Thursday, April 02, 2009

The TRUST GAP: yesterday's and today's

Pharaoh in all his glory would have envied today’s CEOs their perquisites and ever-sweetening pay. Too busy living the cosseted life, America’s managerial elite have lost touch with the humble employee. Workers’ faith in top management is collapsing. CEOs who don’t come down from the heights are in trouble.

Those words appeared on the cover of the December 4, l989, issue of Fortune magazine, which I just found in a file of material I collected back then while writing an encyclopedia article on exorbitant executive pay.

graphic indictment of 1989 applies today, but with crucial differences. The managerial elite still live as modern-day Pharoahs, but now they are joined by their peers in the shadowy financial world. And it is not just the faith of the humble workers that has collapsed; the public trust, the trust of the people at large. is in shambles. And, whereas the “trouble” of two decades ago faded away without serious repercussions, the crisis today is shaking the nation.

The contrasts with the past are striking. In 1990 the average CEO made 107 times more than the average worker. Now, according to the latest data, that ratio is 334 times to one. But until now exorbitant CEO compensation has not provoked a populist reaction, partly because of a widespread belief that, after all, the bosses earned it. That assumption has been shattered for at least two reasons.

First of all, even companies in bankruptcy or near it have brazenly rewarded their chiefs with sky-high pay and matching bonuses. The bonuses, especially, ignited unprecedented outrage.

Secondly, in recent years our great leaders of American enterprise have presided over a massive export of U.S. jobs, particularly to a neo-Communist state, China, to the point that our respected National Association of Manufacturers (NAM) is really the U.S. Association of Asian Manufacturers.

These Pharaohs, who would never tolerate a governmental role in supervising elections for corporate boards, are militantly opposing the Employee Free Choice Act, a union-friendly bill in Congress. The NAM and its allies are zealously devoted to maintaining the present restrictive system, which requires the federal government to run a referendum before a union is allowed to exist and operate in any workplace.

There is a strong case for freeing up that system. It is supported by an impressive number of noted economists, even Professor Jagdislh Bhagwati.

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