High CEO pay is not capitalism

Nor is it a reflection of the free market. Nicolas Kristof correctly hammers the corporate pirate crew:

But one of our broad national problems is rising inequality, and it is exacerbated by corporate executives helping themselves to shareholders’ cash. Three decades ago, C.E.O.’s typically earned 30 to 40 times the income of ordinary workers. Last year, C.E.O.’s of large public companies averaged 344 times the average pay of workers…. “Compare the massive destruction of wealth for shareholders to what he gets at the end of the day,” said Lucian Bebchuk, the director of the corporate governance program at Harvard Law School. A central flaw of governance is that boards of directors frequently are ornamental and provide negligible oversight….

These Brobdingnagian paychecks are partly the result of taxpayer subsidies. A study released a few weeks ago by the Institute for Policy Studies in Washington found five major elements in the tax code that encourage overpaying executives. These cost taxpayers more than $20 billion a year.

Absurdly high CEO pay, which we have recently seen has absolutely nothing to do with actual corporate performance and may in fact be a reasonable predictor of future disaster, isn’t comparable to stratosphereic athletic salaries. In the case of the athlete, the well-compensated individual is responsible for creating much of the value. In the case of the CEO, they are usually skimming off the value.

Those who have never sat on a corporate board or had much contact with the executive class don’t realize that the executive class is largely parasitical; they are the remoras on the capitalist shark. Their power is the result of government interference in the free markets, which among other things forces families to sell their capital assets due to the inheritance tax and causes firms seeking investment to work with a very small number of favored Wall Street entitities if they wish to find funding. And, of course, one can’t hope to find funding without first installing a properly “professional” executive team and corporate board….

The executive class is not, for the most part, capitalist, it can be more accurately understood as a sort of pirates union that is loosely allied in common cause against the capitalists who actually own the companies that they are systematically pillaging under the guise of “managing” them. Until this distinction between executives and owners is properly understood by the American people, the irresponsible rape-and-pillage will continue to the detriment of the shareholders, the employees, the economy and even the government.