What the World Needs Now: New CEO Bonus & Pay Metrics?

What the World Needs Now: New CEO Bonus & Pay Metrics?

The Koch brothers spent tens of millions of dollars to get the tax law passed and continue to build support for it. The changes are expected to save the brothers and their company more than $1 billion a year in taxes. Charles Koch, his wife and Koch Industries gave Speaker of the House Paul Ryan (R-Wis.) and his political action committee $500,000 in campaign contributions just days after the House passed its version of the tax bill. 

• Huffington Post: Charles Koch Complains About Corporate Influence In Politics In Surprising Op-Ed

By J.M. Hamilton (3-18-2018)

Since the delivery of the Citizens United decision, Americans have become increasingly aware of the exceptional power billionaires and multinationals wield over our democracy, the economy, the electoral process, and politicians.  Indeed, the oligarchy holds vast power over the Federal and State courts, as well as, the executive & legislative branches.

But the corruption, hubris, and myopia that surrounds some of the world’s most powerful billionaires and CEOs not only is widely noticed, but it also means the country is being ruled by men, who often place the C-Suite and shareholder short term interests above the long term health of the nation and its citizens.

And some wonder why the nation is in the shape its in: a slow motion fiscal train wreck is playing out before our very eyes, where the GOP has voted in tax cuts for the wealthy (paid for on credit and the backs of future generations) and annual deficits are projected to soar; bailing out Wall Street banks, and keeping America’s perennial credit card wars financed, the Federal Reserve resorted to interest rate suppression, and only in the last year ended quantitive easing (essentially the printing of money to keep the Federal Ponzi scheme going… the Fed was rolling over assets from QE from its greater than four trillion - plus balance sheet, up until last year); and Americans have grown ravenous for political change, due to the instability caused by oligarchical rule.

Recently four individuals caught JMH’s eye that sum up the problems the US now faces in our Neo-Gilded Age, that is in allowing monied interests to call the shots in Washington.

Koch Industries:  The Koch brothers never fail to amaze; their hypocrisy was on full display recently when they wrote a Washington Post editorial, decrying - get this - crony capitalism.  Despite their verbal & written libertarian political positions, the Koch brothers define “crony capitalism,” which they generally justify as necessary to stay competitive (or everyone else is exploiting Washington, so Koch Industries must participate too).  This time, the hundred billion dollar gorilla - the Koch brothers - was upset that POTUS Trump, for a change, actually attempted to take a baby step forward in helping America’s long forgotten middle class, by enacting steel tariffs.  

The brothers, of course, loved the Trump tax cuts, and poured millions into lobbying for the GOP tax cut law (undoubtedly, creating a tremendous windfall for Koch Industries).  But the Kochs - like any other despots - aren’t happy unless they define the rules of the game, and that includes defining “capitalism, free markets, and free trade” on their terms, exclusively.  That the Kochs’ actions favor crony government, free trade agreements negotiated - exclusively - from the multinational vantage point (that usurps the power of nation states and the people), and the formation Any Randian cartels and monopolies -that are antithetical to capitalism and free markets - apparently is beside the point.  

It’s as if the nation has returned to rule by divine right of kings.

Wells Fargo & CEO Sloan:  Wells Fargo - once adored and loved by Mr. Buffett - has been fighting for number one pole position, for the most corrupt Wall Street mega-bank.  The list of Wells Fargo's, alleged & proven, crimes against its customers, and investors, is exhaustive, and well enumerated in a recent Vanity Fair Hive piece.   So when Mr. Sloan was awarded millions in annual compensation - at a time that Wells Fargo’s corporate culture appears congenitally corrupt, and is presently, under SEC investigation - perhaps a wiser CEO would have flown below the radar.

Instead, the CEO Sloan, unwisely, attacked - a possible Democratic Presidential frontrunner for 2020 - Senator Elizabeth Warren.  Mr. Sloan stated, in response to a Twitter barb issued by Senator Warren (as reported in the same Hive piece): 

It’s not surprising I disagree with almost everything Elizabeth Warren says, Sloan told reporters on Thursday after speaking to the Detroit Economic Club.  Most of her comments are both ill-informed and inappropriate.

