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and firing workers to get even richer
and firing workers to get even richer
Imagine it. A world in which you, the average American worker, gets a princely $110,000 a year for your efforts. Well that’s what you would be getting paid if you’d gotten the same rate of pay raises over the last ten years as America’s top corporate CEOs have.
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These days, America’s Boss Hogs don’t just have their snouts wedged firmly in the trough, they’ve climbed right up into it and are keeping everyone else away. In 1970, the average CEO made 42 times what the average factory worker was paid—and that disparity was considered an outrage back then.
But a study just released finds that this disparity today has increased by 1,000%! The average CEO now makes 419 times what the average blue collar worker is paid. The report’s called “A Decade of Executive Excess: The 1990s,” and it details a trend that has meaning way beyond the fact that the bunch of guys (and they’re practically all guys) who run the big companies are getting richer than royalty . . . and treating employees like serfs.
What’s at work here is the fact that CEOs have gained autocratic power over our economy—the power to inflate their pay checks artificially, while arbitrarily holding down the paychecks of employees. Think about it like this: If the minimum wage had gone up in the decade of the nineties as drastically as the top hogs’ pay has gone up, it would not be $5.15 an hour, but $22 an hour!
Right now, the average honcho of major US corporations is paying himself $10,600,000 a year. It takes an extra limousine to drive their paychecks home! And that’s peanuts compared to the golden guy at the top—last year Disney’s chief Mousketeer, Michael Eisner took $576 million! That’s $287,500 AN HOUR.
How do these guys rationalize their wretched excesses? Their apologists in those think tanks with words like “Enterprise” and “Freedom” in their names, say it’s all in the name of competition: We have to pay our executives top dollar, in order to compete for world-class CEO talent. But if you actually look at the rest of the world, as the authors of the report did, you’ll find that no other country is fattening their executives like ours are fattening themselves.
The boss of Volvo, in Sweden, got $414,660 in 1998, compared to Chrysler’s kingpin who took $11 million! At Britain’s pharmaceutical giant GlaxoWellcome, the CEO received $2.8 million, but at the U.S. firm Bristol-Myers Squibb the boss got $56 million—while both companies made the same profit. In Japan, top dogs still get an average of 20 times the average blue collar wage, yet their companies certainly seem able to compete with ours.
The apologists also argue, hey, these CEOs really are worth it! I mean they work hard . . . well, not really work hard, but they’re smart you know . . . well, not really smart I guess, but cunning, you know what I mean? Yeah, cunning. So cunning that they are paid outrageous sums no matter whether they pollute the environment or exploit workers, or even whether they perform well for their companies—Michael Eisner not only ranks number one in executive pay, but also number one in giving shareholders the least for his pay. Then there’s Nolan Archibald at Black & Decker[- -] his company had a 37% decline in profits last year, and he fired 3,000 workers, yet hiked his own pay by 686% . . . to $36 million!
And, finally, don’t swallow the lie that this is all a function of “market pricing,” that executives are simply getting what the market will bear. Horse dooties. This isn’t about markets, but about old-fashioned collusion.
Corporations have compensation committees to set CEO pay, and it is common for these committees to be stacked with relatives, golfing buddies, and other cronies of the CEO. Take the rich example of Bud Paxson, top man at Paxson Communications. In 1997, the company’s compensation committee awarded Bud a nice $1.8 million bonus. Who was on the committee? Bud. Who else? No one—he was the sole member!
The issue here is not that a few people are making a ton of money. I’m in favor of making money (as Mark Twain said, “I’m opposed to millionaires, but it would be dangerous to offer me the position”).
The issue is disparity and plain old fairness. Our economy is humming—worker productivity is up, output is greater than ever, corporate profits have set records, stock prices are through the roof, and more wealth is being generated than ever before. This enormous economic gain was not created by a handful of CEOs. Our entire society pitched in to create it—workers, family farmers, teachers, and yes, governments. But only the top strata of society have pocketed the gain.
One big reason for the disparity is that in the convoluted financial system of the corporate structure the boss has a powerful incentive to fire masses of workers periodically. This bizarre practice is the result of today’s trendy way to fatten CEOs’ paychecks by essentially giving them stock in the company each year, which they can cash in as the price of the stock rises.
The fastest way to goose-up stock prices is to cut costs dramatically by firing a few thousand workers in one whack. Wall Street brokers and speculators love nothing more than to see a CEO do this, and they usually reward such actions by bidding up the price of the company’s stock. . . which means the CEO can cash in for a killing. It’s not the CEO’s concern if the mass firing undermines the company’s profitability over the next 10 years (which it usually does), because he’ll have descended onto the golf course via a golden parachute by then, or he’ll be busy looting another company.
The Executive Excess report found that workers at all levels up to the top become demoralized and cynical in proportion to how outrageous the gap is between their salaries and their boss’s.
Boom for whom?
We keep asking this because the fact is that behind the hoopla of the booming nineties, most Americans have actually lost wealth. If you add up all the things you own and subtract your debts you get your “net worth,” and most households have lower net worth today than they did in 1983, when the stock market began its record- breaking climb. Since 1983, the stock market has grown 1,336%. In that time, the net worth of the top 1% of American households grew by 17% while households in the middle (the median household) saw their financial worth tumble from $54,600 to $49,900. The bottom 40% of households lost an astounding 80% since 1983—their net worths shrunk from $4,400 to just $900. That top 5% now have more than 60% of all household wealth. Almost 20% of households have more debt than assets (including the value of their home). That’s nearly double the rate in 1962.
