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Thoughts on Inequality

The ongoing economic doldrums, as well as the "occupation" of various U.S. cities in recent weeks, have focused the attention of many on inequality--not the sort, mind you, that the Founders worried about (equality of opportunity, equality before the law), but rather equality of outcome, specifically equality of wealth. A chart appeared recently on the Daily Kos, and quickly went viral on Facebook, purporting to show that the average CEO is paid 475 times what the average worker is paid in the United States.  It turns out that the statistic is untrue, although it's unclear what the real figure is.  The Economic Policy Institute puts the ratio at 185:1, while the Institute for Policy Studies has it at 325:1. 

Either way, it is clear that the ratio has been getting smaller over the years.  Even according to the IPS numbers, CEOs made 475 times what workers did in 1999-2000.  Of course, during those years unemployment fell below 4 percent for the first time since the early 1960s, and U.S. median income reached an all-time high, so this was hardly a period out of Charles Dickens.  Moreover, those who see a connection between tax policy and inequality should recall that this occurred when taxes on the wealthy were considerably higher than they are today.  (Of course, this is something which supply-siders must take into account when claiming that higher taxes are inconsistent with economic health.)

Meanwhile, my old graduate school friend John Gurney over at econscius has been looking at inequality on a state-by-state basis.  It turns out that the largest inequalities exist in the District of Columbia, New York, and Connecticut--all places where Democrats (indeed, liberal Democrats) have been running the show for a long time.  By contrast, the three states with the least inequality are the GOP strongholds of Alaska, Utah, and Wyoming.  Some other findings:

There is no statistical correlation between levels of inequality and whether a state has a "Right to Work" law.

There is a loose correlation between median income and inequality.  The wealthier the people of a state are on average, the more inequality there is.

There is also a loose correlation between income tax levels and inequality.  States with higher income taxes actually have greater inequality.  Note that this does not take into account property taxes, which are notoriously regressive.
Categories > Economy

Discussions - 23 Comments

Final exam for liberal arts students

1. What's the maximum permissible level of economic inequality in society, expressed as a ratio of the lowest income to the highest income?

Defend your choice. Explain how it applies to movie stars, sports figures, and other celebrities. Show all assumptions and steps in your calculations.

2. For extra credit, address these points: Does this ideal ratio ever change? How does society know when it's time to change it, and in which direction, and by how much? Be explicit.

Fuzzy terms such as "fair share" and the like will not be accepted in any answer unless its meaning is exactly specified in numbers.

3. Get-an-A-for-the-term question: How would society achieve and maintain your ideal ratio without causing civil insurrection? Be specific.

Thanks for this post. Note as well that the accounting rules have changed, with individual owners of businesses listing their business income as personal income, once it became advantageous for them to do so. At least at one point, alan Reynolds of Cato claimed that any increase in income inequality resulted from this accounting shift.

Are Americans allowed to be concerned with anything that wasn't a priority for the Founders?

"Either way, it is clear that the [CEO-worker pay] ratio has been getting smaller over the years."

What? That's only very relatively true if one considers the last 3-4 years in isolation. Looking at trends over the last 16 years makes that much less clear, and looking at the trend since 1965 simply contradicts the claim.

That's funny, I was about to link to the very same chart that you did. Did you look at it?

Look at the ratios. In 1965 it was 24.2, in 1979 it was 34.9, in 1989 it was 70.4. In 1992 it was 125.6. As the 21st C. neared it was approaching 300. It's oscillated quite a bit since then, but never gone below 140 or so.

As a card-carrying lefty, I find these figures absurd. Yes, obviously, some people work harder than others and some people provide more value to an enterprise than others, but anyone who's ever actually worked within corporate America, either in the offices or - to the extent they exist - the factory floor (and I have a bit of experience in both) knows that such differentials can't really be seen as reasonable. A worker who puts in 50 hour weeks and takes in $30K/yr. can't really be 100 times less hard-working or valuable (think about it, each "times" is their entire salary over again) than the CEO raking in $3 million/yr. And at 185X, that'd be $5.5 million/yr. And of course, none of that includes the income the CEO can then acquire simply by stuffing a modest million into a non-risky CD down at the local branch of Uni-Bank (the same one that charges the worker $5 every time he uses his debit card) and making enough to buy a car every few years. It's not about the Limbaugh truism of "equality of outcomes" it's just that the outcomes be sensible, and they aren't at all.

