Time to Rein in the Robber Barons Again

I'm going to let you on a little secret about many of the CEOs of America's largest companies: the biggest decision that they make these days, is how best to divvy up the wealth that they've stolen from America's working families and middle class.

Seriously, according to research by Lawrence Mishel and Jessica Schieder at the Economic Policy Institute, CEOs in America's largest firms are raking in an average of $15.5 million in compensation.

That's an average compensation of 276 times the annual average pay of the typical worker!

And that's DOWN from 2014, when the average CEO of America's largest firms earned 302 times the average pay of a typical American workers.

But don't feel too bad for the poor CEOs who are only earning $15.5 million as opposed to the $16.3 million they earned in 2014, because their earnings are still up over 46% since Barack Obama took office.

The fact is, CEO compensation only appears to be down because so much of their compensation comes in the form of stock options, which means that the market slowdown in 2015 is really the only reason that it looks like CEOs earned relatively less than they did in 2014.

Despite the market downturn and the decrease in top-CEO pay in 2015, the average compensation for a CEO of one of America's largest firms is still up over 940% since 1978, back when CEOs "only" earned about $1.5 million per year, roughly 30 times more than the average worker.

In Mishel and Schieder's analysis, they point out that most major CEO's simply extract wealth from the economy without adding to the economy in any truly productive manner.

They write that "We have argued that high CEO pay reflects rents - concessions CEOs can draw from the economy not by virtue of their contribution to economic output but by virtue of their position. Consequently, CEO pay could be reduced and the economy would not suffer any loss of output."

And that tells us something very important, and very troubling: right now we're living in another gilded age, and the CEOs of the largest American corporations are nothing but 21st century robber barons.

While CEO pay has increased by over 940% since 1978, average worker pay has only increased by 10.3%, meaning that while top CEOs have seen their earnings go up by $15 MILLION a year since 1978, average workers are only earning about $5000 a year more on average.

It wasn't always this way, as you can see in this graph, CEO pay didn't start tracking to the stock market until the early 1980s.

As economist JW Mason points out, one major reason for the change was the "shareholder revolution" in the early 1980s, when incentives under the Reagan administration made it so that companies became more interested in buying back their own stock from the public than they were in investing in new projects or hiring American workers.

That turn towards stock buybacks and away from reinvestment in making companies grow disconnected stock value and dividend payouts from real economic output, and priced out smaller investors while concentrating wealth and voting power into the hands of a few economic elite who serve as corporate executives and board members.

But up until 1993, the top CEOs still "only" made between 50 times and 90 times what a typical worker would make.

Then, Bill Clinton and Congress passed a law placing a $1 million cap on how much a company can deduct for executive pay as a business expense.

And that sounds like a good plan, because it places a hard limit on how much a firm can pay out to its executives before taking on giant tax burdens.

But there was a huge exception written into the law that made the stock buyback situation even worse.

Under that law, compensation that's based on a company's "performance" is exempt from that $1 million limit, and since a company's stock market value is supposed to be a measure of economic performance, companies started simply paying their executives in stock shares and options.

But remember, stock options don't actually reflect a firm's performance anymore, because ever since the "shareholder revolution" in the 1980s, firms have been artificially inflating their stock value by buying back their own stock from the public to decrease the number of available shares and thus artificially drive up the price of the stock.

The nation's 1% has been making a killing from artificially inflated stock prices for nearly four decades, and that concentration of wealth and power has come at the direct expense of America's working and middle class.

Between 1948 and 1973, productivity and wages tracked very closely, productivity increased by 96.7% and wages went up 91.3%.

But between 1973 and 2013 (that's the same time period when stock buybacks effectively de-linked stock value from economic output), worker productivity increased by 74.4%, and wages only increased by 9.2%.

And that's been really harmful to our economy, because it's a basic economic fact that the wages of average workers, the people who actually buy stuff, are what drive real economic growth.

It's no coincidence that as stock prices grew since 1979, the top 1% of earners in America saw their wages increase by 138%, while the entire bottom 90% of American earners only saw their wages increase by 15%.

Because the top 1%, and especially the CEOs and board members of the largest firms in America, are nothing but a new generation of robber barons.

Modern CEOs of most of America's largest firms don't create anything, many don't even steer their companies to become more economically productive.

They simply siphon wealth from the American working and middle class, from average investors, and from the American economy as a whole.

The biggest decision these modern robber barons make, is how best to divvy up that stolen wealth among themselves.

And it's time to rein them in.

We need to raise the highest marginal income tax rates to where they were before the insane policies of Reagan's trickle-up economics, and we need to end corporate tax subsidies and close corporate tax loopholes that let companies evade American taxes and stash their earnings overseas.

It would be a good thing for the American economy to set higher corporate tax rates for companies that pay their executives hundreds of times more than their average workers.

We need to make it so that a company's shareholders vote on how top executives are compensated, instead of allowing the old boys club of corporate executives and board members to choose their own compensation. It's time to make America's economy work for everyone, and to take real action to rein in these robber barons and the obscene level of income inequality they've created in this country.


KCRuger's picture
KCRuger 7 years 49 weeks ago

The canyon which must be crossed in order to solve this problem was put there intentionally; Globalism. The U.S. is competing with the likes of Ireland and the Bahamas, who value being the corporate home to such a degree they literally give away tax revenue with which to run their country. Of course, this will come back to bite the corporations eventually, as their pursuit of new markets will be fruitless, while their old markets will have dried up, and their income tax rate will be the least of their problems.

rofo47's picture
rofo47 7 years 49 weeks ago

Just move from this plutocracy. We had a slim, slim chance with Bernie and you see what happened. Money has always won out and always will. The Catholic Church did it for a thousand years. Keep the people ignorant and poor. That's the key to power.

