Two Stories About Wealth Distribution

 

Corporate success should be shared with workers, not just CEOs

By David Horsey

April 18, 2014

http://www.latimes.com/opinion/topoftheticket/la-na-tt-corporate-success-shared-20140418,0,2951383.story#axzz2zL9fAuoh

 

Of the many statistics that expose America’s increasingly wide wealth gap, there is one that has stuck with me this week: The top 10% of wage earners in the U.S. receive half the income of all wage earners combined. 

It is a function of simple math that people at the top of a wage scale will grab a bigger share of the money, but that share is not constant. According to Thomas Piketty of the Paris School of Economics, the highest 10% took in just a third of all income in 1960. In a New York Times interview, Piketty said a large proportion of the current rise to nearly 50% is due to the recent sharp increase in “supersalaries” being paid to senior executives. 

Now, this may be simplistic math, but it strikes me that if supersalaries are taking a larger share, that means there is less left to pay workers and managers well down the corporate ladder. In other words, one cause of middle-class income stagnation might just be the greed at the top.

At many American corporations, the stark difference between the average worker’s wage and the CEO’s pay has become scandalous. In the U.S. in the 1960s, a top executive might receive compensation 20 times that of the people building the product or delivering the service. Now, the multiple is quite often 100 or 200 or more.

Much of the increase for CEOs comes from payment in company stock. Supposedly, this literally invests the boss in the success of the company. Unfortunately, it also has the effect of making workers look like expensive liabilities so that, in the service of improving the corporate bottom line, CEOs are inclined to ax some employees while loading down those who remain with more work for no extra pay. Perversely, this pushes productivity up even as wages go down.

Is it not time to start rewarding someone besides executives for a business’ success? Why should the guys in expensive suits on the top floor be the only ones to get a share of corporate success? It seems only fair that profit-sharing should extend deep into the ranks of those who actually do most of the work -- especially if those people have spent years absorbing the downside of the business cycle through pay cuts and layoffs. 

Americans used to have a better deal in the workplace. Much of it was fairness forced on companies by the power of labor unions. Collective bargaining, though, has all but disappeared from much of the economy and workers are now mostly left as individual cogs in the system with little to rely on but luck, their own gumption and the beneficence of their employer.

It would be lovely if big companies voluntarily recognized that better compensation for employees is better for the corporate enterprise and for the economy as a whole. But those who would make that enlightened choice are those richly rewarded folks in the executive suites and boardrooms who are rather content with the system as it is.

These are people who believe, in the words of Gordon Gekko, “greed is good.” What will it take to persuade them that broadly sharing the wealth is better?

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Obscenely high CEO salaries are stark marker of U.S. wealth gap

By David Horsey

April 16, 2014

http://www.latimes.com/opinion/topoftheticket/la-na-tt-high-ceo-salaries-20140415,0,4593262.story#axzz2zL9fAuoh

A beginning elementary school teacher in a small district in California makes around $40,000 per year. That’s 2 or 3 thousand dollars more than poor Larry Ellison brings in -- but Ellison, the CEO of Oracle Corp., earns it in an hour.

There’s nothing that illustrates the vast and growing wealth gap in America more starkly than a list of the incomes enjoyed by the top business executives in the country. A new study done for the New York Times found that pay for the 100 top CEOs jumped 9% from 2012 to 2013, raising their median annual compensation to nearly $14 million.

At the top of the pile is Ellison, the Silicon Valley potentate and America’s Cup champ, who is the fifth-richest person on the planet. Divvying up Ellison’s yearly cash, stock and options package into 40-hour-a-week slices, New York Times reporter David Streitfeld set the CEO’s hourly earnings at $37,692.31.

No. 2 on the generously paid CEO list is Robert Iger, head man at Walt Disney. He has to scrape by on less than half of what Ellison takes home and must work more than two hours to make what that starting teacher earns in a year. Another movie and media mogul, Rupert Murdoch, comes in at No. 3, which is also the number of hours he needs to work before he matches that teacher’s annual income.

CEO compensation has been controversial for many years, and various efforts have been made to rein in the runaway pay scale. Nothing seems to be working. It might not be such a point of contention if all boats were rising, but, as we well know, incomes for most Americans have stagnated for three decades. As the nation has become immensely richer, a tiny share of our citizens have raked in exorbitant gains.

CEOs are just the most visible beneficiaries of an economic system that values and rewards a small cluster of people at the top in an outlandishly disproportionate way. Sure Ellison and Eiger and Murdoch are good at what they do. They are probably business geniuses. But are they orders of magnitude more valuable to our society than a teacher or a nurse or a fireman or a farmer?

In 2013, Tim Cook, the boss at Apple, and Steve Ballmer, the just-departed head of Microsoft, received seven-figure pay packages -- $4.2 million for Cook, $1.2 million for Ballmer. That’s pretty good money. Cook and Ballmer, though, were near the bottom of the top 100.

In a more sane economy, that kind of money would put them at the top, but sanity is no longer the rule. Today, the super-rich get super richer and the middle class continues to feel the pay ceiling press heavier on their backs.