Kick the hogs out of the trough
CEO extravagance is made all the easier because corporations are allowed to deduct these gross paychecks from their taxable incomes—so we taxpayers are subsidizing the insanity! Let’s limit the deductibility of those mega-pay packages and make the shareholders foot the bill, and then we’ll see how hot they really think their chosen leaders are.
No less a “radical” than Bill Clinton has advocated this. “The government should not support such largess through unlimited tax deductions. If a company wants to overpay its executives to perform less well, and underinvest in the future, it shouldn’t get special treatment from Uncle Sam.” Great stuff—way to go, Bill! But it was 1992 when Candidate Clinton said this. Once he got into office, he dropped his populist pose and hasn’t mentioned it since.
He hasn’t even endorsed Representative Martin Sabo’s (D-Minn.) Income Equity Act which would cap the amount of deductible CEO pay to 25 times the lowest paid worker in the firm. The corporation could still lavish all it wants on the top exec, but, say, if the lowest paid worker received $15,000 a year, only $375,000 of the boss’s haul would be subsidized by taxpayers. Seems generous to me.
Labor, religious and community groups are backing this legislation, while also pushing the better “living wage” idea. Used to be that the minimum wage was set high enough to keep people out of poverty. Now it is $10,712 a year, which for a family of four is 40% below the poverty threshold. Republicans want to stick with the status quo. Democrats have “boldly” proposed a big, fat 50-cent increase for each of the next two years. Even if it passes, the Democratic plan pays only $12,000 a year for full-time workers, leaving them in poverty.
The good news is that people are fighting back at the local level . . . and winning! There has been a groundswell of support for a really radical idea: our tax dollars should not go to companies paying poverty wages in our own communities. Activists across the country have organized behind proposals that require companies doing business with local governments to pay their employees wages that approximate the real cost of living. Ordinances that set such a livable wage—typically around $8 an hour—have passed in over 30 cities or counties around the country, including Los Angeles, New Haven, Chicago, Boston, Detroit, Milwaukee, and Portland, Oregon. More living wage campaigns are under way in 70 other cities.
Behind the Shrub
GEORGE W. PROVES HE’S A HAYSEED ON FARM POLICY
Baseball great Ted Williams once advised a rookie: “If you don’t think too good, don’t think too much.” I suppose this is why George W. Bush’s handlers don’t want him going around talking policy or issues—just stick to the feel-good “compassionate conservative” stuff . . . and don’t think too much.
At a September photo-op outside Des Moines, however, George W. decided to take a stand on an issue: the farm crisis. It’s been little noticed by the media, but America’s family farmers are sinking into a full-fledged depression. The prices that they’re paid for their crops have plummeted below what it costs to produce them. This quickly adds up to bankruptcy, and thousands of family farmers are going under.
Farming is a unique business in that producers can be highly productive and efficient . . . yet broke. This is because the producers have no say on the price of their product. Computer makers, fast-food restaurants, Wall Street brokers and others say “here’s our price”—but not farmers. Assuming they survive the weather and the bugs, they come to market with a perishable commodity asking, “How much will you pay me?”
There’s no competitive bidding on their load of grain or trailer of cattle, since a couple of corporate middlemen monopolize the buying of most farm products (the actual term of this market blockage is “oligopsony,” our word of the day). To make the farmers’ plight worse, U.S. agricultural policy encourages surplus production, so there’s nearly always a glut on the market, conveniently making the price of farm products dirt cheap for the middlemen (who happen to be reliable campaign contributors to the very politicians who make ag policy). Today, of every dollar you spend on food, only 20 cents gets back to the farmer.
There. Now you know more about the farm issue than Bush does. Ignorance, however, did not keep Farmer George from expounding on the “solution” to the crisis. The setting for his photo-op was priceless—standing with him were farm organization bureaucrats and middleman lobbyists trying their best to look farmer-like, hay bales were stacked around like it was a Hee Haw set, and all the participants sported spiffy John Deere?style caps with the cute slogan “Bush Farm Team.” It was enough to make a hog upchuck. Then Bush spake, saying that the answer to the farmers’ woes is: “Exports.”
In the quiet of America’s rural areas, real farmers who heard this let out a collective groan. They know that an export-based ag policy is a disaster for farmers. This failed policy dates back to Nixon’s infamous agriculture secretary, Earl Butz, who told farmers to “get big or get out” of farming. Expand grain production drastically, he preached, because we’ll sell it on the world market. As a result, thousands of American farmers went deeply into debt to get more land and increase their grain crops—but what Uncle Earl didn’t tell them was that every country, from Brazil to Bangladesh, was also expanding grain production. The world was soon awash in the stuff with no one to buy it. The market collapsed and the farm bankruptcy crisis of the late ’70s and the ’80s swept the country. But ADM, Cargill, and Continental, which control grain marketing in America, made a killing.
Bush even says he supports an expanded export subsidy program to help farmers sell even more grain around the globe. No one told poor George that farmers don’t export; corporations do that—and ADM, Cargill, and Continental control 80% of the world’s grain shipments. They’re the ones that get the tax subsidies—not a dime goes to farmers.
Earl Butz is gone, but if Shrub makes it to the White House his policies are back. The oligopsonists are proving to be eager contributors to his campaign fund.
By the way . . . remember those “Bush Farm Team” caps? The tag inside read: “Made in Bangladesh.”