Outback 7 years 49 weeks ago

Of course, the likely next president (Hillary) has been in bed with the 1% from the get go. She Loved the TPP before she had to slither to the left due to Bernie's pressure, but you can count on her slithering back to the right soon after election and we will see NAFTA cubed sometime around April, if not before the actual coronation. Nothing will have changed, because the oligarchs have succeeded. They provide bread and circus to the masses, who have dumbed down to the point that they don't even have the capacity to THINK about what's happening to them. I'm not talking about people that frequent Thoms blog and other alternative sources of information. I'm talking about the 97%. "Hey Marge, bring me another beer **buuurp**, and hurry up! You're missing America's Funniest Home Videos!"

Ou812's picture
Ou812 7 years 49 weeks ago

58% of the fortune 500 CEO'S support Hillary Clinton for President. http://fortune.com/2016/06/01/fortune-500-ceos-favor-clinton-over-trump/

Kend's picture
Kend 7 years 49 weeks ago

Hillary is one of the CEOs, what is the difference between raking in millions from a business or a foundation? Both fly around in private jets.

2950-10K's picture
2950-10K 7 years 49 weeks ago

I agree with Thom, going back to the "highest marginal income tax rates" that existed before Reagan's trickle down swindle would be a very wise move and might even help us avoid the next Great Depression.

Don't count on Trump/Pence doing this though. During the Bush/Cheney Great Recession, Mike Pence a hardcore Teafascist, twice refused to endorse unemployment benefits if it meant that taxes went up on only millionaires.

Unrelated: Last night I noticed that NBC news spent the first six minutes talking about how brilliant Trump is for creating suspense around his VP pick, comparing it to his TV shows. Hillary then got two minutes of nothingness.

Queenbeethatsme's picture
Queenbeethatsme 7 years 49 weeks ago

Gee Thom, thank you for telling everyone what they already know..now how about sharing the plan for reining them in?

BTW, I'd like the extra 15k a year it costs for me to have my health insurance. You know, the insurance I and everyone else is forced to have so that hospitals and insurance companies can get rich and build mega medical campuses while they diagnose bogus illnesses to justify tons of tests and dangerous surgeries.

Before Obama care, my insurance was 4300/ year with a 250.00 per person out of pocket, a 20 dollar Co pay or an 80/20 plan...I could choose any provider I wanted as long as they were in network, out of network my insurance paid 80% and I paid 20% until the max of 2500.00 or 4000.00 per family.

.....I pay over 12k a year, my personal deductible is 4k and the insurance company pays nothing until my deductible is reached. Out of pocket is 10,500 per year.

So basically, I pay a lot more and have no insurance...because I am not spending 6K just so they start splitting bills with me 80/20.

People should start insurance Co ops..pay a nominal yearly fee to meet insurance requirements, then f... the government. OBAMA CARE is about a captive consumer for insurance companies and the uninsured have been duped into thinking they now have great coverage...they now have a chance to get butchered or a nosocomial infection and die from it like the rest of us.

christine ohio's picture
christine ohio 7 years 49 weeks ago

You mentioned a site yesterday that was incorrectly stated...weareheremovement.com, I think you said, "weareherethemovement.com."

Mark J. Saulys's picture
Mark J. Saulys 7 years 49 weeks ago

Well Queenbee, everybody didn't know that but since you did what's your plan?
You sound like Jill Stein when you talk about Obamacare - without a public option - except that the government could easily solve the problem - if it wasn't captured by big business the same way Obamacare (without public option - thanks to Joe Liebermann, Senate waterboy of the insurance industry) was.
You seem to want us to stop expecting government to serve us so we wouldn't interfere with the capture.
You were paying less before Obamacare?

Mark J. Saulys's picture
Mark J. Saulys 7 years 49 weeks ago

Ou812, you're right, they want the cheap labor coming in from south of the border and their "free trade" and so on. This is all part of the strategy of moving the American political spectrum incrementally to the right every election by having Fortune 500 contribute to both parties and that way determine the nominees of each party. They then nominate a Darth Vader, monster Republican and a corporate shill Democrat, and so, force a choice between evils.

Wall Street and Fortune 500 don't need a crazy guy, they're happy with a corporate shill.

Legend 7 years 49 weeks ago

The CEO salary issue seems to fly under the radar with the American public. It has outraged me for years. I have worked for several companies and seen it first hand. You can be a complete idiot and pull in millions in America.

Mark J. Saulys's picture
Mark J. Saulys 7 years 49 weeks ago

You're absolutely right, Kend, you nailed it.
Didn't want to miss the opportunity to say that.
I think it's gonna snow today.

Mark J. Saulys's picture
Mark J. Saulys 7 years 49 weeks ago

Hillary is clearly with the plan. All she has going for her is that she isn't Trump. She doesn't let anybody forget that too. Seems her campaign slogan is, "Hillary, she's not as bad as Trump!"
But the way Wall Street, with their buying of the election and nomination process, has it laid out, that's all she needs. That's exactly the set up.
I recommend Jill Stein. She's as good and as capable as Bernie, pure on the issues and accepts no money from business or superpacs, nobody Bernie wouldn't take from. There's no need to try to get Bernie to run independent.

Mark J. Saulys's picture
Mark J. Saulys 7 years 49 weeks ago

Here's the 2012 third party debate introducing Jill Stein, moderated in part by Thom on RT.


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