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 offshore drilling, 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 at 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 plan 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 re forms 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.
Jim Longworth is the host of “Triad Today,” airing on Fridays at 6:30 a.m. on ABC 45 (cable channel 7) and Sundays at 10 p.m. on WMYV (cable channel 15).