. The cream will rise to the top. You can’t suppress it, no matter what.”
I don’t know... What if Leopold Mozart had been a baker? Would Wolfi have been the best baker in all of Austria?
Sondheim said that if Jamie’s father had been a geologist, “I probably would have been a geologist too.”
Craft
Sondheim was probably his own fiercest critic. In his book, Finishing The Hat, published in 2010, he famously reflected on his disappointment with the lyric he wrote at the age of 25 for ‘I Feel Pretty’, in West Side Story. You’d imagine that most lyricists who’d come up with a lyric as memorable as ‘I Feel Pretty’ would keep quiet about their reservations, of course, but this is what he told CBS:
"What had happened was simply that it was my first show, I wanted to show off, I wanted to show that I could rhyme," Sondheim said to us in an unaired portion of his 1988 profile.
"It's alarming how charming I feel," Sondheim remarked to correspondent Bill Whitaker in 2020. "Can you imagine a Puerto Rican girl who's just arrived in the country and she's singing it's alarming how charming I feel?"
The song was dropped from the 2020 revival of West Side Story, which is a benefit of outliving your collaborators. Mind you, he also had reservations (also in Finishing the Hat) about the famous couplet in the Rodgers and Hart standard ‘My Funny Valentine’, song: “Your looks are laughable./ Unphotographable.”
His critique:
“Unless the object of the singer’s affection is a vampire,” he said, “surely what Hart means is ‘unphotogenic.’ Only vampires are unphotographable, but affectionate ‘-enic’ rhymes are hard to come by.”
Technique
He spent his life in musical theatre, and he was also a fan, encouraging others (like Jonathan Larson, who died at 35 before his musical Rent opened. At the Washington Post Alexandra Petri reflected on Sondheim and the song:
“A song exists in time,”... A song is delivered in time, and it has only as long as it lasts to tell you what it is trying to say, whether you hear it or not. It can’t be too clever, and it can’t be too dull. It has to land on your ear as a surprise. If it contains jokes, they have to rhyme. (If it contains rhymes, words that are spelled differently are funnier, Sondheim thought, than words that are spelled the same.) And it doesn’t hurt if it’s hummable. The song has to take the character singing it somewhere. It has to be essential to the show. “If you can take the song out," Sondheim said, "and it doesn’t leave a hole, then the song’s not necessary.”
Hits and misses
Sondheim was human—he was discouraged by his failure with Anyone Can Whistle, after three early successes. But instead, he left Broadway to work in the more left-field off-Broadway theatres. By his late 70s, he was able to be phlegmatic about this in a conversation with the New York Times theatre critic Frank Rich.
It wasn’t about being ‘ahead of the audience’, he said, it was more than it takes audiences time to get used to a style or an approach or a subject matter. But the fact is that a lot of his musicals closed early and lost money. Even the stage version of West Side Story, remembered as a hit, made money—on Sondheim’s account—only because the cast was so young they were on minimum rates.
As theatre director Jim Petosa told Chris Slattery at Everything Sondheim.
“When his work was fresh and new it would often be ahead of the audience’s ability to take it in,” said Petosa, who recalls watching a preview of Sweeney Todd at the Uris Theatre where “easily 50% of the audience bailed” at intermission in clear discomfort.… “People come to Sondheim and develop an appreciation for him over time,” he observed. “I think sometimes the first taste can be acidic, in a form that had grown up giving people a sense of comfort.”
Cultural moments
When Obama awarded Sondheim the Presidential Medal, he summarised his body of work like this:
"As a composer and a lyricist, and a genre unto himself, Sondheim challenges his audiences," Obama said. "His greatest hits aren’t tunes you can hum; they’re reflections on roads we didn’t take, and wishes gone wrong, relationships so frayed and fractured there’s nothing left to do but send in the clowns.
Although his career stretches back to the 1950s, his work becomes darker and more complex in the 1970s, broadly from his work with Hal Prince, starting with Company in 1970. Broad brush, but historically the musical had generally been light, even optimistic, often escapist.
But by the time we get to the 70s, the mood has changed. Society has become darker, and social relationships had become more complex. Both of these changes are reflected in the kind of work that Sondheim brough to his musicals. One piece, by Narelle Yeo in The Conversation, noted that he was expert at portraying complex women. Yeo points to the character of Mrs Lovett, Sweeney Todd’s business partner and accomplice, for example, and ‘I’m Still Here’, from Follies, which can be thought of a song about the challenges of staying in theatre as an older woman actor.
A Top Ten
Playbill magazine re-published a 2013 article that listed their view of Sondheim’s Top Ten songs. The criterion was songs that worked out of the context of the musical they first appeared in.
Spoilers, but the number one is ‘Send In The Clowns’, one of the few songs from more recent musicals that has escaped from genre into popular culture. The video quality is appalling here, but the sound works fine.
j2t#218
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