Still, even for True Believers of the Randian Way (I'm guessing hardcore Robert above to be among them - although he should get a few demerits for using the term "society" as though there is such a thing), there is often, with CEOs, just no correlation whatsoever between their compensation and the outcomes of their superhuman intense labor and rarefied management and strategic techniques - particularly when the company is sinking, dividends are plunging (or nonexistent), and the execs are still raking it in:

http://www.reuters.com/article/2007/05/08/businesspro-executivepay-study-dc-idUSN0735549620070508

"Dell Inc., Eli Lilly and Co. and Ford Motor Co. are among the 12 worst offenders of so-called "pay for failure" for their chief executives, a study released on Monday has found.

CEOs at these companies have all received total pay of more than $15 million over the last two fiscal years, according to governance research firm The Corporate Library.

At the same time, the report said, the companies' total shareholder returns have fallen over the last five years and performance against peers slumped over the same period.

"It continues to be the case that far too much executive compensation is delivered without any link to performance at all," said the report, written by Corporate Library senior research associate Paul Hodgson.

The list includes five companies targeted by the research group in a similar study last year: Home Depot Inc., Pfizer Inc., Time Warner Inc., Verizon Communications Inc. and Wal-Mart Stores Inc.

New to this year's list were Dell, Eli Lilly, Affiliated Computer Services Inc., Ford, Abbott Laboratories Inc., Qwest Communications International Inc. and Wyeth.

At Verizon, Chairman and CEO Ivan Seidenberg was awarded $32.5 million in total compensation over the last two fiscal years, while total shareholder return declined 5 percent over the past five years, according to the Corporate Library."

Of course, how much "value" a CEO brings to a company can only be calculated from a shareholder and/or board of directors perspective - by this Randian/Friedmanite POV. Laying off workers, outsourcing work to cheaper labor pastures (to countries where the CEO him/herself would never dream of living in most cases), or cutting wages might well mean bringing value to the company. The bottom line is the only line.

But even when the CEO fails from a corporate perspective, he/she is often given a platinum parachute that effectively rewards them for their failure - contrast that with the floor workers, who would simply get a pink slip and a quick shuffle into the realm of possible homelessness:

gmiratings.typepad dot com/blog/CEO-Pay/

Odds are, such failures by CEOs will not make them unemployable pariahs in their fields (contrast it with the consequences of, say, leaving the fry cooker unattended and burning down your local McDonald's outlet), but if it should, their punishment will involve sipping drinks on the shore of the tropical isle of their choice.

Another way in which the gaps in income (and thus, often, wealth) don't make sense, and can't be justified as they grow with seemingly no limits whatsoever (again, where's the conservative virtue of restraint?) is that corporations that see increased productivity award little to no increased income to workers, and enormous sums to the execs. Or, if there is growth, it's barely arithmetic for the workers and logarithmic for the CEOs.

(contd....)

For more examples of the disconnect between CEO performance and CEO pay, see myriad other articles in typical lefty rags such as the Wall Street Journal and BusinessWeek.

Or here:
http://gmiratings.typepad.com/blog/CEO-Pay/

Or even that radical publication "Plastics News" (good chart here):
plasticsnews dot com/headlines2.html?id=23116

As for the blog you linked to, John, I don't see what's so surprising about most of what he discovered (except that he's talking about DC as a "state" which is not only inaccurate nomenclature, but demographically as well - what other state is simply nothing more than a single city?).

He's surprised - or thinks we should be - that inequality is greater in a city-state and states dominated by large cities (DC, NY) than in mostly rural states with smaller cities (AL, TX, Alaska)? This is not news:

http://www.princeton.edu/~erossi/CURE2010/inequality_citysize.pdf

His conclusion - that measures of inequality are "overhyped" - is even less surprising, but very unconvincing, what with its wealthy-guy-drops-his-iPod-in-a-river analogy. Has he been hanging out with cowgirl, next to her polluted canal?

Scanlon, it's replaceability, not contribution. Your typical worker is, well, very replaceable. The company can afford to pay him less because it can hire someone just like him in a day or two. A good CEO (and I don't mean just any CEO, but one that really pulls his weight) can be nearly irreplaceable. They really don't grow on trees, and their loss sometimes means the firm folds (Steve Jobs comes to mind, even though he too was a man of the Left). Any system that is NOT driven by this kind of self-interest doesn't last long. Deal with it.

