17 May 2011

Corporate Immaturity

The 1990s were a good time for economics and business in America. 

During Clinton's administration, median incomes rose $6,000, more jobs - 22.5 million - were created than under any other administration, unemployment and inflation were at the lowest in 30 years, and the number of people living in poverty dropped by 15 million. 

About the same time, Jack Welch was CEO of General Electric. He, too, presided over record performance. During his 20 years, GE's revenues rose from $27 billion to $130 billion, and its market value rose from $14 billion to $410 billion. 

Two popular leaders who presided over great business / economic performances. 

In Jack Welch's best year, he made $125 million. 

In Clinton's best year, he made the same amount as he did in his worst year: $200,000. 

Jack's salary could have paid Bill's for 625 years. 

Such disparity was not an anomaly of the 90s. Last week, oil company CEOs appeared before the Senate. All three of the American CEOs made more than the entire US Senate. (Well, nearly all. Chevron's CEO made only $16.3 million, about a million less than the 100 senators 's combined salary of $17.4 million. Conoco and Exxon's CEOs made $17.9 and $29 million.)

This seems like a serious clue that the corporation is still immature, about where the nation-state was at the dawn of the Enlightenment.

There is a great story about Louis XIV early in his reign failing to realize just how much wealth the state commanded. He had a Finance Minister who was taking a portion of the taxes for personal gain and had commissioned the construction of a chateau that, at its peak, employed 18,000 men and covered the area of three villages. King Louis XIV thought that the man was “stealing beyond his station,” and, invited to a dinner at this minister’s chateau that served 6,000 guests dinner on plates of silver or gold, would have arrested the man that very evening “but his mother convinced him that it would spoil an enchanting evening.”[1]

After he’d removed the Finance Minister from his position, Louis took the man’s wealth and added it to his own. Suffice to say, Louis lived well. And in this we see the final problem with absolute monarchies: they make the state a tool for the few.

Unemployment is persistently high. Median wages have been largely stagnant for decades. Yet CEO pay continues to steadily - and spectacularly - rise. Is anyone out there talking about reform? 

[1] Will & Ariel Durant, The Age of Louis XIV: a History of European Civilization in the Period of Pacal, Moliere, Cromwell, Milton, Peter the Great, Newton and Spinoza: 1648 – 1715 [New York, NY, Simon & Schuster, 1963]  19

1 comment:

David said...

I'm more or less with you on this crusade although after reading the book on Jobs it appears whatever he's made personally he's made things vastly better for computer users, other consumers, employees, stockholders, etc. Where is that line in the sand that would satisfy you?