CEO greed endemic to capitalism
Robber barons clash at workers' expense
By Milt Neidenberg
How much is too much?
A debate is smoldering between powerful investors and
shareholders and the chief executive officers that manage the
giant monopoly corporations. Greed is the driving force.
Obscene financial reward is the goal. Control of the money and
ownership is the prize.
Huge fortunes are on the line. But these opposing cliques
aren't as easily recognized as the Rockefellers, Morgans and
DuPonts of yesteryear.
In an unprecedented, two-page account entitled "Executive
Pay," the April 7 New York Times documented the huge salaries
of 200 of the most powerful corporate and banking CEOs during
fiscal 2001. The report illuminates their bloated salaries,
bonuses, stock options, long-term incentives and other
handouts.
The compensation of these 200 chief executives and their
underlings is a mind-blowing disclosure. But it only confirms
the existence of a corporate and banking culture that
ruthlessly rips off assets and leaves employees at the mercy of
layoffs, downsizing, and bankruptcies.
Unlike the workers, these officials are paid astronomical
amounts regardless of performance. Some CEOs rip off their
companies for hundreds of millions of dollars. The majority
takes millions, and not a single one takes less than $1
million. Berkshire Hathaway Chair Warren E. Buffet received $36
billion--that's right, billion--in compensation during fiscal
2001, even with no stock options.
Shareholders vs. CEOs
It's clear that the Times report was calculated to expose
the executives who run the companies. The Times, by its
agitation for reform, has taken the side of the big
shareholders and investors. Many powerful shareholders and
investors suffered heavily during the stock market downturn. Of
course, millions of smaller investors were entirely wiped
out.
The controversy is over how stock options are distributed to
CEOs and whether the major shareholders and investors are the
victims of accounting practices that cover up the real earnings
of the giant corporate/banking entities.
This is not an arcane issue. AOL Time Warner CEO Gerald M.
Levin, who plans to leave in May, has more than $146 million in
stock options in his account. Recent panic-selling triggered a
10-percent plunge of the stock, marking a post-merger low.
Shareholders took a beating in earnings per share. But later,
when the stock rises again, Levin will make a killing.
Similarly, Jeffrey R. Immelt, who recently became General
Electric's CEO, has more than $20 million in stock options in
his account during his first year. GE, the world's biggest
company by market value, reported a decline in profits that
caused its stock to drop sharply. Now GE plans to lay off 7,000
workers.
The stock market slumped more than 200 points on April 12,
while both AOL Time Warner and GE stocks were sliding. Wealthy
shareholders are boiling mad as CEOs continue to reap handsome
rewards at their expense.
As Congress prepares to rewrite accounting rules, a war of
words has opened up between President Bush and Federal Reserve
Chair Alan Greenspan, a powerful figure in the world of high
finance. The issue appears to be over complex accounting
practices. But it is far more than that.
What's at stake is corporate governance of critical
decisions over the distribution of billions of dollars siphoned
off from the revenue of the mega-banks and corporations.
Greenspan wants legislation that would force companies to
record stock options as expenses like other forms of
compensation, such as wages and benefits. This would provide
shareholders and investors with more transparency, giving them
more accurate information on profits earned by corporations and
banks. Greenspan hopes to eliminate any shocks to the financial
markets that are seesawing dramatically week-to-week.
Bush, acting on behalf of the wealthy CEOs--remember, that's
how he runs the government--wants options to appear on a
company's financial statement as income, not as an expense.
Corporate and banking tycoons are then able to add their stock
options, like any other stock transfer, to inflate the
corporate books. This artificially adds billions more to
corporate income. Those earnings, however, get severely diluted
when the CEOs cash in their exorbitant stock options.
Stock options, combined with inside information, provide
CEOs with valuable choices about when to cash in. If a stock is
down, the CEO can hold onto it and wait for it to rise. If a
company's stock has peaked and bankruptcy is in the wind, the
CEO can cash out before the stock's value crashes to earth.
This allowed appointees like Secretary of the Army Thomas
White, who ran Enron Energy Services--a fraudulent Enron
front--to dump more than $12 million in stock options,
pocketing a significant profit for himself shortly before Enron
went bankrupt. White has already admitted that he had 73
contacts with current or former Enron executives since he
joined the Bush administration.
As secretary of the Army, White now applies his thieving,
fraudulent tactics to dishing out multi-billion-dollar
contracts to the military-industrial corporations.
The proposed accounting changes could expose the Bush
administration's many connections to law-breaking Enron
executives and their bankers.
It's a no-win situation for both warring factions in this
period of slow economic growth: a declining rate of profit;
inflation; overproduction; a mountain of debt in the private
and public sectors; and most important, a recent decrease in
the consumer confidence index that will further exacerbate the
capitalist crisis.
It's like an argument over how to line up deck chairs on the
Titanic. There are more Enrons, Global Crossings, Tycos,
Qwests, Kmarts and Bethlehem Steels on the horizon. As the
waves of bankruptcies grow, they will in time deepen the
capitalist crisis in the U.S.
The fallout has been brutal on workers, their families and
loved ones. Millions have been laid off, health benefits lost,
and retirement plans like 401(k)s wiped out because companies
invested the workers' funds in their own self-serving
interests.
Workers suffer
Even now, Congress plans to further weaken legal protection
for workers' pensions while Democrats and Republicans
hypocritically lament the loss of 401(k)s.
The cruelest hoax of all was played on workers at Arthur
Andersen, the giant accounting corporation whose executives
cooked Enron's books, allowing management to cover up its
fraudulent trading operations.
When the Justice Department initiated criminal
obstruction-of-justice charges for shredding documents related
to their audit of Enron, Andersen bosses ordered thousands of
workers to march with "I am Andersen" signs to protest the
criminal charges. Now these very employees--between 5,000 and
8,000 of them--are being laid off.
Instead, picture millions of workers who are receiving the
same treatment taking Andersen's idea, but turning it against
the bosses. They carry signs into the streets that read, "We
are GE, we are AOL Time-Warner, we are Bethlehem Steel" as a
symbol of their realization that they are the true owners of
these giant corporations.
Because they are. Workers are indispensable to production.
They alone add something of real value in the process of
creating goods and services--their labor power. The dollar
value of their deferred accumulated benefits, such as pensions
and wages, also gives them the legal right of ownership. How
and when those rights will be implemented remains to be
seen.
Now is an ideal time for labor to intervene and challenge
the robber barons, while they are at each other's throats.
Reprinted from the April 25, 2002, issue of
Workers World newspaper
This article is copyright under a Creative
Commons License.
Workers World, 55 W. 17 St., NY, NY 10011
Email: ww@workers.org
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