Wednesday, April 11, 2007

BUSH REGIME'S ONE BIG SUCCESS-- INCREASING THE DISPARITY BETWEEN THE SUPER RICH AND THE REST OF AMERICA

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A few days ago I was ignoring the flatulence coming out of George Bush's face on CNN when I noticed an interesting crawl under his image. Someone I used to work for had had a big pay raise-- from $16.5 million a year to $22 million a year. His name is Dick Parsons and he became the CEO of TimeWarner in May of 2002 and added the Chairman of the Board title one year later. After the death of the company's founder, Steve Ross, Time Warner fell prey to avaricious corporate predators from outside the company-- AOL's Steve Case-- and inside. Under that regime, of which Parsons was a part, the company lost tens of billions of dollars and the share price plummeted from over $90/share to around $20/share. Today it is almost exactly where it was when Parsons became CEO. In all likelihood, at least $6 billion was looted by insiders, although I'm not accusing Parsons on being one of the ones who looted the company. Nor am I accusing him of being a visionary or a powerful force of any kind. I was a division president when he took over. I barely knew him and had the impression that he was a colorless bureaucrat who managed to wind up advancing up the corporate ladder by never making any waves. And he just gave himself a very nice raise. His contract expires next year and many think he harbors hopes to run for mayor of New York City. That raise he just got should be a good downpayment on that race. And, yes, of course, he's a Republican.

The official propaganda that his staff wrote about him is quite heroic:
Since becoming CEO, Mr. Parsons has led Time Warner’s turnaround and set the company on a solid path toward achieving sustainable growth. In the process, he has put in place the industry's most experienced and successful management team, strengthened the company's balance sheet and simplified its corporate structure, and carried out a disciplined approach to realigning the company's portfolio of assets to improve returns.


If any of it were remotely true he might be worth a tenth of the salary he's being paid. It isn't and he isn't. Unless you compare him to other chief executives. Oh, he's just as good as almost any of them. In 2006 the typical CEO at a big company made just over $10 million a year, almost a 10% increase from the year before. That doesn't count lavish exit packages and the benefits of deferred compensation-- and personal use of the corporate jet.

That said, Monday's NY Times ran an exhaustive piece on executive compensation, "in response to a barrage of criticism that regulators have not kept up with the complexities of swelling pay packages." This, of course, is one instance where it is not Bush Regime incompetence, but rather carefully-planned design where the interests of our country and our very society have been severely damaged. Regime "regulators"-- maybe "enablers" would be a more appropriate description-- have overseen the development of a reporting system so complex that even experts are unable to decipher the basics. "And a new section in proxies, meant to explain clearly how executives are compensated, is overrun with mind-numbing corporate-speak and legalese. Even the simplest of questions becomes mired in the disclosure swamp."

The CEO of AT&T, far from the highest paid executive ($31.5 million last year) "can look forward to about $73.8 million in deferred pay and the largest pension on the list, at $84.7 million in retirement benefits. The guy who did get the highest pay, Ray Irani of Occidental Petroleum ($52.1 million), "has more money socked away in his deferred compensation account than any other executive Equilar examined. In fact, Mr. Irani’s deferred pay of $124 million yielded at least $679,396 in interest last year-- interest that amounted to more than 14 times the average salary of an oil industry worker."

And that brings us to the plight of ordinary workers. Between 1995 and 2005, CEO compensation has increased by 298%. The average worker's pay has gone up by 4.3%. Worse, there is no correlation whatsoever between CEO pay and company profits. Earlier in the year I talked about the growing gap between the very rich and the rest of us in the Bush years. Under George Bush, the disparity between the boss and his workers has risen to a point to where the boss makes 475 times more than his average employee. There are no other industrialized countries even in the same ballpark.

Today's Wall Street Journal cautions investors that when the CEO buys a mansion, it's time to sell the company's stock. What about when he buys his sixth mansion? What is it time to do then? May I direct you to the little video hotlinked to the DWT World Headquarters icon on the right? David Sirota points out that the Journal should have mentioned that the hideous bankruptcy law actually allows the wealthy to shield their mansions. "A company CEO who knows he might be bankrupt or the target of shareholder lawsuits likely knows the best way to protect his money from seizure is to dump it in a huge house. That's thanks to bankruptcy laws that Congress passed on a bipartisan basis-- laws that created and preserve this mansion protection loophole."

