I'm probably not the right person to be writing this. I'm not an economist; I don't have the math background; and I have a serious bias against CEOs who get away with shareholders' money for screwing up!
Be that as it may, this article on MSNBC MoneyCentral just points out how screwed up income inequality really is in this country...
More below the fold.
http://articles.moneycentral.msn.com/...
If you follow the link, you arrive at an article by Michael Brush which discusses just what a CEO's salary and options will buy. He goes through different markets and basically points out what they can buy in their particular market. The numbers are astounding, not to mention downright infuriating!
I've been thinking about this for awhile now, and I'm always surprised that the WSJ's and Forbe's and the other rightwing journals editorial position on this problem carries any weight. The WSJ and others have stated over and over again that these salaries are necessarry to get the very best CEOs, that CEOs have a limited workspan and should therefore be compensated accordingly. That, to put it bluntly, is Horse-Shit!
Firstly, CEOs, like the general population, come with differing levels of competency. Yet their salaries don't. The worst CEO in the US still makes a bonus even when he's managed to run the company into the dirt (remember K-Mart's bankruptcy and the Executive board trying to give out bonuses after closing 700 stores). And let's not forget the ones that are just plain criminal (can anyone say Kenneth Lay).
As to the question of limited lifespan as a CEO: Maybe if they stayed longer and cared more about the company, the company would do better. There are numerous examples of this as well. If you do any investing, you know that a significant factor in a company's health is the stake a CEO has in it, not just financially but in length of tenure. Look at Whole Foods Market for example. The CEO has been there for years and has no intention of going anywhere, and because he's competent, the company is thriving.
Finally, let's talk about who loses out when CEOs get paid these huge salaries and bonuses: All of us. Quite simply, if you're a stockholder, and the CEO gets paid over a couple million dollars, that's money out of your pocket. And since we can say with a great deal of certainty that most CEOs are mediocre at best, not only are you losing money because of mediocre performance but also because the guy (most CEOs are still men) is being over-paid.
How about workers: When CEO needs to downsize, does he downsize his salary first? No! So let's say the CEO gets $5 million. If he lowers his salary by $2 million (note he's still making $3 million), how many $40,000 jobs could he save? And let's not forget how many CEOs are making way more than $5 million (Lee Raymond received a $490 million retirement package from Exxon-Mobile).
And the economy: If I'm a CEO, how many houses can I buy? How many kids will I send to college? Whose healthcare will I pay for? How many cars will I buy? You get the picture. There's just no way a single CEO can spend the kind of money they make to fuel the economy the same way spreading some of that money around to more employees and shareholders will spend that kind of money to fuel the economy. 1 versus 100 or 1,000.
And let me point out, no one is saying that CEOs shouldn't get well-paid. But at what point does well-paid actually hurt the economic health of the country? I think that you could easily reduce the salaries and bonuses for most CEOs by 20%, and their lifestyle would feel no changes, while the economic benefits to the country would be significant. But that's just what I think.
If you've made it this far, thanks for your attention.