How did we get into the problem of insane pay for U.S. corporation leaders? The problem basically originated from the title above. Every board of directors wants to pat themselves on the back for selecting that exception person who will lead their company to outperform all the others. They need to do that so that they can somehow rationalize their board being paid thousands of dollars per hour for their time. So the statement is made:
Our CEO is exceptional so we must guarantee him a paycheck in the top 20% of all CEOs.
On the surface this is a rather innocuous statement that is bound to be true for some. But the problem is that almost every board now makes this statement and backs it up with a iron-clad golden parachute to match. So when 100% of the CEOs are to be paid in the top 20% of all CEOs it becomes an impossibility to actually occur. The only thing that can happen is that CEO pay goes through the stratosphere seeking a never-ending top 20%.
The impossibility that all CEOs can be in the top 20% seems rather easy for most people to understand so why can’t the typical board of directors figure it out? Again there is a again simple answer and that is most CEOs are actually on the board of directors for several other companies. So, when the above pledge is made they also guarantee an ever dramatic increase in their own pay. This is the typical “I’ll scratch your back if you scratch mine”.
There is one simple solution to this dilemma and that is for the shareholders to put an end to it. That is where more greed comes into the equation. Everyone who buys stock in a company want the cost per share to increase dramatically so they can rake in some big profits. In order to do that they must think that the guy in charge is the best in the business. Or at least in the top 20%. You get the idea.
The only way to stop this ever escalating CEO pay is for the stockholders to cause it to end. It will not be an easy matters as the CEO and the board of directors will probably fight tooth and nail for their wealth. But it can and actually does happen once in a while. So, the next time you start complaining about CEO pay remember that you the stockholder are allowing it to happen. Even if you only have one share in a company you have power to cease this ridiculous practice.
But I’m just a simple guy so what do I know.
Source: Drugmakers have paid $8 billion in fraud fines – USATODAY.com.
The nation’s largest drugmakers have paid at least $8 billion in fines for repeatedly defrauding Medicare and Medicaid over the past decade, but they remain in business with the federal government because they are often the sole suppliers of critical products, records show.
This is one of those cases where “you can’t live with them can’t live without them”. Drug companies definitely have improved the quality of life for all of us. We should all be thankful that they are around. But greed, that seems almost ingrained in the capitalist process pollutes their contributions to society. I am sure that as usual the fines are a small fraction of what the companies raked in profits. When you can easily make a million bucks by “misreporting” what you provide and in the future only pay $50,000 fine, fraud become an unwritten part of your business plan.
My Republican friends are constantly saying government is impeding the “free market” and all we have to do is to free them from regulations and any government intrusions and our economy will flourish beyond imagination. But to those of us who are less naive know that at capitalism’s core is greed and we also know that greed without limits is a deadly proposition.
Contrary to what my Republican friends think I am a firm believer in the capitalist system but a critical part of that system is someone to protect us from the greed of the primary players. We rational people look to our government representatives to do that job for us via regulations. If no one reigned in the overwhelming obsession of profits they would soon bring down our country instead of rising it above imagination. Just look at Greece as an example.
We depend on the checks and balances of our government to protect us from power abuses within our democracy. We also depend on our regulators to protect us from the abuses of our capitalist system. Anyone who thinks that unfettered capitalism is a good thing just hasn’t learned the many lessons in our past history. You need look no further than four years ago to see what stripping regulations did to our financial system and the resulting costs laid on each of us taxpayers. If that doesn’t convince you then go back to the 1980s and see an almost exact same thing happen to our savings and loan industry. Oh, by the way it was also a Republican administration, namely Mr. Reagan, who bailed out the S&Ls. Why we seem to make the same deregulation mistakes over and over again is a mystery to me.
But what do I know…
We elect our Presidents, be they Republican or Democrat, then go home and start daring ’em to make good. – April 1, 1935 Will Rogers
Sometimes I can really get down to that deep thinking. I mean the pure foundational stuff. I think what Will said above is foundational stuff for a democracy. We elect our presidents and all the other people’s representative and then go home and dare them to get it right! This worked pretty well for the first two centuries of our existence. There were a few duds during that period but generally the people we elected at least tried to “make good”.
But something in the process seems to have broken as we entered the 21st century.
