Corporate managers earn a very large wage. Thus, it would be inappropriate for them to do tasks that cheaper labor could do. This is because each amount of time they spend can be valued as their pro-rated salary for that period of time.
Thus for instance, if a CEO making 100 million dollars a year were to get coffee for everyone in the office every morning, consuming half an hour of his 10 hour day, this would amount to 1/20 of his salary in costs to the company. That is, it would cost the company 5 million dollars a year to get the coffee for the whole team at headquarters.
Seeing as the other executives working with the CEO are also paid large salaries, it would be most cost effective to have a secretary or other low level employee stationed at the headquarters to acquire coffee.
As you can see, the time value of money is a way of preventing companies from being "penny safe and pound foolish". If someone is worth lots of money to perform a role in a company, it would be injurious to the company to have them perform menial duties.
Apr 25th, 2015
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