The market offers only a rough justice, but it's the only justice you'll find in Nature. I'll listen to you yapping hounds when and only when you begin to denounce the salaries of lawyers, professors, and bureaucrats (the people who always think they are better at running my life than I am). Such people are strictly social overhead (facilitators at best, parasites at worst), and we need a lot fewer of them.

I agree with you Craig.

I also agree with Redwald for what it is worth, the true measure is supply and demand. But I also think a lot of these folks conspire to deflate the extent to which they are irreplaceable. There are a host of agency and duty of loyalty questions that are supposed to get asked but don't really. i.e. salaries are ridiculous because at best they get something like rational basis/ business judgement.

I could deal with 500 to 1 ratios if the top guys were just capturing what they are worth. But essentially I think they just end up captureing the business cycle. Makes sense to me that a lot of CEO's would be Keynesian and pro-deficit.

Also I don't like the fact that in a lot of labor intensive economic projects liquidated dammages are not available. This varies from state to state, but liquidated dammages would allow compensation to workers for speed and quality. In its absense competitve bidding drives down price, but also quality and speed. (liquidated dammages would be a digression here.)

Even agreeing with Redwald, and I think you get into it with the McDonalds burning down example, a lot of underpaid workers can actually cause a lot of dammage.

CEO's are the only ones compensated in a certain sense for dammages that did not occur, including a host of macro events that aren't clearly tied to action they took.

But certainly someone working on the line at Honda can scratch a door and shut down the whole line costing Honda around 15k a minute.

So replaceability is really about how much your mistakes will cost the buisness. Those who make the fewest mistakes and deal with the most expensive equipment get or should get paid the most.

Theoretically even a very slight difference could have huge income ramifications. Compare a pilot that has a 1 in 10,000 chance of crashing a plane with one that has a 1 in 20,000 chance of crashing a plane.

New Airbus value 500 Million (potential of causing Billions in dammage by crashing in an urban area discounted for unlikelihood). 500k liability per passenger/loss of life...environmental cleanup, loss airline reputation... a bad plane crash could end up averaging out at a billion dollar event.

So a good pilot may be worth 100k more than an average one. Of course the airlines insure against this, then the insurance company imposses regulations, that a court has agreed are fair for coverage purposes. There isn't apriori certainty as to who is the best pilot (or maybe it is a trade secret, certainly the insurance and actuarial formulas are.)

Of course trade secrets and intellectual property are really part of the backbone of non-compete agreements which in turn prop up the large golden parachutes.

The CEO's(and possibly even good engineers) are sipping drinks on the beach, because if the field is narrow/technical/oligopolistic enough no one wants them working for a competitor.

So non-compete agreements are really part of a legal framework that helps to constrict supply and alter the nature of the replaceability.

Really to say that it is replaceability is Marxist. So you have a set of workers that are "not replaceable", and then you have the "industrial reserve army".

One way to think about the market crash that I like is somewhat epistemic. It is really about the VIX (fear and uncertainty) and derivatives, systemic risk and the collapse of a massive insurance company (AIG).

So if we are talking about replaceability the discussion has to include "systemic risk".

I would argue that a major reason for income disparity is the different relation of workers vis a vis insurance contracts.

A good pilot might never capture his true value, just his statistical average value. (the airline doesn't know the difference between the 1:10k and the 1:20k risk), and in some respect the insurance company is more worried about it than the airline itself. So the way in which the middle class labor has been commodified differs in important respects from the way in which CEO income has been commodified.

In other words 500:1 is not justified because it represents the ability to capture exogenious macro-economic variables, that are unavailable to say the airline pilot under an insurance system.

Under a CEO model a great airline pilot would fly his entire life without a crash and make 600k a year. He is worth it because the disaster/downside really is pretty bad. After much trainning he would decide to leave, but the skills he acquired would be so valuable that Delta would prevent him from working for american, so he would get a golden parachute as part of his consideration for his non-compete clause. Of course sometimes even these great pilots would crash (and provided they lived) they would still walk away without having to pay back the premium they captured for attributed quality.

CEO pay is often outrageous because it captures too much exogeneous alpha without accounting for beta, VIX, systemic risk and really non-justifiable/cognizable events (and thus to a great extent crony boards that fail in fiduciary duties with soft standards of business interest, and self serving bonuses).