- Maybe it got broken because we have done something that prevents the really good guys/gals to come forward to “live up to the dare”? – Being a guy that has done some pretty serious studying of history I can see that the political processes we have now is pretty raunchy. It has been bad in the past but never to the extreme as now. I can’t see where anyone would want to put themselves through the process of becoming one of our political leaders. Have we just ground out the civility in seeking elected office so that only the “pretenders” with hyper-inflated egos will even attempt to endure our election process?
- Maybe it is got broken because the people doing the choosing got lazy? – Being a representative democracy is tough stuff. It takes work to choose the right leaders. Maybe we have just become too lazy in choosing our leaders. We don’t do our homework any more to try to wean the pretenders and wannabes from the crowd. We fall victims to 30 second sound bites instead of studying the issues. Maybe we are just too lazy to maintain a democracy anymore?
- Maybe it got broken because of all the money that corrupts the process? – When the Supreme Court decided that corporations are people and they should have free exercise in buying the candidates and elected officials we started down a road with no return. When we as individuals must compete with $trillion corporations it is pretty easy to figure out who is going to come out ahead. Maybe we have sold our democracy to corporate and elitist greed?
- Maybe it go broken because we have outlived the positive aspects of a capitalist society? – This one gets really deep! I don’t want to blow a gasket in my brain so will only touch the surface. Our capitalistic society is based on greed. That is not a bad when there are checks and balances to add in a moralistic factor. Pure capitalism just doesn’t have any compassion for anything but profits. Everything else is a very distant second if it is even considered. This type of greed was also pretty dominant about 100 years ago but it was stomped down by hard-fought unions and a Republican President named Roosevelt. But, even compared to that time the moralist factor seems to have died out in the 21st century. Our society seem to have devolved down into the survival of the fittest mentality. Another way of saying that is “I got mine so screw you!!” We just seem to have lost the compassion for our fellow-man any more and no one seems to be able to rescue it. Are we finally succumbing to the dark side of capitalism?
To wrap this up it is probably a combination of all of the above. I just hope that we can come back from the edge of the cliff once again but I have my doubts this time around.
But what do I know…..
If it weren’t so pathetic it would be laughable how these guys will do or say anything to get elected. It’s time to put on your “Peace” badge Newt and join the Occupiers you thoroughly dissed last week.
Those who consider themselves religious and yet do not keep a tight rein on their tongues deceive themselves, and their religion is worthless.
Religion that God our Father accepts as pure and faultless is this:
- to look after orphans and widows in their distress
- and to keep oneself from being polluted by the world.
In regards to keeping a tight rein on your tongue this is a continuation of yesterday’s post.
To look after orphans and widows is to be your brother’s keeper.
The second lesson being polluted by the world is really about forgetting the first lesson.
In the old days, I’m talking about pre-Reagan, a company’s workers were considered an asset but it seems like today they have turned into a liability. I read an article recently (I don’t remember the source right now so I can’t give it to you here ) that basically said that many companies can’t find adequately trained people to fill their jobs and won’t hire someone and then train them for that job. It seems they would rather complain about not having skilled workers than actually training someone to do the job.
I can almost remember when I was turned from an asset to a liability by the “major communications company” I worked thirty years for. Indeed it was in the early 1980′s. This was about the time that telecommunications was being deregulated by Mr. Reagan’s clan so I thought the change was a result of that action but looking back on it now it was a broader thing than just the deregulation. It was happening across U.S. industry.
What caused this to happen? Part of it was of course the Reagan White House. The guys he had around him never met a regulation that they thought was really needed or a company CEO they didn’t love and respect. We were all told that we should leave our future totally up to the benevolence of the corporate structures. They knew what was best for us and that was all we needed to know. Another part of this change was caused by the newly invented MBA degrees. That is “Masters of Business Administration”. All of the professors teaching at these schools had suddenly declared that “Greed is good” and that workers are liabilities.
With all these things coming to a head at the same time I was now treated like a cost that my company would rather do without but couldn’t figure out how to totally do that. Of course, I watched over the years as my wages became stagnant, my benefits constantly shrink and my workmates constantly disappearing for one reason or another. Every time someone came up missing I was told I had to do “more with less”. Every time another benefit was taken away I was told it was to give me more “choices”. Those words became the mantra for the next 15 years until I was finally downsized and retired.
Will this type thing ever swing back to where the workers are treated with respect and given their fair share of the company profits? We can only dream of that day but I kind of doubt! Now instead of deregulation, Reagan, and the MBAs they blame it on globalization. It’s all the same thing; the company want to squeeze blood from you their turnips. As long as we let them nothing is going to change. Where is Norma Ray when we need her??
But what do I know….