And yet we have a Democratic Congress now. Won't that help? Maybe around the margins. I mean they voted to raise the minimum wage a bit, although Bush is likely to veto it unless they agree to more tax breaks for the super wealthy. And if you'll take a look at the piece Joshua Grossman wrote last night about California and extrapolate on a national basis, you'll get a better understanding of how difficult it is for progressives and populists to make real progress. Corporate-oriented Democratic senators like Max Baucus (MT), Joe Biden (DE), Mary Landrieu (LA),  Mark Pryor (AR), Blanche Lincoln (AR), Ben Nelson (NE), Tom Carper (DE), and Evan Bayh (IN)-- a few examples-- are more apt to vote with Republicans and their corporate allies than with Democrats on crucial issues of basic fairness. And, it's at least as bad in the House.

Progressive taxation has given way to the most regressive tax system this country has seen since Bush's political and spiritual antecedents, Herbert Hoover, Calvin Coolidge and Warren Harding. And in the immediate future, we have Americans believing hard economic times are just around the corner and that a recession is looming. There is probably nothing more likely to guarantee that than the widespread unease about Bush's economy. This morning's L.A. Times points out the bleaker outlook: "Sixty percent of the poll respondents said a recession was somewhat or very likely within the next year. Two-thirds said they thought the country was 'seriously off on the wrong track.' This is down from 70% in a similar poll last month but otherwise the highest in 12 years. 'I see prices keep going up-- gas, produce, groceries, heating oil, electricity,' said Martha Flynn, who lives in Chicago. 'People are struggling.' ...Economists say such sentiments often foreshadow trouble to come.

Is it any wonder that, according to today's NY Times, "Republican leaders across the country say they are growing increasingly anxious about their party’s chances of holding the White House, citing public dissatisfaction with President Bush, the political fallout from the war in Iraq and and the problems their leading presidential candidates are having generating enthusiasm among conservative voters?" Yesterday Republican leaders interviewed by the Times "were concerned about signs of despondency among party members." They ain't seen nothing yet-- especially not when you consider moves like the one management at Citigroup, the country's largest financial institution, made today. They just announced that they're "eliminating 17,000 jobs as part of a companywide restructuring to reduce costs and improve profit." When management fires large numbers of workers they inevitably get gigantic bonuses, regardless of whether long-term profitability is actually improved or not. And while the WSJ suggests selling shares if the CEO buys a mansion, another NY Times story recommends renting a place if the economic roof collapses.

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9 Comments:

At 9:17 AM, Anonymous Anonymous said...

As for hard times around the corner, consider the winter cold snap that will ruin fruit crops and the collapse of bee populations. More so than oil, these are big worries. Global warming is real and the consequences will be felt sooner rather than later.

The bees? No one knows why yet. Pesticides? GM crops?

Can we say famine?

 
At 7:06 PM, Blogger Standard Gauge Blogger said...

I have to agree completely. The question is how to stop bad management from destroying good companies and how to stop the managers from pillaging the treasury.

It has been a problem for centuries, however the issue is that the greed has become so prolific it is actually devastating the economy and leaving the ruling class walking over the bodies of the poor. In this case the poor is now the middle class.

Economically foolish? Well, yes, you never shit where you eat. And the middle class can't all be Walmart greeters. Thus the outsourcing to India continues and the ruling elite get to buy their yachts and go to the Cannes film festival.

Still, the French Revolution happened for very similar reasons. One difference though; there weren't nearly as many pissed off Frenchmen as there are pissed off New Yorkers. 300 Million pissed off people can make income redistribution look like a turd in a punchbowl. There's going to be a lot of ticked off church goers out there.

Go figure.

 
At 1:06 AM, Anonymous Anonymous said...

I agree 100%. The company went down hill very fast with no direction.... I was there as well. And lost too much.... We had plenty of projects. AOL WAVE ANYONE????!! Or Broadband??!!! They missed the boat on purpose! He will have plenty to answer for when he gets to the pearly gates.. If they even let him even go that far

 
At 7:49 AM, Blogger JustInTime said...

Dead on.

There is a real problem with CEO pay in general. I've just started reading the Lou
Dobbs book and I quote this fact from memory but I think it's pretty close. CEO pay from 1992 to 2002 in the US rose 340%. Rank and file workers pay in the same period rose 36%.

Rich getting richer, war on the middle class.

 
At 9:58 AM, Anonymous Anonymous said...

What about the standard economics theory that CEOs need to be paid exorbitant fees to promote risk taking, which theoretically benefits shareholders? Isn't that the real reason for the insane CEO salaries?

MB

 
At 10:11 AM, Anonymous Anonymous said...

They should have taken the (circa '88) Paramount offer when they had the chance - I still have the WSJ quote saying "..stockholders got hosed.."

 
At 7:37 PM, Blogger Unknown said...

check this web:
fairsalaries.com allows employees to anonymously share information about their salaries and jobs.
Find out if your salary is fair.

 
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