By MARC MCDONALD
CEO pay continues to soar into the stratosphere, while wages for the average American worker stagnate.
Forbes magazine reports that the CEOs of America's 500 biggest companies received an aggregate 54 percent pay raise last year. As a group, their total compensation totaled $5.1 billion (compared with $3.3 billion in fiscal 2003).
Conservatives, no doubt, would argue that under America's free market system, these chief executives "earned" their pay. But did they?
Forbes, a publication not exactly considered to be in the progressive camp, seems to think otherwise.
The magazine says some CEOs "did so bad they should have paid their shareholders."
Take Peter Cartwright of Calpine, a maker of gas-fired power plants. Forbes reports that Calpine's average annual return to shareholders over the past six years has been minus 7 percent. During the same period, Cartwright pocketed an average annual $13 million.
America's CEOs are by far the highest paid CEOs of any nation on earth. Which begs a question: why?
The U.S. economy isn't exactly stellar at the moment. In fact, an increasing number of commentators warn that America's economy is facing a major crisis.
Our exploding fiscal and trade deficits are the highest that any developed nation has ever seen. America's once-vaunted manufacturing base has been hollowed out. And the dollar continues to crumble in value.
Exploding CEO pay is a relatively recent phenomenon in U.S. history. For example, in the 1960s, the average CEO earned around 40 times what the rank-and-file workers earned. Today the average CEO makes over 500 times what the average worker earns. And the gap continues to widen, year by year.
Like a magician pulling a rabbit out of a hat, conservatives are constantly coming up with reasons to justify soaring CEO pay. Here are three of my favorites:
CEOs create jobs. They create shareholder value. They have supposedly made the U.S. economy the strongest and most competitive in the world.
First of all, let's take a look at jobs. The past few years haven't exactly been a boon to job seekers in the U.S. Fewer and fewer jobs are being created these days. And the jobs that do exist are paying less and offer increasingly meager benefits. And American employees work the longest hours in the industrialized world, as author Juliet Schor pointed out in her book, The Overworked American.
Now, consider the issue of "shareholder value." The past few years haven't exactly been stellar for the stock market. But even the CEOs who preside over companies with sinking share value continue to pocket huge compensation packages.
Last, but not least: let's take a look at America's "competitiveness" these days.
A recurring mantra with America's mainstream and business press is that the U.S. is the most "competitive" economy in the world. A casual look at America's current trade figures, though, explodes this myth.
The fact is, America has the largest trade deficits of any First World nation in history. It seems to me that the U.S. has a difficult time these days creating products that other nations want to buy. Meanwhile, Americans line up to buy products from countries like Germany (which exceeds even China as the world's largest exporter) and Japan---despite the fact that average wages in those two countries are now higher than U.S. wage levels.
If U.S. corporations are really that "competitive" these days, it seems strange to me that America's CEOs seem to have a tough time making ends meet without corporate welfare.
Take Wal-Mart for example. The world's largest corporation (with over $286 billion in annual sales) cost American taxpayers over $1.5 billion in 2004, according to Walmartwatch.com.
If you want to get an idea of how out-of-control soaring CEO pay has gotten, it's important to look at the CEO pay of America's automakers. To me, Detroit sums up many of the major problems that America's economy as a whole faces these days.
Detroit's CEOs have long pocketed by far the highest compensation levels of any auto executives in the world.
This shouldn't really be surprising: American CEOs in general have long raked in vastly higher pay packages than their overseas counterparts. U.S. CEOs make, on average, 22 times what their counterparts make in Japan and 17 times what their counterparts earn in Europe.
If pay is somehow tied to performance, then you'd think that America's automakers are the world's most competitive, correct?
If so, you'd be wrong. Detroit, in fact, has been steadily losing market share to foreign automakers for the past five decades. And the blame for this can be laid squarely on the shoulders of Detroit's CEOs, who've made one stupid decision after another for decades. One recent example: Detroit's decision to stake everything on gas-guzzling SUVs, while the Japanese were busy perfecting hybrid technology. (Hybrids are currently by far the auto industry's hottest segment).
Detroit CEOs have long complained that "it's not their fault" and have offered up one excuse after another as to why America's car companies are losing market share. My favorite excuse of theirs is that foreign automakers' workers earn less than their America counterparts (an excuse that the U.S. mainstream and business media has never bothered to challenge).
A quick look at the numbers explodes this lie. The fact is, automaker employees in both Japan and Germany earn higher salaries than U.S. automaker workers do these days. Japan's wages run 30 to 40 percent higher than Detroit's wages. And German automakers workers earn around $49/hour on average versus $39/hour for Detroit's workers.
Although U.S. automaker workers earn less than their foreign counterparts, Detroit CEOs make vastly higher pay packages than their counterparts do in Germany or Japan.
This vast gulf was vividly demonstrated in 1998 when German automaker Daimler-Benz took over U.S. automaker Chrysler. As it turned out, the CEO of Daimler-Benz, Jurgen Schrempp, was earning a pay package that was less than one-tenth of the pay package of Chrysler CEO Robert Eaton.
One might think, given the gigantic pay packages of America's CEOs these days, that being a chief executive is a demanding job. It seems to me that the opposite is true. CEOs seem to do little more these days than bitch and moan and offer up excuses for their companies' declining fortunes. There are always plenty of handy scapegoats around. Unions. Democrats. "Excessive" red tape and regulations. Lower wages overseas. Ad nauseam.
It seems to me that, far from having a difficult job, America's CEOs actually have one of the easiest jobs in the world these days. When things aren't going well, simply blame others for your mistakes (shades of the Bush White House here). And, if that doesn't work, simply ask for another round of corporate welfare from the government.