Most of these "studies" or "research" done on CEO to typical worker pay are usually titled to the person conducting the study views. I have seen tons of these studies with ratios spreading from 60:1 to 500:1. Once you know that the study is being done by a liberal/progressive/OWS/Democrat, all you need to do is find out their controls. Usually the higher the ratio, i.e. 500:1, the most likely a liberal/progressive/democrat/OWS has conducted the research.

The controls that were used in the 500:1 ratio I saw in one study was conducted by a liberal think thank (holy crap is that oxy-moron - liberal think tank). The control for the CEO side was based on the salaries of the 100 most highly compensated CEO's in the United States and the average part-time worker. Great that makes a whole hell of a lot of sense. A highly compensated CEO of one of the top 100 companies in the United States and a part-time worker - only a liberal think tank ROTFLOL could come up with that research.

Larry Ellison of Oracle is the highest paid CEO in the United States along with about 99 other CEOs. After that highly compensated pretty much goes by the wayside. The average CEO in the United States does not make anywhere close to what Ellison and company amke. You take these 100 highly compensated CEO's out of the picture, and start using say Mr. Ben Jones CEO of XYZ company located in BumPuck Mississippi who probably makes $250,000 a year and start using guys like him as a control for the CEO side of the ratio and guess what - Liberals/Progressives/Democrats/OWS lose the game.

These are bull$hit studies used by liberal think tanks ROTFLOL to make Corporations look greedy.

You never see Liberal Think Tanks (ROTFLOL) go after Leonardo DiCapra or Johnny Depp and crucify them for making tons and tons of money. These guys rake in about 60 to 70 million per movie, get things given to them like cars, expensive jewelry, clothes, trips, etc which probably add another two or three million dollars to their salary and maybe add in residuals from DVD sales/rentals for another couple of million. Or, better yet take Bon Jovi the guy who runs around point fingers at the United States for not solving the proverty problems in the world, yet he does everything he can to avoid paying income taxes - another hippocritical liberal. Bon Jovi and his band raked in a million dollars an hour while touring in 2010.

Why don't liberals Occupy Hollywood too. Why, easy. liberalism is a ......

The real question is, do we want to live in a society where the government is powerful enough to dictate salaries to everyone? Craig and his ilk apparently want to, so I invite them to move to North Korea (or some other place like it -- such destinations are shrinking because most people are smarter than Scanlon, thank God).

I've never understood why these people NEVER give any benefit of the doubt to capitalism, but also NEVER think government can be just as bad or worse at screwing things up. Has it never occurred to these people that politicians are just like CEOs, and that the inequality in power is just as bad if not worse?

Envy, what a monster.

I am not one actually in awe or even in admiration of CEO types. I'm not entirely sure most of them are actually worth whatever money they are paid. Maybe they are, maybe they aren't.

But there is one thing I do know. It is far more possible for a CEO to run a company into the ground than any "average worker", and so, just based on that reality alone (that he can do *at least* 475 times more damage than any one "average worker" can), I have no problems with him being paid commiserate with both the level of benefit he brings (if he is the right choice) as well as the risk the company assumes (if he is the wrong one). At some level, you get what you pay for. If I could be a good CEO, I won't settle for working for $200,000 if I could make $5m--and if I am good my financial impact on the company will more than make up for my salary difference.

Therefore, the potential impact of a CEO--either for good or for ill--is simply more than an "average worker". The CEOs salary should reflect that. The thing you do with a CEO who has proved he is not worth his salt is get rid of him and look at the Board that hired him, not lower the pay for his replacement.

As far as the matter of "parachutes" and other things after the CEO has proved his impact will be "ill", I defer for the moment, but like it no better than anyone else.

I'm no Randian, but I don't get upset when some people make enormous piles of money as heads of corporations. If those in control of a corporation's purse decide to pay someone that, well, that's their choice. Let the market decide.

My reasons for thinking this are the same as Redwall's, "The real question is, do we want to live in a society where the government is powerful enough to dictate salaries to everyone?"

Ya gots the whole enchilada right there.

"If those in control of a corporation's purse decide to pay someone that, well, that's their choice. Let the market decide."

Interesting. I'm writing that one down.

"The real question is, do we want to live in a society where the government is powerful enough to dictate salaries to everyone?"

Apparently some are content to allow "The Market" (as manifested in corporate boards) to decide - or at least, what gets attributed to this amorphous, invisible non-entity that can be ascribed to anything or nothing, depending on the whim of the analyst.

