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John Edwards’ Plan to Stop Corporate Abuses
By JLP | January 2, 2008
John Edwards’ editorial in today’s Wall Street Journal starts out pretty much the same way that Barack Obama’s did by telling us how bad things currently are in the U. S.:
The basic bargain of America — that everyone should have a chance to work hard and build a better future — is falling apart. Families are working longer hours, but skyrocketing education and health-care costs, the foreclosure crisis and stagnant incomes have made it harder for working Americans to provide a better future for their children.
Not everyone in America is struggling. Investors on Wall Street took home a record-setting $38 billion in bonuses this past year, even after losing millions in the credit meltdown.
In 1960, the average CEO made 41 times what the average worker made. But in 2005, the average CEO made over 400 times the average worker’s salary. The share of corporate profits going to CEO pay has doubled since the 1990s. Meanwhile, the value of the minimum wage has plummeted 30% since 1979.
I’ll be the first to admit that corporate executive pay seems to be out of control. In my opinion CEOs earn way more than they deserve – especially when you consider the packages they walk away with when they get fired.
In the very next paragraph, Edwards goes on to say this (emphasis mine):
Don’t get me wrong — it is a good thing that some Americans are doing well. The son of working class parents, I have been blessed with extraordinary success in my own life and now want for no material thing. The problem is that the successes of our economy are no longer shared. Forty percent of all economic growth over the past 20 years has gone to the top 1% of American families.
This is where I wish politicians (all politicians) would provide footnotes with links to sources for their “claims.” Here Edwards gives us a nice little soundbite but nothing to back it up.
Anyway, the rest of the opinion piece goes on to give us his plans for fixing our greedy corporations and their executives. Unfortunately, he fails to address lawsuit abuse and the outlandish pay that some lawyers receive on really big cases. Hmmm… I wonder why?
Topics: Miscellaneous | 6 Comments »
January 2nd, 2008 at 10:51 am
I won’t be voting for Mr. Edwards.
January 2nd, 2008 at 2:18 pm
I won’t be voting for Edwards either, but the whole “lawsuit abuse” claim is very overstated.
January 2nd, 2008 at 6:00 pm
He’ll stop corporate abuses by chasing corporations out of the country. And Wall Street will happily follow; London’s just as world-connected as NYC, and has a better regulatory environment after SOX.
January 2nd, 2008 at 10:01 pm
It appears that when he says “all economic growth” he really means “share of income” based on IRS tax return data. Prof. Emmanuel Saez of Berkely seems to have some of the more prominent work on the subject, http://emlab.berkeley.edu/users/saez/ is his homepage with links to his papers.
The statistic that is more dubious to me is the “average CEO vs average worker” comparison. According to the Census Bureau, in 2006 the median income per household member was $23,535. Four hundred times this amount is $9,414,000. According to the IRS, there were only 13,776 tax returns filed in 2005 with an adjusted gross income of $10 million or more, out of 134,372,678 total returns filed. That’s .01%. The Department of Labor estimates there were about 300,000 Chief Executives as of May 2006, not including self employed people. For all of them to *average* $9.4million, when only maybe 15,000 of them filed tax returns for that amount…strains credibility.
Other points to ponder: More and more of the rich are self made, either entrepreneurs or executives. Particularly for the entrepreneurs, how could/would you try to limit their income and wealth?
Or, why do people always use income as a standard for wealth and economic stability? If you make $10 million but spend $11 million and have millions in debt, how are you really better off than me if I make $50,000 save 20% and retire at 45?
January 2nd, 2008 at 10:51 pm
You sound like me (a lawyer, I mean). I want to say this more often that not when reading anything in the paper: “Please provide supporting facts, conclusory statements are insufficient.”
January 3rd, 2008 at 11:52 pm
I will be the first to agree that the CEO’s of most S&P 500 companies are overpaid. However, when that occurs at a company, just whose fault is that — the CEO? I don’t think so. Every employee, including the CEO, is going to try to get the most attractive package he/she can.
The root problem is corporate boards that approve this nonsense. If you were a CEO, wouldn’t you try to negotiate the highest possible compensation for yourself? Sure you would. But when a corporate board routinely rubber-stamps a $10 million salary, a $200 million severence package, a private jet, $25 million options grant, etc, with little to no accountability for performance, they are not representing the shareholders correctly, and frankly, unlike the CEO, the board is simply not doing their job in compensation negotiations.
I am not exactly the first to articulate this position. Marty Whitman has been railing for years about how corporate boards are very, very weak in this country.