A few months ago, Mr. Kay wrote a book entitled “Myths and Realities of Executive Pay” (Cambridge University Press), with Steven Van Putten, a Watson Wyatt colleague, that goes even further. “It is not a coincidence that the Dow Jones industrial average, which stood at 5,000 in 1996, is now well above 13,000,” the authors write. “While U.S. executive pay practices do not entirely explain this rise, there is little doubt that it would not have occurred without them.” I’ve heard Mr. Kay make this point before — and even debated him on it. He really does seem to believe that all of the great economic benefits we’ve enjoyed in this country during the past two decades or so can be traced back, in no small part, to the way we pay our chief executives. I, on the other hand, believe he’s got the cause and effect exactly backward: that it was the rising market that made the lucky fellas running America’s corporations look like geniuses — and made them richer than they’d ever imagined, thanks to the shift to stock options as the primary way to reward executives.
I don’t have anything to add to this. I just thought it was worth sharing.
A good question is: what is the market force that countermands the forces that raise CEO pay to such dizzying heights? What ways, if any exist, can the market be ‘unfettered’ to properly contain disproportionate reimbursement? If that mechanism doesn’t exist, can one be created?
what we have right now is crony capitalism, where the gain is privatized and the losses are socialized.
all the counter forces, unions, free press, democracy, competition, have been suppressed.
at some point the dam will break.
That’s EXACTLY right – risk is placed on the public’s back, but the profits go straight to private hands.
When the Savings and Loans failed, who had to bail out the people? The people themselves, through higher taxes. What happened to the profiteers? Nada.
How much health care would 42.5 million buy?