American Elephants


Wading Through The Political Swamp. Put On Your Hip Boots! by The Elephant's Child
May 18, 2015, 10:50 pm
Filed under: Politics | Tags: , ,

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Income inequality is the key theme of the Democrats’ 2016 re-election strategy, and the main target is the nation’s chief executive officers. Hardly surprising — Democrats hate corporations.

Much has been made of the gap between the average corporate worker and the CEO. Business News Daily says the average annual compensation for a CEO of a public company in the U.S. in 2012 was $9.6 million. The average U.S. worker, in contrast made a little more than $44,000 in 2012.

I don’t get the issue. What is “the average U.S. worker?” That includes the janitor, the receptionist and people with a vast variety of skills from practically none to a whole bunch. How do we compare ourselves to an average worker and why is it a useful comparison? This is purely a political ploy, designed to promote envy and attract those who think that the politician who promises to reduce income inequality “cares about me” David Horowitz explains about that theme in his book Take No Prisoners:

At election time, “caring” is not one issue among many. It is the central one. Most issues are complex and require more information than the public can readily acquire. Consequently, voters care less about policy details than about the candidates who are going to shape them Voters don’t get to decide the policies. They elect their representatives to do that for them. They want to know whom they can rely on to sort out the complexities and vote in their best interests. Above everything else, they want to know whom they can trust to make those decisions. They want to know who cares about them.

Forgive me, but politicians care only about your vote. They don’t give a damn about you. And why is it only CEOs whose pay we are supposed to be concerned about? Lebron James makes $72.3 million. Kobe Bryant makes $61.5 million. Phil Mickelson makes $53.2 million. Matt Ryan makes $43,8 million. Did you have a personal manager or attorney to bargain for your compensation? If you work for a corporation, you have probably been told that you will be fired if you discuss your salary with any of your co-workers.

Hillary Clinton spent 8 years as First Lady in the White House, attempting to be a co-president. Then she was a Senator from a safe Democrat open seat, and ran for the presidency and was defeated by Barack Obama, and became Secretary of State, in which office she racked up a record in air miles, and not much else. One would think that after all that time in the nation’s capitol, she would have some clear observations of what our nation needs to do differently, or what’s wrong with the direction of the country. But she has already made it clear that her campaign will be about “income inequality.” Hillary Clinton demands $300,000 for giving a speech. Surely that gets some hypocrisy award.

How is CEO compensation determined? First of all, CEO compensation is public knowledge, which lets them know what the others are getting. They have lawyers to bargain for them. Their base pay for the core role and responsibilities of running the organization accounts for just 20 percent of their compensation. The other 80 percent is based on incentives. There are annual bonuses for meeting performance objectives. There are long term incentive payments for a two to five year period. Restricted stock awards to make sure the executive’s interests are aligned with stockholders’ interests. Stock options for increasing share price and shareholder’s returns. Retirement package, insurance separation pay. Average tenure for a CEO is currently 9.7 years which the highest it’s been in years. Largely, I assume, because stock prices are high because the best return you can get on your money is in dividend-paying stocks.

Possibly a major reason for the Left’s envy of CEO pay is because the highest paid professors make only $212,000 (Columbia), $203,000 (Harvard), or $179,000 (Cal Tech). Those professors have PhDs, and CEOs don’t. The AFL-CIO has an Executive Paywatch website which laments that “corporate CEOs have been taking a greater share of the economic pie.”

Pure politics again. There is no “economic pie” but an economy that grows or shrinks with the success or failure of the free market. When there is growth or new business or new ideas, or new products or services, money is created and the economy grows.

We’re already deep into the political season, though not everyone who is going to run has declared. The media are already asking silly “gotcha” questions like “If you knew then what you know now would you have …?” But we are encouraged to think that way. We are supposed to judge past wars with what we know now, not what we knew at the time. We are supposed to judge slavery by today’s sensibilities, not what was customary at the time. We are supposed to judge past presidents by how their actions have turned out many years later. Hindsight can be very, very comfortable.


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