Lessons on Finding Fair Pay For Feds

Toward the end of his richly anecdotal book, Who Gets What, compensation expert Kenneth R. Feinberg observes that when considering the fairness of pay, “everybody counts other people’s money.” Money, of course, is a key signal of success in our market economy. And federal workers today are increasingly subjected to pay and job security comparisons by private sector workers who are worried about their own pay—or lack thereof.

Feinberg has been the mediator and paymaster in high-profile cases where demand has arisen for “fair compensation after tragedy and financial upheaval,” as his book’s subtitle notes. Who Gets What (PublicAffairs, 2012) recounts the author’s experiences stretching from the post-Vietnam Agent Orange case in the 1970s to the ongoing case of the Gulf of Mexico oil spill. His experience bears testimony to people’s sensitivity about parity in compensation, and, perhaps, offers lessons for resolving the debate about appropriate pay for federal employees. 

Public compensation programs are very much in the news. In California, voters in two large cities recently approved cuts in public pensions. Republicans in Congress have made many attempts to enact extended pay freezes or reductions for federal workers. In a document released in September 2011, GOP presidential candidate Mitt Romney implied that he might seek a pay reduction to “align federal employee compensation with the private sector.” 

Obama has made “fairness” a watchword of his campaign—but so far it’s little more than a slogan justifying higher taxes on high earners. In contrast, Feinberg’s real-life experience shows what’s needed to find consensus about the fairness of other people’s pay.

He was drawn into the fairness game in 1984, when federal Judge Jack B. Weinstein recruited Feinberg, a former clerk, to work with the chemical industry and veterans groups to settle the nine-year class-action suit brought by victims of exposure to the chemical defoliant Agent Orange. Eight chemical companies settled for $80 million, an impressive sum at the time, but still not large enough to provide much money to those who could prove to Feinberg that they’d suffered adverse health effects.

Weinstein held hearings across the nation to seek veterans’ views on how to fairly distribute the money. Feinberg listened “in amazement as leaders of the Vietnam veterans community pleaded for money—not for themselves but for their brothers in arms who needed it more than they did.” Over 10 years, payments went to 52,000 individual veterans, but $42 million was used to fund legal, social and medical programs to assist families of the vets and other programs to inform the community about available government benefits.

In the end, he writes, the money was not as important as the facts of the settlement, viewed by vets as a “vindication of their suffering” and “an important step on their road to recovery.” More broadly, he adds, the program was “an important concluding chapter in America’s sad Vietnam experience.”

In 2001, Feinberg was chosen as administrator of the Sept. 11 Victim Compensation Fund. With few guidelines from Congress, and no limit on disbursements, he had to devise a matrix that people would view as fair. Were the lives of a waiter and an investment manager at the World Trade Center worth the same or not? Should people be compensated for pain and suffering? Would it be fair to give those without life insurance policies more than those who did buy such insurance? In the end, a system was devised to answer these and other questions, and the fund awarded $7 billion to the survivors of those killed and the injured victims. 

Feinberg was called on to administer a privately raised, $8 million fund to compensate victims of the 2007 Virginia Tech massacre, which cost the lives of 32 people. Most recently, he was tapped to run the $20 billion fund pledged by BP, whose deep-drilling rig’s failure in 2010 caused an oil spill that despoiled coastlines and cost business owners billions of dollars in income. In between, Feinberg was recruited by the Treasury Department to establish fair and publicly acceptable standards for paying 175 top executives and earners at seven financial institutions that received the most assistance from the 2008 Troubled Asset Relief Program. 

In meetings with the financial executives, he was told emphatically that compensation “was a symbol of self-worth. Compensation mirrored individual fulfillment [and] without generous pay, company officials would view themselves as failures.” 

Subsequently, personal meetings, or public forums in the BP case, were essential to achieving acceptance of tough decisions, Feinberg concludes. 

His experience may offer lessons to help in the polarized debate about federal pay. Today, there are too many competing sets of “facts”—from the Government Accountability Office, the Congressional Budget Office, conservative think tanks, not to mention the President’s Pay Agent. And those who believe feds are overpaid seem to be gaining the upper hand. Without a doubt, many with uncertain economic futures must envy the relatively good and certainly more stable paychecks and benefit packages that feds enjoy—including pension programs rarely matched in the private sector. They surely are counting other people’s money.

To borrow from the Feinberg model, one could appoint a neutral party, as Feinberg has been, to hold public forums nationwide that would air the issues, educate the public, generate consensus about what’s fair and, incidentally, attract more people to federal service. 

My candidate for the position: Paul A. Volcker, who has sponsored two commissions on public service reform and has not shied from various other high-profile public-interest tasks. The former Federal Reserve chairman has the credibility to get the job done. 

(Image via venimo/Shutterstock.com)