Outsource Executives

Over the next few months, I'll be returning often to the topic of outsourcing, specifically what it means for the economy, what it means for working people in America, and most importantly what it means for workers in the developing world who have every bit as much a right to a good job as those lucky enough to be born within our country's borders. Needless to say, I'm disturbed by the xenophobic, America First! tone of the Kerry/Edwards campaign when it comes to outsourcing. When Kerry said during his acceptance speech that his administration, "will reward companies that create and keep good paying jobs where they belong - in the good old U.S.A." I almost gagged. Good paying jobs don't just "belong" in the "good old U.S.A.," they "belong" in Chad and Mongolia and Haiti, and every single country on the globe. That said, I understand the anger, resentment and fear that outsourcing inspires in people. There's a certain sense of powerlessness you must feel when you realize that your expensive training and education doesn't protect your livelihood anymore than an assembly line worker in a shoe factory. One of the biggest problems with outsourcing as I see it is that it always something done by the bosses to the workers. As far as I can tell, executives are never outsourced. David Cay Johnston, the New York Times tax reporter who is easily one of the five greatest journalists working in America makes this point beautifully in a letter to the journalism site Romenesko. In response to a report that Reuters would cut 20 members of its editorial staff in the US and move the jobs to India, Johnston writes: But is firing 20 journalists and support staff is the only way, or even the best and most efficient way, to cut personnel costs? Could there be a better way to do this, one that would do a smoother job of improving efficiency and maximizing shareholder value? Hmmm….are there any other options? What about outsourcing the top executives at Reuters? The top four Reuters executives had combined compensation of almost $3.6 million last year, the Wall Street Journal reported earlier. Add on fringe benefits and their real cost is likely to be at least $4.4 million. If Indian executives can be hired at the same wage discount ratio as Indian journalists then Reuters could expand its top level executive suite from four to 12 and still save $968,000. That's more than four times what could be saved by outsourcing journalists. Of course one wonders why Reuters would need more executives. India has plenty of competent executives, especially in IT and in news. Maybe one can higher even better executive talent for lower costs by going to India. So if Reuters only needs to replace the four outsourced executives with the same number of Indian executives it could save $3.3 million annually, based on the conservative assumptions above. That's 15 times as much as can be saved by outsourcing the jobs of 20 journalists and support staff in the U.S. and Europe. If looking out for shareholders is the reason for outsourcing then why just nibble at costs when you can slash them? Why save a dollar when you could save 15? Why not squeeze every possible dollar out of personnel costs for the benefit of shareholders? If outsourcing is sound then why not apply it across the board? Did top management at Reuters even considered this? Did it conduct a single study or make an analysis of savings from outsourcing the executive function? It seems reasonable for shareholders to ask. After all, what's fair on the top floor should be fair on the shop floor, right? This is a great point. Over the last several decades, executive pay has risen at an astronomical rate, while real wages have essentially reminded stagnant or declined. If companies are looking to cut the fat, why not go after the fat cats?