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 All across Corporate America, top executives are accumulating vast wealth while employees lose their jobs, have their wages reduced, and lose their benefits. Peter Drucker, the Austrian born American who founded modern management science, considered excessive executive pay an assault on the good management of enterprise.
Ford employees have seen their pay decline from $28 an hour to $19 along with giving up cost of living increases and health benefits. Though the decline in compensation is considered absolutely necessary for Ford employees, CEO Alan Mulally apparently does not think such an emphasis on austerity applies to his own compensation. His pay package alone for 2012 was $21 million. In addition, in 6 years, he has amassed $300 million in Ford stock.
Such excessive executive pay made possible by decline in the financial well being of workers is not tolerated in other countries. The financial compensation of Toyota CEO, Akio Toyoda, in comparison, was $1.48 million. In France, the newly elected government of President François Hollande placed a cap equivalent to about $580,000 on executive pay at the 52 companies where the French government holds a majority stake. This is about 20 times the average pay of French workers at the lowest 10% of wages. A whopping 83 percent of the French public supported limiting maximum pay for all CEO's. Peter Drucker himself recommended that executive pay be no more than 20 to 25 that of workers.
See the article by Sam Pizzigati: "The Bailouts Taxpayers Seldom Ever Notice."
Sam Pizzigati edits Too Much, the online weekly on excess and inequality published by the Washington, D.C.-based Institute for Policy Studies. His latest book, The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900-1970, has just been published.
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The “working poor” ... are in fact the major philanthropists of our society. They neglect their own children so that the children of others will be cared for; they live in substandard housing so that other homes will be shiny and perfect; they endure privation so that inflation will be low and stock prices high. To be a member of the working poor is to be an anonymous donor, a nameless benefactor, to everyone else.
Barbara Ehrenreich, Nickel and Dimed: On (Not) Getting By in America
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Last Updated on Sunday, 02 October 2011 02:29 |
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 Thirty years experience shows that the theory that making the wealthiest people in a nation richer will trickle down to the poor and middle class does not work. Deregulation and and a huge decrease in high income individuals' tax rates transferred money from the middle class to the wealthy over three decades and resulted in the financial meltdown from which our nation has not yet recovered. The pie chart to the left shows that the bottom 50% of Americans own only 2.5% of wealth while the top 10% owns over 70%.
Other slides show the stagnation in the average hourly wage, the huge increases in income for the top 10%, the decline in the share of income for the bottom 90%, the relationship of income to changes in tax rates, and comparisons to the wealth gap in other countries. See the slides: "15 Mind Blowing Facts about Wealth and Inequality in America."
In a recent article, Roberrt Reich points out that the wealthy used to fund the government by paying taxes. In the last 30 years, the wealthy funded the government through loans. Just like foreign governments that buy U.S. bonds, the wealthy will stop buying them if deficits become too large and they fear the U.S. government might default on the loans. See Reich's article, "The Great Switch by the Super Rich." |
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Last Updated on Saturday, 13 August 2011 09:06 |
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 William Lazonick writes that "The top dogs have a huge interest in allocating corporate resources to jack up their companies’ stock prices, thanks to some terrible decisions by the SEC." Not only were laws passed that allow CEO's to get far higher pay without the strict requirements for performance found in other countries, not only were their taxes greatly reduced, but the Securities and Exchange Commission changed the rules in ways that allow CEO's to jack up their companies' stock prices.
In 1982, the SEC changed rules that prohibited large-scale stock repurchases to allow up to 25% of a stock's daily trading volume to be traded every day, day after day. Stock buybacks result in an increase in the price of a stock. In 1991, the SEC made another rule change that enabled top executives to make quick gains by exercising their stock options and immediately selling the shares. Prior to 1991, executives had to hold the stock options six months after exercising the options before the stock could be sold. This rule change enabled top executives to time sales so they could benefit from stock price boosts from buybacks.
