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Dr. Reich applauds the invasion of the SEC into the private, legal operations of corporations. For what purpose? The only possible reason for government involvement is for future government regulation. We know that mandating disclosure is always the prelude to mandating practices.
We see this over and over in leftist activism. They are never content with simply pointing out the object of their ire. They always undertake to force compliance with their viewpoint. If they can't do it through boycott and hyperbole, they will invoke government.
Dr. Reich also makes some truly outlandish claims about CEOs and their value.
Read on:
--------------------------------
The Securities and Exchange Commission just ruled that large publicly held corporations must disclose the ratios of the pay of their top CEOs to the pay of their median workers.
About time.
For the last thirty years almost all incentives operating on American corporations have resulted in lower pay for average workers and higher pay for CEOs and other top executives. (Correlation is not causation. There is no evidence that high CEO pay causes lower employee pay.)
Consider that in 1965, CEOs of America’s largest corporations were paid, on average, 20 times the pay of average workers.
Now, the ratio is over 300 to 1.
Not only has CEO pay exploded, so has the pay of top executives just below them.
The share of corporate income devoted to compensating the five highest-paid executives of large corporations ballooned from an average of 5 percent in 1993 to more than 15 percent by 2005 (the latest data available).
Corporations might otherwise have devoted this sizable sum to research and development, additional jobs, higher wages for average workers, or dividends to shareholders – who, not incidentally, are supposed to be the owners of the firm. (Notice that Dr. Reich knows exactly how a corporation, every corporation, ought to spend its own money. What he doesn't seem to understand is that corporations spend money according to their priorities, not Dr. Reich's.
That does not guarantee they'll make good choices. But that doesn't matter. It is not the business of government to ensure corporations make choices according to government's values.)
Corporate apologists say CEOs and other top executives are worth these amounts because their corporations have performed so well over the last three decades that CEOs are like star baseball players or movie stars.
Baloney. Most CEOs haven’t done anything special. (Painting with a broad brush, "most" CEOs will shortly evolve into "all" CEOs. And he can't know about "many" or even "some" CEOs, let alone "most" CEOs. There simply isn't a metric. There isn't information available to Dr. Reich to make such sweeping generalizations.)
The entire stock market surged over this time.
Even if a company’s CEO simply played online solitaire for thirty years, the company’s stock would have ridden the wave. (Completely irrelevant and vapid. This "surging" stock market is no guarantee of anything. Apparently Dr. Reich believes that corporate success is a no-brainer, anyone can do it. The market "surge" automatically means universal business success, and is apparently the only factore.
Never mind that 9 of the 20 largest corporate bankruptcies in HISTORY occurred after the crash, which means, during the recovery. Including the #1 largest, Lehman Brothers.
Indeed, many large corporations failed in 2010, 2011, 2012, 2013, 2014, and yes, 2015. Despite this, and in contravention of the recovery, Dr. Reich seems to think that corporate success is foolproof. On this basis he concludes that CEOs aren't worth the money they're paid.)
Besides, that stock market surge has had less to do with widespread economic gains that with changes in market rules favoring big companies and major banks over average employees, consumers, and taxpayers. (Well, so it's not really a "surge." Why would Dr. Reich make his argument then pull the rug out from underneath it? Was the "surge" due to prosperity, or was it due to rule changes?)
Consider, for example, the stronger and more extensive intellectual-property rights now enjoyed by major corporations, and the far weaker antitrust enforcement against them. (Because we certainly wouldn't want corporations to be able to protect what they create. It's certainly better to have cheap Chinese knockoffs, right?)
Add in the rash of taxpayer-funded bailouts, taxpayer-funded subsidies, and bankruptcies favoring big banks and corporations over employees and small borrowers. (Whaaa? It was Democrats, liberals, and leftists that proposed, passed, and continued government bailouts, subsidies, and "shovel ready jobs!" It's the Left that wants corporate-government partnerships.
Remember back in 2008 when the first bail-out vote failed in the House? "Two-thirds of Democrats and one-third of Republicans voted for the measure." The second vote passed:
In any case, Dr. Reich's criticism is a startling reversal, considering he has supported bailouts in the past.)
