Jim Stillman
NevarThe gap between the extremely rich and the rest of us expands.
September 20th 2008 18:07
Over the past 25 years or so, the gap between corporate executive and regular worker-employee has widened to an obscene degree. One of the results of this separation has been crisis after crisis in the financial markets and the United States economy. Senator John McCain, certainly no advocate of government intervention or regulation, acknowledged this, noting that the economy was being threatened "because of the greed by some based in Wall Street and we have got to fix it."
The magnitude of the manifest unfairness is reflected in the numbers. In 1980, the average income of the chief operating officers of the largest American corporations was 42 times that of the average worker in the company; ten years later, in 1990, the ratio had increased to 107 to one; the latest figures reported in the Wall Street Journal reelected a ratio of 364 to one!
Excessive income is, of course, reflected in entertainment personalities, sports figures and others, but in those cases, the incomes are the result of negotiation between employer and employee. While I wonder at paying a motion picture actor umpteen millions to appear in a movie or paying a current-day singer, who couldn’t carry a tune in a suitcase, or a song writer who offers up a song where the entire lyric is, “Baby, baby, oh…” millions, at least those excesses are not at my expense and have no effect on anyone other than entertainer and promoter.
Corporate income for the upper levels are dictated by Boards of Directors who are, often, made up of top corporate officers, rarely really independent and excessive salaries do affect others. Most pension plans relied upon by the average worker are funded by corporate stock. Excessive executive salaries diminish that stock and pensions are placed in jeopardy.
Moreover, there appears to be little or no relation between performance and income for the highest echelon of executives. Take a look and recall the most publicized corporate failures over the past several years, from Enron to Lehman Brothers to Merrill Lynch and others. Bill Moyers wrote a useful summary and reminder for us all:
The results of all of these excesses, ignored and thereby ratified by the Republican administration as acceptable business practice, has been the widening gap between the ultra-rich and the middle class, the peddling of high-risk mortgage loans and the resultant collapse of the related market, the weakening of and outright plundering of corporate pension plans upon which millions depend, corporate lack of loyalty and concern towards its own employees and, now, the guarantees by the taxpayer of debts and losses incurred by those business people who reject government oversight.
We are now told that the: bail out” of the investment houses, mortgage producers and other financial institutions will cost you and me, and our children and their children and their children between $500 Billion and a Trillion Dollars.
As long as our spending obligations include mandatory interest payments on that debt, basic expenditures for national security and even reduced necessary programs such as Social Security, we will never get out of the red.
Both parties claim they will reduce taxes, although to his credit, Senator Obama speaks mostly of shifting the tax burden from the middle-class to the top 1 or 2% of income earners.
At the very least, laws restricting obscene salaries and golden parachutes need to be written and enforced, transparency mandated. One possible approach would be the elimination of the income tax deductibility of executive salaries and bonuses that exceed average wages in the company by a certain amount. There are other possibilities – the important thing is that something be done and done quickly.
The magnitude of the manifest unfairness is reflected in the numbers. In 1980, the average income of the chief operating officers of the largest American corporations was 42 times that of the average worker in the company; ten years later, in 1990, the ratio had increased to 107 to one; the latest figures reported in the Wall Street Journal reelected a ratio of 364 to one!
Excessive income is, of course, reflected in entertainment personalities, sports figures and others, but in those cases, the incomes are the result of negotiation between employer and employee. While I wonder at paying a motion picture actor umpteen millions to appear in a movie or paying a current-day singer, who couldn’t carry a tune in a suitcase, or a song writer who offers up a song where the entire lyric is, “Baby, baby, oh…” millions, at least those excesses are not at my expense and have no effect on anyone other than entertainer and promoter.
Corporate income for the upper levels are dictated by Boards of Directors who are, often, made up of top corporate officers, rarely really independent and excessive salaries do affect others. Most pension plans relied upon by the average worker are funded by corporate stock. Excessive executive salaries diminish that stock and pensions are placed in jeopardy.
Moreover, there appears to be little or no relation between performance and income for the highest echelon of executives. Take a look and recall the most publicized corporate failures over the past several years, from Enron to Lehman Brothers to Merrill Lynch and others. Bill Moyers wrote a useful summary and reminder for us all:
This last couple of weeks, ordinary mortals below could almost hear the ripcords of golden parachutes being pulled as the divinities on high prepared for soft, safe landings - all this while tossing their workers like sacrificial lambs into the purgatory of unemployment.
During the last five years of his tenure as CEO of now-bankrupt Lehman Brothers, Richard Fuld's total take was $354 million. John Thain, the current chairman of Merrill Lynch, taken over this week by Bank of America, has been on the job for just nine months. He pocketed a $15 million signing bonus. His predecessor, Stan O'Neal, retired with a package valued at $161 million, after the company reported an $8 billion loss in a single quarter. And remember Bear Stearns's Chairman James Cayne? After the company collapsed earlier this year and was up for sale at bargain basement prices, he sold his stake for more than $60 million.
Daniel Mudd and Richard Syron, the former heads of Fannie Mae and Freddie Mac - aka the gods who failed - are fighting to keep severance packages of close to $24 million combined - on top of the millions in salary each earned last year while slaughtering the golden calf. As it is written in the Gospel According to Me, when the going gets tough, the tough get going.
During the last five years of his tenure as CEO of now-bankrupt Lehman Brothers, Richard Fuld's total take was $354 million. John Thain, the current chairman of Merrill Lynch, taken over this week by Bank of America, has been on the job for just nine months. He pocketed a $15 million signing bonus. His predecessor, Stan O'Neal, retired with a package valued at $161 million, after the company reported an $8 billion loss in a single quarter. And remember Bear Stearns's Chairman James Cayne? After the company collapsed earlier this year and was up for sale at bargain basement prices, he sold his stake for more than $60 million.
Daniel Mudd and Richard Syron, the former heads of Fannie Mae and Freddie Mac - aka the gods who failed - are fighting to keep severance packages of close to $24 million combined - on top of the millions in salary each earned last year while slaughtering the golden calf. As it is written in the Gospel According to Me, when the going gets tough, the tough get going.
The results of all of these excesses, ignored and thereby ratified by the Republican administration as acceptable business practice, has been the widening gap between the ultra-rich and the middle class, the peddling of high-risk mortgage loans and the resultant collapse of the related market, the weakening of and outright plundering of corporate pension plans upon which millions depend, corporate lack of loyalty and concern towards its own employees and, now, the guarantees by the taxpayer of debts and losses incurred by those business people who reject government oversight.
We are now told that the: bail out” of the investment houses, mortgage producers and other financial institutions will cost you and me, and our children and their children and their children between $500 Billion and a Trillion Dollars.
As long as our spending obligations include mandatory interest payments on that debt, basic expenditures for national security and even reduced necessary programs such as Social Security, we will never get out of the red.
Both parties claim they will reduce taxes, although to his credit, Senator Obama speaks mostly of shifting the tax burden from the middle-class to the top 1 or 2% of income earners.
At the very least, laws restricting obscene salaries and golden parachutes need to be written and enforced, transparency mandated. One possible approach would be the elimination of the income tax deductibility of executive salaries and bonuses that exceed average wages in the company by a certain amount. There are other possibilities – the important thing is that something be done and done quickly.
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