Saturday, March 01, 2008

Louis Gallois: The Triumph Of A Socialist CEO


Are there any CEOs out there who aren't greedy bastards these days? If there are, they're few and far between.

Over the past quarter century, CEO pay has skyrocketed in the U.S. In the 1960s, CEOs made around 40 times what rank-and-file ordinary workers earned. Today, CEOs make over 400 times what the average worker earns. (And they keep much more of what they make, thanks to income tax laws that are vastly less progressive than they were in the 1960s).

Business schools and economists routinely argue that exploding CEO pay is "inevitable" and that it's all a normal (and unavoidable) aspect of capitalism. Titanic pay packages are necessary to attract the best talent, they argue.

But there's at least one CEO out there who defies all these conventions: Frenchman Louis Gallois, the CEO of EADS, the European defense company.

A CEO like Gallois, 64, would be inconceivable in any American corporate boardroom (where the belief that "greed is good" has been elevated to the status of a religion these days).

After all, Gallois is a lifelong socialist. He once read Das Kapital, cover to cover. He's a business leader who has earned the respect of the workers at the companies he has run (including SNCF, the French rail company). And as The Financial Times once pointed out, Gallois has "disdain for money and the trappings of power."

When Gallois was named the CEO of EADS, he insisted on retaining his old SNCF salary of $273,000/year. EADS had offered him an annual salary of $3.4 million. To this day, Gallois retains his old salary and gives the balance to charity.

Can you imagine any American CEO voluntarily accepting a $273,000 salary, when they could be earning $3.4 million a year?

These days, American CEOs are busy laying off workers by the thousands and exporting jobs overseas, and pulling down fantastic pay packages. As long as they make Wall Street happy, their creed is: screw the workers (and society as a whole). While U.S. CEOs make over 400 times what the average worker earns, in Europe that multiple is a mere 22. In Japan, the gap is even narrower: the average CEO there makes only 17 times what the average worker makes.

In fact, these days, U.S. CEOs don't even have to make Wall Street happy to rake in their huge salaries.

Take Peter Cartwright of Calpine, a maker of gas-fired power plants. In 2005, Forbes reported that Calpine's average annual return to shareholders over the previous six years had been minus 7 percent. During the same period, Cartwright pocketed an average of $13 million annually.

Getting back to Gallois. Sure, he voluntarily pockets a modest salary. But what about his performance as CEO of EADS?

As it turns out, times are very good for EADS right now. Indeed, the future looks bright for the company.

On Friday, EADS scored a stunning upset victory over its rival Boeing with a $35 billion contract to supply the U.S. Air Force with refueling tankers. The Financial Times noted that the huge contract could ultimately be worth more than $100 billion.

For Boeing CEO James McNerney, Friday's news was a crushing blow.

But at least McNerney can take solace in one thing: his titanic CEO pay package. As The New York Times pointed out in 2006, McNerney has a pay package worth more than $52 million. And you can be assured that he won't be handing the vast majority of that fortune over to charity to live on a modest salary.


dr sardonicus said...

So Boeing gets beat out of a defense contract by a Frenchman who reads Marx. That didn't go down well back at the country club...

Distributorcap said...

and we wonder why we arent competitive, falling apart and struggling as a country...

but those CEOs...... no problems teeing up at 15th hole....

but of course the working poor will continue to vote for people like Bush and McCain because having a beer with someone and talking to god is much more important than food on the table

Marc McDonald said...

Hi Dr Sardonicus and Distributorcap, thanks for stopping by.
I wanted to also go into the topic of how Boeing has become a hollowed out corporation and is now outsourcing the most sophisticated parts of its planes (i.e. the composite wings) to Japan.
In fact, the Dreamliner is really more a product of Japan than it is an American product.
I hope to go more into detail on this in a future piece.

WageslaveZ said...

Efficiency and progress is ours once more
Now that we have the Neutron bomb
It's nice and quick and clean and gets things done
Away with excess enemy
But no less value to property
No sense in war but perfect sense at home:

The sun beams down on a brand new day
No more welfare tax to pay
Unsightly slums gone up in flashing light
Jobless millions whisked away
At last we have more room to play
All systems go to kill the poor tonight

Kill kill kill kill Kill the poor:Tonight

Behold the sparkle of champagne
The crime rate's gone
Feel free again
O' life's a dream with you, Miss Lily White
Jane Fonda on the screen today
Convinced the liberals it's okay
So let's get dressed and dance away the night

While they:
Kill kill kill kill Kill the poor:Tonight

(Dead Kennedys: Killing the Poor)

Anonymous said...

Sorry to bust your bubble distributorcap, but the president actually has very little political power. So whether you vote for Bush, McCain, or Hillary Clinton, it won't make a bit of difference. If you want change, go to congress and submit a law and argue with people who frequently fall asleep throughout the explanation of a law, then put their vote in despite having no idea what they are voting about. Democrat does not equal better than republican. They're both crocks of crap. (Not that independants are any better. Personally I don't think a sane person would run for president.)