Note to Mr. Sloan: Americans are tired of (top-down) trickle-down: fiscal, foreign, monetary, & trade policies.  These policies have been in place for the last 38 years, and they’ve been an abject failure, except to grossly enrich an elite few (at the expense of many).  And pray Mr. Sloan… yes, pray… Senator Warren doesn’t soon become POTUS Warren.  Given Mr. Mueller’s progress, and the current mood of American voters, increasingly, not an improbable event.

Apple & CEO Tim Cook:  What does it say about the most powerful CEO perhaps in the world, and certainly in charge of the company with the largest market cap, that he rants at Western governments w/ derision and great scorn. But when it comes to China and its Dear Leader - who recently had China’s Communist party appoint him Dear Leader for life - Mr. Cook, quickly, rejected principle and parroted China’s Communist party line (particularly on Web censorship and state control of the internet & internet content)?  

1984? Indeed.

All this speaks to the moral failing of America’s corporate leadership.  It speaks to the problem of multinationals - like Apple - exploiting China’s slave labor pool, at the expense of American workers, so as to maximize short term profit mark ups, and investor returns (that are nothing short of astounding).  

What then of Apple donating and lobbying for U.S. government policies that favor its interests, both domestic & foreign?

POTUS Trump - sensing the voters’ shift in mood - has been going on the offensive against unfair trade agreements, and has targeted nation states (and trade agreements) that have benefited at America’s expense.  

But here’s a questions for the Trump administration, and the US Trade Rep, Lighthizer, in particular....

Are American multinationals - who exploit foreign labor, regs, and tax loopholes - any less guilty of dumping product on U.S. shores (to the detriment of the U.S. business, the economy, labor, and our tax base)?  This administration has done everything to help the plutocratic donor class; it's time to help out the citizens, who - and who did not -  place Trump into power.  

Renegotiating trade agreements is a great start.

The brothers Grimm?…  far more frightening, the brothers Koch.

At the end of the day, these three examples say as much about our nation’s commercial leadership, as they do about the very people who run this nation from the shadows.

And Americans are boiling w/ rage.  There are at least two solutions, one political, and the second, market based.  The political solution is campaign finance reform.  Given the oligarchy’s desire to control politicians and the political process, and many politicians apparent love of graft & money, the odds of passing true campaign finance reform are extremely low.

The more likely reform is market based, and that is for investors to insist upon changing CEO and C- Suite pay packages, so that executives aren’t incented, solely, by short term gain; but rather, by the long term interests of the country, and society as a whole.  

For example, reformed CEO compensation might reward organic growth, R&D, and customer service performance, and penalize financial engineering (consolidation, loading the company up w/ debt to pay dividends, M&A, stock buybacks, etc.).  Reforms might further reward paying employees a living wage, and penalize, a scenario where employees are paid a non-living wage.  If executive compensation reform was adopted industry wide, no single CEO could claim that he was placed at an unfair competitive disadvantage. 

It’s interesting, as noted in JMH’s last piece, true reform - after the latest catastrophic mass shooting - hasn’t arrived from the cowards in Congress, or even the Executive branch… but rather, from the multinationals and large corporations that retail guns, and service the NRA.  The consumer, and public relations, likely forced many CEOs to change course in regards the NRA, but one would like to think some of them did it purely because it was the right thing to do.  

Might the consumer, employees, investors, and public relations also force a change in the manner the C-Suite class is paid?

Americans may not be able to reform our government; but, perhaps better still, they may have greater luck in reforming the bonus and pay incentives of the puppet masters, who run our crony government.  Hedge, mutual, and retirement funds (and University endowments) might help clear a path.  

As for the billionaire class, nothing short of a tax on crony wealth will remedy that situation. 

Copyright JM Hamilton Publishing 2018