Posts Tagged ‘CEOs’

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A week ago, I wrote about the fact that the United States’ top 500 chief executive officers managed to capture 335 times the average worker’s wage last year, taking home $12.4 million on average.

But I didn’t make this calculation for the top 200 CEOS, including Wells Fargo’s chief executive, John G. Stumpf, who was awarded $19.3 million, “making him perfectly representative of the best-paid chief executives in the country”:

According to Bureau of Labor Statistics data compiled by the A.F.L.-C.I.O., the average worker in the United States who doesn’t have management responsibility earns $36,875 a year. . .

A bank teller at Wells Fargo making that average wage would have to work more than half a millennium, until 2539, to earn what that company’s chief executive, Mr. Stumpf, who made the average among chiefs on the Equilar list, earned last year.

That’s right: the average American employee would have to work until 2539 to earn as much as the average of the 200 highest-paid American CEOs did just in one year.

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Many CEOs and top-level managers manage to capture an enormous share of the surplus as payment in exchange for working. That we know.

We also know that, while faculty salaries have stagnated, the size and salaries of collegiate athletic coaching staffs have soared in recent years.

Then there are those, like former-Notre Dame football coach Charlie Weis, who get their cut of the surplus for literally not working—for doing nothing.

As has been the case for many years, former Notre Dame football coach Charlie Weis again received more money from the university in a recent year than any Notre Dame athletics employee.

Weis — who was fired by Notre Dame in November 2009 — received what has become his customary $2,054,744 during the 2014 calendar year, according to the university’s new federal tax return.

That means Weis received more from Notre Dame in 2014 than all but two university employees listed on the return, which the school provided Monday in response to a request from USA TODAY Sports.

Vice President and chief investment officer Scott Malpass was credited with nearly $5.4 million in total compensation in 2014, including just over $1 million that had been reported as deferred compensation in prior years; Malpass’ total also included nearly $2.9 million in bonus pay. Michael Donovan, the school’s managing director for private capital investments, was credited with more than $2.3 million, including just under $400,000 that had been reported as deferred pay in prior years and more than $1.1 million in bonus compensation. . .

According to the school’s tax records, Weis received more than $6.6 million pay and severance in 2009. He subsequently has been paid nearly $10.3 million by Notre Dame from 2010 through 2014. The tax records say that Weis was due to be paid through December 2015.

During that time, Weis also worked as an assistant for the Kansas City Chiefs and the  University of Florida. In December 2011, he became the head coach at Kansas, which was paying him $2.5 a season until firing him in late September 2014 with more than $5.6 million owed him under that contract.

 

Disclaimer: I am an employee of the University of Notre Dame but I have no say in determining the pay of anyone, working or not.

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Capitalism is a giant machine for pumping out the surplus from workers—just like feudalism, slavery, and other class-based economies before it.

That’s from one perspective. But the capitalist machine isn’t just about the “vampire thirst for the living blood of labor.” It also involves various mechanisms for capturing that surplus—in the form of dividends, CEO salaries, interest payments, and so on.

Another, increasingly important such mechanism is hedge funds. And boy are they capturing a lot of the surplus these days!

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The hedge-fund industry continues to balloon in size (after a dip during the financial crash in 2008, and even though 2015 was by all accounts a rocky year), with something like $3 billion dollars in assets under management.

And, as the New York Times reports, the pay of the industry’s leaders has soared.

JPMorgan Chase paid its chief executive, Jamie Dimon, $27 million in 2015. In another Wall Street universe, the hedge fund manager Kenneth C. Griffin made $1.7 billion over the same year.

Even as regulators push to rein in compensation at Wall Street banks, top hedge fund managers earn more than 50 times what the top executives at banks are paid.

The 25 best-paid hedge fund managers took home a collective $12.94 billion in income last year

Yes, billions, with a “b.”

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That’s the list of the top 10 (courtesy of Institutional Investor’s Alpha magazine)—from Griffin (at $1.7 billion) to Joseph Edelman (at $300 million) in 2015.

Not only are Griffin and company capturing a large share of the surplus (even when some of their funds actually lost money for investors last year, just by virtue of their sheer size).* They’re spending it—on everything from art and luxury housing to funding politicians and political campaigns.**

So, with the rise to prominence of hedge funds and other financial instruments, it’s time to revise our definition: capitalism is a giant, vampire-like machine for pumping out, capturing, and spending the surplus from workers.

*Ray Dalio made $1.4 billion in 2015 through Bridgewater Associates, the world’s biggest hedge fund firm with $150 billion of assets under management. Dalio, who founded Bridgewater, is frequently quoted promoting a strategy he calls risk parity. Yet Bridgewater’s risk parity fund, called All Weather, lost investors 7 percent in 2015.

**Griffin was the biggest donor to the successful reelection campaign of Mayor Rahm Emanuel of Chicago.

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There’s a story behind this Rick Friday [ht: jm] cartoon: he was subsequently fired.

Rick Friday has been giving farmers a voice and a laugh every Friday for two decades through his cartoons in Farm News. . .

“Again, I fall hard in the best interest of large corporations. I am no longer the Editorial Cartoonist for Farm News due to the attached cartoon which was published yesterday. Apparently a large company affiliated with one of the corporations mentioned in the cartoon was insulted and cancelled their advertisement with the paper, thus, resulting in the reprimand of my editor and cancellation of its Friday cartoons after 21 years of service and over 1,090 published cartoons to over 24,000 households per week in 33 counties of Iowa.

“I did my research and only submitted the facts in my cartoon.

“That’s okay, hopefully my children and my grandchildren will see that this last cartoon published by Farm News out of Fort Dodge, Iowa, will shine light on how fragile our rights to free speech and free press really are in the county.”

