From 1978 to 2014, executive compensation at American firms increased 997%, compared with 10.9% for the average worker compensation. This is not about some people working harder than others, or critics being envious of high earners. This is about a system of corporate welfare and cronyism designed to extract obscene riches for the few at the expense of everyone and everything else. Not surprisingly, it is finance executives that account for 58% of the expansion of income for the top 1% and 67% of the increase in income for the top 0.1% from 1979 to 2005. Bankers continue to make off like bandits as the rest of the world grows insolvent. See: Skyrocketing CEO pay bad for the economy.
“The current trend in how CEOs are paid, particularly with stock options, creates a range of economic problems. Several studies show that equity-heavy pay, because it makes executives very wealthy very quickly, distorts CEOs’ incentives, inducing them to take on too much risk. Instead of bearing this risk themselves, they shift it onto the rest of society, as we saw during the financial crisis. This model also encourages executives to behave fraudulently, as in the backdating scandals of a decade ago, and lessens their motivation to invest in their businesses. In addition, according to economist William Lazonick, in order to issue stock options to top executives while avoiding the dilution of their stock, corporations often divert funds to stock buybacks rather than spending on research and development, capital investment, increased wages, or new hiring. To top it all off, these pay packages cost taxpayers billions of dollars due to the performance pay tax loophole instituted by President Clinton.”
The Dodd-Frank bill introduced steps to report and reign in executive pay. Thus far the finance-captured SEC, led by Mary-Jo White, former top Wall Street defense attorney (who’s husband is still working as a highly sought after Wall Street defense attorney) has not surprisingly failed to deliver as mandated on executive pay. Since White is no doubt headed back to represent those same firms after she leaves the SEC, one can understand her reticence to offend finance execs now.
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