I would be comfortable living in a society where the government is powerful enough to dictate everyone's salaries, provided that it's a government of, by, and for the people.

What's obvious is that corporations and their CEOs do not operate of, by, and for the people. Well, they do operate for some people, but an incredibly narrow subset of the people.

Scanlon, where have you left your brain this time? Government by, for, and of the people is it? Is this the same government you suspect was/is in bed with Haliburton? Is this the same government that you loons on the Left always accuse of being bought and paid for by "Wall Street fat cats?" Now listen very carefully -- large-scale democracies ALWAYS boil down to oligarchies manned by elite actors. Always. No exceptions. And this is why you must at all costs 1) severely limit the scope of government, and 2) hold spirited elections without fail every few years. Why in the world would you think government is corrupt today but somehow will be just fine tomorrow?

I'm wasting my words, I know. Just go put your tinfoil hat on, grab your stupid OWS placard, and go protest! At least you'll be out in the open with the other "slow" children where sensible people can manage you.

"I would be comfortable living in a society where the government is powerful enough to dictate everyone's salaries, provided that it's a government of, by, and for the people."

Then get the H E double toothpicks out of this country and head off to Russia, Cuba, Vietnam, China or North Korea.

I will pay for the plane ticket and cost of moving all your belongings.

How stupid are you?

"I'm wasting my words, I know."

No, not necessarily. I think there's some therapeutic benefit for you to have one of your cathartic name-calling rants from time to time.

"Why in the world would you think government is corrupt today but somehow will be just fine tomorrow?"

Did I say that? Did I even imply that?
Of course, your stated assertion does raise the troubling possibility that corruption can't be addressed at all, so - as seems to be the predominant Tea Party sort mentality and approach - Why Bother Trying?

Humans, and thus Society (to the extent a conservative can even concede such a thing exists) aren't perfect-able, so we shouldn't even try to improve things. Unless of course, we define improvement as minimizing government and allowing those uncorruptable and wholly non-elite corporations to run the show. A large government institution can never be trusted to serve the public, but large institutions whose primary motivations pivot on quarterly returns will ultimately serve the public better/best?

Your name-calling session did lack clarity in some respects, though. On the one hand, you seem to suggest that anyone who thinks that Wall Street fat cats are running the show are loons, and that such suspicions (or firmly-held beliefs based on evidence, as the case may be) are illegitimate. But then you seem to be saying, OF COURSE that's the case: "large-scale democracies ALWAYS boil down to oligarchies manned by elite actors." And then, you suggest "severely limiting the scope of government" - yet, I fail to see how this would prevent any of the ills brought on by the CORPORATE elites. But maybe I missed the whole point, since I've left my brain somewhere, am stupid, etc., etc.,etc. (yawn) - or maybe you just didn't make much sense.

Robert's quote sums things up about how that will work out:

"If those in control of a corporation's purse decide to pay someone that, well, that's their choice. Let the market decide."

In 2 sentences the truth is laid out. The "market" that is deciding is actually the corporate board of directors (i.e., "those in control of a corporation's purse") - and we can be ever so sure that those boards are a trustworthy group of non-elites.

Why not just say "The commoners should just step aside and let the elites have their way."?

I should think that if a corporate board is using the firm's money unwisely, the stockholders would have something to say about it. I don't presume to know whether any particular CEO is overpaid; I assume that board members have no desire to spend more than they need to on any employee's salary, but that the rate required to attract a competent chief executive tends to be high. However, since the money they are spending is neither mine, nor yours, but belongs solely to the firm, it is simply none of our business.

Craig Scanlon misunderstands what I was saying. To spell it out more fully, "If those in control of a corporation's purse decide to pay someone that, well, that's their choice. Let the market success or failure of the company decide whether or not the company got its money worth in the CEO salary."

Looking more broadly at Mr. Scanlon's arguments, it appears he's painted himself into an inescapable corner.

His underlying theme is that people's will, as expressed through individual choices made in free markets, is not to be trusted. But the will of other people — those in the select group in charge of a government-managed economy — is entirely reliable and infallible. In fact, these exalted people are so much to be trusted that we'll let them guide, basically, the entire economic activity of the nation.

Hunh?

It occurs to me that in his heart of hearts, Mr. Scanlon distrusts corporations in the same proportion that he trusts government. I have a hard time understanding this view, given 20th century history, but let me just say —

If you don't like a corporation, you have numerous alternatives. Avoid their products. Sue them if they break the law. And so on.

