Participation by every American family in the market and in corporate governance is needed to address growing inequality, sense of powerlessness and slowing growth rate. As long as 84% of corporate stock is owned and controlled by 10% of Americans, corporations will not be trusted; nor should they be. Continue Reading →
Tag Archives | inequality
Compensation: The Difference it Makes
Compensation. Most Americans think CEOs of the 500 largest publicly traded corporations are overpaid, even though they think CEOs made less than a tenth of what they actually earn. The Rock Center for Corporate Governance at Stanford University conducted a nationwide survey of 1,202 individuals — representative by gender, race, age, political affiliation, household income, and state residence — to understand public perception of CEO pay levels among the Key takeaways are:
- CEOs are vastly overpaid, according to most Americans
- Most support drastic reductions
- The public is divided on government intervention
Americans and CEO Pay: 2016 Public Perception Survey on CEO Compensation found 74% believe that CEOs are not paid the correct amount relative to the average worker. Only 16% believe that they are.
A brave panel tackled the topic, Compensation: The Difference it Makes, at the Corporate Directors Forums I attended in San Diego last month. Like all Corporate Directors Forums, this one operated under the Chatham House Rule, so you will not find any direct quotes below. These are my notes on Compensation: The Difference it Makes. As such, they include my opinions as well observations made by speakers panelists and others in attendance at the Forum. This is certainly not a transcript. However, I hope even those who attended the Forum will find the post useful, especially my attempt to provide additional context through links and commentary. Continue Reading →
Part 4 28th Annual SRI Conference in San Diego. Search #AllinForImpact on Twitter to see more posts. See Parts 1, 2, and 3. Yes, I know, this conference was held months ago but I’m still digesting… maybe until the next one. I could spend a productive year just exploring links to the work of the speakers. Mark your calendar for November 1-3, 2018. The SRI Conference returns to the Broadmoor in Colorado Springs. Get on the mailing list. Continue Reading →
How Shared Ownership Reforms Can Address Popular Anger about an Unequal Economy
In May 2017, U.S. Senators Sanders, Leahy, Gillibrand, and Hassan introduced legislation intended to help workers become owners. Their bill calls for a national employee ownership bank and helps states develop employee ownership centers. This comes after a dozen major cities and nearly as many states have acted to reduce barriers to shared ownership business models that offer an alternative to the investor-owned corporation. Promising approaches include employee stock ownership plans, worker-owned cooperatives, and community-owned renewable energy cooperatives. Continue Reading →
Peter Georgescu’s Capitalists Arise!: End Economic Inequality, Grow the Middle Class, Heal the Nation correctly identifies short-termism and a focus on stock price as a problem contributing to growing wealth inequality. His solutions depend on enlightened managers and boards to transform how America does business by taking all stakeholders into account, not just shareholders. I say, don’t count on enlightened self-interest by those now in control. They are unlikely to overturn the system that benefits them.
Transformation is not likely to come from those in power, even if it would be to the advantage of all. Transformation must be demanded from below. Any transformation system that purports to consider all stakeholders must effectively redistribute power. We cannot depend on benevolent dictatorships like Facebook’s Mark Zuckerberg or Alphabet’s Sergey Brin and Larry Page to act as if all stakeholders matter. To get where Georgescu correctly wants to go, there must be a real shift in power. Continue Reading →
Starting fiscal years beginning in January, companies must disclose CEO pay ratios to the median compensation of their employees. Companies have flexibility with regard to sampling and other methodologies, according to how the SEC has interpreted the Dodd-Frank Act. In preparation, PayScale and Equilar surveyed employee sentiment on CEO pay ratios.
CEO Pay Ratios: Employees Surveyed
Do employees know what their CEO earns? If so, do they think it’s fair? If they believe it’s not fair, does it negatively affect their perception of their employer? And, finally, does CEO pay have any effect on the ability of a company to retain its employees? Additionally, they asked some CEOs to weigh in with their thoughts on the SEC rule and their approach to employee communication as it pertains to executive pay.
