June 30 Too Much: CEOs in a Class All Their Own
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|June 30, 2014|
|A new poll out from the respected Pew Research Center has some rather unsettling statistics to share. Over three-quarters of conservative Americans, Pew reported last week, apparently believe that “poor people have it easy.”
The latest example of how “easy” life for poor people has become? In Detroit, a city with monthly water bills now running 50 percent over the national average, officials have begun shutting off the water to 150,000 households behind on their bills. No running water for cooking or washing or drinking. Yes, sir, the easy life.
But we do have a question for those who think the poor have it easy: Do they also feel that the rich have it hard? Actually, that rates as a trick question. Wealth, the research shows, does place real burdens on affluent psyches. We would all, rich and poor alike, be better off in a more equal world.
We have more on the burdens of affluence in this week’s Too Much, plus some comparative historical trend lines, courtesy of economist Thomas Piketty, for 4th of July reflection. We end with an anniversary — of a prescient and still useful resource for “understanding and overcoming the inequality that limits our lives.”
|About Too Much, a project of the Institute for Policy Studies Program on Inequality and the Common Good
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|GREED AT A GLANCE|
|Woe would be you, two new commentaries posit, if you ever gain the misfortune of becoming fabulously wealthy. CNN Money last week listed, with tongue only partly in cheek, the five top “stresses of the super rich.” High on the list: finding a parking spot — for your yacht. Meanwhile, on a more sober note, the popular Quora question-and-answer social media site found itself with a host of moving responses to the query, “Is getting rich worth it?” With wealth, one respondent lamented, “it can be harder to figure out whether someone is being nice to you because they like you or your money.” And if you make gaining a grand fortune your all-consuming motivation in life, another contributor related, you may find yourself “at a loss for what else to do” once that fortune arrives . . .
What do the super rich fear the most about their fortunes? A new survey of affluents worth over $10 million, conducted for the law firm Withersworldwide, has found that the seriously wealthy worry more about their children lacking “drive and ambition” than their investments failing. To ease that worry, the rock star Sting — net worth, $327 million — has let slip that he won’t be passing on his fortune to his children. Neither will British retail CEO John Roberts, who hopes that denying his kids his $625 million will help them lead “normal lives.” The ultimate wisdom on wealth and well-being? That may have come back in the 1920s from the great playwright George Bernard Shaw. The truly happy rich, Shaw noted, “do not live like rich people at all.” They “might therefore,” he concluded, “just as well have ordinary incomes.”
Four decades ago, the war-ravaged nation of Cambodia made front pages the world over on a regular basis. This desperately poor nation seldom makes headlines any more. But odd pieces of news sometimes do filter out. This one came earlier this month: Rolls-Royce will open this July its first-ever Cambodian showroom, in Phnom Penh. Cambodia’s annual per capita income averages out at just over $1,000, less than one half of 1 percent of the sticker price for the cheapest Rolls available. But Cambodia’s richest can now afford not just the sticker price, but the 45 percent excise tax, 35 percent import duty, and 10 percent added value tax that applies to “any vehicle brought into the country.”
|Quote of the Week
“I have a message for my fellow filthy rich, for all of us who live in our gated bubble worlds: Wake up, people. It won’t last. If we don’t do something to fix the glaring inequities in this economy, the pitchforks are going to come for us.”
|PETULANT PLUTOCRAT OF THE WEEK|
|Hedge fund billionaire Paul Singer has a standard “vulture investing” M.O. He snaps up the bonds of distressed nations at “next to nothing,” then flexes his fortune to force those nations to pay him far more than he paid. One result: Instead of building schools, the Congo ended up paying Singer $127 million for debt he acquired for $10 million. In Argentina, a government elected in 2003 convinced over 92 percent of the investors holding the old government’s defaulted bonds to accept partial payment. But Singer refused to go along. He set up a front group to lobby in Washington and found a federal court in New York that eventually ruled in his favor. Earlier this month, the U.S. Supreme Court refused to hear Argentina’s appeal. Singer originally paid $49 million for Argentinian debt. He now stands to collect $832 million.||Like Too Much?
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|IMAGES OF INEQUALITY|
Massachusetts state lawmakers think they can ignore the state’s nurses. Better think again. This past December, nurses filed over 100,000 signatures backing legislation that would, among other provisions, penalize hospitals that pay their CEOs over 100 times their lowest-paid workers. Lawmakers have so far not acted on the legislation. Last week the nurses took to the airwaves with a TV ad campaign urging an end to the dawdling. If lawmakers don’t take the hint, the nurses will move to put their pay cap bill on this November’s election ballot.
