Thursday, May 25, 2006

From community pillars to community pillagers

Malcolm Gladwell has an excellent post today about CEO Pay then and now:
After reading the article in the New York Times yesterday on the hundreds of millions of dollars in compensation given over the past few years to the CEO of Home Depot, I ran across this: in 1949, the highest paid CEO in America was Charlie Wilson of General Motors, who earned $586,100 in salary, bonus and stock. That's roughly equivalent to what some of the better-compensated CEO's are making today.

But what did Wilson pay in taxes? $430,350.
As Gladwell concludes, times have certainly changed.

Why the title of this post? In 1949 over 80% of CEO pay went back into the community, into roads and schools and dams and bridges and from there into the local economy. Today, CEO pay goes into off-shore tax shelters, investments with slashed dividend taxes, and donations to government lobbyists and elected officials to buy big-business-friendly legislation. Does some of it go back into the local economy? Sure--through property taxes, at the pump, here and there, but nothing like the investment CEO's use to make into the infrastructure of America and the communities their employees lived and worked in. Despite Republican myths, lies and fairytales to the contrary, the truth is that the era of the corporate robber barons is back.

Feh. I'll take the 1949 version. You know, back when "fiscal responsibility" was more than a cynical Frank Luntz-tested echo chamber talking point divorced from reality.

On a related note, I was speaking with a dear friend recently who runs a small business (under 5 people) in Quebec. Someone had suggested he relocate the business, on paper, to a country with lower business taxes. His response was that he had been educated in Canada, he had benefited from Canadian health care all his life, and it was an honour to be running his own business and be able to contribute back to a system that had always taken care of him.

How many people think like that today?

(For an interesting discussion on the math at play, sources on the tax rates, etc., see the comments on the original post at Gladwell's blog. And here's a link to the original New York times article about Home Depot CEO Bob Nardelli's $123.7 million compensation.)
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