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Time for change Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Dec-12-09 09:30 PM
Original message
Extravagant CEO Salaries and Ballooning Income Inequality in the U.S.
Grossly excessive CEO salaries in the United States have in recent years generated much wonderment and displeasure. With the coming of the severe recession or depression of 2008/2009, that displeasure has turned to outrage in many quarters. 77% of Americans believe that that CEOs are paid too much money, whereas only 11% of Americans admire those who run America's "largest companies" either "a great deal" or "quite a bit.

In 2008, the average annual pay for a CEO of a Standard & Poors 500 company was $10.9 million. Those at the top, our nations financial elite, make hundreds of millions of dollars in a year. In 2004, the average CEO pay in the U.S. was 431 times that of the average production worker. That compares with a ratio of only 42 to 1 in 1982.

Congressional hearings into this issue in recent years reflect the public outrage, though Congressional Republicans are not comfortable about digging too deep:

The questioning mainly fell along party lines, with Republicans apologizing for hauling such distinguished corporate officials before the panel, and Democrats questioning everything Many Republicans on the committee fought the very premise of the hearing. This is a hearing in search of bad guys, said Darrell E. Issa, Republican of California. Are there bad guys in front of me? Im not seeing it.

Many Congressional Democrats have expressed a very different view. I think Henry Waxman nailed it with this statement:

There seem to be two economic realities operating in our country today. Most Americans live in a world where economic security is precarious and there are real economic consequences for failure. But our nations top executives seem to live by a different set of rules.

Yes, two economic realities. One reality for some people, and another reality for other people. One reality for those who face long prison sentences for possession of a small amount of marijuana and another reality for those who commit treason with impunity.

An article by Gabriel Thompson titled Meet the Wealth Gap summarizes the roots of these different realities:

Its about the vast political power conferred by wealth, which can be deployed to support institutions pushing policies that, in turn, magnify the wealth divide. (These institutions) subsidize senior fellows who see something sinister in a living-wage movement that seeks to force urban firms to pay up to double the minimum wage. (They) call the movement a sneaky way of bringing socialist economics to Americas cities.


THE CONSEQUENCES OF SEVERE INCOME DISPARITY

I have often heard the opinion expressed that those (liberals) who complain about the excessive salaries of others do so out of nothing more than jealousy jealousy of the hard work and well-earned success of others.

But what if the multi-million dollar salaries of Americas CEOs have little to do with hard work or what we usually think of as success. What if their astronomical salaries are the result of other, more sinister causes? Is it really plausible that the work of the average CEO is 431 times more valuable than the work of the average production worker in the CEOs company? Is it plausible that a defense industry CEO warrants a salary of $11.6 million, while a military general with over 20 years experience warrants only $169 thousand? If it is true, as many believe, that CEOs rarely deserve their multi-million dollar pay, then what does that mean for our well-being as a nation?

Common sense tells us that unjustified astronomical salaries for some mean that there will be less for others. Commonsense also tells us that if CEOs are guaranteed multi-million dollar salaries regardless of whether their performance generates anything of value regardless of the effects of their activities on other people then they will have little motivation to consider the value of their activities with respect to the people who are affected by them. But lets not rely on common sense. Lets just consider some of the consequences of huge income disparities in general, as those increases have largely paralleled the increases in income disparity between CEOs and their workers:


Depression

Inside of Gabriel Thompsons article is a graph titled Plutocracy Reborn Re-creating the Gap that Gave us the Great Depression. Here it is:



This chart plots income inequality, measured as the ratio between the average income of the top 0.01% of U.S. families, compared to the bottom 90% (that would be most of us at DU). Note that preceding the great stock market crash of 1929, which plunged us into depression, the ratio rose from about 250 at the start of the 1920s to a peak of about 900 by 1929. The ratio then plunged, and by the start of WW II it had declined to about 200, where it remained with some relatively minor ups and downs until the beginning of Ronald Reagans Presidency. It then began another precipitous climb, with a sharp decline beginning during the last year of Clintons Presidency, but then another sharp increase beginning at about the time that the Bush tax cuts for the wealthy first went into effect, so that by the end of 2006 weve exceeded even the peak ratio of 1929 that preceded the Great Depression. The three green bars in the chart represent the stock market crash of 1929, the last pre-Reagan year, and two years preceding our current recession/depression.


Poverty

Consider the graph on page 11 of the U.S. Census Bureau publication, Income Poverty and Health Insurance Coverage in the United States: 2006. That graph shows that beginning with President Lyndon Johnsons much maligned War on Poverty in the early 60s, poverty in the United States declined precipitously, from about 22% to 12%, before leveling off beginning around 1970. Then, with the onset of the Reagan Revolution starting in 1981, poverty began to rise again, reaching a maximum of about 15% twelve years later, just prior to the Clinton Presidency. The poverty rate then began a slow steady decline, to about 11% by the end of Clintons presidency, followed by another rise with the onset of the Bush II administration, to 12.3% by mid-year 2006. It then climbed to 12.5% in 2007 and 13.2% in 2008. However, that is not the end of the story, by any means. The current recession/depression will in all likelihood (and its probably already started) send another 5-10 million Americans into poverty, thus raising the poverty rate in our country another 1-4%.