MIT Living Wage Calculator/ This interactive site last week gained new prominence when the Ikea retail chain announced plans to base the lowest wages at its U.S. stores on the local living wage as calculated by MIT. But Ikea will only be using the MIT “living wage” calculation for a single individual. The MIT site also includes living wages for supporting families, as many low-wage workers do. Bloomberg currently puts the net worth of Ikea founder Ingvar Kamprad at $42.7 billion.
|PROGRESS AND PROMISE|
|Can one skilled person do more and better work than four? Kathleen Causey, a Canadian professor, doesn’t think so. Causey and three colleagues have applied — as a job-sharing quartet — for the $400,000-to-start University of Alberta’s president’s slot. This imaginative protest against excessive executive pay began as a Causey quip to a colleague: “I joked that we could split the job four ways and she’d still triple her salary.” But then Causey and her colleagues realized that no single person could possibly fill a president’s slot as well as four of them. That realization spread. In a powerful gesture against “the growing disconnect between those at the top of the ivory tower and those that keep it standing,” 56 North American academics have now applied for Alberta’s opening, all in groups of four.||Take Action
Think globally, act locally. Learn how to start a “resiliency circle,” a small group where people come together to increase their personal economic security through learning, mutual aid, and social action.
|inequality by the numbers|
|Stat of the Week
In the years since 2008, world economic output has increased just 16 percent. But the combined wealth of households with more than $1 million in “investable wealth” — a measure that doesn’t count primary residences or jewelry and other collectibles — has jumped 60 percent, nearly four times as fast, notes the latest annual World Wealth Report from Capgemini and banking power RBC.
|America’s CEOs: In a Class All by Themselves
Workers in the United States don’t make double what workers make in Japan or Switzerland. Why should U.S. CEOs routinely make double — and often much more — than Japanese and Swiss top execs?
The free market made us do it.
Ask members of any American corporate board of directors why they pay their CEO so much and you’ll get some variation on this market-inevitability theme.
To compete effectively in the world economy, Corporate America’s argument goes, we need world-class executive talent. And that top-notch talent costs. We’re just paying the going market rate.
That argument, on its face, certainly seems credible enough, except for one inconvenient fact: Corporations elsewhere in the developed world pay their top execs far less than what U.S. corporations pay, and these corporations seem to be competing — and thriving — quite nicely in the global marketplace.
The gap in corporate executive pay between U.S. firms and their foreign rivals has been the dirty little semi-secret of corporate compensation for some time now, ever since U.S. CEO pay first started soaring in the 1980s. Analysts have periodically documented that gap, nation by nation. But their data haven’t percolated into America’s public consciousness.
One reason: All the annual CEO pay surveys that appear in America’s top media outlets seldom drop in any international perspective.
Take last week, for instance. On Monday, the Wall Street Journal unveiled its latest listing of America’s highest-paid CEOs. In 2013, the Journal list shows, 186 chief execs in the United States walked off with $10 million or more in compensation, 32 of them with over $20 million.
The Journal’s figures appeared just a day after the Washington Post unveiled its latest pay tally for chief execs in the nation’s capital region. The area’s 10 highest-paid execs, the Post related, last year pulled in a combined $198.8 million. Nine of the local D.C. area execs scored over $10 million.
Executive pay stories like these typically compare America’s latest executive pay totals to comparable totals the year before. They’ll also often compare the new executive pay rates to the paychecks average workers are taking home.
But the comparisons rarely extend offshore, despite the ready availability of international information.
In Japan, for example, corporations have had to disclose all annual executive compensation over 100 million yen, about $980,000, since 2010, and analysts at Tokyo Shoko Research have just released their first take on the required disclosures for 2013.
Some 41 major Japanese corporations, this new analysis notes, have so far reported their executive pay totals for last year. Only one exec from these firms pulled in over $10 million for the year, Nissan’s Carlos Ghosn, with $10.7 million.
Overall, 72 executives at the 41 companies made over $980,000. The total number of Japanese execs making about $1 million or more, once all companies file their figures, appears likely to reach a bit over 300, a total that would match Japan’s all-time record for million-dollar execs set two years ago.
In other words, in all of Japan, only just over 300 high-ranking corporate execs pulled down at least $1 million in compensation last year. One comparison: Just in the Dallas-Fort Worth metro area alone, the Dallas Morning News has just reported, exactly 100 chief executives grabbed at least $1 million in 2013.
And that total doesn’t include any of the $1 million-plus paychecks that went to Dallas area execs under the CEO level. At Solera Holdings, an auto software firm, four execs besides the CEO last year each collected at least $5.1 million.
In the first, voters outlawed signing bonuses and golden parachutes for CEOs and gave shareholders the power to vote down lavish executive pay packages. In the second, voters rejected a proposition that would have limited executive pay to no more than 12 times a corporation’s lowest pay, mainly because the Swiss public wanted to give the first proposition a chance to make a difference.
So far, a new study released last week charges, the first set of reforms hasn’t made much of a difference. In the first year of the new reform regime, the trade union center Travail Suisse notes, the nation’s corporate pay gap “widened almost all over the country.”
