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||July 28, 2014|
Things should be hopping this Wednesday at the annual meeting of the medical products giant McKesson. Activist shareholders will be trying to water down the severance package that’s awaiting company CEO John Hammergren.
If McKesson changes hands in a buyout, turns out, Hammergren currently stands to walk away with $292 million in severance. Hammergren is also sitting on a rather hefty stash of McKesson stock and options already awarded to him. He’ll exit McKesson, Businessweek notes, with a total windfall of $616.6 million.
McKesson’s board of directors is, of course, opposing any move to downsize Hammergren’s exit package. Generous rewards, the company informs us, remain “an important tool for motivating our executives.”
How about you? Need some motivation for clipping the likes of Hammergren down to democratic size? We offer plenty of it in this week’s Too Much.
|GREED AT A GLANCE|
America's hottest new luxury option? The summer camp! Operators have been busy, the New York Post reports, turning rustic sleepaways into five-star “experiences” complete with everything from air-conditioned bunks to water-skiing. Top summer camps for the 1 percent now fill up nine months in advance and cost as much as a college semester. Eight weeks in Maine’s “blue-chip” camps typically run around $11,000. The International Riding Academy in New York’s Catskills charges $2,150 a week and offers enticing optional extras, like chauffeur-driven stretch-limo hops down to Manhattan’s biggest toy store. In Oregon’s High Cascades camp, tykes can learn how to snowboard — from former U.S. Olympic team trainers — at just under $4,000 per week . . .
One year ago California game maker Zynga handed newly hired CEO Don Mattrick $58 million. The company’s 2013 sales: $873 million. Bay Area high-tech giant Intel also hired a new CEO last year. This new hire, Brian Krzanich, pulled in $9.5 million. Intel’s sales for the year: $53 billion, 60 times more than Zynga realized. CEO pay in modern America, reporter Steve Johnson observed last week, can certainly be “hard to understand.” The corporate pay tracker firm Equilar has one reason: Pay at the corporate summit seems to bear “zero relationship” with performance. Equilar has just generated a series of stunning data visualizations that contrast the pay of 200 top U.S. CEOs to their company revenue, profitability, and shareholder returns. What the new data visualizations show: completely “random patterns.”
Oh, the stories this house could tell! The brick Elizabethan on Round Hill Road in Greenwich, Connecticut has just gone on the market for a sweet $65 million. The home first gained notoriety in the 1980s when billionaire hotelier Leona Helmsley and her hubby Harry bought the gated 40-acre property for $11 million. The couple proceeded to have their company shell out $3 million more for renovations, a no-no that eventually led to criminal charges on tax evasion. Leona’s basic defense — “only the little people pay taxes” — wouldn’t prove particularly persuasive. She eventually served two years behind bars before kicking the bucket in 2007 at age 87. In her will, Helmsley stiffed two grandkids and left $12 million to her dog. That dog doesn’t come included with the home’s new sale price. “Trouble” passed on in 2011.
Quote of the Week
“Another year has passed with no one from a Wall Street bank going to jail for the criminal behavior everyone knows helped cause the financial crisis. Fines against Wall Street banks are reaching $100 billion, but all will be paid by stockholders. Bank CEOs and managers pay no fines and face no prison.”
|PETULANT PLUTOCRAT OF THE WEEK|
In California, the beaches belong to everyone. No private landowner along the coast can legally block the public from beach access. But a private landowner can sure try. Billionaire Vinod Khosla bought 53 coastal acres south of San Francisco six years ago for $32.5 million, then locked the gate on the access road locals had been using for decades. A coastal protection nonprofit group has since taken Khosla to court. Khosla, a private equity kingpin, told reporters earlier this month that the activists challenging him are offering up only “the cynical rhetoric of class warfare — when all they really want is to permanently and irreparably upset the balance between public access and private property rights in our state.” What about the 1976 state law that guarantees the public beach access? Says Khosla: “I disagree with that.”
|IMAGES OF INEQUALITY|
Media mogul Rupert Murdoch picked up this Manhattan penthouse this past March for $43 million. Murdoch must really like the condo’s East 22nd Street location. Earlier this month he picked up another condo in the same building, this one for just $14.7 million. Overall, 76 Manhattan residences have sold so far this year for at least $15 million, an all-time record pace for New York top-end real estate.
Sir Douglas Robb Lectures 2014/ New Zealand's University of Auckland hosted this past spring a series of three illustrated presentations from two of the world's top scholars on inequality's human cost, the British social scientists Richard Wilkinson and Kate Pickett. Videos of all three talks now appear smartly packaged online.
|PROGRESS AND PROMISE|
Last Monday, in a pivotal advance for social equality, President Obama signed an executive order that protects LGBT people working for government contractors from discrimination. The move, most Americans seem to agree, makes sense. Why, after all, should our tax dollars support businesses whose behavior leaves us more unequal? That same reasoning holds for economic inequality, too. Why should our tax dollars be going to firms that pay top execs over 300 times what they pay their workers? The White House has already this year issued an order that requires businesses with new federal contracts to pay a $10.10 minimum wage. The next logical step: leveraging the power of the public purse to help define a responsible maximum wage. A first step toward that goal? That could be an executive order that gives preferential treatment in the contract bidding process to firms that pay their top execs no more than 25 times worker pay.
