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Pay-For-Performance Hypocrisy

The end of the year is a propitious time to take a closer look at the proposal that teachers should be paid like workers in business because it's when bonuses are handed out. In this regard, no group is more fitting to examine than executives, whose pay is ostensibly based on company performance.

But the truth is that far from being deserved, those at or near the top in corporate America receive pay packages largely disconnected from individual performance. Wall Street is the most blatant example, although it is hardly alone.

In an op-ed published in the Washington Post on Dec. 16, four professors at the prestigious Wharton School at the University of Pennsylvania explained their surprise when roughly 800 of their students wrote essays describing how much they distrusted the entire bonus system ("Why tomorrow's Wall Street leaders don't like bonuses"). Many of these students had worked for Wall Street firms and had received hefty bonuses. They felt that bonuses often served as "a substitute for thoughtful supervision or meaningful reviews."

To be more specific, "Wall Street's pay packages, including bonuses, are set to total 4% more in 2010 than in the already record year of 2009" ("Wall Street Bonuses Will Cost Us All in the Long Run"). Yet these unprecedented payoffs were given even though earnings were not necessarily record breaking.

This point was picked up by Eduardo Porter in his new book The Price of Everything: Solving the Mystery of Why We Pay What We Do (Portfolio, 2011). He writes that in 2007, as the financial bubble reached its height, Wall Street bonuses hit a record $32.9 billion, or $177,000 per worker.

Yet when teachers maintain that they shouldn't be rated on standardized test scores (which serve as a rough proxy for earnings and stock prices in corporations), they are accused of hiding from accountability. Teachers also argue that judging their effectiveness on such scores would undermine the quality of education their students receive by forcing them to focus on short-term results. But their claims are routinely met with disdain. Even more ridiculed is their argument that pay for performance won't motivate them. Yet Porter agrees. He says that if only a lucky few receive big rewards, most employees will likely figure that it is not even worth the effort to try.

Confronting business executives with these double standards and contrary evidence invariably leads to their last defense. They point out that when they fail to deliver, at least they can be fired. In contrast, they say, public school teachers are protected by their unions. What they don't mention, however, is that an executive who is dismissed walks away with more money in one year through a golden parachute than a teacher makes in an entire career.

The Securities and Exchange Commission is trying to correct matters. But it is unlikely to change anything substantially because those in power like the way things are. On the other hand, the U.S. Department of Education is far more likely to be able to convince states to eliminate tenure, weaken seniority rules, and emasculate unions. If so, the hypocrisy will become even more obvious.

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The opinions expressed in Walt Gardner's Reality Check are strictly those of the author(s) and do not reflect the opinions or endorsement of Editorial Projects in Education, or any of its publications.

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