May 14th / 16th
"Greed is Spewing from all Sectors"
I know this is going to sound like some sort of contrived analogy, but
while watching the gulf oil spill unfold, my thoughts turned to CEO pay. Hour
by hour no one could seem to cap the well, just as no one has been able to
cap the outrageous levels of compensation taken by America's executives.
Both situations are out of control, and both have been enabled by our
President. Barely a week after ordering an increase in off shore drilling, Mr.
Obama came face to face with the reality (and folly) of that order. And
barely a year after the White House set its sights on curbing CEO pay, corporate
greed is spewing forth as never before.
Last week Nell Minow, co founder of the Corporate Library, an independent
research firm, told the Washington Post, "I see no indication whatsoever
that the business community is paying any attention to the administration's
suggestions (to impose restrictions on executive pay)". Obama's original
plan was targeted to companies who had received federal assistance, and it
sought to stamp out compensation practices that "encouraged excessive risk
taking for short term results". The President even named Ken Feinberg to
serve as special master for compensation to oversee pay reform. But Obama's
best laid plans fell short, both for what it hoped to achieve, and for what
it never sought to address.
Today, the AIGs and Goldman Sachs of the world are still thumbing their
noses at the White House by paying out huge bonuses, and circumventing any
intended reforms on total compensation, by restructuring the way cash and
stocks are awarded. But while Wall Street pirates may be the most visible
villains on the corporate landscape, the President has also failed to provide
leadership in curbing excesses by executives on Main street.
At first glance, it wouldn't seem appropriate for government to interfere
with free market capitalism. But the disparities between CEO salaries
versus those of their employees has grown to obscene proportions. That, in turn,
has made it easier for greedy executives to justify sending American jobs
overseas so they can make more and more profit by paying less and less to
those who toil for them.
Just pick up any newspaper published in the last few months, and you'll
see story after story about how yet another CEO has taken a huge raise, or
been paid an enormous bonus. And next to those stories are headlines about
how personal income in North Carolina and throughout the nation has continued
to decline. Again, some of these corporations are making huge profits, but
most are experiencing losses. Either way, the common denominator is CEO
compensation. Regardless of the P&L statement, these pirates keep getting
richer and richer with no regard for the recession, or for the people who are
suffering from it. In fact, according to a 2008 report by the Institute for
Policy Studies, CEOs of large corporations make on average 364 times the
salary of their employees. That prompted Charlie Crystal, founder of the
Pennsylvania software company Mission Research, to propose that corporations
cap CEO pay at seven times the company's median salary.
Thus far, neither Obama nor corporate America has embraced Crystal's
proposal, but there have been some good faith gestures by a few public and
private sector executives. Scott Bauer and his fellow officers at Southern
Community Bank recently took a pay cut, while Greensboro City Manager Rashad
Young turned down a raise given him by his bosses on City Council.
Unfortunately their kind of leadership is rare. The same week in which Young
unselfishly refused a pay hike, Rep. Mel Watt voted against a measure that would
have halted Congressional pay raises. The fact is that most executives,
whether elected or appointed, have little or no regard for the plight of people
who have been victimized by corporate greed, or displaced by an unrelenting
economic downturn. On the other hand, honest, public spirited folks like
Bauer and Young figure they make enough money already, and don't need more
of it simply because they have the power to take it.
Just as with the BP oil spill, CEO compensation is out of control, and no
one seems to be willing or able to cap the excesses. Both tragedies are a
reminder of the damage that can occur to our natural and human resources
when greed goes unchecked. From my perspective, the solution is simple. We
need more executives who feel our pain, and who lead by example. Until then,
we're stuck with having to live a life full of disasters.
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