Corporatism and Executive Salaries

Many people like to assert that “companies have the right to pay their people whatever they wish”, and then go on to quote the Wall Street line that “we have to retain talent”.

The people who accept this tenet don’t seem, however, to understand that it is not “the company” which determines corporate top-level-executive salaries; it’s the Board of Directors, which usually consists of CEOs from other corporations.  This turns into a case of “you scratch my back, and I’ll scratch yours”, in that any Board member who rejects a request for exorbitant salary increases risks having his (or, rarely, her) own salary brought back down to earth.  This is something that's usually not discussed, and is typically only discovered by gaining access to the "upper echelons" of a company.

The second point is illustrated by the following articles:
“GMAC boss pockets $11.6 million”
http://www.caradvice.com.au/24536/gmac-boss-pockets-116-million/   
and, from CNBC (by no means a “Liberal news source!)
“Treasury talks to GMAC about more cash” which, the body of the articles notes, “…already has received $12.5 billion of taxpayer funds.”
http://www.cnbc.com/id/33500790/for/cnbc/                           

In other words, all too often, these Boards of Directors completely ignore the actual company; both success, and abject failure, are rewarded multi-million-dollar per year salaries and perquisites.  This is not about rewarding or retaining “talent”; it’s about a collusion between people who posses such immense hubris, and have such an excessive sense of personal entitlement, that they view entire corporations as little more than a personal ATM machine.

The central issue, however, is not the salaries per se, but rather, the mechanism by which they are obtained, a mechanism that has made the complete severing of financial reward from actual accomplishment not only all too common, but worse, entirely expected.

So, yes, a company should indeed be able to set the salary levels for its employees – but a Board of Directors is in no way related to, or a part of, the company.  I even heard one long-term Board member of a company say, “Oh, so that’s what this company actually does…”  It’s stunning (and not in a good way) that this same person had, for several years, been involved in making financial and other decision for a company about which he knew virtually nothing – but from which he obtained a great deal of financial reward simply for being on the Board.

I think of him whenever I hear some Average Joe make the assertion quoted at the beginning of this comment, and I really almost envy the sheer manipulative abilities, the cold Machiavellian genius for calculated information-filtering, of the people who have managed to actually convince said Average Joe that his repetition of their self-serving Corporatist mantra is somehow a cry for Liberty, for the choice and inventiveness encouraged by a Free Market.  That grudging admiration is completely tempered by the sadness I feel knowing that Average Joe doesn’t, and probably never will, understand that Corporatism, and its sense of entitlement, has about as much to do with a Free Market as did the Soviet Union’s Five Year Plans for the economy.  Central planning has more than one form; the Soviet form was merely the one that is patently obvious to even the casual observer.  The Corporatist form seems to be a uniquely American innovation – and it’s not the innovation that I personally would like to have this Nation best-known for developing.