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In the important book by Thomas Piketty, Capital in the Twenty First Century, it is pointed out that in the US, the great rise in economic inequality has a higher component of wage inequality than in other countries.  Much of this is the enormous pay packages of the CEOs of corporations, and the huge bonuses of the financial industry.  

But how much of this is really wages or salary, and how much is simply management simply diverting capital from the corporation to its own pockets?  A recent example is the $58 million dollar severance package received by former Yahoo COO Henrique do Castro after only 15 months in his job.  Most of this was in the form of stock.  According to orthodox economic theory, wages should correspond to the marginal productivity added by the worker to the revenue of the employer.  Can anyone say that this guy, after 15 months of a job he was fired from, had added $58,000,000 more value than any of the other people who could have done that job for much less money?

What is really happening is that the upper management of American corporations, especially financial businesses, now have total control over their businesses, and are using this control to transfer as much of the wealth of those businesses to themselves as they can get away with.  This is no longer wages, this is diversion of capital.  This situation is becoming more institutionalized.  Just look at the utter failure to close the hedge fund manager tax loophole, the largest and most obvious special favor in the tax code.  

With the concentration of wealth comes increasing separation of the wealthy from the rest of society.  Will the current group of corporate and financial upper management become a de facto hereditary class?

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Comment Preferences

  •  Tip Jar (4+ / 0-)
    Recommended by:
    Greyhound, tardis10, Azazello, alypse1

    "The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt." Bertrand Russell

    by Thutmose V on Fri Apr 18, 2014 at 03:09:32 PM PDT

  •  IOW, Looting. (1+ / 0-)
    Recommended by:
    alypse1

    I had a front row seat to this "practice" for two corporations. Exactly the same technique both times.

    And don't forget the lawyers. The legal departments in these companies are full of lawyers that make more millions for themselves by facilitating this plunder.

    "Those who can make you believe absurdities can make you commit atrocities." - Voltaire

    by Greyhound on Fri Apr 18, 2014 at 03:16:40 PM PDT

  •  Wealth Has Become a Hereditary Class (1+ / 0-)
    Recommended by:
    alypse1

    The US has had less economic mobility, less of the American dream, than the other advanced democracies for decades. Birth to wealth is the best guarantee here of living out one's life in wealth.

    I'm sorry if bothers anyone that management rather than ownership are the beneficiaries. Because I don't give a rat fuck which it is.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Fri Apr 18, 2014 at 03:39:59 PM PDT

  •  Thutmose - de Castro left tens of millions (1+ / 0-)
    Recommended by:
    alypse1

    of dollars in unvested options at Google when he joined Yahoo. He would have never left Google without a guarantee that he would be made whole on his Google options, even if things didn't work out. You can argue that the cost of recruiting de Castro was too high, and with 20/20 hindsight it was, but not how the severance was crafted because that was the only way the deal could have been done. de Castro was a star at Google and could have stayed there and vested his Google options.

    "let's talk about that"

    by VClib on Fri Apr 18, 2014 at 04:38:30 PM PDT

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