William Lazonick is director of the University of Massachusetts Center for Industrial Competitiveness and author of Sustainable Prosperity in the New Economy? Business Organization and High-Tech Employment in the United States (Upjohn Institute 2009) which won the 2010 Schumpeter Prize for innovation and economic development. Read his article: "The Reason CEOs Make 350 Times More Money Than Their Workers -- And Why That's Terrible for the Economy." |
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Last Updated on Saturday, 13 August 2011 09:07 |
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According to a Pew Research Center analysis of Census Data, the median wealth of white households was 20 times that of black households and 18 times that of Hispanic households in 2009. This inequality in wealth is the largest since the government began publishing this data a quarter century ago.
The size of the wealth ratios doubled since the Great Recession. The bursting of the housing market bubble in 2006 resulted in a 16% decline in net worth for whites, a 66% decline for Hispanics, and a 53% decline for blacks. As a consequence, the typical black household had just $5,677 in wealth (assets minus debts) in 2009; the typical Hispanic household had $6,325; and the typical white household had $113,149.
A larger percent of Hispanics live in California, Florida, Nevada and Arizona which were among the states that had the largest declines in housing values. You can read the 36 page report here or download it at the bottom of the first page.
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Last Updated on Saturday, 13 August 2011 09:10 |
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The top 20% of Americans hold a record 84% of the nation's wealth while the bottom 40% own almost nothing. Paul Solman recently interviewed people for a series on inequality for Public TV and showed people three pie charts with 1) an equal distribution of wealth, 2) the distribution of wealth in Sweden, and 3) the distribution of wealth in the United States. Like Michael Norton and Dan Ariely found in their research on Americans' perceptions and preferences for the distribution of wealth, Paul Solman observed that most people don't realize the extent of inequality in America, probably because they live near others who have incomes that are relatively similar to their own. Most people thought the distribution of wealth in the U.S. was that in the chart for Sweden and that is also the distribution they preferred rather than either perfect equality or the extreme concentration of wealth that actually exists in the U.S. Following are the charts representing the actual, perceived, and preferred distribution of wealth that Norton and Ariely found in their research:
The greatest concentration of wealth is at the "tippy-top," the people in the top 0.1%. Norton and Ariely found that a remarkably similar 93% of Democrats and over 90% of Republicans prefer a more equal distribution of wealth. Listen to Paul Salmon's 12 minute video:
Land of the Free, Home of the Poor |
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Last Updated on Saturday, 20 August 2011 06:56 |
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British epidemiologists Richard Wilkenson and Kate Pickett's book The Spirit Level: Why Greater Equality Makes Societies Stronger reveals the widespread effects of a country's inequality of income. Greater income inequality is related to a wide range of harmful effects including many related to health such as life expectancy, obesity, drug use, and mental illness, and to social measures such violence, bullying and conflict in schools, rates of imprisonment, happiness, levels of trust, children's well being, educational performance, and teen pregnancy.
Wilkenson and Pickett based their book on research that used statistics from first world nations and from states in the U.S. Following are two videos from a longer talk that they gave in 2010.
"Can an Unequal Society Become Sustainable?"
Epidemiologist Kate Pickett from the University of York addresses this question and more. See the 6 minute video and transcript
"Why Cubans Live Longer than Americans" - Kate Pickett explains that the systemic problems of inequality penetrate the entire social hierarchy, giving wealthy societies like the U.S., greater health problems and shorter life expectancies than many, less economically developed, nations. The video is not actually about Cuba, but part of a broader discussion of countries' wealth and their life expectancy. See the 3 minute video.
A cross cultural research project in 2009 found the U.S. to be the most dysfunctional society in comparison to 16 other wealthy countries on measures of social cohesiveness from the Successful Societies Scale. In fact, David Strand remarked in the August 3 Aitken Independent Age that the U.S. was a remarkable outlier, lagging other nations by a wide margin. Strand wrote, "our poor standing on the Successful Society Scale is not surprising considering three decades of public policies promoting economic and social insecurity. The middle and lower classes have been under attack for 30 years." Read his column summarizing the study.
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Last Updated on Sunday, 02 October 2011 02:32 |
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