Why CEO’s compensation packages are bad for the “moral economy?”
A new poll released by NBC New and the Wall Street Journal last Sunday shows that 70% of Americans are quote; “angry because the political system seems to only be working for the insiders with money and power.” Greg Wilpert, The Real News
US bosses now earn a staggering 312 times the average worker’s wage, studies of the top 350 CEO’s compensation shows. Typically when CEO’s are looking for work, they hire a guy that negotiates on the behalf and the first thing that is always agreed upon is that the corporation pays the guys fees. In a macabre twist of Kafkaesque irony, the guys sitting across the table from the negotiator feels compelled to relent to the incumbents salary expectations because he is in effect hiring his own future boss. So it raises a very pertinent and even moral question; just how hard are these guys going to negotiate with their future employer?
Once hired, the new CEO constitutes a fresh remuneration or compensation committee to negotiate his compensation package, but like previously, the only way the compensation committee members are going to retain their respective positions in the business and stay in the “good graces” of the new guy is if they acquiesce, nay, capitulate to his financial demands? This is the equivalent of the new CEO negotiating with a pack of his best friends, but pretending they don’t know each other, which is clearly a massive systemic flaw in the neocapitalism structure. There are enough instances of incumbent CEO’s demanding all sorts of upfront payments for relocation, time allocated for the relocation, the payment of the transfer of kids swopping schools/colleges, a once-off payment for the wife, transfer fees and the monthly payments for clubs memberships, bridging payments for himself and other such emoluments he may deem necessary and even prescribes to the company.
Even the most conservative economic commentators or pundits agree that the only way to see if the now hired CEO’s strategy works is over the long-term, say a period of 10-years, but the it is unfortunately commonly accepted practice for the incumbent to negotiate contracts of two years length, which is too short to measure strategic performances on account of the fact that many factors quite beyond the CEO’s abilities often positively influences the share price, and this has the immediate knock-on effect of increasing his annual remuneration. But this system is open to manipulation if the CEO prefers a large portion of share options, apropos actual salary. It means he can encourage minority shareholders who have just received their dividends to buy back their own stock. This has the net effect of artificially inflating the share price and again, increasing the CEO’s bonuses and overall remuneration packages. This practice is known as “round tripping.”
The inherent evil of neoliberalism is the accepted dyscognitive notion that we have to relegate all other interests and areas of our lives, our social mores and morals to the wisdom of the markets because the markets knows best, is self-regulating, is neutral, is colour-blind, is asexual, seeks only the best person for the job, automatically adds value and is the final arbiter of all of human activities and defines human existence. In other words, we have abrogated to the markets the powers and position of gods, or a God, and if New York is the citadel, then Wall Street is the cathedral at which we all have to reverentially genuflect and accept its ever-present omniscience?