These statistics are no accident. They are the result of federal legislation and policies meant either to help the poor or to help the wealthy. President Johnsons War on Poverty reduced poverty substantially in our country. The only rises in poverty rate weve seen in our country since FDRs New Deal (which decreased poverty) began with the Reagan and Bush II administrations, which are the only two presidential administrations since that time to substantially lower the top marginal tax rate, along with other fiscal policies that favor the wealthy at the expense of the poor and the working and middle class.


Pricing the rest of us out of the market

Severe income inequality means that everything that rich people want will be priced to reflect the amount of money that theyre willing to spend on in it. Barbara Ehrenreich, in an article titled This Land Is Their Land discusses what severe income inequality means to the rest of us in practical terms. First, she notes a recent vacation of hers that was going pretty well until she found out that even with a 60% discount she couldnt find a sleeveless cotton shirt for less than $100. That experience made her recall the first rule of todays income inequality, which is If a place is truly beautiful, you cant afford to be there. For example, on the subject of Key West, Florida, for which that rule did not apply as of 1986, Ehrenreich notes:

Then, at some point in the 90s, the rich started pouring in. They drove house prices into the seven-figure range. They encouraged restaurants to charge upward of $30 for an entre. They tore down working-class tiki bars to make room for their waterfront condotels. As for Key Wests characters with the traditional little conch houses once favored by shrimpers flipped into million-dollar second homes, these human sources of local color have to be prepared to sleep with the scorpions under the highway overpass

Once theyve made (or inherited) their fortunes, the rich can bid up the price of goods that ordinary people also need housing, for example dispersing the urban poor into overcrowded ranch houses, while billionaires horse farms displace rural Americans into trailer homes. Similarly, the rich can easily fork over annual tuitions of $50,000 and up, which has helped make college education a privilege of the upper classes. Going out to a ballgame has become prohibitively expensive Superrich collectors have driven up the price of artworks, leading museums to charge ever rising prices for admission The more expensive a resort town gets, the farther its workers have to commute to keep it functioning.


THE ROOTS OF GROSSLY OUTRAGEOUS CEO SALARIES

Though the good majority of Americans believe that most CEOs in their country are overpaid for what they do, there is much debate on the reasons why corporate executives are rewarded so lavishly today, even when they fail at their job. As noted above, astronomical CEO salaries are reflective of our societys priorities in general, as manifested by legislation and policies that influence the distribution of wealth in society.


Corporate tyranny prior to the Great Depression of the 1930s

Our current economic plight is the worst since the Great Depression of the 1930s. Because of President Hoovers ideological inflexibility, he was unable to make any progress in fighting that depression, which led to FDRs landslide victory in the election of 1932. FDRs New Deal resulted in a reversal of the steep slide in GDP and the largest rate of job creation (5.3%) in any presidential term in recorded U.S. history to this day.

In his 1936 address to the Democratic National Convention, FDR explained the role of corporate tyranny, with the never-ending striving for greater corporate profits, as the major cause of our nations economic plight. He called them Economic Royalists.

Out of this modern civilization economic royalists carved new dynasties. New kingdoms were built upon concentration of control over material things. Through new uses of corporations, banks and securities, new machinery of industry and agriculture, of labor and capital, the whole structure of modern life was impressed into this royal service

Throughout the Nation, opportunity was limited by monopoly. Individual initiative was crushed in the cogs of a great machine. The field open for free business was more and more restricted. Private enterprise, indeed, became too private. It became privileged enterprise, not free enterprise

For too many of us the political equality we once had won was meaningless in the face of economic inequality. A small group had concentrated into their own hands an almost complete control over other people's property, other people's money, other people's labor-other people's lives. For too many of us life was no longer free; liberty no longer real; men could no longer follow the pursuit of happiness.

Against economic tyranny such as this, the American citizen could appeal only to the organized power of Government. The collapse of 1929 showed up the despotism for what it was. The election of 1932 was the people's mandate to end it. Under that mandate it is being ended.

And indeed it was ended. But then in the 1980s it began again, as a new Republican president re-sold our nation on the virtues of small government and corporate freedom to do whatever they want, with massive government assistance. Thom Hartmann discusses this in his book, Threshold The Crisis of Western Civilization:

During the greed is good era of the 1980s, something changed. CEO salaries began to explode at the same time that the behavior of multinational corporations began to change. When Reagan stopped enforcing the Sherman Antitrust Act, a mergers-and-acquisitions mania filled the air The result was a series of waves of layoffs, as entire communities were decimated, divorce and suicide rates exploded

It was the same old philosophy that a succession of three conservative Republican presidents and a Republican Congress operated on during the 1920s, leading up to the Stock Market Crash of 1929, followed by the Great Depression. We shouldnt be surprised that were seeing similar events unfolding today. .


