Friday, October 11, 2013

CEOs and Welfare Cheaters

The subjects I address are based on the premise that behaviors have matching consequences.  Touch a hot stove and get burned.  Be convicted of a crime and have trouble finding a good job.  Fail to save while you’re working and become dependent on the government/charity for a not-very-comfortable retirement.  Graduate from high school and have a better chance at a good job.  There are a few exceptions, and as usual, I want to show surprising similarities between two classes of people not usually associated.

The first group is overpaid CEOs who take money from the owners of the corporation when they have clearly not earned it.  The second group consists of those who accept money from the government when they are not eligible.

We are asked to believe that those who rise to become CEOs have very special talents, and that no one else could do what they do.  They are special, and their time is so valuable that they travel in private jets and chauffeured limousines.  Their special status justifies lavishly decorated offices with thousand-dollar trashcans.  Their decisions affect the lives of thousands, but if they make mistakes and lose their jobs, they have developed a network of contacts to help them find another high-paying position quickly.  (They may have screwed up, but they’re still special).  Others pay the price while boards of directors continue to treat CEOs like rock stars, often ignoring these quirks and errors, while rewarding them at levels hundreds of times the pay of an average worker.  Take for example the ousted JC Penney CEO who made over $53.3 million while putting the company in a position where survival is now questionable.  (Several others a few years ago collected huge bonuses on the heels of a government bailout.)  They play on their status to avoid consequences, while gathering wealth and fame.  Then, in retirement, they consult and write books.  Contrast this behavior with that of Pope Francis who shows everyone, not just Catholics, that a position of power need not be automatically linked to a lifestyle of luxury, privilege and self-indulgence.  This characterization does not apply to all CEOs and top executives, but there are enough of them in the news to give the rest a bad name – a few bad apples but too few exemplary ones.

At the other extreme, dishonest behavior can also lead to favorable consequences.  They haven’t the status, and we find nothing to admire about them; but they seem to use a similar rationale that they are special and deserve to be treated differently.  “Since 2003, there's been a 29% jump in Americans with little or no work experience getting disability payments, according to the Social Security Administration. Over the same time, there's been a 44% increase in disability claims by people formerly in the workplace.”  With no evidence of an epidemic of injury or illness, a reasonable conclusion is that a major proportion of this increase must be attributed to cheaters, people who feel they have the right to continue their cash flow from the government without working, taking the money indirectly from us while ignoring the rules that the rest of us follow.  Last Sunday a 60 Minutes segment showed the depth of the problem.  Again it’s not a majority, but statistics tell a distressing story.

The behaviors and attitudes of these groups from each end of the socio-economic spectrum are so similar.  Except for the level of power, the main difference is that those who benefit by claiming disability, the cheaters, have only an indirect obligation to society, the same obligation shared by the rest of us to act honestly and not take what we don’t deserve.  Their actions are illegal, and if caught, they may be punished.  Those CEOs, on the other hand, have a direct and explicit obligation to shareholders, customers and especially to employees to be faithful stewards of the corporate resources, using them to provide quality products and secure jobs. Irresponsible actions may be unethical, but only in rare cases are they prosecuted and rarely do they act guilty or remorseful.  When things go well, they take credit.  When things go poorly, they blame the economy.  Both groups justify their actions by feeling privileged with a primary obligation to themselves, regardless of the effect on others. Both act without consequences with few mechanisms in the system to correct this misalignment.  It’s the height of irresponsibility, but the appropriate consequences are missing.

Unfortunately there is little we can do to balance the scales. There is no sense of shame.  Ordinary stockholders have little influence.  Reporting slackers is frowned upon.  As long as enough Americans consider it cool to be a powerful, but self-serving executive or a clever slacker abusing the system, the behavior will continue at a cost to us as customers and taxpayers.  It would take a groundswell of citizens with economic understanding and true feelings of contempt toward such behavior, as well as the lawyers and boards of directors who support them, to begin to right the equation.

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