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Source:  http://www.pe.com/opinion/editorials-headlines/20120402-nation-skimp-on-ceo.ece

NATION: Skimp on CEO?

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The United States Postal Service faces many daunting challenges, the salary of the postmaster general not being one of them. Still, Congress may soon consider legislation to drastically cut USPS executive salaries. The service needs a business visionary to return it to both profitability and relevance and should pay what is required to attract top executive talent. Congress should therefore defeat this short-sighted measure.

Rep. Kathy Hochul, D-N.Y., has proposed legislation to require that USPS executives be paid no more than Cabinet secretaries, now $199,700 a year. This would reflect a substantial cut to postal executives, whose salaries Congress capped in 2006 at 120 percent of Cabinet salaries.

The proposal comes at an odd juncture. The postal service by law must cover operating expenses with revenue generated from the sale of postage and other services. Yet the service has run operating deficits of $3 billion to $5 billion for the past five years. Trimming the executive payroll would barely make a dent in these deficits.

But then, the legislation really isn’t about the deficits. It is all about purported fairness: “The Postal Service cannot make the argument that they need to cut costs and let go hard-working postal workers when their own management team continues to rake in bonuses and make more than the president’s Cabinet,” Hochul said in a press release this month.

Add two pieces of bread, and that statement yields a baloney sandwich.

The postal service is a $65 billion a year business. It competes, most prominently, with Federal Express and UPS. It also competes with electronic mail and online bill pay services, which have devastated the USPS first-class mail monopoly. The service has massive pension obligations, 32,000 retail outlets, home delivery six days a week, and roughly 600,000 employees. In terms of sheer size, it falls between the biggest U.S. company, Wal-Mart, and No. 2 McDonald’s.

But unlike these other enormous corporations, the postal service cannot be profitable without congressional cooperation. Postmasters general have asked Congress repeatedly for permission to close unprofitable locations and to reduce service to five days a week. Congress refuses to comply. Elected officials would prefer that the USPS lose money if it means keeping a rural post office open and a few votes in their pockets for re-election.

Hochul’s proposal, in fact, would deny USPS executives a bonus if they succeed in closing unprofitable locations. Is there a more crystalline example of inverted congressional logic?

And despite having to compete with highly efficient operations and alternative technology, to say nothing of the complications of congressional interference, the government permits the USPS to pay its CEO just a fraction of what similar-sized companies pay their executives. In fiscal year 2010, Postmaster General John Potter received about $275,000. Wal-Mart paid its top executive $20 million. CEOs at McDonald’s and FedEx earned about $8 million each.

Congress should want an executive who can reinvent the postal service as a going concern. Maybe Potter can do the job. Maybe one of America’s super CEOs would take the job for $1 a year. But those numbers shouldn’t matter to legislators. They should be focused on results, and doubling down on a failing approach is an unlikely path to profits.


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