Incestuous methods for determining CEO salaries

Thus it is that today the salaries for corporate CEOs are determined by a corporate Board of Directors, with little oversight. A principle method that these boards use to determine executive pay is to tie it to the average pay for executives in similar companies, which are referred to as peers. But research has shown that for the purpose of determining executive compensation, peers at the high end of the income scale are typically identified, resulting in an over-estimation of CEO pay of several hundred thousand dollars, with a corresponding overpayment of the CEO in question. This generates a positive feedback loop, wherein executive pay is continuously raised by comparing it to salaries that have been previously raised by the same process.

Why do the boards routinely overpay the executives whose pay they are charged with determining? There are many related reasons, all centering on the fact that they and the CEOs are part of the same club and there is little oversight. One problem is that many CEOs sit on each others boards. If that doesnt represent a conflict of interest, then what does?

There are many different kinds of interrelationships between the CEOs and the boards that determine their compensation. The end result is:

Flawed compensation arrangements have been widespread, persistent, and systemic, and they have stemmed from defects in the underlying governance structure that enable executives to exert considerable influence over their boards

For example, a Home Depot compensation board awarded $245 million to its CEO over five years, despite the fact that its stock slid 12% during that time:

To its critics, the Home Depot Compensation Board exemplifies the close personal and professional ties among board members and executives at many companies ties that can make it harder for a board to restrain executive pay. They say this can occur even though all of a board's compensation committee members technically meet the legal definition of independent, as is the case at Home Depot When you have a situation like this where it is so incestuous, it creates uncertainty whether pay is a reflection of these relationships or performance.

Yeah, thats one of the biggest understatements Ive ever read.


What is so valuable about todays corporate executives?

Thom Hartmann explains in his book that there is one special skill that many of todays most highly paid CEOs have that could partially explain their extravagant salaries:

One of the questions often asked when the subject of CEO pay comes up is What could a (CEO) possibly do to justify a $1.7 billion paycheck Its an interesting question. If there is a free market of labor for CEOs, then youd think there would be a lot of competition for the jobs

Only one rational answer presents itself: CEOs in America make as much money as they do because there really is a shortage of people with their skill set What part of being a CEO could be so difficult that there are only a few hundred individuals in the United States capable of performing it? In my humble opinion, its the sociopath part.

CEOs of community-based businesses are typically responsive to their communities and decent people. But the CEOs of the worlds largest corporations daily make decisions that destroy the lives of many other human beings. Only about 1 to 3 percent of us are sociopaths people who dont have normal human feelings and can easily go to sleep at night after having done horrific things. And of that 1 to 3 percent of sociopaths, theres probably only a fraction of a percent with a college education. And of that tiny fraction theres an even tinier fraction that understands how business works, particularly within any specific industry. Thus there is such a shortage of people who can run modern monopolistic, destructive corporations

Todays modern transnational corporate CEOs are remnants from the times of kings, queens, and lords. They reflect the dysfunctional cultural belief that wealth is proof of goodness, and that goodness then justifies taking more wealth.

An example Chevrons quest for oil
A $6 billion lawsuit brought against Chevron in 2003 for their activities in Ecuador provides one example of the things that some corporations do when they accumulate too much power. Antonia Juhasz describes the events in her book, The Bush Agenda Invading the World One Economy at a Time:

Indigenous communities were removed from their land to make way for the oil facilities, as were more than one million hectares of ancient rainforest. According to the suit, rather than install the standard environmental controls of the time. Texaco (a co-defendant in the suit) dumped 18.5 billion gallons of toxic waste directly into the rainforest. The result is an exploding health crisis among the regions indigenous and farmer communities


CONCLUSION THE FRUITS OF REAGANISM

Obscenely high salaries for corporate executives is perhaps the most ostentatious manifestation of the accelerating trend towards vast economic inequality in the United States today, not seen since the days preceding the Stock Market Crash of 1929 and the Great Depression. Both trends began in the early 1980s and have much the same root cause the Ronald Reagan philosophy that advocates that government get out of the way so that corporations may have the freedom to do whatever they want.

We now live in a country where lower class criminals are imprisoned for possession of small amounts of drugs, contributing to the largest imprisonment rate of any country in the world, while barriers to swindling perpetrated by the rich and powerful have been removed one after another, facilitating their legal accumulation of vast riches. And even when they cross the line and break what legal barriers remain they are often pardoned or their crimes simply ignored sometimes with the rationalization that we must look towards the future.

We are constantly told that the economic foundation of our country is the free market. But the free market is free only in the sense that corporations are given the freedom to do whatever they want, at the expense of everyone else, and ogten with massive government assistance.

