Should Politicians' Salaries Be Based on Their Performance?

Business owners only get paid when their company performs. Should our political leaders get the same treatment?
Getting Small Businesses Unstuck, Shafran Moltz Group
March 14, 2012

Business owners only get paid when their company performs. That is why most entrepreneurs aim to build a business that is profitable and earns them money. Similarly, corporate directors usually set the compensation of big business CEO’s based on how well their company performs.

This method of capitalism has created many profitable businesses. So why can’t we apply this same capitalistic metric to paying our politicians? Would this solve the gridlock and incessant finger pointing that is now popular?

In Asia, this is not a new idea—it is exactly the way Singapore works. Prime Minister Lee Hsien Loong is paid $2.4 million to run his country with a GDP of less than $500 billion. Interestingly enough, there are few public gripes about his performance among the population. In 2011, Transparency International rated Singapore as one of top five least corrupt governments in the world. (The U.S. ranked #24 on the list.) According to Worldwide Governance Indicators, Singapore also ranks as one of the best governed countries.

There is a very different financial scenario in the U.S. As President, Barack Obama is paid a paltry $400,000 a year. This salary barely puts him in the top 1 percent of all Americans. In fact, his cabinet members only earn $193,000. (Attention Occupy Wall Street: They are part of the 99 percent of Americans.) If our country paid top business level compensation, we would get more qualified people to work in government, and therefore get better results. This is exactly what Mitt Romney is discussing as he emphasizes his CEO experience during the 2012 Presidential campaign.

There is no debate about wanting the highest skilled people at all levels of government, and better pay especially during tough economic times will attract a higher performing individual. In addition, being paid well when a person has that government position will put a lot less pressure on them to cut corners. They can act with integrity and honesty in their jobs and not be pressured by outside financial interests. Today, many politicians only “cash in” on their experience when their official political career is over. Many go to work for an organization that lobbies the exact part of government they formerly worked.

So should taxpayers give Barack Obama a huge raise? Based on the Singapore model, we would pay him $120 million to be President of our $15 trillion corporation known as the United States of America. (Our GDP is 50 times bigger than Singapore). As a “shareholder”, $120 million is small compared to the size of the “company” President Obama runs. For example, Tim Cook, CEO of Apple, made $60M to operate his $108 billion company.

Every small business owner knows that the key to their success is the people in their organization. If we are able to pay the best and the brightest for jobs in our government right now, they are bound to do a better job running this country.

What do you think? How would you measure success?

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Getting Small Businesses Unstuck, Shafran Moltz Group