Sunday, February 18, 2007
Not Even Fat Cats Like Fat Cats Anymore
During the Reagan era we had (supposedly) "trickle down economics". Now we have entered an era (I hope) of "trickle upwards populism". Or perhaps the better phrase is "percolating populism", as surely it is about time that the top dogs smelled the coffee. Some actually do - or profess to. Federal Reserve Chairman Ben Bernanke has cited income inequality as a threat to "the dynamism of capitalism". President Bush has scolded overpaid CEOs. According to Bloomberg.com - itself a remarkable organ for such news - "These conservatives have realized that, for all the strength of the American economy, many people feel it's chiefly the rich who are getting richer while the middle and working class struggle to stay even." Thoughts of the 2008 election are clearly driving some of these gestures of concern, but they aren't limited to politicians. Even Warren Buffett admits, "Too often, executive pay in the U.S. is ridiculously out of line with performance."
The article at the link below points out that there are greater (and ultimately more intractable) sources of income inequality than excessive CEO compensation, but overpaid CEOs are both highly visible and almost entirely oblivious to the negative image they've created among the public at large. This combination of supreme narcissism and PR imbecility has made them a very convenient target. More than anything else, they have emerged as the symbol of economic injustice in America. Barney Frank of the House Financial Services Committee is confident that he can push forward legislation to give shareholders the power to vote on compensation packages for CEOs, and on "golden parachutes" to outgoing CEOs who hitherto have believed they have the right to get rich on failure. Some in the financial arena fear that these small empowerments of the shareholder will expand into a larger and more intrusive interference into corporate governance. But I say, the more power, the better. Academic studies have demonstrated that executive compensation bears little relation to actual performance, and the experts believe that CEO compensation should be as strictly controlled as any other line item of company overhead. CEOs should be treated as gods no longer. And that is something on which even the demigods among us have begun to agree.
"Corporate Chiefs May Come to Rue Fat Paydays: Albert R. Hunt" from Bloomberg.com