Cui bono? (Who benefits?):
The fall of the empire
The obscene excesses of executive pay practices are not aberrations, but the inevitable products of a complex system.By Arlene Goldbard / The Rag Blog / July 12, 2011
Recently I read a piece on executive pay in the business section of The New York Times. Ever since, I have been wondering how to write about it.
Here are some of the images I did not want to include: bad apples spoiling a whole barrel; pirates (and other types of marauding bandits); weeds spoiling the garden. Why not? Because the obscene excesses of executive pay practices are not aberrations, but the inevitable products of a complex system.
To redeploy a phrase beloved of judges on TV crime shows (where it refers to something quite different, evidence obtained illegally), they are "the fruit of the poisonous tree."
Most of the images still circling my mind are from the Ancient History 101 version of the fall of Rome: Rome fell, the history teacher told us, because those in power pursued personal wealth and privilege at the expense of collective well-being. Such explanations were illustrated with lurid depictions of toga-clad degenerates cramming whole roast birds and huge bunches of grapes into their gaping mouths.
Nowadays they are garbed in gray flannel and power ties, but the facts are equally shocking.
While ordinary working people (and the unemployed) were being exhorted to "share the pain" by accepting pay cuts, job losses, and limits on unemployment benefits, executives' slice of the roast goose got bigger:
Let’s begin with the view from 30,000 feet. Total executive pay increased by 13.9 percent in 2010 among the 483 companies where data was available for the analysis. The total pay for those companies’ 2,591 named executives, before taxes, was $14.3 billion.
That’s some pile of pay, right? But Mr. Ciesielski of the Times puts it into perspective by noting that the total is almost equal to the gross domestic product of Tajikistan, which has a population of more than 7 million.
It's not even the sheer dollars so much as the fact that the standard rationales for such expenditures no longer provide even as much cover as the flimsiest toga for the self-regarding indifference that drives so much of the corporate sector.
The executive pay study shows clearly that top-level salaries and bonuses swelled even at the expense of shareholders, of research and development, and of market capitalization. Consider a few facts:
The report calculated that at 179 companies in the study, the average value of stockholders’ stakes fell between 2008 and 2010 while the top executives at those companies received raises.
Moving on to R.& D. costs, the report examined the 62 technology companies in its sampling that reported such an expense, excluding certain costs associated with acquisitions.
Mr. Ciesielski found that the median level of executive pay was equal to 5.3 percent of these companies’ R.& D. expenditures.
Eleven companies analyzed in the report gave top executives a combined pay package amounting to 1 percent or more of the companies’ average market value over the course of the year. The Janus Capital Group, the mutual fund concern, topped the list, with pay totaling almost $41 million for five executives. This accounted for 1.95 percent of the company’s average market value over 2010.
“To earn their keep,” the report said, “managers would have to create stock market value in the full amount of their pay.” The executives at Janus failed to increase value in 2010, when the stock closed out the year roughly where it had begun it. This year, the company’s shares are down almost 30 percent.
It's hard to skip over the fat-cat bad-apple imagery and give such information its full import, because -- in a culture that generally ignores class while focusing on individuals -- we tend to think in terms of specific cases rather than a whole system.
But it's really a mistake to allow the facts of executive pay to pull us toward a personalized moral critique of the executives who stockpile wealth at the expense of shareholders, or R&D, or general economic well-being. Focusing on this as individual aberrations misses the most important questions:
The facts of executive pay put the lie to loudly persistent protestations by corporate spokespersons that they're only following capitalism's prime directive, to maximize shareholder profit. They are prioritizing the accumulation of personal wealth over shareholder income, which hurts business, shareholders, and the economy in general. Why is everyone else allowing this?
Despite corporate profits being at an all-time high, few corporations are rehiring or replacing laid-off workers, preferring to export jobs to less expensive markets overseas, or simply to work with fewer employees to keep the profit figures high. How many workers could have been paid a living wage for, say, half of the $14.3 billion that was paid to a mere 2,591 executives?
The people who work, share, care, without exploiting others outnumber the fat cats by a magnitude. It's not Corporation Nation yet; we still have a constitution, and the right to regulate commerce, even if we've put Emperor Nero's crew in charge of our collective commonwealth. Why aren't we taking the facts seriously and demanding accountability from the piratical system that allows and encourages this?
To find out more about people who are spreading information and taking action, here are a few links:
- An information-rich site by the Program on Inequality and the Common Good at the Institute for Policy Studies, which also has a good page of links to other groups.
- Take a look at the Patriotic Millionaires for Fiscal Strength, if only just to clarify that this is not about individuals, but a system, and that people in all income-brackets support positive social change.
- Watch the video from Van Jones's recent launch of The American Dream Movement's "Rebuild The Dream" campaign, a promising effort to build a united front for liberty, equality, and justice --- more or less along the lines of the tea party movement, but with very different values.
In ancient Rome, Cicero popularized a question he attributed to Lucius Cassius, whom he said the Roman people used to regard as a very honest and wise judge: "...He was in the habit of asking, time and again, 'cui bono?' -- 'To whose benefit?'" A simple question we mostly seem to have forgotten: if we can't move ourselves to ask it now, when?
I really wanted to link to a video of Tommy's Castro's "No One Left to Lie to But Myself," but I couldn't find one, so here's a bit of the lyrics:
The truth hurts but I know I can't deny itOn the off chance the universe is pushing me toward an optimistic ending, I'll go instead with his version -- click to it here -- of "My Time After Awhile": "It's your time now, baby/But it's gonna be my time after awhile." May it be so.
Can't sell nothin' when there's no one left to buy it
I made this bed and I guess I got to lie in it tonight
But deep down inside I know it's just as well
Cause now there's no one left to lie to even if it tried to
Got no one left to lie to but myself
No there’s one left to lie to but myself
When the Empire falls, who benefits?
[Arlene Goldbard, a writer, speaker, social activist, and advocate on behalf of community-rooted art, is chair of the board of The Shalom Center. Her website is ArleneGoldbarb.com.]
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