Monday, November 09, 2009

America's caste system - a reflection on executive compensation

When I drive back to Washington, from my home in the country, I pass the barricaded parking areas and shuttered buildings of what were once State of Virginia rest stops for travelers on Route 66. Both of these facilities were closed to help meet deficits in the State budget. For some reason, passing by these facilities, which made ordinary traveler’s lives more pleasant in small ways always brings the topic of executive compensation to mind.

For me a poster child of obscene levels of executive compensation is former General Motors Chief Executive Rick Wagoner. This evening, I researched how Mr. Wagoner is doing on the internet. A Fox news posting (Fox News is not unsympathetic to the business community and free enterprise) noted Mr. Wagoner’s accomplishments in an article headlined “Former GM CEO Rick Wagoner Gets $10M Retirement Package." It noted that when Wagoner became CEO, GM shares were valued at $92. Recently, with GM in Bankruptcy, trading in GM shares was suspended with the value at $1.15 per share. According to Fox, GM has issued statements that its stock has, essentially no value. It noted that during the past four years, ‘GM racked up $40 billion in losses.’

Fox News sympathized with Mr. Wagoner’s plight. It noted that during his 32 years with the company he earned only $62.3 million $38.7 million for his services as Chief Executive, leading GM into bankruptcy. It noted that in contrast to the $400 million received by the Chairman of Exxon Mobil, the $161.5 million earned by the Chairman of Merill Lynch, culminating a disastrous tenure, and the $140 million awarded to Michael Ovitz after a brief tour as Disney President, Wagonner’s compensation was modest indeed and, according to an ‘executive compensation specialist,’ not at all out of line. The fact that this occurred when GM slashed previously guaranteed benefits for most of its retirees was not viewed as a problem.

For those, such as myself, who have spent many years researching in South Asia, especially India and Sri Lanka, the explanation is simple. Compensation in ‘free market’ America as become part of a caste system. Corporate Executives such as Wagoner, Stan O’Neil of Merill Lynch, Disney’s Ovitz and many others simply view themselves as a different species of human beings, governed by different rules and guided by different moral precepts and entitlements. The are the Brahmins, those they employ are low caste or untouchable. Their 'needs' are described using an entirely different discourse.

Except when I drive past shuttered rest stops on route 66 I think little about this immoral system and the ill-gotten financial gains it has produced for a privileged upper caste few. But I do wonder how they are spending the munificence that deprived-stockholders, employees or, in some cases, the US taxpayers have unwillingly (or unwittingly) bestowed on them. Are they spending it on expensive vacations and $10,000 watches, first class travel, and $100 plus bottles of wine for dinner. Or have they, perhaps, established scholarship funds for the children of fired employees or contributed to the creation of social businesses such as Nobel Laureate Mohammed Yunis described his recent book, A World Without Poverty.

If they are looking for a worthy target for some surplus cash, perhaps they could consider creating a special fund to open the closed rest stops on Route 66, for the benefit of the less privileged lower caste Americans - teachers, truck drivers, commuters and ordinary tourists - who miss them.

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