Corporate CEOs do not have to reveal the political contributions they have their corporations make. Fight “dark money” in the political process. Tell the SEC to mandate corporate political disclosure.
|inequality by the numbers|
Stat of the Week
In 2013, the federal government gave $137 billion in tax benefits to encourage retirement savings. Americans in the top 10 percent drew three times more of these benefits than Americans in the bottom 60 percent.
Who Really Rates as a ‘True Egalitarian’?
A leading conservative academic is charging that critics of America's top-heavy distribution of income and wealth are missing the bigger picture. In the process, he's only fogging that picture up.
One of America’s top apologists for our billionaire status quo has a rather daring new approach to defending inequality. He’s claiming to be an egalitarian.
And not just any egalitarian. Tyler Cowen, the director of an Koch brother-backed academic center, is claiming that folks like him — who regularly oppose efforts to tax, regulate, or otherwise discomfort our global super rich — rate as the world’s “true egalitarians.”
Cowen is making these claims, amazingly, without getting laughed out of the room. In fact, just over a week ago, the New York Times gave him a prominent platform to make his case.
At the heart of that case, a single fact: The world is getting more equal.
You read that right. More equal. If you place the incomes of all the people in the world today in one statistical basket, the distribution of those incomes would be less unequal than the distribution of global incomes 10 or 20 years ago, notes Cowen, the top academic at George Mason University's Mercatus Center.
In other words, he adds, “we have been living in equalizing times for the world.” Life in our global economy is heading “in a fundamentally better direction.”
Cowen, to be sure, does acknowledge that income inequality within individual nations has been rising. He even acknowledges that some policies that help America’s top 1 percent — like “free trade” deals — can hurt American workers and increase inequality within the United States.
But these same policies, Cowen argues, have “also increased prosperity and income equality globally.” Those Americans who rail against policies that enrich America’s rich, he charges, are taking a “narrow” nationalistic view. They’re hiding parochial national interests behind the “cloak of egalitarianism.”
The “true egalitarian,” Cowen goes on to insist, should applaud “wealth-maximizing policies” — translation: policies that let rich people do their thing — and start “worrying less about inequality within the nation.”
After all, Cowen concludes, all “globally minded egalitarians” have cause to be optimistic. Good old “capitalism and economic growth” are still delivering us “the greatest and most effective equalizers the world has ever known.”
America’s most ardent cheerleaders for grand fortune have, not surprisingly, greeted Cowen’s manifesto for “global egalitarianism” with unrestrained glee.
This past spring has been a tough slog for these cheerleaders. French economist Thomas Piketty’s bestseller Capital in the Twenty-First Century has shoved them onto the defensive. The story Piketty tells — of income and wealth concentrating in ever fewer hands — has alarmed readers worldwide and thrust up politically previously unmentionable ideas like a global tax on grand fortunes.
Cowen’s latest formulation offers right-wingers ideological ammunition for fighting back — and they're shooting away. “Check Mate Pikettards. Income Inequality Is Not Rising Globally. It’s Falling,” blasted out one conservative online site last week. Headlined another: “The Left’s Big Fumble on Inequality.”
Do these right-wingers have reason to gloat? Could Cowen be right? Could the level of income inequality on planet Earth actually be decreasing?
The short answer: Yes. But Cowen’s core statistical observation, as University of London economist emeritus John Weeks contended last week, counts as “trivial to the point of meaningless.”
Statistically, Weeks explains, inequality can be increasing within every nation on Earth at the same exact time inequality on the entire planet, if you sit everyone in a single data dump, is decreasing.
How can that be? We need only look at China, a nation with some 20 percent of the world’s population.
Over recent decades, rapid economic growth within China has substantially lifted the incomes of Chinese urban workers. Essentially, nearly a billion people have “leapfrogged” their way up the global income ladder. That leap has left the world, taken as a whole, less unequal.
But China internally has become more unequal. The gains from China's growth have gone disproportionately to China's elite.
In fact, between 1988 and 2008, China’s top 5 percent accounted for an incredible 44 percent of global income gains, point out economists Christoph Lakner and Branko Milanovic, whose work has been Cowen's prime source for data on global inequality.
Why should we care about within-nation inequality if global inequality is falling?
Economist John Weeks has the simple answer: “The curse of inequality falls upon people at the national level.”
That curse, as social sciences philosopher Daniel Little chimed in last week, wreaks “profound problems.” Rising income inequality within nations leaves the quality of life for each nation’s poor “significantly lower than it could and should be, given the level of wealth of the societies in which they live.”
