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How could compensation be unreasonable?

 

How could compensation be unreasonable?

It is also worth asking: How could compensation be “unreasonable” and therefore subject someone to prosecution? What conditions occur that we can clearly identify as “unreasonable”?

Compensation is measured in dollars, so there are only two possibilities:

The first is that the compensation is unreasonably low from the point of view of the provider. It does not give the provider the necessary funds to continue the operation. If this is the case then the provider will stop providing the service. Presumably, law enforcement would have no argument with someone who wanted to stop growing and selling marijuana – even if they violated SB 420 by losing money in the process. Therefore, that part of the “reasonable compensation” problem solves itself – for law enforcement, at least.

The second is that the compensation to the provider is too high. Because there are only two parties to the transaction that naturally means that the compensation is too high from the point of the view of the person paying the compensation – the buyer. In any market transaction, it can be safely assumed that, regardless of the current compensation, the seller will always think more compensation is “reasonable”, while the buyer will always think that less compensation is “reasonable”. The transaction happens when they both reach the conclusion that the compensation is “reasonable enough”. In all likelihood, there would be a range of values over which the same two parties might conclude that it was reasonable for them to complete the transaction.

This is the same interplay found in all transactions where something of value changes hands but our hearts tend to sympathize with the perspective of the patient. After all, this was all about protecting the patients. There are no limits in the law to give guidance as to what might be considered too much compensation. Should it be ten cents a bag profit, fifty dollars an hour for their labor, or a set amount per year?

There would be no point in any state or legislative official attempting to answer that question. Even if they had the wisdom of Solomon, whatever answer they chose would be wrong next year, anyway – and they don’t have the wisdom of Solomon.

The only sensible method of determining when compensation is “reasonable” is the same rule used everywhere else with every other product and service – free market economics. Reasonable compensation is the compensation at which the provider will agree to provide the product, and the consumer will agree to buy it.

If the local pharmacy tries to sell aspirin at one hundred dollars per bottle, market forces will guarantee that they fail. People simply won’t buy their product. Consumers won’t buy their product until the consumers themselves determine that the price is reasonable, given the market situation. If the consumers bought the product then the compensation is – by definition – reasonable to the people involved in the transaction. The consumers said it was reasonable when they gave their money. If the consumers did not feel the price was reasonable then they wouldn’t buy it. If the consumers don’t buy it, there is no issue with unreasonable compensation because there is no compensation – no transaction took place.

But what about the suitcase full of cash found in one dispensary? Somehow – aside from our own personal envy -- that just seems wrong. It just seems like “too much”. Surely, that much money has breached our basic moral principle that the system should operate for the benefit of the patients. It seems that the system has been distorted to operate for the benefit of people who are primarily interested in making money and have little, if any, compassionate interest in the needs of the patients.

Let’s compare this any other area of commerce to see what is “reasonable”. But – before we do, let’s re-emphasize the point that Proposition 215 was passed for the benefit of the patients. The goal should be to provide a system that best provides for the needs of the patients. If our system does not meet that goal then we have failed.

In any other area of commerce the person who earns the most money is the person who has made the most sales. The winning salesperson gets those sales by providing the greatest perceived value to the consumer. Consumers vote with their wallets. In doing so, they define “reasonable compensation”.

The most “reasonable” choice to the consumer is the provider who managed to provide the best combination of value and cost. As in every other line of business, the dispensaries that provide the most value to the most people will have the most sales and, therefore, the most profits.

Sam Walton has earned tens of billions selling medicines and other products. Is his compensation “unreasonable”? Certainly there is nothing legally “unreasonable” about it. No law prohibits a corporation from paying its executives huge sums if they think that person is worth the money.

Is it “unreasonable” to the consumer? Apparently not, because the true test of “unreasonable compensation” from the consumers’ perspective is whether the consumers bought his products -- and his sales are huge.

Is Sam Walton even to be criticized for making tens of billions? No. On the contrary, he is a role model for other people who provide products and services. He succeeded because he found a way to provide better value to the consumers. He is to be emulated, not scorned.

 

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