Because they CAN be, and the politicians get a piece of the action so don’t expect change.
By Jack E. Lohman
The pay ratio was 365:1 in 2000, between CEO and average employee, compared to 25:1 in Britain and 10:1 in Japan. The median income of the top 100 U.S. CEOs today is $14.4 million, versus the average annual American salary of $45,230.
The difference is in the amount of political corruption. Higher CEO salaries and fewer regulations requires more cash to flow. (Aren’t our politicians sweet? They don’t do anything for free.)
Back to the point…
CEOs are picked by the Board of Directors, usually a group of 8 to 12 CEOs from other companies that meet at your digs for a couple of hours every 3 months or so. And the CEO that they pick to run your company often sits on their Board as well, so there’s mutual back-scratching going on.
And be assured, there will almost always be an insurance company CEO on the board, to be their healthcare expert and influence their direction on health care.
No, boards do not see the conflict of interest. The best “jobs bill” ever would involve dumping this industry.
… to cover themselves legally, when setting the CEO salary and avoiding the “giving away the store” collusion charges, the Board hires an “independent compensation consultant” to research the field and give them “unbiased” feedback on the going CEO rate.
Of course this consultant also sets the Board member’s own salary at their company too. So if the consultant knows better, and wants to be hired again, they will keep the pay-trend going up. It’s a nice job, if you can get it.
And you’d be surprised to know that we have congressmen calling for even MORE tax cuts for the rich, the so-called “job creators,” even though they are at the lowest tax rate ever AND the Bush tax cuts to get us there did absolutely nothing to add jobs, and in fact everything to destroy them! But when you have congress in your back pocket you can get by with anything.
They often use the “free market” ploy…
IF we want the best, they argue, “we’ll have to pay a high amount.” They rarely get the best, but they do get someone who has done a great job on his resume and finagled his salary upward along the way. In fact there is evidence that the more they pay the less they get.
Who pays? The taxpayers for one. Employee salaries and benefits are tax deductible. And the shareholders pay as well, because what doesn’t come off of taxes comes out of shareholder profits. But the CEO and Board determines this, the shareholders don’t.
It’s also in knowing who to pay off.
Our politicians know that without outrageous salaries their income from bribes will decrease. Of course, they will retain the campaign bribes from the SuperPACs, but more is merrier.
Worse, for the country, is that corporate laws are bought-and-paid-for. And they will not change as long as campaign cash continues to flow from private industry. Money WORKS!
A federal “Incorporation” option
Corporations are currently created on a state level, and as such the states see who can create the most competitively weak laws. Delaware has been quite successful in this endeavor.
But now is a good time to introduce a federal version. One that offers ZERO taxation for those complying. It gives shareholders the reins to calling the shots, limits CEO pay to 50 times the lowest, and gives U.S. workers preference over other countries.
What’s not to like about that?