How the Middle Class Is Getting Screwed - New York Magazine
Although I certainly agree that upper-management compensation has become absurdly inflated, I was disappointed that Mr. Andersen didn't point out who is asleep at the wheel while this is happening. It is the owners of corporations who are ultimately responsible for what their companies do. Turns out, that's ultimately you and I, since most ownership is now in the hands of institutional investors who are minding the nest-eggs of ordinary people such as ourselves. They, alongside the increasingly rare individual stockholders, are only interested in the performance of their shares. They do not take any interest in the actual operation of the companies they own. As a result, their appointed directors have no particular incentive to bid competitively for management talent - to the contrary, a directorship that approves an absurd compensation can proudly state they've spared no expense to recruit the very best. I suspect a bit of investigation would reveal a disconcerting level of cozy familiarity between management and directors, that enables these abuses. As mentioned in the article, we in the US could improve on things by having salaries of top management voted on by the owners. But this would still require that enough owners take an active interest in the running of their companies. A second point I feel the author neglected was what the net effect would be of confiscating 100% of the salary of these overpaid CEOs and distributing it among the remaining workers. If the average CEO earns something close to 100 times what an average worker does, and if the average overcompensated CEO heads a company with, say, 5000 workers, then confiscating his entire salary and distributing it would amount to a 2% bonus for these workers. Nothing to sneeze at, but hardly the difference between being screwed and living the high life, and not very supportive of the sensational thesis of this article. But in a Utopian world of journalism, where facts are facts, fair is fair, and a journalist's continued employment doesn't hinge on how much they pander to the emotions of their readers, this is a significant point that should have been made.
So, although I agree upper-management compensation is abusrdly inflated above the actual wealth-creation they contribute, it seems to me that claiming the middle-class is "being screwed" by this is just another example of sensational media distortion.
Still, Mr. Andersen points out that median household income has risen only 15% in the preceeding 25 years, and has actually dropped over the preceeding five years. Given greater levels of productivity, one might imagine this indicates somebody, somewhere is skimming all this productivity into their own pockets at our expense. But this supposition ignores a dramatic shift in the composition of American households. According to the US Census Bureau,
"Householders living alone had become the most common specific household structure in 2000, replacing the 1990 combination of householder, spouse, and natural and/or adopted children."So although average US household income fell, so did the size of the average household. Without controlling for this factor, the observation of a decline in household income is another sensationalistic factoid that transcends lies, damn lies and statistics, by telling a half-truth.