William Kleinknecht, in his book, The Man Who Sold the World Ronald Reagan and the Betrayal of Main Street America, comments on how Reagans deregulatory philosophy affected our country:

In the Reagan years, corporate leaders were crossing lines that a few years before would have been unthinkable. A 1984 article in the New York Times captured the moral revulsion aroused by the budding era of greed: a me-first, grab-what-you-can extravagance appears to be cropping up among the nations top executives. It shows itself in the disproportionate salaries and bonuses paid to so many corporate chiefs the multi-million severance payments awarded even to CEOs who fail and drive their companies into the ground

After the stock market bubble burst, these towers of speculation and accounting chicanery came tumbling down. The falling stock market revealed the inherent instability of huge companies hastily put together by mergers Enrons mind-boggling betrayal of employees and shareholders and its unseemly manipulation of power prices in the midst of Californias electricity crisis should in itself have been enough to forever repudiate Reaganism.

Where was the Securities and Exchange Commission while this free-for-all on Wall Street was reshaping the corporate map? Where were the Federal Energy Regulatory Commission, the Federal Trade Commission, the Justice Department Antitrust Division, and a host of other federal regulatory agencies whose job it is to protect citizens from corporate thievery? They were fulfilling the promise of Reagan and his Millionaire Backers. They were letting the market work its magic.

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The Magistrate Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Dec-12-09 09:39 PM
Response to Original message
1. Home Truths, Sir....
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proud patriot Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Dec-12-09 09:40 PM
Response to Reply #1
2. Agreed
Hello Sir :hi:
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olegramps Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Dec-15-09 08:09 AM
Response to Reply #2
57. Want a solution: UNIONIZE
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WVRICK13 Donating Member (930 posts) Send PM | Profile | Ignore Sun Dec-13-09 07:48 AM
Response to Reply #1
14. The Government Is Making
us more like Afghanistan than I like to think. Corruption is rampant, with everything designed to raise the wealth of the rich and lower the power of the middle and lower classes. It is hard to have power when you are concerned about survival. Our economic and social collapse has occurred in a series events that had a compound effect. First, tax cuts to the wealthy that helped collapse the income gains of the middle class so we fixed it by helping the wealthy with TARP. The rich are still rich and the rest of us are wondering about what the future holds. No matter what the problem, the solution is to prop up the wealthy through taxes on the middle class. Health care reform is a sham. It has become diluted for the working class and offers a great potential of big Pharma and the insurance industry raping the masses. There may be a glimmer of hope with the Jobs Bill but who knows what the final document will look like? The decline of the middle class began with the destruction of family owned businesses in our communities. We rushed to buy junk knock offs of expensive items at places like Walmart helping destroy our own survival. Did everyone really need a $60 microwave? Are the junk knock offs really more economical than the more expensive items they replaced? For example, my parents are still using a microwave I bought in 1981 for $469 and it has not failed one time. Since then I have owned so many cheaper models I have lost count.

The real tipping point for the economy was when the Bush administration allowed the price of gasoline to spike to over $4.00 per gallon. The oil companies took the economic buying power of a nation and put it in their bank accounts. Why did the price spike? I contend it spiked because it was their last hurrah before the oil president left office. Money that had been paying huge mortgage payments was suddenly put into gas tanks so we could commute to work. And the slippage began. As more dominos fell the rest followed suite.

When you put entire segments of a society into survival mode you can do anything you want in government, because people stop paying attention. On the flip side when you start raising peoples comfort levels they begin to question and expect more progress. The trick is to keep us quiet at the beginning and the depressive mental state will take care of the rest. I see many Americans who have given up and are in survival mode with more and more of us joining their ranks every day. This is what happened in Nazi Germany. The people were tired of declining wealth and hyperinflation (Same effect as a sustained recession. The prices may not be rising but our ability to buy is decreasing). All it will take to become unrecognizable as the United States of old will be a charismatic candidate who promises growth and prosperity. There are some who think Obama is that candidate. I discount that belief because I think our President means well but he is basing his trust on his own ethics so he is easily duped by those who seek to destroy the middle class. He has not figured out he cannot win by being inclusive or nice. He needs to follow his heart and push forward and not care about a consensus.
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Blue_Tires Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 07:41 PM
Response to Reply #1
41. welcome back, sir!
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NYC_SKP Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Dec-12-09 09:47 PM
Response to Original message
3. Great post, and a fundamental argument to bring more Americans around to change.
I hope you don't mind that I posted a link to your OP in another thread.

:kick:
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Time for change Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 09:28 AM
Response to Reply #3
15. Thank you
I don't mind at all -- Thank you for posting it.
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KakistocracyHater Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Dec-12-09 09:51 PM
Response to Original message
4. end ceo position, as it exists soley at the pleasure of the U.S. government
it is good for the corporation & good for the tax-payer & good for the workers & the shareholders, as their salaries & pensions will no longer be plundered to pay the ceo.

