Saturday, October 15, 2011

Occupy Wall Street, Athletes, Movie Stars, and Corporate Compensation

Source: PolitiFact.com
The chart at the right has been circulating Facebook almost since the Occupy Wall Street protests began, and knowing better, I accepted it at face value. In fact, I cited it in an argument about corporate executive compensation.
 
Politifact.com says that it is exaggerated, although it has been used in several arguments and papers and presentations. Politifact says, "But in its claim that the U.S. ratio is 475 to 1, the chart conveys a sense of certitude and statistical precision that simply isn't warranted -- and which is contradicted by the facts. The latest number for the U.S. is 185 to 1 in one study and 325 to 1 in another -- and those numbers were not generated by groups that might have an ideological interest in downplaying the gaps between rich and poor."

Whatever the discrepancy in the chart, I continue to believe that money is power and the concentration of wealth in a minor percentage of the USA population is anti-democratic, and I believe that is the key to the Occupy Wall Street protester's argument: the concentration of wealth through the manipulation of a poorly regulated financial system. 

I am not a socialist. I believe in the Constitution and its amendments, and I believe that regulated capitalism married to democracy is the best social system possible, but it seems that our republican democracy is rapidly evolving into an oligarchy of wealth.

Someone in the discussion posed a question, paraphrasing, "I suppose you resent all the movie stars and pro athletes earning their multi-millions?

First, athletes and film actors are operating in a direct market economy. The CEOs are not. They are the beneficiaries of a contrived, self-rewarding system meant to favor executives over workers. I care only that the rich sports/film celebrities pay a fair share of tax commiserate with their income, which the present tax code doesn't require of them. 

Did not Warren Buffett say something similar? 

Secondly, the sports/film top earners are paid what they can negotiate from other people who intend to make more money than that promised the performer/athlete.

Thirdly, CEOs are self-rewarding. Most executive compensation is set by boards of directors rather than by a direct free market situation exampled by sports and film millionaires. Many of those directors are beholden or will be beholden to the executive for fees and perks awarded for their places on the board. 

There is a measure of negotiation, obviously, but the system cannot be defended when it is organized so that a CEO/executive group is award bonuses when a corporation loses money. A person only needs to follow the news to see that has occurred on a regular basis. 

The financial system is out of whack. The protests of the Occupy Wall Street people are far more logical than that of the Tea Party.
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