Not to mention trade agreements making it easier to outsource American jobs, (Hmm, sounds like government is the cause... And might we ask, why are jobs being outsourced? If you answered, because it's cheaper than paying high wages to Americans, go to the head of the class. If you further answered that government is forcing this by making it more expensive to employ American workers, you get a gold star.)
and state legislation (ironically called “right-to-work” laws) dramatically reducing the power of unions to bargain for higher wages. (Yeah, unions: An idea so good we have to make it mandatory.)
The result has been higher stock prices but not higher living standards for most Americans. (But the Left, and Obama himself, points to the stock market as evidence that Obama's recovery initiatives are working!)
Which doesn’t justify sky-high CEO pay unless you think some CEOs deserve it for their political prowess in wangling these legal changes through Congress and state legislatures. (I sincerely doubt any CEO has pointed to the generic stock market and said, "See, I deserve my pay." And what is justified or not justified is not a matter for Dr. Reich, government, or anyone else to decide.)
It turns out the higher the CEO pay, the worse the firm does.
Professors Michael J. Cooper of the University of Utah, Huseyin Gulen of Purdue University, and P. Raghavendra Rau of the University of Cambridge, recently found that companies with the highest-paid CEOs returned about 10 percent less to their shareholders than do their industry peers. (Assuming the study is definitive and not ideologically driven, it would be useful information to for private parties to use in support the idea that CEO pay ought to be based on performance. This is a market-driven solution, not a government imposed mandate.
But again, correlation is not causation. "Highest paid" might be the difference between $28 million and $54 million. $28 million is a lot of money. Are corporations paying their CEOs at the lower level doing well? Is it a matter of degree, or what? Should we nod approvingly at $28 million, but howl and whistle at $54 million because it is damaging?)
So why aren’t shareholders hollering about CEO pay? Because corporate law in the United States gives shareholders at most an advisory role. (Um, yeah. What about boards of directors? They have the power and the desire to profit. They can vote their interests as well. Thus, private solutions...)
They can holler all they want, but CEOs don’t have to listen.
Larry Ellison, the CEO of Oracle, received a pay package in 2013 valued at $78.4 million, a sum so stunning that Oracle shareholders rejected it. That made no difference because Ellison controlled the board. (Controlled the board? Could it be that Mr. Ellison owns a lot of shares of Oracle? Indeed, we find out that "Ellison currently owns 1,143,934,580 shares of the company" Out of 4.33 billion shares outstanding (1/3 of the company). So he is in control because they are his shares.
But why would he torpedo the value of the shares he himself owns? He wouldn't. A better question is, how is Oracle's performance? Remember, we are supposed to be tying CEO pay to performance. Dr. Reich changes the subject.)
In Australia, by contrast, shareholders have the right to force an entire corporate board to stand for re-election if 25 percent or more of a company’s shareholders vote against a CEO pay plan two years in a row. (Another private solution. Dr. Reich doesn't mind refuting his own case.)
Which is why Australian CEOs are paid an average of only 70 times the pay of the typical Australian worker.
The new SEC rule requiring disclosure of pay ratios could help strengthen the hand of American shareholders. (Who apparently are powerless to do anything about it, according to Dr. Reich.)
The rule might generate other reforms as well – such as pegging corporate tax rates to those ratios. (You see? It took a while, but Dr. Reich is not interested in disclosure, he's interested in government control. Which has worked out so well in the past.)
Under a bill introduced in the California legislature last year, a company whose CEO earns only 25 times the pay of its typical worker would pay a corporate tax rate of only 7 percent, rather than the 8.8 percent rate now applied to all California firms.
On the other hand, a company whose CEO earns 200 times the pay of its typical employee, would face a 9.5 percent rate. If the CEO earned 400 times, the rate would be 13 percent.
The bill hasn’t made it through the legislature because business groups call it a “job killer.”
The reality is the opposite. CEOs don’t create jobs. Their customers create jobs by buying more of what their companies have to sell. (Another truly vapid assertion. Businesses create jobs by making products people want to buy. They fill a need. When they creatively ascertain what the public wants, they prosper and hire people. Customers do not create jobs, they're needs and wants are satisfied.)
So pushing companies to put less money into the hands of their CEOs and more into the hands of their average employees will create more jobs.
The SEC’s disclosure rule isn’t perfect. Some corporations could try to game it by contracting out their low-wage jobs. Some industries pay their typical workers higher wages than other industries.
But the rule marks an important start.
Dr. Reich applauds the invasion of the SEC into the private, legal operations of corporations. For what purpose? The only possible reason for government involvement is for future government regulation. We know that mandating disclosure is always the prelude to mandating practices.