Outlaw ceo position.
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OffWithTheirHeads Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Dec-12-09 09:55 PM
Response to Original message
5. NOW can we PLEASE chop their fucking heads off?
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grahamhgreen Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 08:49 PM
Response to Reply #5
43. You should start the Guillotine Party!
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bdamomma Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Dec-15-09 09:08 AM
Response to Reply #5
59. yea for real.
let them bend to us for a change.
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HCE SuiGeneris Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Dec-12-09 10:05 PM
Response to Original message
6. An excellent essay.
I hope you publish in more places than DU. Your work needs greater exposure.
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Time for change Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 03:10 PM
Response to Reply #6
28. Thank you. I do occasionally.
Daily kos, OpEd News, and some other lesser known sites. Sometimes people pick them up and publish them on their own sites.
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WhaTHellsgoingonhere Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Dec-12-09 10:10 PM
Response to Original message
7. Ah, here's that "we're turning into a 3rd World country" thread I was looking for.
Excellent thread. Thanks.

K&R
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dotymed Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 05:56 PM
Response to Reply #7
34. We are a third world country
with the worlds largest arsenal and more wealthy people than almost anywhere. Yet, fathers(with degrees) and kids in college have to work at gas stations for minimum wage, if they can find it....Take to the streets. Take our wealth and our country back. People before profits...the revolution is coming, soon I hope.
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lonestarnot Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Dec-12-09 11:32 PM
Response to Original message
8. We be fucked and they're not jump'n yet!
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Oldtimeralso Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 12:48 AM
Response to Original message
9. America Love It...
or Leave It. (if you can afford to) :sarcasm: :sarcasm: :sarcasm:
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Vidar Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 01:34 AM
Response to Original message
10. K&R.
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Goldstein1984 Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 03:57 AM
Response to Original message
11. Very nicely put together. I love reading this kind of thing...
It keeps me pissed off.

There is nothing else on my mind at this moment that I can put in print with our nation as constitutionally challenged as it currently is.

The "chop off their heads" suggestion is very appealing, though.
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Union Yes Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 04:09 AM
Response to Original message
12. Great Post. Note the wealth divide's explosive growth since the passage of NAFTA.
knr!
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mistertrickster Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 05:48 PM
Response to Reply #12
33. Yup. That's what I noticed too. Mr. Clinton may not have been as bad as
Reagan-Bush-Bush, but the facts don't lie: the top .01 percent earned 400x the average salary of the "bottom" 90 percent when Clinton took office. That number shot up to above 800x before it settled back down to about 500x at the end of his eight year run.

One can't say that Clinton helped the situation much . . .
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markbark Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 07:16 AM
Response to Original message
13. Word..
It's quite ironic that the current power elite (of BOTH parties!) want to change the economic system that defeated communism into the system that spawned it. George Santayana wasn't far off, huh?
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liberation Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 01:35 PM
Response to Reply #13
25. Huh?
whaaaaaaaaaa?
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laughingliberal Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 09:31 AM
Response to Original message
16. K & R nt
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WT Fuheck Donating Member (392 posts) Send PM | Profile | Ignore Sun Dec-13-09 10:44 AM
Response to Original message
17. At the risk of all of y'all seeing my butt crack while I'm bent down under the political sink,
Edited on Sun Dec-13-09 10:44 AM by WT Fuheck
I'd just like to say, "Well there's your problem, right there!"
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bertman Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 11:06 AM
Response to Original message
18. Thanks for that installment of "Continuing Education Regarding Critical Matters" by
Time for change.

Recommend.
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zeemike Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 11:14 AM
Response to Original message
19. What can I say except bravo and K&R.
And if we can get people to wake from this mesmerized state and see this, change will come quickly.
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snot Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 11:48 AM
Response to Original message
20. K&R'd & Bookmarked.
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Octafish Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 12:00 PM
Response to Original message
21. CEO skillset qualifier: Sociopathy
Abso-rockin-lootly.

William K. Black, author of "The Best Way to Rob a Bank Is to Own One," pegged the fellahs as "Control Fraud" artistes:

The Two Documents Everyone Should Read to Better Understand the Crisis

Thank you for another outstanding essay, Time for change. Your work is great.
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Time for change Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 08:41 PM
Response to Reply #21
42. I really like this quote, from your link:
Control frauds cause greater financial losses than all other forms of property crime -- combined. Control fraud epidemics can arise when financial deregulation and desupervision and perverse compensation systems create a "criminogenic environment".

A "criminogenic environment"! Kind of like a wealthy neighborhood with no police or private security guards.
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Octafish Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-14-09 11:00 AM
Response to Reply #42
53. ''Control Fraud'' is no accident. It is a crime. For some, it's S.O.P.
Got your "Criminogenic Environment" right here, pal:

Know your BFEE: Goldmine Sacked or The Best Way to Rob a Bank Is to Own One

Here's how Bush and his cronies did it:

Know your BFEE: Phil Gramm, the Meyer Lansky of the War Party, Set-Up the Biggest Bank Heist Ever.

