There's been a lot of talk lately about bedbugs. It seems that they are swarming over the nation. My research indicates that there are two distinct species of bedbugs: the kind that inhabits mattresses and the suitus gluttonus, commonly known as the "overpaid CEO." Like their more diminutive cousins, corporate moochers have been pervasive, much-discussed, but rarely successfully fumigated.
Well folks, a form of regulatory DDT has arrived. To the surprise of pretty much everyone, it emerged last week that the Dodd-Frank financial reform bill actually addresses this long-neglected infestation of the capitalist system. The
picked up on this
and created a sensation, with an approving
and predictable exclamations of horror from the business community.
"Logistical nightmare!" the corporate types are screaming. Someone from the Business Roundtable told the
, with oozing condescension, that "you can do more harm than good if you take a well-intended piece of policy and implement it badly." Goodness, we can't have that. So what are they getting steamed about? Are executive perks being de-perkalated? Are the limos being e-limo-nated? Are shareholders to directly vote on executive compensation, God forbid? No, all that's being talked about here is actually telling people stuff.
The new rule in Dodd-Frank, details of which will be hammered out by the
Securities and Exchange Commission
, requires that public companies disclose
the ratio between their CEO's pay packages and the wages of their typical employee
. There is now much agonizing about that. Shall they include outsourced employees in Bangalore? Etc. etc.
Given the anemic quality of much of Dodd-Frank, I was stunned when I heard about this new requirement, as it is revolutionary. It tackles head-on one of the true social inequities of recent decades, which is the spiraling disparity between the rich and the not-so-rich. It has come to be known as the "plutonomy," a term coined by a
analyst, in a 2006 report that cheerfully described how middle-income people saw their real incomes increase by one-fifth between 1979 and 2004. During that same period, the real income of the top 1% climbed 179%. Thanks to the Reagan-Bush tax cuts, the new grandees shared an ever-shrinking portion of their take with the IRS.
This obscure provision of Dodd-Frank is therefore less an executive-comp disclosure provision than a window into the ever-gaping class differences in contemporary America. When implemented, it will show how stratified, calcified and just plain immense is the gap between the executive suite and the cubicles downstairs. It will give every worker bee in America a good idea of just how much they're being shortchanged -- and, perhaps, educate shareholders on just how much the CEOs grinning from annual reports are getting fat while they're throwing their people into the street.
found that in 2009, median CEO pay was 263 times the pay of the average worker. In the1970s the ratio was 30 to 1. I guess that's what they call "corporate governance reform." The institute found that the 50 CEOs who laid off the most people over the past two years paid themselves (while weeping, no doubt) an average of $12 million a year.
The 2009 crop of overpaid corporate lichen cited in the report includes Fred Hassan, ex-CEO of
( SGP), who threw 16,000 people out of work after it merged with
last year. He received a golden parachute of more than $49.6 million, making him the richest job-slasher of the bunch. Right up there is Ivan Seidenberg, CEO of
who raked in $17.5 million at the same time that his telecom was laying off thousands. Coming close behind Ivan 's treasure chest is Dan Hesse, CEO of
, who poured $12.3 million into his bank account at the same time that he mailed over 10,000 pink slips.
Now, keep in mind when the boss-to-prole ratio numbers come out that CEOs are always paid fairly, even when their paychecks seem insane. A Sprint-Nextel spokesperson pointed out to the Kansas City Star that "every Sprint employee's compensation, including the majority of Dan Hesse's, is tied to company performance." I suspect that this fair-pay system is already in place for one of my favorite CEOs,
Facebook-pretexting Patrick Byrne
. He doesn't draw a salary --and judging from the recent earnings disappointment and stock-price slaughter, he is still paid too much. In the plutonomy, you see, no matter what the salary, competence is always optional. What we really need is a brains-to-bucks ratio.
Gary Weiss has covered Wall Street wrongdoing for almost a quarter century. His coverage of stock fraud at BusinessWeek won many awards, and included a cover story, "The Mob on Wall Street," which exposed mob infiltration of brokerages. He uncovered the Salomon Brothers bond-trading scandal, and wrote extensively on the dangers posed by hedge funds, Internet fraud and out-of-control leverage. He was a contributing editor at Conde Nast Porfolio, writing about the people most intimately involved in the financial crisis, from Timothy Geithner to Bernard Madoff. His book "Born to Steal" (Warner Books: 2003), described the Mafia's takeover of brokerage houses in the 1990s. "Wall Street Versus America" (Portfolio: 2006) was an account of investor rip-offs. He blogs at garyweiss.blogspot.com.