We see this over and over in leftist activism. They are never content with simply pointing out the object of their ire. They always undertake to force compliance with their viewpoint. If they can't do it through boycott and hyperbole, they will invoke government.
Dr. Reich also makes some truly outlandish claims about CEOs and their value.
Read on:
--------------------------------
The Securities and Exchange Commission just ruled that large publicly held corporations must disclose the ratios of the pay of their top CEOs to the pay of their median workers.
About time.
For the last thirty years almost all incentives operating on American corporations have resulted in lower pay for average workers and higher pay for CEOs and other top executives. (Correlation is not causation. There is no evidence that high CEO pay causes lower employee pay.)
Consider that in 1965, CEOs of America’s largest corporations were paid, on average, 20 times the pay of average workers.
Now, the ratio is over 300 to 1.
Not only has CEO pay exploded, so has the pay of top executives just below them.
The share of corporate income devoted to compensating the five highest-paid executives of large corporations ballooned from an average of 5 percent in 1993 to more than 15 percent by 2005 (the latest data available).
Corporations might otherwise have devoted this sizable sum to research and development, additional jobs, higher wages for average workers, or dividends to shareholders – who, not incidentally, are supposed to be the owners of the firm. (Notice that Dr. Reich knows exactly how a corporation, every corporation, ought to spend its own money. What he doesn't seem to understand is that corporations spend money according to their priorities, not Dr. Reich's.
That does not guarantee they'll make good choices. But that doesn't matter. It is not the business of government to ensure corporations make choices according to government's values.)
Corporate apologists say CEOs and other top executives are worth these amounts because their corporations have performed so well over the last three decades that CEOs are like star baseball players or movie stars.
Baloney. Most CEOs haven’t done anything special. (Painting with a broad brush, "most" CEOs will shortly evolve into "all" CEOs. And he can't know about "many" or even "some" CEOs, let alone "most" CEOs. There simply isn't a metric. There isn't information available to Dr. Reich to make such sweeping generalizations.)
The entire stock market surged over this time.
Even if a company’s CEO simply played online solitaire for thirty years, the company’s stock would have ridden the wave. (Completely irrelevant and vapid. This "surging" stock market is no guarantee of anything. Apparently Dr. Reich believes that corporate success is a no-brainer, anyone can do it. The market "surge" automatically means universal business success, and is apparently the only factore.
Never mind that 9 of the 20 largest corporate bankruptcies in HISTORY occurred after the crash, which means, during the recovery. Including the #1 largest, Lehman Brothers.
Indeed, many large corporations failed in 2010, 2011, 2012, 2013, 2014, and yes, 2015. Despite this, and in contravention of the recovery, Dr. Reich seems to think that corporate success is foolproof. On this basis he concludes that CEOs aren't worth the money they're paid.)
Besides, that stock market surge has had less to do with widespread economic gains that with changes in market rules favoring big companies and major banks over average employees, consumers, and taxpayers. (Well, so it's not really a "surge." Why would Dr. Reich make his argument then pull the rug out from underneath it? Was the "surge" due to prosperity, or was it due to rule changes?)
Consider, for example, the stronger and more extensive intellectual-property rights now enjoyed by major corporations, and the far weaker antitrust enforcement against them. (Because we certainly wouldn't want corporations to be able to protect what they create. It's certainly better to have cheap Chinese knockoffs, right?)
Add in the rash of taxpayer-funded bailouts, taxpayer-funded subsidies, and bankruptcies favoring big banks and corporations over employees and small borrowers. (Whaaa? It was Democrats, liberals, and leftists that proposed, passed, and continued government bailouts, subsidies, and "shovel ready jobs!" It's the Left that wants corporate-government partnerships.
Remember back in 2008 when the first bail-out vote failed in the House? "Two-thirds of Democrats and one-third of Republicans voted for the measure." The second vote passed:
The Senate accepted the amendment and passed the entire amended bill, voting 74–25... and on October 3, the House voted 263–171 to enact the bill into law.This was a largely Democrat initiative, supported by some RINOs and signed into law by Bush. Conservatives uniformly objected to the bailouts, but were powerless to stop them.
In any case, Dr. Reich's criticism is a startling reversal, considering he has supported bailouts in the past.)
