According to Business Week, the average CEO of a major corporation made 42 times the average hourly worker's pay in 1980. By 1990 that had almost doubled to 85 times. In 2000, the average CEO salary reached an unbelievable 531 times that of the average hourly worker.
"Pay for performance", tying executive compensation to the financial success of their company, has become very popular in the past decade. In the face of the largest bull market ever, that isn't surprising. It also isn't realistic. What CEO honestly believes that all or most of the appreciation in value of their company is due to their own talent?
ZD Net's Total Compensation Vs. Total Return To Shareholders chart (no longer online), shows that total return to shareholders was higher for many companies whose CEO compensation was under $500,000 than for companies who paid their CEOs multi-million dollar compensation (emphasis added).
Virtually all of the organizations and pundits who talk about the egregious wealth-destroying actions of top executives and other controllers of money-mountains act as if the only things wrong were moral character and a few regulations. None of them get to the core of the problem, as George did.
Money goes to where it can get the greatest return, and right now, and especially in the last 30 years, that has been in the FIRE sector. While there have been innovations in computing, materials, manufacturing etc. that have created real wealth, it is harder to make that case for financial innovation, where piles of money (really, credit) are merely shifted around, without producing anything of lasting value, while siphoning both money and opportunity from the shrinking middle class. Indeed, ex-Federal Reserve Chairman and current Economic Council Head to the President, Paul Volker, has said that the most important financial innovation of the last couple of decades has been the automated teller machine. And, Danny Latham, head of infrastructure, First State Investments, said, " We [infrastructure investment teams] need more real engineers and fewer financial engineers." Ah yes, how true, but where will get the money to pay them? We will get it from the Land, George answered, in the age of Jay Gould, 130 years ago. But this cannot happen unless we rip the plant out by the root, merely trimming off a few bad branches will not do. Ordinary workers have no chance to produce positive wealth when the top 1% is producing negative wealth. Like matter and anti-matter, wealth created by labor acting upon the resources of the earth gets annihilated when confronted by credit-wealth (which is not wealth at all). Worse, since the size of credit implosions are only limited by the imagination of those who created the initial bubbles in the first place, unlike goods and services, which are created from true labor and finite land, there is no limit on the anti-wealth side of the equation, hence no limit to their destructive capacity. If this kind of reaction could be placed in a bomb, it would destroy the world which, in a different way, it threatens to do.
Looking for the winner of the Golden Unpro, or the"Lex Overpaid CEO" and "thief" Award presented to Dick Fuld by the Financial Times, misses the point. The blame for the creation of the Speculator Class belongs to the same place as the blame for the creation of the Poor Class: to the absence of a tax on the finite resources of the Earth and on the actions of speculation itself. As George said in Social Problems, what good does it do society for someone to become the world's richest pirate, if all he is doing is merely stealing from the average seagoer?
Oh, and the homeless person we passed by earlier on our race to below the bottom for the most unproductive citizen? He's more likely than not to have had a job producing something at some time in the past, quite likely he served in the military, and, contrary to popular belief, there's only a 25% chance or so he has a mental illness. In any case, he is unlikely to ever be as counter-productive as most of the richly rewarded failures listed above. To achieve that level of unproductivity, you really have to be a Star.
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