Posts Tagged ‘CEOs’

Tom Toles Editorial Cartoon - tt_c_c160926.tif

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capitalist

Who are the capitalists?

It’s one of those questions I always pose to my students, and they always get wrong. Their mainstream economics courses don’t offer much help, since the term is never even mentioned. (I know, bizarre, since presumably what the students are being taught is a theory of capitalism, which surely includes capitalists.)

But, after scratching their heads for a while (since, clearly, they haven’t really thought about it before), they finally offer up some guesses: Shareholders? CEOs? Everyone?

Nope, I patiently and sympathetically respond. Not shareholders, since they offer money to firms in exchange for some portion of equity ownership, for which they receive a cut of the profits in the form of dividends. They’re not capitalists. Nor are the CEOs, who are hired by the capitalists to run the enterprises on a day-to-day basis.* And most of us are not capitalists, since we receive the bulk of our income in the form of wages; we don’t deploy capital to generate additional money in the form of profits.

So, my questions to them continue: What is the position of capital in corporate America? Who occupies that position? Who is the personification of capital in contemporary capitalism? Who is Mr. (and Ms.) Moneybags?

They remain stumped. And so I answer my own question: the boards of directors of capitalist corporations.

As I explained earlier this year:

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 enterprises. . .

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.

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But I was wrong—not about who occupies the position of capital, but about those “small fees.” As it turns out, according to recent research by Williams Tower Watson (a business consultancy that designs “solutions that manage risk, optimize benefits, cultivate talent and expand the power of capital to protect and strengthen institutions and individuals”), the average compensation of members of corporate boards of directors again increased last year, to $265,748 (about half in cash, the other half in stocks). That’s no “small fee” for a part-time position, which involves attending a few board meetings and offering occasional advice—and it’s a lot more than $160,000, which was the average board member’s compensation in 2006.**

So, as it turns out, the small group of individuals who occupy the position of Mr. (and, increasingly, Ms.) Moneybags not only appropriate the surplus from their workers. They also distribute to themselves a growing chunk of that surplus.

Not a bad job if you can get it. . .

 

*Corporate CEOs may not be capitalists but they’re certainly well compensated for their service to capital. According to the Economic Policy Institute [ht: sm], “in 2015, CEOs in America’s largest firms made an average of $15.5 million in compensation, which is 276 times the annual average pay of the typical worker.”

**According to Jena McGregor, “the average director would seem to be earning a little more than $1,000 an hour.”

 

 

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Apparently, Gravity Payments CEO Dan Price [ht: sm] recently received a gift from his employees, a new Tesla.

Price and Gravity gained fame last year when the young CEO announced to much fanfare a plan to raise pay to $70,000 a year for all employees, after a phase-in period. Price said he would also make $70,000, dropping his salary from more than $1 million annually. . .

Gravity spokesman Ryan Pirkle said the gift was thought up and organized by Alyssa O’Neal, an employee who he said was one of the “most impacted” by the raise.

A gift for a gift. Price decided to raise the salaries of his employees, and they reciprocated by buying him a new car.

It’s a heart-warming story. But, as I wrote a year ago,

I’m not prepared to celebrate Price as a “good capitalist,” as against all the “bad capitalists” who are choosing to increase the gap between average workers’ pay and the enormous payments to CEOs.

My point is a actually somewhat different: first, that capitalists—whether in Columbus or Seattle—do lots of different things, and presuming they follow a simple rule (whether profit-maximization as in the usual neoclassical story, or the accumulation of capital in many heterodox stories) means missing out on the complex, contradictory dynamics of capitalist enterprises; and second, that other kinds of enterprises (in which workers themselves make the decisions about how the surplus is appropriated and distributed) would do even more, on a wider scale, to transform the dynamics of the distribution of income and wealth in the U.S. economy.

It’s the difference between an individual gift and a gift economy. In the former, workers are forced to rely on the benevolence of their employer, to whom they feel beholden; in the latter, because they participate in appropriating the surplus they produce, workers actually have the means to regularly bestow gifts on themselves as a collectivity, on whatever bosses they may have chosen, and on the wider society with which they have a reciprocal relationship.

Now, that’s a gift economy worth celebrating.