LETTER TO THE EDITOR: Another lesson in economics
I blew coffee out my nose when I read Leigh Mateas’ letter to the editor. “Supply and demand determines how much to pay top executives. If a CEO fails, the board replaces him.” The goal of business is to maximize shareholder value, so big CEO paychecks must mean big profitability. Not.
Bank of America stock plummeted from $50 to $5 while the bank lost $9 billion in the second quarter. Yet their top four managers received over $40 million in compensation while their CEO received $284 million over a recent seven-year stretch. Plus, BofA just transferred $500 million of under-performing mortgages to Fannie Mae thus privatizing financial gain and unloading huge losses on the American public. Jeff Mezger (KB homes) received $1 million plus a $6 million bonus while his company lost one billion dollars and share value dropped 66 percent. Fannie Mae lost $170 billion last year, yet their top execs were bonused $10 million. The list goes on.
Even when CEOs do such a poor job that they’re fired, they’re still richly rewarded. Bob Nardelli (Home Depot) and Hank McKinnel (Phizer) were fired – but received $200 million in severance! Charles Prince (CEO of Citigroup) got the boot and received a $40 million severance. Merrill Lynch’s CEO received a $161 million “Golden Parachute”. And Michael Bloomberg (now NYC mayor) – what did he contribute to society to justify his $19.5 billion net worth? Did he cure cancer? Solve the AIDs riddle? Bring peace to the Middle East? No, he traded securities at Salomon Brothers. It’s Wall Street’s blatant misclassification of mortgage backed securities that has erased trillions of dollars of American homeowners’ equity, yet traders continue to pocket billions.
Adjusted for inflation, worker pay has increased one percent since 1965 while CEO compensation has skyrocketed more than one thousand percent. This abhorrent disparity of wealth isn’t ‘supply and demand’. It’s a product of corporate greed, corruptions and immoral behavior. And it’s why the Occupy movement is so critical. Like the peace movement in the sixties, only a massive grass-roots movement will restore a fiscal conscience in America.
South Lake Tahoe
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