You have none of these options with government. Because it so all-powerful, the smaller the realm of action it has, the safer individuals are in their lives.

Why do statists — that's you, Mr. Scanlon — always assume that they, or sympatico people, will forever be in charge of government? A foolish belief, sir. Very foolish and naive.

"I should think that if a corporate board is using the firm's money unwisely, the stockholders would have something to say about it."

You are assuming that individual shareholders have some control of the board - they often don't (at least those who have http://wallstcheatsheet.com/stocks/washington-post-the-question-of-ceo-compensation.html/

" * As the board of Amgen convened at the company’s headquarters in March, chief executive Kevin W. Sharer seemed an unlikely candidate for a raise. Shareholders at the company, one of the nation’s largest biotech firms, had lost 3 percent on their investment in 2010 and 7 percent over the past five years. The company had been forced to close or shrink plants, trimming the workforce from 20,100 to 17,400. And Sharer, a 63-year-old former Navy engineer, was already earning lots of money — about $15 million in the previous year, plus such perks as two corporate jets.
* The board decided to give Sharer more. It boosted his compensation to $21 million annually, a 37 percent increase, according to the company reports. Why? The company board agreed to pay Sharer more than most chief executives in the industry — with a compensation “value closer to the 75th percentile of the peer group,” according to a 2011 regulatory filing.
* This is how it’s done in corporate America. At Amgen and at the vast majority of large U.S. companies, boards aim to pay their executives at levels equal to or above the median for executives at similar companies.
* The idea behind setting executive pay this way, known as “peer benchmarking,” is to keep talented bosses from leaving. But the practice has long been controversial because, as critics have pointed out, if every company tries to keep up with or exceed the median pay for executives, executive compensation will spiral upward, regardless of performance. Few if any corporate boards consider their executive teams to be below average, so the result has become known as the “Lake Wobegon” effect.
* It wasn’t until recently, however, that its pervasiveness and impact on executive pay became clear. Companies have long hid the way they set executive pay, but in late 2006, the Securities and Exchange Commission began compelling companies to disclose the specifics of how they use peer groups to determine executive pay.
* Since then, researchers have found that about 90 percent of major U.S. companies expressly set their executive pay targets at or above the median of their peer group.

---

Taking off my delusional, capitalism-skeptic blinders and just looking at it from the POV of a cold performance analyst, I'd say that, at the very least, there was no need to give the guy a raise. Pretty presumptuous, I know (and probably foolish and naive, too).

What I find interesting is how, when CEOs evaluate each other's performance, and then address it as a group self-reflection, they seem to conclude that they're all above average - even excellent and deserving of just rewards for their excellence. Just like when you ask a group of people to rate their own driving abilities - everyone's at least above average!

So, even as a company sinks or shows signs of trouble, boards often see fit to increase the salaries of their top bosses. Of course, when evaluating the hoi polloi in the offices and on the shop floor, they become rather hard to please, and lay-offs and various cuts (benefits, pay rates, etc.) become not just advisable, but completely necessary.

But surely, cry the True Libertarians, all of this would be righted by eliminating the SEC and any other government entity sticking its elitist nose into corporate affairs. No, much more likely, the boards would simply continue to ratchet their fellow CEO's salaries up into the stratosphere, while insisting that their middle and working-class employees "do their part in these trying times."

"However, since the money they are spending is neither mine, nor yours, but belongs solely to the firm, it is simply none of our business."

That would be a fine approach in which corporate decisions and activities don't effect the greater public - or their employees, who may not appreciate seeing their wages and salaries redistributed upward to the guys who shuffle between coastal or even multinational estates.

And why do the corporate board members continually want to ratchet up CEO compensation packages? Could it be that the overlap within and between boards is like a thick spider web of interlocking directorates?

http://www.usatoday.com/money/companies/management/2002-11-24-interlock_x.htm

"Major banks are at the center of many of the overlapping ties. Links spreading from the banks go so far that if a board member at J.P. Morgan Chase got a highly contagious disease, 97% of large corporate boards could be infected in about six months, Davis says."

And from the same article, which relates to your earlier comment about what shareholders have to say about CEO compensation:

"Major banks are at the center of many of the overlapping ties. Links spreading from the banks go so far that if a board member at J.P. Morgan Chase got a highly contagious disease, 97% of large corporate boards could be infected in about six months, Davis says."

