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Why You Might Want To Read This: Corruption is all around us. A malignant narcissist president and his family who treat the government like their personal piggy bank. Illegal gambling in sports (shocking, shocking given that every other TV ad on a sports show is a come-on to gamble). But, the half-century, daily corruption that *really* eats away at us is rarely flagged explicitly, which goes to a fundamental question stoked today courtesy of Elon Musk, a question that shapes economics, politics and community: who creates the value of a company? And the 3 points to carry forth…
We live in an age that normalizes the illogical, the insane and the just plain outright lie. It isn’t as Jonathan Swift opined back in the 18th Century that “Falsehood flies, and truth comes limping after it”. It’s that, today, truth isn’t even part of the equation.
Today’s evergreen topic—likely familiar to most of my readers—is: who, in any industry, creates the real value of a company, the CEO or its workers?
Now, to you, dear reader, the answer seems obvious because you operate in a world of rationality, honesty and fairness.
But, if you look at the debate that happens in the public arena and how the debate translates into real life, there is a tacit acceptance among the chattering classes that CEO pay, though sometimes a bit exorbitant, is geared to generating the maximum value for company shareholders. And this notion, repeated non-stop, infects conversations about corporate behavior among even people who should know better.
Of course, this has always been pure nonsense.
CEO pay has never been tied to value. It’s always been a core element of the corrupt economic system.
When I wrote my book “The Audacity of Greed”back in 2009, I had the good fortune to talk with Graef “Bud” Crystal who was once one of the country’s premier compensation consultants—the guy who would be hired by CEOs to come up with compensation packages. He was there in the very first days of what would become a broad scam. He told me back then:
“In 1970, one CEO hired me and said, ‘we don’t have a bonus plan and do we need one?’” recalls Crystal. “I did the study and I went back to the CEO and said ‘yes you do need a bonus plan. But we have a problem area. You are making $150,000-a year and the problem is that the $150,000 is equal to the salary and the bonus to what your competitors are paying so we have to cut your pay to $100,000-a-year and then we can put in a bonus.’” Crystal laughs. “It was like a scene from The Exorcist where ice formed on the windows…he started arguing about the findings and he finally said ‘let me say this to you this way: who do you think is paying your bills anyway?’ I replied, ‘If I recall correctly the checks were drawn on the corporate account, not your personal account so the shareholders are paying me, not you.’ The meeting ended quite quickly.
The point is the whole game is fixed, a scam, and has little to do with “free market” competition. The CEO stacks his board with cronies, pays them $20,000-per-meeting board fees, places his most loyal subjects on the compensation committee and, then, makes sure his cronies approve pay packages.
The Musk-crat gives us a very opportune moment to dig into this.
You may have heard: he’s asking shareholders of Telsa to approve a one trillion dollar pay package.
Wait, did I just write casually “one trillion dollars”? Ummm… this deserves some emphasis, no?
A ONE TRILLION DOLLAR PAY DEAL!!!
And if he doesn’t get the deal voted up at Tesla’s November 6th shareholder meeting, the Musk-crat is threatening to leave the company:
Musk’s leadership was “critical” to Tesla’s success, she said, and warned that without a plan that properly incentivizes him, the company could lose his “time, talent and vision”. Musk’s role was vital as Tesla seeks to become a global leader in artificial intelligence and autonomous technology, she said.
The proposed package would grant Musk 12 tranches of stock options tied to ambitious targets, including a market capitalization of $8.5 trillion and milestones in autonomous driving and robotics.
The 3 points we need to pay attention to and bring up at every opportunity.
Point #1: The Great Man Theory.
The Musk-crat is simply riding the wave of the long-entrenched Great Man Theory: the idea that a singular person—the CEO—is responsible for a company’s success, not the thousands of people who work on the assembly lines or toil in offices or churn out valuable stuff remotely. It’s a theory that the malignant narcissist in the White House—a “businessman” who has gone bankrupt four times and saddled countless bond holders with the carnage of his incompetence—embraces with both tiny hands.
There is no company, or organization or political movement, that has risen or fallen thanks to a single person. And, yet, the Great Man Theory is a convenient cover for greed and avarice, and the impoverishment of the legions of people who are the cornerstone of progress for any company.
The Great Man Theory is also an obvious argument for the need for unions. It’s not by chance that Musk-crat is hard-core anti-union. Though it’s been a rare instance where unions can constrain a CEO’s pay, *at least* unions are able to squeeze from the CEO’s grubby, greedy hands some cash to pay folks a bit better than they get in the largely non-union economy.
CEOs have been riding this scam for a very long time, which this graph shows:
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The headline of this post takes the view that this corruption is endemic, mostly slipping by. Test this for yourself: read every story in the traditional, corporate media, or watch any TV program, to see whether the absurd idea of paying Musk-crat one trillion dollars is ever paired with the concept that 99 percent of that money really belongs to all the other non-Murk-crat workers who are the ones who create the core value to Tesla.
The Great Man Theory and the CEO corporate pay thievery are subsets of what Robert H. Frank and Philip J. Cook called “The Winner-Take-All Society”. This Great Man Theory has spawned an economic kleptocracy in the private and public worlds. It’s infected every corner of society from sports to politics.
Consider: you are paying, through your tax dollars, to support ex-presidents (with robust staffing and benefits) who have all (with the exception of the late Jimmy Carter) become multi-millionaires on your dime, buying up vast estates on, say, Martha’s Vineyard or signing $100-million film production deals. Because they are “great men” and deserve, like CEOs and even more so because of public service, to be richer than everyone else—without a hint of awareness that it’s the taxpayers, the people, who bestowed upon them the elected office who created their “greatness.”
Point #2: This endemic corruption is at the root of the anger bubbling up from every corner of the country. That expresses itself with the clear disgust people have for both political parties.
To be sure, the relentless, shameless Trump family shake-down (crypto deals, Saudi money investments) is gross and brazen. These folks are amoral crooks.
But, day-to-day, what leaves millions of people in dire economic circumstances is the endemic, careful, structural siphoning off of the wealth people create at work into the pockets of Musk-crat and the other billionaires who now are worth $5.7 trillion.
Point #3: I don’t see a way to stop, in the near-term, the corporate CEO robbery. Shareholder activism, which has been in vogue for 25 years or so, is a lot of noise and fireworks but rarely stops the robbery because it’s scope is limited by the law (a longer story) and it’s an inside game (the CEO and his minions—including large investment and private equity firms—control the majority of shares).
But, that’s our money. Meaning, the value created by working people as expressed by money.
And if you believe, as I do, that it is corrupt for the richest nation in human history to have millions of people without homes, workers with full-time jobs who sleep in their cars because they can’t afford the rent, kids going hungry, then, we have a damn right to take it back.
Which is why I’ve been loudly advocating for a concerted, focused nationwide state-based effort to enact state-based wealth taxes to claw back some of our money to go at least to supporting the services we all benefit from.
It’s a no-brainer and winnable.
