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This Week:
- The quietest scandal
- Dialogue: media diversity and democracy
- Places & Culture
- Weekly Digest
Every time I hear someone complain how much sports stars are paid, I always wonder why our society fixates on this molehill and misses the mountain. For that matter, when it comes to moral outrage over social issues, there's one whopper that dwarfs the cases that make the headlines, from Bill Clinton's adultery to Bill Bennett's gambling.
The 600-pound elephant in the room—or should we say the $82-million elephant in the room—begging for more of our ire is the scandal of CEO salaries.
A recent rash of stories in the mainstream media tried to shove this onto our outrage-thirsty culture's front burner in the wake of Enron and other corporate Hindenburgs (and yes, most of these stories were written by people whose paychecks are signed by well-paid CEO's). Fortune, Business Week, Slate, the London Guardian, along with the reliably plucky Sojourners, have all run stories (linked below) calling attention to a certain side effect of capitalism.
How crazy is it? In 1960, the average CEO's salary exceeded the average employee's wage by a factor of 12, according to CBSMarketWatch.com.
Now it's by a factor 531. No, that isn't a misprint. Once again: the average CEO's salary is 531 times larger than the average employee's.
Who knows how they come up with these statistics, but the point carries through—the natural economic rhythms of our society are facilitating greed in an alarming way. And we're complaining about outfielders?
Now you can extol the virtues of a free market system versus a state-run economy. You can even try to argue that the achievements of CEOs are due primarily to their industriousness as much as their luck in being born into the middle or upper class and massaging their connections in the financial world to elevate them to such staggering heights. If you want to be insensitive, you can argue, as did a Forbes article called "In Praise of Inequality," that inequality is a necessary motivating mechanism in our economy (see second item here for a rebuttal).
But you can't say that CEOs work harder today than 40 years ago by a ratio of 531 to 12—that they're that much better at what they do or that it's that much harder to find a good one to run your company.
It shatters the notion of earning a salary. And lest any doubts remain about the irrelevance of merit, see the Fortune cover story from last month entitled "Have They No Shame?" It was subtitled, "Their performance stank last year, yet most CEOs got paid more than ever." The story begins by reporting that Tyco executive Dennis Kozlowski made $82 million last year, a generous reward for his company's stock sliding 71% after a crippling federal indictment. Kozlowski's former CFO made even more; the two were the highest-paid executives of an S&P 500 company last year, according to Fortune.
At least 12 others made tens of millions while their companies performed poorly. Meanwhile, hard workers across the nation fret over how to make ends meet. Millions more don't have health insurance. These are the vices of an otherwise virtuous economic system.
The recent spurt of media coverage of CEO salaries provides some perspective to the media's own constant reports of how bad the economy is, which tend to reflexively blame world events or insufficiently-spending shoppers (see 3/10 weblog on defining "weak economy"). But it doesn't figure to catch on. Compared to other moral outrages, the issue of CEO salaries just isn't that dramatic. A president's disgraces in the Oval Office, the latest drive-by shooting or nightclub fire, the latest ten-figure contract for a sports star while teachers and nurses are paid a relative pittance—now those are outrages you can hang your hat on. (At least Shaquille O'Neal's salary has some relationship to how much fans will pay to see him. No one was buying Enron shares to bask in the glory of Ken Lay. See this column of mine on sports salaries.)
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