Nobody is denying it. CEOs these days are getting paid huge amounts of money while much of the country is agonizing over how to pay its bills.
Times like these are bound to put people on edge. But rather than suffering in silence and worrying about their own affairs ““ which would be more constructive ““ many people are reverting to name-calling and finger-pointing. And they’re saving their loudest criticism for America’s highest-paid businesspeople.
CEOs and corporate executives have become the common scapegoats for everything wrong with the economy. They are repeatedly torn to pieces for making salaries that are deemed extravagant, for owning jets or for taking vacations.
Responding to the populist charge, President Obama announced earlier this month that executive pay was to be capped at companies that received bailout money from the Troubled Asset Relief Program.
According to Treasury Secretary Timothy Geithner, the measure was designed to “strengthen the public trust” and ensure that those who are responsible for the crisis are held accountable.
Nevertheless, this is far from an equitable system of punishment. It lays responsibility squarely on Wall Street when there’s plenty of blame to go around.
If the government were really interested in imparting justice, it would follow this up by attacking all the other guilty parties ““ the subprime borrowers, the lenders and especially Congress. But of course the people in power are not about to risk their political futures by indicting members of Congress.
And there is another consideration. According to some insiders, a number of companies whose CEOs will be forced to take a pay cut under the Obama plan resisted the bailout policy to begin with. Notwithstanding the fact that they had TARP money foisted on them, these executives will be penalized along with the rest, which is a true miscarriage of justice.
Obama and Geithner’s efforts to single out CEOs and give everyone else a pardon are diversionary and dishonest. People’s fortunes will not improve by one red cent because someone on Wall Street is hit with a pay cut. It is simply a pretext for attacking the rich to further solidify the support of the masses ““ the chief gimmick of the Democratic Party.
Furthermore, the notion that CEOs are overpaid is a fallacy concocted by people who lack the knowledge and expertise to make the judgment. President Obama and pols are in no position to pontificate about the merits or demerits of CEO compensation and how companies do business. Just because a company happens to lose billions of dollars in a particular year does not necessarily reflect the CEO’s performance. It may have lost even more with someone else at the helm or been swept away by a bad economy.
Then again, that some CEOs happen to get a severance package worth millions of dollars is often no fault of their own. The assumption is that the CEO’s pay is determined by a board of directors that he appoints himself, which produces a conflict of interest. But what if his company is owned by an investment firm? If his superiors decide to give him a $20 million bonus, then what does he have to answer for?
Then, the amounts that CEOs are getting paid do not seem outlandish when we compare them to what people in other fields are making. People are not offended when they hear that Will Smith made $80 million last year. In contrast, the highest-paid CEO (John Thain of Merrill Lynch), who made about $84 million in 2007 (one-third of what Oprah made), provokes alarm and resentment.
The point is not that corporate executives deserve to be paid for failure. Even though Will Smith is paid the same when a movie he makes flops at the box office, CEOs generally get paid less when their companies fail. People should be glad to get executives out of their offices before they make things worse (even at the price of millions of dollars).
But we’ll have no such luck. The desire to vilify corporate America has become transfixed in our culture ““ by the media and now by President Obama. His pay cap idea is nothing more than poorly disguised class warfare bent on marginalizing the rich, much as his entire economic policy is essentially an austerity program for the rich and a free-for-all for everyone else.
The current crusade against CEOs is shameful. If seeing others fail comes as a relief to anyone, it shows a tragic flaw of character. Rather than reveling in other people’s misery and playing the blame game, we should think of a viable solution for how to extricate ourselves from this mess. If Obama’s goal is truly to promote unity, this would go a long way.
If you speak for justice then e-mail Pherson at apherson@media.ucla.edu. Send general comments to viewpoint@media.ucla.edu.