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Special mention

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Yes, American workers are angry. But not just for one reason—for many reasons.

It took a long time for U.S. political and economic elites (and their friends in economics) to understand that the American working-class has been squeezed far beyond what it can take. Even now, it’s not clear they understand, although the campaigns of Donald Trump and Bernie Sanders have given clear indications that the establishment is out of touch.

Even then, the anxieties and frustrations of U.S. workers can’t be put down to one thing.

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Sure, as Mark Muro and Siddharth Kulkarni explain, the American working-class is angry about the loss of manufacturing jobs.

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But let’s also remember that the share of manufacturing jobs in the United States has been on a steady decline since its peak of 39 percent in 1943.

Still, the drop in the number of U.S. manufacturing jobs accelerated in the new millennium, coinciding with a rise in the offshoring of jobs to and the rise of imports from Mexico, China, and other countries in the process of capitalist development. That’s certainly one key factor.*

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But American workers are angry for other reasons—such as the fact that, as Jared Bernstein explains, their wages, which had doubled from the 1940s to the 1970s, have flat-lined since.

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Even more: only wages at the top—above the 90th and 95th percentiles (which, as I have explained before, aren’t really like other wages but, instead, represent cuts of the surplus)—have seen any appreciable increase since the start of the Second Great Depression.

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Meanwhile, even with slow growth, corporate profits (both financial and nonfinancial) continue to rise to record levels.

Thus, workers are falling further and further behind, while the tiny group at the top continues to pull away from everyone else.

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What this means is that every indicator we have—such as average incomes and the share of income captured by the top 1 percent—shows grotesque and growing levels of inequality within the United States.

So, yes, American workers are angry—at the loss of jobs, their stagnant wages, their employers’ record profits, and the obscene and still-increasing levels of inequality they witness every day.

 

*Daron Acemoglu et al. (pdf) estimate that, considering both the direct and indirect effects, import growth from China between 1999 and 2011 led to an employment reduction of 2.4 million workers—and thus about 40 percent of the decline in manufacturing employment during that period.

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We have, by all accounts, a capitalist economic system.* But who are the capitalists?

It’s one of the questions I ask my students. And they always get the answer wrong. So, in my experience, do most other people.

But it’s a key issue. If we’re going to figure out how capitalism works—and, perhaps even more important, how to change it—we need to know who the capitalists are.

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Well, for starters, they’re not the “top 1 percent” or the “billionaire class”—although many capitalists are in fact members. Those groups, which have become part of our lexicon after Occupy Wall Street and the Bernie Sanders campaign, are defined by how large their incomes are. They’re clearly at the top of the pile in terms of the size of their incomes (and, even more, wealth) but they’re able to capture (and, via low tax rates, to keep) that money not by virtue of being capitalists, but by other means. They own stocks, bonds, and property (and receive dividends, capital gains, interest, and rent) and they are often chief executives of large corporations (and receive more equity share in addition to very high salaries). They benefit from capitalism but they’re not necessarily capitalists.

To put it differently, those who belong to the “top 1 percent” or the “billionaire class” receive large shares of the surplus created within capitalism but they don’t necessarily appropriate the surplus. They don’t “share in the booty” as capitalists; instead, a portion of the surplus is distributed to them by the group of people who are the real capitalists.

So, stockholders are not capitalists. They buy (or receive as compensation) shares in capitalist enterprises, and receive a part of the surplus in the form of dividends and capital gains. Nor are CEOs (and, for that matter, CIOs, CFOs, and other top executives). They’re hired to run the corporations on a daily basis, and often receive a cut of the surplus in the form of exorbitant salaries, benefits, stocks, and golden parachutes.

My students think that shareholders or chief executives are the capitalists but they’re wrong.

So, who are the capitalists?

As we often do with students, I answer that question with another question: who today occupies the position that is constituted—economically, politically, legally, and culturally—as the representative of “capital”?

And the answer is: the corporate boards of directors. The members of the boards of directors of corporations (say, of Standard & Poor’s 500 companies) are the ones who sit at the top and are ultimately responsible for the enterprises. They are the people who, during occasional meetings of the boards (for which they receive a small fee), decide the general direction of the corporation, hire and oversee top executives, and fend off crises. In other words, they occupy the position of capital and appropriate the surplus created by the workers within those entperprises.

To be clear, that doesn’t mean the capitalists get to keep the surplus they appropriate. Some of it is retained within the enterprise to hire more workers and to invest in new software and equipment (or, increasingly these days, to be kept as cash). Another portion of it is distributed to the management, to make sure the surplus continues to be produced by the workers, and as dividends to shareholders. And still another portion is distributed outside the firm—in the form of interest payments to banks, taxes to the government, and so on.

Within contemporary capitalism, then, capitalists are members of corporate boards of directors. And it’s a tiny group. Given that boards are made up of 10-15 members, we’re talking about (for the leading, S&P 500 companies) only 6250 individuals. Even less (closer to 4500), if we subtract interlocking directorates, that is, individuals who sit on more than one board.

For all kinds of reasons, capitalists are also members of the top 1 percent, the billionaire  class, stock owners, and chief executives. But, as capitalists, as appropriators of the surplus and the personification of capital, they’re a much smaller group.

The answer therefore is: in the United States today, the capitalists are members of the tiny group of people who form the boards of directors of the nation’s largest corporations.

 

*Well, to be accurate, the economic system in the United States is not entirely or exclusively capitalist. There are all kinds of forms of noncapitalism that form the economic iceberg hidden from view below the water line. I’m thinking of things like cooperatives and worker-owned enterprises, gift exchanges and volunteering, modern forms of slavery, feudal indentured servitude, and so on. None of those can very well be described as capitalist