Tag Archives: CEO pay scale

Who benefits from the politics of outrage?

Outrage-industryThe authors of The Outrage Industry: Political Opinion Media and the New Incivility, have offered an interesting and balanced article on Politico appraising why so much of the media has become polemical and angry-immature, here and now in the 21st Century.  In Are Americans Addicted to Outrage? — Jeffrey Berry and Sarah Sobieraj suggest that we the viewers are to blame, by flocking to the hate-waves for our daily doses of sanctimonious thrill.

And, of course, at one level they are right….

And yet, we should note that this cynical payoff is not homogeneous or uniform:

(1) MSNBC’s profits are a fifth those of Fox.  Moreover, as Berry and Sobieraj point out “talk radio, which is more than 90 percent conservative, offered only a modest selection of liberal programs, all with much smaller audiences; as a result, only two of the 10 radio programs we studied are oriented toward liberal audiences.

(2)  The liberal stations favor a return to “fairness rules,” even though those doctrines, if once again enforced, would compel them to change their business practices, inviting top opponents to offer rebuttals onscreen. In contrast, Fox and Clear Channel and the outrage industry of the right act as if they are utterly terrified of the prospect that their audiences might hear one minute of rebuttal for every 20 minutes of biased ranting. That is a fundamental difference, not one of just amount.

politics-outrge(3) Who does it all serve?  Follow the beneficiaries. There are reasons that Fox is co-owned by the Sa’udi Royal House and that coal and other carbon barons finance the right’s propaganda machine.

And yes, Big Labor influences the left.  Granted. Only ask yourselves this.  Which power center is growing, and which has become… pathetic… during the last generation? Is there, even theoretically, any level that the labor movement can decline to, when you’d admit “Okay, I’m not afraid of them, anymore… and maybe there are other, rising centers of influence that are a bit more worrisome”?

== The beneficiaries of broken politics ==

It isn’t all about carbon barons though.  Much discussion has recently focused on the skyrocketing disparities in both wealth and income between the very richest 0.01% and the hard-pressed U.S. middle class.  While the ratio between a company’s average employee wage and that of its CEO was in the teens and twenties in the glory-days of American capitalist entrepreneurship… the 1950s, 60s etc.

CEO--pay-ratioAmerica now has by far the biggest disparities. Major U.S. execs now pull in, on average, over 350 times the pay of America’s rank-and-file workers. Even the most successful Japanese firms, by contrast, don’t exceed ratios of seventy to one. See a global comparison of CEO to Worker Pay Ratios.

This will get clearer, soon. “The federal Securities and Exchange Commission, after four years of delay, will likely release this year new regulations that require America’s top corporations to annually reveal the ratio between their CEO and median worker compensation, a disclosure that the 2010 Dodd-Frank Act mandates.”

The aspect to all of this that I find most surprising — as I illustrated in the year 2040, in EXISTENCE — is the notion among today’s conservatives that this trend might simply go on and on, without reaching an inflection or tipping point. Without eventually raising the kind of radicalism and push-back that has not been seen in American life since the 1930s.

== Push back begins ==

In Massachusetts, nurses have collected over 100,000 signatures for an initiative that would levy fines against any hospital in the state, profit or nonprofit, that compensates its CEO over 100 times the hospital’s lowest-paid worker.  In Switzerland last year, young activists ran a referendum campaign to cap Swiss CEO pay at 12 times worker wages. This pay cap proposition was running even in the polls until an ad blitz sent the measure to defeat.

percentage-signCould 2014 be Year One of the Pay Ratio Era? A vigorous article at Truthout –– while of course partisan — nevertheless makes a strong case that these measures portend a rebellion brewing, against what I’ve called the Oligarchic Putsch — the transformation of America from a diamond-shaped society, dominated by an empowered middle class, more toward the classic pyramid of privileged (and largely inherited) power that dominated 99% of human cultures across 6000 years.

In fact, though, let me briefly give voice to my libertarian side: I do not see this disparity being solved by simple-minded ratio laws.  Socialist decrees and price-setting are not a long-term or even desirable solution.

What is needed is a return to the principles of Teddy Roosevelt – that market economics is best when it is competitive,  This would require, especially, the breaking up of a cartel of cheaters, restoring the natural synergies and feedback mechanisms of capitalism!  Think about it —

== If you truly believe in market forces… ==

By capitalist theory, high rates of compensation in a particular field of human endeavor should attract talented people from other professions, drawing them to compete with these top-CEO guys, thus swelling the pool of managerial talent until prices… go… down!

Essential-man-CEONothing could be more fundamental.  It is basic market forces 101. It is the sine qua non, and the whole justification for competitive enterprise. Supply rising to meet high demand. No matter what the field of endeavor, whether it be the availability and pricing of local plumbers or the allocation of fields to next year’s wheat or soybean crops, or hedge betting on interest rates – markets are supposed to self-correct great imbalances.

Failure of this to happen is prima facie evidence for collusion and cheating.

This is so basic that it bears reiterating in other words: If capitalism works, then these high CEO wages should be attracting brilliant talent from elsewhere, till demand meets supply and the wages fall.  How can supposed defenders of capitalism proclaim their fealty to a system that they, themselves manipulate to fail in its core process?

1-  On the rare occasion when a member of this caste comments on this contradiction, here is their excuse. At the very highest managerial level, they are irreplaceable!  They are in effect calling themselves “mutant geniuses” like NBA basketball players — worth any price. And hence, market forces do not apply to their own compensation. (See: The Syndrome of the Essential Man.)