How much has the Swiss corporate pay gap widened over the last year? At the banking giant UBS, the top exec pulled down 229 times more pay than the bank’s lowest-paid employee, up from 177 times the previous year. The chief exec at UBS collected $12 million in compensation. At Nestlé, the world’s largest food company, the top-bottom pay ratio hit 230 times.
These pay gaps have rekindled the Swiss public furor over executive pay. But Switzerland’s corporate pay divides continue to pale against corporate pay gaps in the United States. The typical U.S. CEO, the AFL-CIO detailed this past spring, made 331 times the pay of the average American worker in 2013 — and 774 times the pay of a minimum-wage worker.
Many of America’s most generously compensated CEOs tower even higher over their workers. McDonald’s, Starbucks, and Dollar General, the compensation-tracker NerdWallet calculates, all take home over 1,000 times the pay of their typical hourly workers.
Another Web media presence that tracks compensation, Glassdoor.com, puts the average pay of a customer account specialist at cable giant Comcast at $13.26 an hour. Comcast CEO Brian Roberts pocketed $31.4 million in 2013, 1,138 times as much on an annual basis.
And the rationale for all this top-heavy corporate compensation? Apologists for America’s executive elite are still singing the same market tune.
“The demand for chief executive talent is increasing,” as the Longnecker & Associates consulting group’s Tyler Brown assures the Dallas Morning News, “so you have to have these pay increases to attract and keep talent.”
Keep talent from what? Taking a job in Japan?
Paul Krugman, Sympathy for the Trustafarians, New York Times, June 24, 2014. A demolition of the just-published defense of inherited wealth by Harvard’s Greg Mankiw.
Paul Hodgson, Rhode Island tries to legislate sky-high CEO pay away, Fortune, June 24, 2014. The business press is taking notice of a landmark new initiative.
Danielle Kurtzleben, How America’s growing partisan split could be making the rich richer, Vox, June 24, 2014. A polarized, do-nothing Congress may be a sign of or cause of growing inequality, or it may be both at the same time.
Harry Stein, How the Government Subsidizes Wealth Inequality, Center for American Progress, June 25, 2014. An analysis that examines the impact of reduced tax rates on dividends and capital gains and the free pass capital gains get when they pass to heirs.
Lloyd Doggett, End taxpayer subsidy for CEO bonuses, Camden Courier-Post, June 25, 2014. A veteran lawmaker details how the U.S. tax code rewards corporations that overpay their execs.
Eric Reguly, Stock-based pay becomes a monster as the rich get richer, Toronto Globe and Mail, June 25, 2014. What began as a defensible idea — handing execs shares as an extra incentive to boost shareholder value — now has our richest bosses gaining oligarch status.
Erik Sherman, Here’s a Disturbing Way to Gauge How Overpaid Some CEOs Are, Daily Finance,
June 27, 2014. Looking at top exec compensation as a share of a total company revenue.
Joseph Stiglitz, Inequality Is Not Inevitable, New York Times, June 27, 2014. The last installment of the “Great Divide” series.
|for your bookshelf|
|The Tenth Anniversary of an Early Warning
Sam Pizzigati, Greed and Good: Understanding and Overcoming the Inequality that Limits Our Lives. Rowman & Littlefield/The Apex Press, 2004, 659 pp.
A great deal has changed on the economic inequality front over the last 10 years. The maldistribution of income and wealth has now become a top-tier political issue. The “1 percent” has become a readily recognizable analytical shorthand. A dense and erudite tome on wealth concentration sits atop the best-seller lists.
None of this would have been imaginable a decade ago.
On the other hand, a great deal about inequality hasn’t changed over the last decade.
Apologists for our unequal economic order are still trotting out the same justifications they trotted out 10 years ago. Corporations are still generating inequality at record rates, and our grand concentrations of private wealth are continuing to squeeze pride out of our professions, pleasure out of our pastimes, even years out of our lives.
All these realities have kept the book Greed and Good, a “highly engaging, encyclopedic survey” of our inequality scene published exactly 10 years ago this week, a valuable resource for “understanding and overcoming the inequality that limits our lives.”
You likely won’t find this resource — authored by Too Much editor Sam Pizzigati — in your local bookstore anymore. But you will now find the book’s complete contents, organized by chapter, available to read free online.
Educators and study group leaders have been tapping these chapters to help build awareness about how increasing inequality breeds everything from unhappiness and the corruption of the legal and medical professions to environmental degradation and a fraying social fabric.
What to do about inequality? Greed and Good lays out and shreds the standard rationales for top-heavy distributions of wealth and explores the antidotes to inequality both in and outside our contemporary political mainstream.
To start perusing Greed and Good, just click through to the book’s online site. To discomfort our plutocrats, just spread the word about it.
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