Equilar provided pay data for some of the the highest-paid CEOs in the U.S. and PayScale provided median worker pay data for those same companies. They then calculated the CEO pay ratios between the CEO at each company and their employees. Many CEOs do receive substantial stock/option grants and perks as part of their compensation, but the firms don’t currently have similar data available for employees, so they looked solely at cash compensation to calculate ratios for this report. However, they did provide the Equilar data on Total CEO Pay as well, so that it’s clear how much of each CEO’s pay is in the form of cash vs. stock/options/perks. Continue Reading →
On 5-7-2014, CtW Investment Group filed a notice of exempt solicitation, urging shareholders to vote against company’s say-on-pay proposal at the 2014 annual meeting. CtW said that the compensation committee failed to modify its executive pay practices. Instead, its practices provided elevated pay even when performance declined. CtW is also concerned about declining financial and operating performance. $MCD’s share price trailed the S&P 500 by 45% in last five years and revenue, gross profits and operating income has been stagnant since 2010. The company also failed to address the growing public concern of strikes and protests by the food service employees even after it was acknowledged by the board that concern over income inequality poses a risk to its business. Continue Reading →
From Moyers & Company
The median pay for the top 100 highest-paid CEOs at America’s publicly traded companies was a handsome $13.9 million in 2013. That’s a 9 percent increase from the previous year, according to a new Equilar pay study for The New York Times. Will the rise of a new oligarchy mean the end of democracy? Continue Reading →
Shareholder-owned corporations were the central pillars of the US economy in the twentieth century. Due to the success of the shareholder value movement and the widespread “Nikefication” of production, however, public corporations have become less concentrated, less integrated, less interconnected at the top, shorter-lived, and less prevalent since the turn of the twenty-first Continue Reading →
Robert Reich makes the case for higher taxes on the wealthy in two minutes and 30 seconds. Notice the overlap between “class warfare” and “common sense.”
Also recommended, Inequality for All. download the discussion guide and find additional resources that accompany the film as well as the list of organizations and partners that made this film and engagement campaign possible. Continue Reading →
… incredible talk. This guy is serious, Nobel Prize in economics and whatnot. He’s talking about industry entrenchment, the finance industry, manipulation of government, and how the rich are way richer than they’ve ever been, and the poor are still really poor, etc. He’s also saying better corporate governance would fix a Continue Reading →
A roundup of just a few of many relevant news items worth reading. Continue Reading →
US companies face a “logistical nightmare” from a new rule forcing them to disclose the ratio between their chief executive’s pay package and that of the typical employee, lawyers have warned.
Yes, the disclosure required by section 953(b) of Dodd-Frank “will provide ammunition for activists seeking to target perceived examples of excessive pay and perks.” Maybe the Tea Party will focus.
S&P 500 chief executives last year received median pay packages of $7.5m, according to executive compensation research firm Equilar. By comparison, official statistics show the average private sector employee was paid just over $40,000.
Admittedly, it may be a “logistical nightmare” for multinationals to calculate the median annual total compensation for all employees in the US and abroad, especially if you’re trying to take into account currency fluctuations.
Companies are now gearing up to lobby the Securities and Exchange Commission, which has to write detailed provisions for the new rule. The rule could also reward with a relatively low ratio those companies that outsourced low-paid work rather than keeping jobs in-house, lawyers said. (US pay law branded ‘logistical nightmare,’ FT, 8/30/10)
I’m not sure there’s any “reward” involved, but explanations will be required. However, it is likely to bring pressures for a more equitable distribution of the wealth. According to research by Emmanuel Saez and Thomas Piketty, who examined tax returns from 1913 to 2008, in the late 1970s, the richest 1 percent of American families took in about 9 percent of the nation’s total income; by 2007, the top 1 percent took in 23.5 percent of total income. As Robert Reich points out:
In the decades after World War II, legislation like the G.I. Bill, a vast expansion of public higher education and civil rights and voting rights laws further reduced economic inequality. Much of this was paid for with a 70 percent to 90 percent marginal income tax on the highest incomes. And as America’s middle class shared more of the economy’s gains, it was able to buy more of the goods and services the economy could provide. The result: rapid growth and more jobs. (How to End the Great Recession, NYTimes, 9/2/10)
Why not repeal George Bush’s tax cuts for the rich? A CBS poll found that repeal is supported by 56% and opposed by 36%.
Repeal would cut $700 billion off the federal deficit over the next decade and, because consumption by the wealthy doesn’t depend very much on small changes in income, it wouldn’t noticeably affect consumer spending either. (One Dollar, One Vote?, Mother Jones, 9/3/10)
Unfortunately, it isn’t likely to happen. Why? Look to the scientific research by Professor Larry Bartels. (Economic Inequality and Political Representation, August 2005)
Senators appear to be considerably more responsive to the opinions of affluent constituents than to the opinions of middle-class constituents, while the opinions of constituents in the bottom third of the income distribution have no apparent statistical effect on their senators’ roll call votes…
These disparities are especially troubling because they suggest the potential for a debilitating feedback cycle linking the economic and political realms: increasing economic inequality may produce increasing inequality in political responsiveness, which in turn produces public policies increasingly detrimental to the interests of poor citizens, which in turn produces even greater economic inequality, and so on.