The International Association of Machinists and Aerospace Workers, which represent 27,000 Boeing machinists in Washington State, Oregon and Kansas, has gone on strike at a time when Boeing has a bulging backlog of 3,600 orders for planes valued at $263 billion.  Machinists at Boeing make pretty good money:  $27 an hour (about $56,000 a year) not counting overtime and bonuses.  Moreover, Boeing offered the machinists an 11% raise over the three-year period of the new contract, a significant increase this day and time.  So, what’s the problem?

In 2007, Boeing earned a record $4.1 billion.  Boeing’s CEO earned $14.7 million in 2007.  The employees feel a bit left out.  The union wants a 13% raise for its members, greater pension benefits, stronger contract language about job security, and no increase in what employees have to pay for health insurance.

These sticking points are common ones in collective bargaining negotiations.  Pay is always hard-fought.  But when an 11% increase is turned down, that’s a head-turner.  It’s not uncommon to fight about pension benefits, but the fights will intensify as employees see their counterparts at other companies losing their pensions or having them reduced.  Job security is more important than ever, since a company’s first reaction to tough economic times these days is a layoff or two.  It’s common for employers to insist that employees share a greater percentage of healthcare costs these days, but until the healthcare problem is fixed, employees will fight back more than they have in the past.

Executive compensation is a growing sticking point for negotiating a collective bargaining agreement.  If a CEO makes $14.7 million in one year, employees resent being nickeled and dimed over their own hourly increase. 

When I think about executive comp, I break it out into two different categories.  One is what I call the Bill Gates category.  Bill Gates started Microsoft in a garage.  It’s one of the most successful companies in history.  Because Gates founded the company and turned it into what it is, you can pay him a gazillion dollars.  Same with Steve Jobs at Apple.  Same with Larry Page and Sergey Brin at Google.  Same with any executive who invented something so wildly successful.

The other category is everything else.  I don’t care how big a company is or how old it is or what it manufactures.  The CEO who happens to run that company–like the CEO at Boeing–is in a completely different league.  He was at the right place at the right time.  He had nothing to do with making Boeing what it is.  His role is, in the whole scheme of things, inconsequential.  Boeing would do just fine if Howdy Doody were the CEO.  No CEO in this second category is worth $14.7 million a year.  Until corporate boards inject reasonableness into how executives are compensated, they should expect increasing union problems. 

Wait a minute.  That’s great for labor and employment lawyers.  Never mind.