The Corporate Looking Glass

Senior executives of Macy’s corporation pay themselves $1.3 million in bonuses the day after laying off 7,000 employees; Wall Street brokerage firms who have taken hundreds of billions of dollars in taxpayer funds paid out $18 billion dollars in year end bonuses; the CEO of Merrill Lynch redecorated his office spending $1.2 million dollars on items including a $35,000 toilet and an $87,000 rug. It’s sometimes easy to believe that the people running corporations in our country are either the most obtuse people on the planet or they simply believe that, since they have worked hard for years and made it to the top, the normal rules do not apply to them. It’s almost as though when they scale the corporate ladder they at some point change their name to Alice and step through the looking glass. Up is down and down is up, and by reviewing some of the CEO bonuses in relation to their balance sheets, it’s easy to see how they could make this mistake.
The exorbitant pay scales of CEO’s has become obscene. The average CEO of a Fortune 500 company brings home $10.5 million in pay, which is approximately 344 times the pay of the average American worker. Greed, is not only good, it’s a birthright to some of these people. They have somehow internalized the idea that life is not complete without a private plane, a summer house on Cape Cod, and a Bentley. But they are mistaken.
General Motors just announced they are laying off 10,000 workers. The CEO of General Motors, Rick Waggoner, made about $14 million dollars in 2007, right about the time his company started to tank. Now who is more expendable, one man whose poor business decisions have caused his company to continually lose money, or 10,000 workers who were forced to implement those decisions and are now having to pay the price? Most Americans believe the CEO is expendable while the CEO’s and boards of directors believe it’s the workers. Waggoner’s salary wouldn’t keep all those workers on the job, but it would keep some of them working.
I was disappointed to learn that the new Treasury Secretary Tim Geitner opposed restrictive salary requirements and other tough conditions for bailed out banks. I’m hoping members of Congress will heed the rising populist sentiment against Wall Street bonuses and other perks and will force the administration to demand more sacrifices from companies who take bailout money. But I’m not holding my breath.
The CEO of Whole Foods has a base salary that is only 14 times that of his lowest paid worker. Now with stock options his salary is higher, but it is still not 344 times that of his lowest paid worker. If Congress were to limit executive pay for all publicly traded companies to 15 times that of their lowest paid worker, it would most likely encourage management to increase worker salaries. In this case, a rising tide would lift all boats…although probably not yachts. If a company wants to pay their CEO above the mandated rate, they can buy out the shareholders and take the company private. I can almost hear the screams of pain from Aspen to the Hamptons, but unless the country does something to, yes, I’m going to say it, redistribute the wealth in this country, we are going to end up like Mexico where there are only two classes, the extremely wealthy and the very poor. It’s only a matter of time until that happens. I believe the very fabric of our democracy is at stake here.
A little common sense is what is required, and unfortunately it’s not going to come from the executives themselves or from their supporters in Congress and elsewhere. The American people will have to shatter the corporate looking glass that divides the haves from the have nots, and let’s just hope that it’s a peaceful shattering.


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