Compensation and Blame: Two Sides of the Same Coin

Last week, Green Bay Packers quarterback Aaron Rodgers signed the largest contract in NFL history, worth up to $180 million over the next six years, with about $70 million being paid out by March 2019. As a Packers fan, it’s a relief to know that Rodgers is signed until he’s 40. At the same time, reading the specifics and comments about the contract got me thinking about what it means to be the “highest paid” person on a team, in a league, or even within a company.

Being the highest paid is, in large part, not a function of your financial needs but instead a recognition that you are the “most valuable” player on the team or in your industry. It’s also a function of what the competition is paying for similar players – it is no accident that Rodgers’ contract came mere months after Kirk Cousins’ record-setting $84 million, three year contract.

compensation and blame

But there is a flip side to being paid the most. The highest paid person on the team – whether the quarterback, the star basketball player, or the CEO – will also be the first one blamed if things take a turn for the worse. Compensation and blame are two sides of the same coin. You can bet that if the Packers have a bad season, commentators and fans will be blaming Aaron Rodgers’ contract for the team’s lack of talent.

Everything else being equal, we’re all trying to make as much money as we can. But it’s important to recognize that the more you get paid, the more you’ll be blamed if things go badly. And this is a fair, reasonable, and ethical reaction – and an essential point of Nassim Taleb’s Skin in the Game.

Anger over executive compensation happens most often when there is a separation between compensation and an executive’s skin in the game. This anger is most obvious when the CEO of a badly performing company makes millions of dollars, despite their lackluster results. Most of us don’t have much issue with Jeff Bezos or Elon Musk being billionaires – they took enormous personal risks to build their respective companies. On the other hand, most people would have problems with a Congressperson becoming a billionaire while in office.

Of course, this rule doesn’t just apply to CEOs and quarterbacks. It’s true at all levels, whether you’re a team lead at a software company or a store manager at McDonald’s. Being compensated better automatically means you will have a greater share of the blame if your team performs badly. And that’s how it should be.

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