Ezra Klein: The CEO's Are All Right

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May 31, 2005

The CEO's Are All Right

In case you were keeping track:

CEOs at California's largest 100 public companies took home a collective $1.1 billion in 2004, up almost 20% from 2003. That compares with the 2.9% raise that the average California worker saw last year, according to the Economic Policy Institute in Washington.

The difference is even sharper at the top rungs of the ladder. The 10 highest-paid executives on this year's list earned 36.7% more than last year's top 10 — garnering a collective $467.5 million. That's enough to buy about 275 homes in Malibu or 1.5 million sets of golf clubs or two 747 jumbo jets.

Some of those CEO's, like Yahoo's Semel or Apple's Jobs, have actually turned their companies around and justified a major salary for themselves. But was Semel's performance so impressive that he needed a 24,000% pay raise in 2004, which meant a total yearly haul of $175 million?

I'm all for performance incentives, but the market for them is simply too high. Since it's climbed so much in past years, any corporation attempting to attract a top CEO has to outbid an already-inflated going rate, leading to bizarro world stock options and cash bonuses. What to do? I'd suggest some nice Democratic demagoguery on the issue, but alienating the nation's CEO's probably isn't so good for our fundraising (particularly relevant as Dean continues to post lower than hoped donation totals). Savvier populists than I might have some suggestions on how to shame these numbers down or force stock options to enter ledger sheets in a rational way, but for now I'm relying on smarmy moral superiority to make my case. Keeps me warm at night.

May 31, 2005 | Permalink

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Comments

The Democrats need to wake up to the fact that they cannot develop policies, which are simultaneously good for the country and cater to the class of rapacious corporate executives.

If Dean wants to change the country's direction, he is going to have to forego contributions from our 21st century robber barons, and do the hard work of developing a funding base, which is indepedent of the funding basis of the Republican Party. Otherwise, the Democratic Party, or a large part of it, for much of the time, will be untrustworthy on ALL economic issues. Democrats will be voting for bankruptcy bills, and Social Security phase-out, and worse, because it is in the interests of the fund-raising class of corporate executives.

The U.S. does not need Democratic "demagoguery" so much as it needs fundamental reform of corporate governance and a truly progressive income tax. Oh yeah, and national health care, and wages, which rise with productivity. Are corporate executives going to support any of these? Maybe some horrifying form of national health care, the most salient elements of which will be a huge tax break for themselves (i.e. "health savings accounts") and a form of private catastrophic coverage, where the delays in payment ("what, you're not dead, yet? yeah, we'll approve that emergency treatment real soon now. Hold on, your call is important to us.") will make MBNA loan sharking look unprofitable.

The Democratic Party needs to find 3 million people, who are NOT corporate executives, to each give them $200/year. Then, the Democrats can develop and campaign for the kinds of policies, which will save the country and win elections.

Posted by: Bruce Wilder | May 31, 2005 12:14:11 PM

This is also the case in my world, the music industry. I have seen too many cases of CEOs dumping the labor force, while raking in huge salary packages, all the attempt to raise the bottom line and appease the stockholders.

Of course, most of the workers at the modern company are also stockholders; I wonder how they feel about losing jobs in order to keep their dividends high.

I posted about this many times, most recently here
where I referenced your recent riff on the WSJ article about "taking one for the team."

Look, somehow we need to raise the collective wisdom in this country about redistribution of wealth. Can't be done forcibly, except perhaps in the case of Mellon and Scaife. (just kidding...). But that needs to be a cultural imperative, that people shouldn't become multi-billionaires while kids are homeless and starving.

Posted by: Stephen Anderson | May 31, 2005 1:25:22 PM

Bruce, you said//huge tax break for themselves (i.e. "health savings accounts") and a form of private catastrophic coverage, where the delays in payment ("what, you're not dead, yet? yeah, we'll approve that emergency treatment real soon now. Hold on, your call is important to us.")//

Im sorry but the maximum an individual can put in their Tax Free HSA is $2,650 a year. I don't think a baseball player making $12 million a year thinks about HSAs as a "huge tax break" as you suggest. Granted, every single parent mother is paying FICA tax on every dollar earned and there is no FICA tax on employer HSA deposits. But if single parent mothers can save some taxes with an HSA, is that bad?

Also, the insurance company that I have my HSA insurance with answers their phone every single time I have ever called. In contrast, I called several government agencies, just today, and never talked to a live person one time.

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