Those millions of people who live more poorly housed and nourished than they could be living, Little adds, will also “be less productive than they have the capacity to be, and future society will be the poorer for it.”
Inequality within nations eats away at social cohesion as well, raises levels of status tension, and swells the political power of those with the largest fortunes, a dynamic that degenerates democracies, over time, into oligarchies and worse.
But what about Cowen’s insistence that you can’t be a “true egalitarian” in the developed world as long as you obsess about levels of inequality in your own affluent national backyard?
Last week’s best rejoinder to Cowen on that score came from economist Dean Baker at the Washington, D.C.-based Center on Economic and Policy Research.
Some of the income gains that workers in China have realized over recent years, Baker notes, “have come from displacing workers in rich countries, especially the United States.”
But if we had organized the global economy differently, on everything from patent rules to taxes on global financial speculation, workers everywhere across the globe, the rich countries included, could have benefited more — and the global top 1 percent would have benefited less.
For Baker, Cowen’s argumentation brings to mind a mob boss who “has his thugs go around and shake down a bunch of small business people,” then hands “a portion of the haul to poor children.” The small business people complain. Don’t you care, the mob boss replies, about poor children?
“Just because the world’s poor benefited at the expense of the middle class in rich countries,” relates Baker, “does not mean it had to be this way.”
Last week’s final word on global inequality? That may have come Thursday with the release of the annual UN Human Development Report. Unlike Tyler Cowen, the UN analysts aren’t celebrating “increased prosperity and income equality.”
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Nearly 80 percent of the world’s population, their new study relates, still “lack comprehensive social protection.” About 842 million people globally still suffer from chronic hunger. The world community, the new Human Development Report advises, has “to ask a basic question.”
“Whose prosperity,” the UN researchers want to know, “are we observing?”
Bill Raden and Gary Cohen, Bonanza! Silicon Valley Sees Gold in Corporate-Driven School Reforms, AlterNet, July 22, 2014. Tech tycoons are rushing to transform America’s public schools — and collect huge windfalls along the way.
Andreas Kornelakis, Empower workers to bridge the CEO pay gap by themselves, The Conversation, July 22, 2014. Top execs need to be accountable to all stakeholders, not just shareholders.
John Tuzyk, Beth Romano, and Shavone Hayes, Is CEO Pay Ratio Disclosure Coming To Canada? Mondaq, July 24 2014. A comparison of approaches to CEO-worker pay ratio disclosure in Europe and the United States.
Nicholas Kristof, An Idiot’s Guide to Inequality, New York Times, July 24, 2014. A useful read. Just look past the snarky intro, mangled fact, and disappointing close that genuflects to empty policy prescriptions.
Larry Bartels, Obama’s uphill struggle against economic inequality, Washington Post, July 24, 2014. Average families used to experience much more income growth under Democratic than Republican Presidents. Now they suffer smaller income losses.
David Cay Johnston, Federal regulators let utilities gouge customers, Aljazeera America, July 25, 2014. How government can redistribute wealth up.
Lydia DePillis, The inequality snowball effect, Washington Post, July 25, 2014. How the consumption decisions of the rich make life more of a struggle for everyone else.
Benjamin Goad, Wall Street spending $1.5M a day on lobbying, campaigns, The Hill, July 25, 2014. On the new Americans for Financial Reform analysis of high finance's political offensive.
Lee Schafer, For a new approach on pay, look to Switzerland, Minneapolis Star-Tribune, July 26, 2014. Good background on last year's Swiss ballot initiative that banned CEO golden parachutes and signing bonuses.
|new and notable|
To Fight Inequality, We First Have to See It
Carina Engelhardt and Andreas Wagener, Biased Perceptions of Income Inequality and Redistribution, CESifo Working Paper No. 4838, June 2014.
In almost all the developed world's major democracies, the few are prospering and the many are not. Yet these democracies — places where the majority supposedly rules — are doing remarkably little to narrow their economic divides.
Why so little? Political scientists have advanced a variety of explanations. The poor don’t vote. Noneconomic issues can distract public attention from questions over who’s getting what. The rich can afford to buy the political process.
Analysts Carina Engelhardt and Andreas Wagener have another answer worth our attention: Most folks have no clue how unequal their nation has become.
Other analysts have raised this same possibility before. But Engelhardt and Wagener, scholars at Germany's Hannover University, bring some heavy-duty stats to the table. People around the world, these stats show, “typically underestimate” inequality's extent and “consider themselves to be relatively richer than they really are.”
The greater the misperception, Engelhardt and Wagener have found, the weaker the support for social expenditures that can help build more equal societies.
Perception, in short, matters. Maybe more than anything else.
|About Too Much|
Too Much, an online weekly publication of the Institute for Policy Studies | 1112 16th Street NW, Suite 600, Washington, DC 20036 | (202) 234-9382 | Editor: Sam Pizzigati. | E-mail: firstname.lastname@example.org | Unsubscribe.