Posts Tagged ‘CEOs’

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Is Dan Price [ht:sm], the founder and CEO of Gravity Payments who raised the salaries of his employees and slashed his own pay, a socialist hero?

Well, no. Not really. Price certainly doesn’t think so. And, in the end, he—not Gravity’s employees as a group—is the one who decided what the new pay scheme would look like. He is the one who took the decision to distribute some of the surplus produced by his workers back to them in the form of higher wages and to take a smaller amount of that surplus in his compensation.

But I do like the fact that the two KTVB interviewers, Dee Sarton and Carolyn Holly, are clearly taken with Dan Price and his decision—which presumably stand in sharp contrast to all the other CEOs they’ve been forced to interview over the years.

Even more, Price’s decision proves once again (as I argued back in 2013) that “capitalists do lots of different things.”

They do make profits (at least sometimes, but over what timeframe are they supposedly maximizing those profits?). But they don’t follow any single rule. They also seek to grow their enterprises and destroy the competition and maintain good public relations and buy government officials and reward their CEOs and squeeze workers and lower costs and build factories that collapse and. . .well, you get the idea. In other words, they appropriate and distribute surplus-value in all kinds of ways depending on the particular conditions and struggles that take place over the shape and direction of their enterprises.

So, 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.

IN-Russell IN-S&P

According to the AFL-CIO Corporate Pay Watch, in the state of Indiana, the 2014 CEO to average worker’s pay ratio was 101:1 (for corporations in the Russell 3000) and 306:1 (for corporations in the S&P 500).

In the nation as a whole, the ratio (for corporations in the S&P 500) was 373:1, which surpassed the ratio for 2013 (331:1)—both of which were much, much higher than the ratio in 1980 (42:1).

The average CEO compensation of Russell 3000 companies in 2014 was $5,504,432. As it turns out, the industry with the highest CEO pay was Tobacco Products ($13,061,671), followed by Railroad Transportation ($12,526,083), Petroleum Refining ($12,502,981), Communications ($10,769,054), and Hotels ($10,058,029).

As for the Security and Commodity Brokers, Dealers, Exchanges, and Services industry (where financial institutions like Goldman Sachs are located), the average CEO pay was “only” $8,102,970—ranging from $105,295 (for Joe Mansueto of Morningstar) to $88,518,411 (for Mario J. Gabelli of Gamco Investors, Inc.).

Clearly, a large portion of the surplus workers create ends up in the pockets (and portfolios) of the CEOs of the nation’s largest corporations.

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CEO-worker

The CEO-to-worker pay ratio is on the rise again, according to the Economic Policy Institute, after falling in the immediate aftermath of the financial crash of 2008. That’s both because corporate executives are able to capture more and more surplus and workers’ continues to stagnate.

The CEO-to-worker compensation ratio was 20-to-1 in 1965 and 29.9-to-1 in 1978, grew to 122.6-to-1 in 1995, peaked at 383.4-to-1 in 2000, and was 295.9-to-1 in 2013, far higher than it was in the 1960s, 1970s, 1980s, or 1990s.

According to more recent numbers, reported by Gretchen Morgenson, that ratio can be 1,073 (for Starbucks), 1,111 (for Qualcomm), 2,012 (for Microsoft), and even 2,238 (for Walt Disney). To be clear, that means Walt Disney CEO Robert Iger pulled in 2,238 times the median workers’ pay (estimated to have been $19,530 last year) at Walt Disney.

Here, according to the most recent figures (from Equilar) is the list of the top 25 highest-paid CEOs in the country.

CEO pay

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As it turns out, crows are even smarter than we thought possible.

And CEOs at large U.S. companies have collectively captured more in compensation than we thought possible.

According to Reuters [ht: ja], 300 CEOs who served throughout the 2009-2013 period at S&P 500 companies together realized about $22 billion in compensation—that’s $6 billion more in compensation than initially estimated in annual disclosures—in the form of pay, bonuses and share and option grants, or an average of $73 million each.

To put those numbers in perspective, the AFL-CIO estimates that, in 2013, the CEO-to-worker pay ratio was 331:1.* That ratio was 46:1 in 1983, 195:1 in 1993, 301: 1 in 2003.

Like any ratio, the result depends on both the denominator and the numerator. The CEO-to-worker pay ratio has grown because, during the 2009-2013 recovery, workers’ wages have remained roughly unchanged while CEO compensation has soared. Thus, the combination of falling unemployment, growing productivity, and higher corporate profits and stock prices we’ve seen in recent years hasn’t helped workers but only the owners and executives of the corporations where they work.

“The numbers can be obscene, particularly when you look at the general challenges we face as an economy and society,” said Matthew Benkendorf, a portfolio manager at Vontobel Asset Management, which oversees about $50 billion.

We’ve long known that crows are pretty clever. Remember Aesop’s famous fable “The Crow and the Pitcher”? The thirsty crow drops pebbles into a pitcher with water near the bottom, thus raising the fluid level high enough to permit the bird to drink.

Do we really need to be any more clever to figure out that—as CEO compensation continues to grow, leaving workers and everyone else further and further behind—existing economic institutions have failed us and need to be replaced?

*The CEO-to-minimum-wage-worker pay ratio in 2013 was, of course, much higher—774:1

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