Only, this comparison fails.  For top NBA players are fiercely measured by statistics. Explicit performance parameters, not only in scoring but in ticket sales. But not one study has ever verified a clear correlation of CEO compensation with long range company success.  In fact, fudging and obscuring any such metrics would appear to be a top priority of the cartel.

2- The cartel is maintained by a system that was supposed to be banished more than 100 years ago.  Interlocking directorships, in which companies that are purportedly in competition with each other feature amazing overlap in their boards. Oh, there are efforts to keep these relationships “once-removed,” substituting partners and family members, or appointing each other onto the boards of companies that aren’t in direct competition… Gerbers and Boeing, for example, thus evading any enforcement of  the creaky, (needful of tuning) anti-trust laws. It still amounts to “vote to raise my compensation and I’ll vote to raise yours.”

Can stockholders fight this?  Many have tried, but systems of shell corporation ownership enable contrivances where a few men can control major enterprises with very small boiled-down minority share ownership. And most small stock-holders (let’s be frank) never exert their proxies. If corporations truly are our future form of governance, then “owner democracy” is going to have to be refreshed with more fairness, or (again) people will start to radicalize.

GuidedAllocation3- Critics of socialism cite Friedrich Hayek and proclaim that any control over an economy by the state — by civil servants — will fail. Because, no matter how smart a set of top-down allocators are, they will be foolish simply because their numbers are few.  Because of limited diversity of knowledge and insight and perspective.

In-groups are delusional. It wasn’t just Hayek who said this.  So did Adam Smith. And so testifies the horrifically bad statecraft of 99% of oligarchy-led human cultures.

Indeed, history does show that narrow castes of “allocators” do inevitably perform poorly, over the long run.  State-capitalist mercantilist trade empires like Japan and China have done well in stretching out their successful phase. But we know the inevitable end-game, as complexity and chaos inevitably prove the limits of in-group hubris.

So sure, I don’t want the government “picking winners and losers” … that is, unless there is a clear and proved need to lay extra weight on certain market forces, for the sake of our kids — e.g. to encourage the development of efficient and sustainable technologies, for example.  And national defense.  And vital infrastructure. And fulfilling Adam Smith’s goal of maximizing the fraction of kids ready to compete… and…

But still, beyond that sort of thing, I know that state -controlled “allocation” can be clumsy, inefficient and wrongheaded, compared to the wisdom of mass markets!  Let us always remember that there is a core essence to libertarianism and conservatism that (despite recent craziness) should have a place at the table.

hayek-road-serfdomOnly in that case…  how is a secretive cartel of 10,000 or so conniving, back-room-dealing, circle-jerking, self-interested golf buddies intrinsically better allocators than say 500,000 skilled, educated, closely-watched and reciprocally competitive civil servants?  Both groups suffer from delusional in-group-think, Hayek had a good point.  But the smaller clade – more secretive and inward-looking, uncriticized and motivated solely by conniving greed – is inherently more likely to fail.

Again, 6000 years of history testify to that.

== What’s needed? ==

We need fierce measures to stop interlocking directorships and the in-group mutual stroking of 10,000 golf buddies — a criminal conspiracy that not only has stolen billions but runs diametrically opposite to the entire notion of competitive enterprise.

We need to demand that hypocrites either stop pretending to believe in market forces, or else show us those market forces at work, correcting a blatant campaign of theft from citizens and stockholders.

We need to break up the worst cartel of all, the “seated members” of the great stock, securities and commodities exchanges, an archaic arrangement that serves no benefit to people or capitalism — especially in the new era of electronic trading — and one that amounts to pure, vampiric parasitism.  All seats should be converted into ten, tomorrow, with nine of them to be sold off to the widest diversity of bidders. Or else, let Google handle all trades for 0.001%. You think they can’t?

TransactionFeeTerminateFinally, tomorrow, for the sake of our children, we must inpose what more advanced nations in Europe and Asia have imposed — a tiny High Frequency Trading (HFT) transaction fee.  Just 0.1% or one thousandth per trade would push these fellows back into earning their livings by helping real humans to find value differences or gradients that are useful to genuine investers or sellers. See my article: A Transaction Fee Might Save Capital Markets…and Protect us from the Terminator?  This is urgent, in some very surprising ways.

Now please take careful note: not one of my proposals is leftist or anti-capitalist. Adam Smith would have no trouble with any of it.  Every single item that I raised would have the effect of invigorating markets by re-establishing actual competition.

These measures are inevitable, as the boomer generation’s delusions start to fade and we become aware – again – of humanity’s perpetual problem of class.   problem that seemed to vanish – in America – for an entire human lifespan, because of rooseveltean reforms and the burgeoned middle class.  As that era passes, and we face our duty to renew and restore the social contract, proposals like the ones I offered (above) will come to the table. When these reforms start looming the best course for the rich and members of the cartel would be to negotiate, since the first wave of reforms will aim to — as FDR did — actually save capitalism from the otherwise inevitable volcanic fury of the sinking classes.


Alas, as happened when the First Estate fought all-or-nothing for their privileges, in 1789, that negotiation will not happen. (See Class War and the Lessons of History.)  Instead, we’ll hear howls of outrage by a rising oligarchy and their media shills. But don’t be fooled. That is noise rising from the ancient enemies of market enterprise.  Not socialism, but feudalism. And they have no idea that modern versions of tumbrels are being fashioned, by their own hands.


Leave a comment

Filed under economy, society