My friend, the turds will be shocked to learn there aren't enough gated communities in all of Westchester and Highland and wherever else they don't give a damn to keep the Rabble at bay.
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moondust Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 12:03 PM
Response to Original message
22. Pigs.
Edited on Sun Dec-13-09 12:47 PM by moondust
Country......Ratio of CEO pay to average worker pay (2004)

Japan................11:1
Germany............12:1
France...............15:1
Italy..................20:1
Canada..............20:1
South Africa........21:1
Britain................22:1
Hong Kong..........41:1
Mexico...............47:1
Venezuela...........50:1
United States....475:1
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hfojvt Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 12:07 PM
Response to Original message
23. it's not all CEO salaries
I don't believe CEOs make up the bulk of the top .01%. According to David Johnston's "Perfectly Legal" - "In 2000, these 13,400 taxpayers had an average income of $23,969,767." (p. 38) and according to you the average CEO was well below that even in 2008
"In 2008, the average annual pay for a CEO of a Standard & Poors 500 company was $10.9 million." (also there are 13,400 superduper rich people and only 500 companies) The people at the very top - the Walton's and Bill Gates, etc. don't make their fortunes as CEOs. They make their fortunes from the dividends and capital gains that their fortunes make for them. A Walton heir can have over $40,000,000 just in dividend income, and thanks to the Bush tax cuts of 2003 that unearned income is taxed at a rate far below the top marginal rate.

True, for some years a CEO can make $200 million like Michael Eisner did one year, but many of the people making ridiculous money at places like Goldman Sachs are not CEOs or CFOs either.

There is also the matter of wealth. For an LTTE I was trying to determine the annual income of Charles Koch. I did not find it, but I found that his wealth grew from $6 billion one year to $12 billion the next year, according to the Forbes 400. His income was probably not $6 billion for the year, but in a practical sense it was. At least income does not seem to be the only measure of his power and prosperity.
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Time for change Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 01:33 PM
Response to Reply #23
24. No, not at all
If CEO salaries were the only problem we had with income inequality in our country we'd be in much better shape than we are. But as I say in the last section of the OP, "Obscenely high salaries for corporate executives is perhaps the most ostentatious manifestation of the accelerating trend towards vast economic inequality in the United States today..." In other words, CEO salaries are emblematic of a much larger problem we see in our society today.

It is also noteworthy that both the obscene CEO salaries and income and wealth inequality in general have very similar root causes, the Ronald Reagan philosophy that advocates that government get out of the way so that corporations may have the freedom to do whatever they want.
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Politicub Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 01:36 PM
Response to Original message
26. Exorbitant CEO pay is immoral
When people are getting laid off by the thousands, it is unconscionable that CEO pay continues to go through the roof. I'm sick of so much of the robber baron mentality that continues to accelerate in America.

But what can we do about it? Congress has no plans to address it. Shareholders don't seem to care. No matter how hard we the people try to do something about it, legislators ignore us.

So much of modern day America seems absurd - and we all continue to play a proscribed role in the farce.
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dotymed Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 06:14 PM
Response to Reply #26
37. If we do not exercise our right
to take the street and establish a new government when the current government no longer represents the people, then we will lose that right and it will be our fault, as it is right now. Kick your TV's in and take to the the street and don't leave until the wealthy have to learn to survive the same way us "lower class" (3 degrees..lol, no ivy league ones though) do.
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Overseas Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 01:40 PM
Response to Original message
27. Another Thank You K&R.
Edited on Sun Dec-13-09 01:41 PM by Overseas
You've done it again for us. Compiled the necessary links and info to make the case we want to make--

It's the Plutocracy, stupid!

We were there again. Late 1920's. Economic royalists abound. Pulled the market back from falling off the cliff, but need to do more to reestablish the middle class.

That's why my dreams of President Obama coming in and corralling the Democrats to go super-FDR on the country are so hard to let go. 2009 would have been the perfect time to have done so. And he could have been very 21st Century about it-- the dramatic changes in policy directions required are also very pragmatic. You don't have to be a super-liberal to make those choices or justify them. Just honest about where things stand.

I was grateful that Matt Taibbi pointed out I was not crazy. President Obama did have economic populist advisors during the campaign. My hopes for an FDR style were not unfounded, as folks seem to want me to believe nowadays. It's just that those advisors were sidelined in favor of the Economic Royalists in Chief.



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Time for change Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 09:12 PM
Response to Reply #27
48. In a rationale world, one would think that following FDR's lead would be the pragmatic thing to do
After all, his presidency, given what it was up against, could be considered the most successful in U.S. history. And it resulted in highly positive effects, including the creation of a strong middle class and several decades of unprecedented prosperity. Why shouldn't we call that "pragmatic" rather than "liberal" or "radical left-wing"?

But unfortunately, we live in an Orwellian world rather than a rationale world, so following FDR's lead would have marked Obama as some sort of "Communist".
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Overseas Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Dec-15-09 08:42 AM
Response to Reply #48
58. The GOP and Rapture Right call even weak populist moves Commie already.
That makes me extra sad. Even groveling for a 1% bipartisan vote is jumped on as too darned socialist for them.