Of course, the obvious solution is to allow the corporations to do as they wish, mostly in secret, with little to no regulation or oversight - it's so cumbersome to the yacht-owners!

We must minimize the government institutions where the public could potentially have a very limited say in that which may effect them (i.e., the vote), while "setting free" (further) the private, for-profit institutions which not only largely are, but apparently should be, beyond the reach of the non-wealthy public (i.e., if one can't afford (a significant chunk of) shares in a company, they can just shut their face and take what they get - perhaps a pink slip).

EDIT: Towards the bottom of my last post, I repeated the paragraph that begins with "Major banks are at the center..."

Instead of the repeat, I meant to paste in this quote from the article:

"Corporate governance experts say, at the very least, investors should realize that some boards are so tangled that shareholders might not always be a director's top concern. "When you have an interlocking network, decisions are not based on intellect and logic, but rather what your friends decide," Bonabeau says."

I did mean to respond to this, as well, from John Moser:

"I assume that board members have no desire to spend more than they need to on any employee's salary, but that the rate required to attract a competent chief executive tends to be high."

http://hbr.org/2010/01/the-best-performing-ceos-in-the-world/ar/1

"This article contains the first ranking that shows which CEOs of large public companies performed best over their entire time in office—or, for those still in the job, up until September 30, 2009. To compile our results, we collected data on close to 2,000 CEOs worldwide.

It may come as no shock that Steve Jobs of Apple tops the list. However, our ranking does contain a few surprises. You’ll see some relatively unknown faces at the top. The inverse is also true: Some obvious candidates in terms of reputation don’t make the top 50, which we’re printing in this issue—or even the top 100 or top 200. (...) In fact, our list overlaps very little with lists of the most-admired or highest-paid CEOs."

Note that final sentence.

sigh... also - another EDIT:

In my 2nd paragraph of the orig. recent post, it should end with:

You are assuming that individual shareholders have some control of the board - they often don't (at least those who have less than 50% of the shares), and that the shareholders and the board members are different people - they quite often are not:

I tried to read Scanlon's post, but fell unconscious about mid-way through.

He misunderstood what I said as well. Government power is an invitation to abuse, but no large-scale society can afford to be without one. Thus, you have to severely limit what government is empowered to do. Surely that's understandable even to Scanlon. This is why conservatives cheer on some forms of government action (such as defending the country) -- some actions are part and parcel of government's original purpose. Redistributing our incomes is NOT, and so we obviously resist that. The government is our servant, we are not its milk cows.

Not to put too fine a point on it (yes, I am trying to get the horse to drink), the micromanagement of a large economy gives government a terrifying amount of power. Gee, Scanlon, I sometimes wonder if you could find your butt with both hands in broad daylight.

"Government power is an invitation to abuse, but no large-scale society can afford to be without one. Thus, you have to severely limit what government is empowered to do."

And corporate power - to the degree that it's unchecked - is NOT an invitation to abuse? The fact that profit is its sole reason for existence is not such an invitation? You don't think that corporations - in and of themselves - don't manipulate the economy? You don't think that those interlocking boards of directors don't work to redistribute income (and wealth) upwards, with no transparency or accountability?

Do we need to limit what corporations can do?

I'm not sure how to feel about the fact that you can't seem to get through a single post - at least one addressing me - without some sort of name-calling or just insulting bar-room hostility.

Sorry, Craig, I call 'em like I see 'em. If you don't want me to call you an idiot then don't act like one. Sober up a little and consider what you say.

Corporations can be and many are corrupt as hell. The difference is 1) market discipline eventually deals with this because corruption is antithetical to the quid pro quo customers expect, and more importantly 2) governments generally are even more corrupt than corporations, and 3) corporations do not hold a monopoly on coercion (like the government does). Think of all the corporations that no longer exist (e.g., Braniff Airlines, Saturn, Lehman Brothers). The market "churns" when government allows it to, a kind of rough justice for stupid business practices (like inflated CEO salaries).

As for CEO salaries, I've never really understood the obsession the Left has with them. If you took every CEO salary in the country in confiscatory taxation it wouldn't even make a noticeable dent in our deficit. It's envy and resentment, Craig, the coins of the realm among Lefties like you. Try to transcend the ape for just a little while, Craig, and look at the big picture.

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