Spare Some Disgust For Silicon Valley, Too?

Poor Jamie Dimon and Lloyd Blankfein.

They get criticized for huge compensation packages—from JPMorgan Chase and Goldman Sachs, respectively—while Silicon Valley executives like Eric Schmidt of Google get a pass for packages worth many times more.

Steven M. Davidoff, a professor of law at Ohio State University, sees a double standard at work. “By every measure, JPMorgan is bigger, with more profits,” Davidoff wrote this week in the New York Times. “And yet Google awards $100 million to its chairman and there is nary a peep.”

In Davidoff’s view, much of the blame lies with excessive glamorization of Silicon Valley and excessive vilification of bankers. “The leaders of Silicon Valley are seen as makers and the leaders of Wall Street are viewed as takers,” he maintained, concluding that “perhaps it is time to call a truce on the Wall Street bias in looking at executive compensation” and instead look at the issue more broadly.

Now, while it might be noted that Wall Street, unlike Silicon Valley, required government bailouts in order to maintain its lifestyle, Davidoff has a point.

As we noted as recently as this past Friday and have discussed before, Peter Drucker didn’t like bloated pay packages for anyone, seeing little correlation between high executive compensation and good company performance. Surely, he would not have minded Davidoff’s barbs directed at Silicon Valley.

In fact, if there were two clusters of business that caused Drucker to take out the brickbats, they were precisely the tech industry of Silicon Valley and the financial industry of Wall Street.

Most business leaders of Silicon Valley were “still inventors rather than innovators, still speculators rather than entrepreneurs,” Drucker contended in Innovation and Entrepreneurship. If pay was excessive, it was characteristic of an industry notorious for patting itself on the back. “High tech, precisely because it has all the glamour, is prone to arrogance far more than any other,” Drucker told Inc. magazine in a 1985 interview.

Not that Wall Street had anything to be complacent about. “There’s a different kind of egomaniac there, but still an egomaniac,” Drucker added. “Partly for the same reason. They make too much money too soon.”

In short, if it came to wishing a pox of reduced pay and glamour upon the houses of both Silicon Valley and Wall Street, we suspect Peter Drucker would have been happy to oblige.

What do you think: Does Silicon Valley benefit from a double standard when it comes to scrutiny of executive pay?