Democrats knew from Clinton's era that whatever their president tried to do to help the natural people rather than the Corporate Superpersons would be labeled as Commie.

The Authoritarian Loonies already have called President Obama everything in the book, as we should have known they would. They've still got the right wing PR firms' ample funding to preserve the plutocracy, like last time.

So why not go for the best-- go for FDR stuff which works-- because whatever you do they'll call Commie.

That's why I had so much hope for the new guy. He could have come in all practical, going to do what works best for the most of us citizens. That's the moderate thing to do. We'd reached a Plutocracy again, like the late 20's, almost crashed again, so okay, we're gonna reinstate the curbs on concentration of wealth and give the masses some bailouts like healthcare. Go ahead and take care of all the deferred maintenance left to us by the Bush Gang that prioritized privatized war instead of the public good. Then do the green jobs as an even more practical approach to national security by making us less dependent upon foreign oil, and the Plutocrats would pay their minions to shout commie some more, but at least we would have gotten practical changes going that would help a lot within a few years and put desperate people back to work right away.

Now we've got all the Democrats appeasing the Corporate Superpersons' Guardian in Chief, Joe Lieberman.


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Greyhound Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 03:26 PM
Response to Original message
29. Auto K&R. n/t
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WCGreen Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 04:39 PM
Response to Original message
30. It amazes me that there has not been some kind of up rising...
But then I think about the almost universal access to entertainment and the fact most people in this country have at least some food and it comes to me that the Bread and Circus mentality of the Roman Empire...
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The Wizard Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 04:45 PM
Response to Original message
31. The road map to
insurrection.
There will be a tipping point when the peasants refuse to eat cake. Then it's guillotines and head baskets.
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Canuckistanian Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 05:46 PM
Response to Original message
32. Excellent post
So full of facts, figures and analysis. You point out not only that there IS a massive disparity, but also the COSTS of that disparity.

K&R& Bookmarking.
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Flatulo Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 06:00 PM
Response to Original message
35. Sociopath is right... I've seen more than one strong company
Edited on Sun Dec-13-09 06:02 PM by Flatulo
completely destroyed by a few morons who made tens of millions by looting the place and moving on. Cutting R&D budgets to the bone, then outsourcing all the jobs until there was nothing left.

The beauty part (for them) is that they are guaranteed their salaries and bonuses from day one, no matter how poorly they perform.

The next wave to hit us will be the outsourcing of all the technical and professional talent to China. I interviewed my replacement last week - he earned $23,000 as an engineer. The CEO has made it very clear that everybody will be replaced by a Chinese counterpart.

The only problem with this strategy is that people begin to flee to greener pastures before the Chinese know how to do our jobs. The company is now suffering from Alzheimers in that absolutely no one remaining knows how their very complex process equipment works. They are one year late in getting the Chinese factory up and running.

But all of this doesn't matter. The CEO goes before the Board and says 'Look how much money I saved this quarter' and no one sees that he's wrecking the entire company.

It all gets down to short term profit verus long-term strategy. The compensations system needs to be revamped to focus more on long-term corporate health.

Good essay, as usual.
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BREMPRO Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 06:04 PM
Response to Original message
36. Great post and points to the seeds of this economic disparity
the Greenspan libertarian (market is self correcting, no regulation, fraud tolerance)policies enacted under Reagan allowed those in power positions a free reign to grab more of their fare share without consequences.

One question- certainly CEO salaries are egregious, but they cannot be blamed for the entire income disparity. All those mini-mansions in Key West are not all CEO's. So who else are we talking about? The CEO salaries are a symbol, but many more became wealthy. mid level managers,hedge fund brokers, lawyers, doctors, investors, realtors, athletes, inventors, sales and marketing. The questions is can we legislate to make equitable the salaries of CEO's and professionals with the working class? how would that be accomplished?
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Time for change Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 06:28 PM
Response to Reply #36
38. Those are very good quesitons
You are correct that CEO salaries cannot be blamed for the entire income disparity, or even a major portion of it. Rather, it is symptomatic of a much larger problem whereby those with wealth and power (mostly not CEOs) use that wealth and power to influence our elected representatives to stack the deck in their favor.

My understanding of this whole mess is far from complete. But I can say that there are many economists whom I admire a good deal who put it all into understandable perspective (though I certainly don't comprehend many of the details).

In these posts I talk about several widely respected economists who warned that our bailout would provide a great boon to our financial elites, at the huge expense of the American taxpayer:

"On the Geithner Bailout Plan Liberal Vs. Conservative Views"
http://www.democraticunderground.com/discuss/duboard.ph...

"Setting the Crown on the Corporate State"
http://www.democraticunderground.com/discuss/duboard.ph...

And in these posts I quote largely from James Galbraith's book, "The Predator State", on how U.S. government coziness with corporate power has sold out the American people:

"The Predator Class and the Predator State"
http://www.democraticunderground.com/discuss/duboard.ph...

