Here at Citizen Action, we’ve been doing a lot of thinking lately about how economic injustice in this country is leading to a climax – a turning point – where something big and drastic is going to have to happen. Sixty years ago, CEOs made $40 for every dollar that their employees made. Now, according to The Labor Institute, for the top 100 US companies, that ratio is more than 800 to 1. That isn’t being rewarded for innovation or profitability. That’s literally CEOs robbing the wealth generated by all of us and keeping it for themselves.
Why does it matter what CEOs make? Because they’re taking so much money now that there simply isn’t enough left over for the rest of the population to earn enough to make a decent living and take care of our families. A successful economy requires money moving from one person to another. But the super rich at the top have rigged the system so that they can suck up billions and then they just keep it for themselves.
We see signs of the extent of their manipulation every day. Fees for everything – taking money out of the ATM, a little extra to use a credit card at the gas pump, an unexplained extra charge for sports channels that you don’t watch. When you nickel and dime millions of people, it adds up fast.
But there’s more than the sneaky ways they do it. In the 1980s, CEOs changed the way they got paid. Instead of earning a salary like normal people, they based their compensation on the price of the stock of their company. That means for them to personally make more money, they needed to raise the price of the company’s stock. Sounds like a good incentive to make the company profitable, right? Well, the problem is that short term profits don’t usually line up with doing what’s best for the community, for employees, or for the company in the long term. Big companies stopped investing in research and exploring new products, instead focusing on the thing they sold that had the highest rate of return. They cut benefits and pay for employees because they could save a buck today instead of hiring the best talent and keeping people on staff longer. They cut quality too, making products as cheaply as possible.
It gets worse though. Here’s the really outrageous part. Stock buybacks. For the sake of simple math, let’s say a company has 100 shares of stock, valued at $1 per share. That’s $100 worth of stock. The CEO uses company funds, or takes out a loan on behalf of the company and buys back half the stock and then eliminates those shares. So now we have 50 shares left, but they’re each worth $2 share. Our CEO just doubled the value of the stock by raiding the company’s bank account and made a killing because now the stock price doubled and his compensation is based on the stock price. If that sounds like an outrageous scheme, that’s because it is, and one that was illegal up until 1982 when deregulation was the economic fad of the day.
This is another great example of how regulations protect us and boost the economy. Too often corporations that can do whatever they want will line the pockets of top management, even if that means polluting the air and water, making dangerous products or in this case, rewarding CEOs at the cost of workers and long-term investment.
Which brings us to GE and the 1.5 million pounds of cancer-causing PCBs that their plants deposited into the Hudson River. In 2002, the EPA ordered GE to clean up its dangerous mess. There’s still 200 miles of the river that need cleaning. But now GE is trying to pull out. Shockingly (that’s sarcasm), it was reported last week that GE’s measurements of pollution in the river were done in a way that significantly underestimated the contamination.
There’s now a push to get GE to finish the job. A proclamation was signed by the Albany County Legislature to call on GE to finish, environmental groups have been pushing hard, and last week, new Assembly Speaker Carl Heastie called on GE to make good on its promise to clean up the toxins they put into our river. You can add your own voice here.
To add insult to injury, GE is now being offered financial incentives by our government to relocate to New York State. New York is in a bidding war with Connecticut over which state gets the privilege of rewarding this polluting, tax dodging behemoth corporation with cash provided by you and me. That’s after GE has spent millions of dollars and years of legal work to avoid paying federal taxes.
Writing for the International Business Times, David Sirota has detailed this whole situation, connecting GE’s campaign contributions, their record of pollution, and their successful tactics to avoid state and federal taxes.
The financial industry, CEOs, and the politicians who they pay off are all banking on us ignoring this problem. They’ve conditioned us to believe that giving away taxpayer money to the CEOs who already have billions is “economic development” and that being “pro-business” means we can’t regulate a system that’s designed to put the interests of the community last.
We live in the richest country in the world yet one in three of our children live in poverty. Why? Read above.
It’s time to change the system. Let’s start by telling GE that they’re welcome to come to New York and pay taxes just like the rest of us.