Saturday, 10 September 2005

Obscene Inequity

431 to 1.

According to United for a Fair Economy and the Institute for Policy Studies, that's the average ratio of CEO pay to non-professional worker pay in 2004 in these United States. This represents a new trend in the wrong direction after a slight remission in this ratio since a peak at 531 to 1 in 2000.

A look at this four year old graph (thanks Spitting Image) will reveal why progressives were hardly enamored of the DLC directed leadership of Clinton in the nineties. But I contend that it doesn't require a progressive attitude to be appalled by this obscene inequity in pay between executives and line workers.

Back in June, I identified the rapid accrual of power to large corporations as one of three huge power imbalances which threaten our global future. The dangers inherent in corporate power are many, including environmental degradation, dehumanization of the work force, poverty and wealth inequity, and ironically the suppression of innovation when bullying drowns out invention as the means for corporate profiteering.

While the potential threat is dire, the outlook need not be so grim, as I really believe the possibility for corporate responsibility is nowhere near lost. Today corporate responsibility exists side by side with corporate malfeasance within many industries, and indeed within many companies. My impression, however, is that there are debilitating blindnesses on both sides of this debate, which make progress sluggish at best, while the trends do not look good. The problem within corporatedom is that there is an annoying reluctance, if not a taboo, against frankly facing the direness of the threat and entertaining truly radical reform among those advocating corporate responsibility. The problem among reformers who do see the direness of the threat is a similar blindness in acknowledging the necessity that industry insiders become a integral part of needed reforms.

It seems likely to me that these two groups eye each other with such distrust and suspicion that they don't take each other seriously and hence undermine the most hopeful course for achieving real progress in curbing the excesses that everyone should agree are not in anyone's interest.

I have looked for exceptions among the groups touting corporate reform, such as: Business for Social Responsibility; World Business Council for Sustainable Development; Center for International Private Enterprise (an affiliate of the heavily right U.S. Chamber of Commerce); or The Conference Board.
To varying degrees these groups have worthwhile projects going on, but their clients or members are corporations, and there's a palpable unwillingness to forthrightly condemn any prevailing questionable practices.

The reform advocacy groups who don't have such reservations, such as:
United for a Fair Economy; CorpWatch; or make unfettered observations which strike me as more honest, but I wonder if their adversarial approach precludes the conversation which needs to happen to actually effect some positive changes.

Free market apologists will protest that the inequities simply reflect the prices which the market will bear for CEO salaries, and that the buying power of the line workers hasn't really sunk (one will hear arguments that it has actually risen) so much as the executive pay has skyrocketed. But studies show that the corporations with the greatest payroll inequities are significantly less successful on average than those with more modest differences. And you can't tell me that it isn't morally wrong for the top paid executives in a company to make millions in salary, and many times that in other benefits, while the laborers who support their fortunes struggle to make ends meet. The market isn't working somehow, and not only is it shameful, it is bad for investors as well.

Shame may be the most effective tool for bringing about change, but it remains difficult to get an audience for these stories. The right-wing noise machine is committed to defending the free market against any effective controls, labeling even the attention to such matters as socialist claptrap. But beneath the surface, I bet you will find some executives who are uncomfortable with their obscene salaries, and there are plenty of examples of executives who refuse to take as much as they could. What is woefully needed is plain-spoken condemnation of the growing inequity within corporations. How can we help those within the system who long for more radical reform to be bolder in saying so?


AC said...

Walker, very nice post. Can you point us to some data on CEO compensation over the years? I'm thinking long term, dating back to at least 1920 or earlier if you can manage it. Thanks!

LN Shapely said...

It is interesting that this discusssion rages ad nauseum over the a Blogger who blogged before Blogging WAS blogging, I wrote a column about this very topic 5 years ago. If I remember corectly, Japan has a close and low ratio betweeen the highest and lowest. This is one place to start studying.

What needs to be examined are the values AmeriKans place on particular work. Teachers are a prime example - a career revered in countries like Spain, but are considered lowly here.

How about prices paid to "house cleaners" and private gardeners? They are paid $20-25/hour in the Seattle area. Let's compare that to the average hourly salary of one who cares for PEOPLE. Home care health workers are paid around $9/hour and preschool teachers are paid even less. Our most precious commodities...our children...are the lowest ranking members. You can work at McDonald's for similar pay.

So, is this simply Big Bad Corporate greed or the free market telling us what we VALUE around here? Approaching this subject on a socialogical level makes it an extremely difficult task to comprehend, for statistical charts do not rate value.

Walker said...

I agree that seeing the long term trends would be interesting. I don't have immediate access to those, and don't plan to hunt them down in the near term. Perhaps something could be found at United for a Fair Economy, CorpWatch, or If you happen to run across that info, do ping me and I may do another post. I may hunt it down myself when I get an opening.

Thanks for your comments. I agree charts generally mask complexity. You ask very good questions.

For additional reaction to this topic, go to my cross-posting at WatchBlog.