"The Defeat of the Predator State"
http://www.democraticunderground.com/discuss/duboard.ph...

I get the distinct impression that this is the general formula for both the obscenely high compensation for today's CEOs, and for rising income disparity in our country in general:

Massive corporate deregulation and tax cuts for the wealthy ==> severe income inequality ==> financial collapse.
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mistertrickster Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 06:32 PM
Response to Original message
39. You know that ridiculous book, "Atlas Shrugged," in which society crashes when
"John Galt" and the moneyed class decide to quit.

Somebody should write a book in reverse of Ayn Rands screed, entitled Sisyphus Shrugged.

Instead of bringing society to chaos and anarchy when the rich stop being productive, a much faster way to bring the rich to their knees would be if everybody making minimum wage stopped working for a week.

MY GOD! Hotels wouldnt have clean rooms and sheets, restaurants would be shuttered, retail would come to a grinding halt, and most of the Fortune 500 companies would be dead in the water . . .
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Goldstein1984 Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-14-09 12:32 AM
Response to Reply #39
51. Are you thinking general strike?
And what if people just stopped buying stuff for a week? Just to send a message.
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mistertrickster Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-14-09 01:11 PM
Response to Reply #51
55. That would sure as hell send a message. But the problem is that poor people
Edited on Mon Dec-14-09 01:12 PM by mistertrickster
can't afford to take a day off, let alone a week . . .

On edit--love the nic, Goldstein, heh.
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Goldstein1984 Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-14-09 01:42 PM
Response to Reply #55
56. Orwell has become my prophet
Not just because of what we're experiencing nationally, but because I work in a corporation that makes reading and rereading "1984" therapeutic.
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greengestalt Donating Member (126 posts) Send PM | Profile | Ignore Sun Dec-13-09 06:40 PM
Response to Original message
40. Wealth Caps
That's what we should be calling for:

And I don't mean on ineffectual "Delete" file petitions to congressmen.

I mean, on the street posting calls for Wealth Caps:


Here's a cartoon I found on the subject- http://kingnot.deviantart.com/art/Wealth-Caps-143879608


And let me assure you the artist allows non-commercial printing, including in "Zines" for a copy of said issue and charges reasonable rates for professional publications. This would be good to print out and pass around.


Get the "Wealth Cap" into the vernacular.


With all the high skilled and laid off professionals begging for ANY job, do we need the "CEO" anymore, the "Shareholders"?
And a "Wealth Cap" will counter their unfair ability to influence government.


Set a wealth cap at say $10 million. In the stratoshpere for most of us, but poverty level to these "Highbrow Welfare Bums". They won't be able to have a dozen stores operating at a loss for 10 years to ruin competition, or send jobs overseas and pay millions for lobbyists or casually loan trillions to obvious "Take and run" schemes and wait till the government bails them out.
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Amonester Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 09:04 PM
Response to Original message
44. Kick & Recommend
Thanks!

Time For Change Is Long Overdue

Send It To The Contact Page

(Even If Nobody May Read It)

(It's Worth A Try)

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Time for change Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 09:07 PM
Response to Reply #44
46. What is the contact page?
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Amonester Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 09:59 PM
Response to Reply #46
50. It's at the web link on the left in my sig.
I should have been more precise, but this will kick this important thread again.

http://www.whitehouse.gov/contact

(I hope someone(s) will wake the ef up over there ASAP.)

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DissedByBush Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 09:07 PM
Response to Original message
45. What kind of salary does Steve Jobs deserve?
He only takes $1 a year technically. But if he were a regular CEO drawing salary how much would he be worth?

He only pulled Apple out of the doldrums. He created over a hundred billion dollars in wealth for the shareholders, which includes lots of people's retirement plans. He created lots of jobs. He created massive exports, helping our trade deficit.

Would we begrudge Jobs 50 million a year? That is only a TINY fraction of the value he contributed.

As a worker, would you be pissed if you only got paid a percent or so of the value you create for your company every year?

Think you make widgets off of which the company makes a profit of $1 million a year. And they pay you $50,000 a year to make them. Wouldn't you feel undervalued?

True, this is not the state of a lot of CEOs. But then my point is to not make blanket assumptions.

A more current question, how much should we pay a person capable of bringing GM to profitability while keeping all the jobs?
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Time for change Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 09:11 PM
Response to Reply #45
47. I don't have a problem with huge salaries for those whose contributions deserve it
But my point is that today's top level CEOs to a very large extent determine their own salaries, which have little or nothing to do with their contribution to society. In fact, many of them get multi-million dollar salaries for huge NEGATIVE contribution.
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Rosa Luxemburg Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Dec-13-09 09:46 PM
Response to Original message
49. Aetna CEO gets $38 million!
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Initech Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-14-09 12:50 AM
Response to Original message
52. Eliminate corprorate personhood now!!!!!
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Karenina Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-14-09 11:49 AM
Response to Reply #52
54. bttt!
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