Not to mention trade agreements making it easier to outsource American jobs, (Hmm, sounds like government is the cause... And might we ask, why are jobs being outsourced? If you answered, because it's cheaper than paying high wages to Americans, go to the head of the class. If you further answered that government is forcing this by making it more expensive to employ American workers, you get a gold star.)
and state legislation (ironically called “right-to-work” laws) dramatically reducing the power of unions to bargain for higher wages. (Yeah, unions: An idea so good we have to make it mandatory.)
The result has been higher stock prices but not higher living standards for most Americans. (But the Left, and Obama himself, points to the stock market as evidence that Obama's recovery initiatives are working!)
Which doesn’t justify sky-high CEO pay unless you think some CEOs deserve it for their political prowess in wangling these legal changes through Congress and state legislatures. (I sincerely doubt any CEO has pointed to the generic stock market and said, "See, I deserve my pay." And what is justified or not justified is not a matter for Dr. Reich, government, or anyone else to decide.)
It turns out the higher the CEO pay, the worse the firm does.
Professors Michael J. Cooper of the University of Utah, Huseyin Gulen of Purdue University, and P. Raghavendra Rau of the University of Cambridge, recently found that companies with the highest-paid CEOs returned about 10 percent less to their shareholders than do their industry peers. (Assuming the study is definitive and not ideologically driven, it would be useful information to for private parties to use in support the idea that CEO pay ought to be based on performance. This is a market-driven solution, not a government imposed mandate.
But again, correlation is not causation. "Highest paid" might be the difference between $28 million and $54 million. $28 million is a lot of money. Are corporations paying their CEOs at the lower level doing well? Is it a matter of degree, or what? Should we nod approvingly at $28 million, but howl and whistle at $54 million because it is damaging?)
So why aren’t shareholders hollering about CEO pay? Because corporate law in the United States gives shareholders at most an advisory role. (Um, yeah. What about boards of directors? They have the power and the desire to profit. They can vote their interests as well. Thus, private solutions...)
They can holler all they want, but CEOs don’t have to listen.
Larry Ellison, the CEO of Oracle, received a pay package in 2013 valued at $78.4 million, a sum so stunning that Oracle shareholders rejected it. That made no difference because Ellison controlled the board. (Controlled the board? Could it be that Mr. Ellison owns a lot of shares of Oracle? Indeed, we find out that "Ellison currently owns 1,143,934,580 shares of the company" Out of 4.33 billion shares outstanding (1/3 of the company). So he is in control because they are his shares.
But why would he torpedo the value of the shares he himself owns? He wouldn't. A better question is, how is Oracle's performance? Remember, we are supposed to be tying CEO pay to performance. Dr. Reich changes the subject.)
In Australia, by contrast, shareholders have the right to force an entire corporate board to stand for re-election if 25 percent or more of a company’s shareholders vote against a CEO pay plan two years in a row. (Another private solution. Dr. Reich doesn't mind refuting his own case.)
Which is why Australian CEOs are paid an average of only 70 times the pay of the typical Australian worker.
The new SEC rule requiring disclosure of pay ratios could help strengthen the hand of American shareholders. (Who apparently are powerless to do anything about it, according to Dr. Reich.)
The rule might generate other reforms as well – such as pegging corporate tax rates to those ratios. (You see? It took a while, but Dr. Reich is not interested in disclosure, he's interested in government control. Which has worked out so well in the past.)
Under a bill introduced in the California legislature last year, a company whose CEO earns only 25 times the pay of its typical worker would pay a corporate tax rate of only 7 percent, rather than the 8.8 percent rate now applied to all California firms.
On the other hand, a company whose CEO earns 200 times the pay of its typical employee, would face a 9.5 percent rate. If the CEO earned 400 times, the rate would be 13 percent.
The bill hasn’t made it through the legislature because business groups call it a “job killer.”
The reality is the opposite. CEOs don’t create jobs. Their customers create jobs by buying more of what their companies have to sell. (Another truly vapid assertion. Businesses create jobs by making products people want to buy. They fill a need. When they creatively ascertain what the public wants, they prosper and hire people. Customers do not create jobs, they're needs and wants are satisfied.)
So pushing companies to put less money into the hands of their CEOs and more into the hands of their average employees will create more jobs.
The SEC’s disclosure rule isn’t perfect. Some corporations could try to game it by contracting out their low-wage jobs. Some industries pay their typical workers higher wages than other industries.
But the rule marks an important start.
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