Posts Tagged ‘corporations’

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The United States suffers from an obscene cult of CEOs. Whether we’re talking about “Neutron Jack” Welch (who was celebrated for raising GE’s market value while laying off tens of thousands of workers) or Bill Gates (who made Microsoft competitive by engaging in anticompetitive practices) or Lloyd Blankfein (head of the “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money”)—they’re routinely feted as being ruthless, “transgressive” leaders who make change happen in the corporate world.

I suppose it comes as no surprise, then, that two business professors—Hamid Bouchikhi and John R. Kimberly [ht: kc]—would extend that celebration to CEOs in the academy, by studying the decision by Dean of Arts and Letters Mark Roche to divide the Department of Economics at the University of Notre Dame.*

Transgressive leaders are those who are expected by members to abide by sacred organizational norms but who deliberately violate them for the sake of what they believe to be the greater good of the organization. . .The model of transgressive leadership we propose emerged in the wake of field work at the University of Notre Dame, where a new Dean of the College of Arts and Letters forced a paradigmatic, organizational, and managerial reorientation of economics after a long period of repeated and failed attempts by others to redirect the department.

What’s bizarre about this study is that the authors make clear that Roche did, in fact, violate many of the “sacred organizational norms” of the academy—and then they go on to celebrate him as a transgressive leader who managed to create a new, exclusively neoclassical department of economics.

What did Roche do to get to the point of forcing a split within the department? According to the authors, he “committed a series of lower intensity transgressive acts,” including expressing his own view of the paradigmatic orientation of the department, producing and publicly sharing numbers about members’ research productivity, and violating “the sacred norm of academic self-governance and democratic decision making in a research university” by appointing an advisory board, vetoing hiring proposals, and recruiting a new outside chair against the formal opposition of the existing departmental faculty. Those, of course, were all in the way—once the department itself didn’t cave to his demands—of preparing for, in 2003, the splitting of the department into two separate and unequal departments.

The department voted (15-6) against the split. So did the College Council (by a tally of 25 to 14). And the decision was challenged by several prominent mainstream economists, including Robert Solow (in a letter to the president of the university):

You should know that I am a mainstream economist, in fact a mainstream mainstream economist. But I am not an uptight mainstream economist. Economics, like any discipline, ought to welcome unorthodox ideas, and deal with them intellectually as best it can. It does pretty well, in fact. To conduct a purge, as you are doing, sounds like a confession of incapacity. I grant that you are not shooting the Trotskyites in the back of the head, but merely sending them to Siberia, That is not much of an improvement.

And Deirdre McCloskey (in an article in the Eastern Economics Journal):

What’s the problem nowadays at Notre Dame? … The Dean of the College of Arts and Letters, one Mark Roche, together with his agent in Economics, Richard Jensen, and with the backing of the Provost, Nathan Hatch, and the apparent entrepreneurship of the Dean of the Graduate School, Jeffrey Kantor, has decided that Notre Dame’s Econ Dept is broke . . . and should become mainstream…The Department has resisted. It’s being punished with appointments imposed on it; its promotions have been turned back. It may be abolished entirely, its distinctive graduate program scrapped, and a new one started that will be drearily Samuelsonian.

But the dean, with the protection of the university administration, ultimately got what he wanted. And, according to the authors, Roche’s transgressions ultimately served the good of his college because he sought to appease the faculty (by opening new communications channels and rewarding faculty members whose work met his criteria), thus leading to a celebratory self-evaluation (in his own private notes):

When I stepped down there was a truly joyful reception, as much like a wedding reception as a retirement party. It may be self-deception, but my sense was that there was more gratitude for what had been accomplished than for my leaving office.

Ultimately, Bouchikhi and Kimberly celebrate the cult of CEOs—who “have a clear vision of what needs to change and accept the collateral human cost, for others and for themselves, if they perceive causing hardship to others as a requirement.” It is a model that is well established in the corporate world and is increasingly becoming the norm in the new corporate university.

 

*Disclaimer: as regular readers of this blog know, I was a member of the Department of Economics when, in 2003, Roche, with the support of the university administration, decided to divide the department into two (one of which, the Department of Economics and Policy Studies, of which I was also a member, was dissolved by Roche’s successor, in 2010). I didn’t know about this research when it was being conducted but I am cited numerous times in the paper.

Capitalism new yorker

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The share of income captured by the 1 percent more than doubled (from 10 to 20.1 percent) between 1980 and 2013.

How did they do it?

Well, we know the tiny group at the top received much higher CEO salaries as well as stock dividends, capital gains, interest payments, and rent on the land and buildings they own. Those sources account for about 60 percent of the increase.

What about the other 40 percent? According to a new study from the National Bureau of Economic Research, the rest stems from the rapid growth in so-called pass-through businesses.

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The basic idea is that “pass-throughs”—businesses whose annual income is taxed at the owner-level (such as partnerships and S-corporations)—now account for more than half of all U.S. business income, thus passing traditional (so-called C) corporations. The figure above shows this dramatic transformation in the structure of business activity: 54.2 percent of U.S. business income in 2011 was earned in the pass-through sectors, compared to only 20.7 percent in 1980.

The key is that pass-through participation and income are especially concentrated among high-income individuals.

Relative to households in the bottom half of the income distribution, households in the top-1% of the income distribution are over fifty times as likely to receive positive partnership income. And the average top-1% household earns over six-hundred times the amount of partnership income as the average household in the bottom half. Overall, 69% of pass-through income earned by individuals accrues to the top-1%. S-corporate income is similarly concentrated, but other business income (typically considered very concentrated) is substantially less concentrated. For instance, only 45% of C-corporate income (as proxied by dividends) accrues to the top-1%, and top-1% households are only eight times as likely to receive C-corporate income as households in the bottom half. Furthermore, the majority of partnership income earned by the top-1% derives from partnerships in finance and professional services.

In addition, the pass-through income of partnerships is taxed at a much lower rate than traditional corporate income.

What the study shows, then, is that the change in the structure of U.S. business activity over the past three and a half decades means that members of the top 1 percent have managed to capture (via pass-through income) and keep (via lower taxes) a growing share of the surplus. That, as it turns out, is the major reason their share of total income has grown so dramatically. It’s also the reason why U.S. tax revenues from business income have decreased during that period.

The consequence is that rest of us, the 99 percent, have been forced to accept a smaller share of total income but to shoulder a higher tax burden.

That’s because the 1 percent have found new ways of both capturing and keeping the surplus.

ncaa

It may be a changing of the seasons in big-time college athletics—from football to basketball—but, according to Will Hobson and Steven Rich, the basic business model remains the same:

Since 2004, many athletic directors have seen their pay soar and have gone on hiring sprees, surrounding themselves with well-paid executives and small armies of support staffs to help their premier teams — primarily football — recruit, train and plan for games. . .

“We’ve gotten so complex . . . we need people with levels of expertise in a whole myriad of areas that we didn’t need years ago,” said Cindy Hartmann, who makes $225,000 as Florida State University’s Deputy Athletics Director for Administration, a job created in 2014.

“We’re responding to the competitive demands of the market,” Hartmann said. “We’re no different than any other corporation that wants its business to be successful.”

That business, however, depends on unpaid labor. To people who have worked for years to expand benefits for football and men’s basketball players, surging administrative pay exposes the fallacy of the NCAA’s argument that most big college athletic departments can’t afford to pay players.

“There’s just this overwhelming force of greed we’re up against,” said Ramogi Huma, president and founder of the National College Players Association. “It’s clear NCAA sports are financially rich but morally bankrupt.”

Pharmaceberg

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