Dr. Peter Rost, HuffPo: "This isn't a market economy; it is a kleptocracy"

[Bush_Eats_Beef]

CEO pay in the past, in the 1960s was limited by what people felt were "reasonable," what society could accept. Today those limitations have been thrown out the window. We have entered the era of the new robber barons. The CEO takes whatever he can get his hands on, irrespective of performance. And if the company stock doesn't increase in value, he still makes money by picking a date retroactively to price his options at a profitable level, according to the Wall Street Journal:

"The Journal's analysis raises questions about one of the most lucrative stock-option grants ever. On Oct. 13, 1999, William W. McGuire, CEO of giant insurer UnitedHealth Group Inc., got an enormous grant in three parts that -- after adjustment for later stock splits -- came to 14.6 million options. So far, he has exercised about 5% of them, for a profit of about $39 million. As of late February he had 13.87 million unexercised options left from the October 1999 tranche. His profit on those, if he exercised them today, would be about $717 million more. The 1999 grant was dated the very day UnitedHealth stock hit its low for the year. Grants to Dr. McGuire in 1997 and 2000 were also dated on the day with those years' single lowest closing price. A grant in 2001 came near the bottom of a sharp stock dip. In all, the odds of such a favorable pattern occurring by chance would be one in 200 million or greater. Odds such as those are "astronomical," said David Yermack, an associate professor of finance at New York University, who reviewed the Journal's methodology and has studied options-timing issues."

This isn't pay for performance. It's cheating and it explains why some fat cats get paid more than others. This is not a market economy; it is a kleptocracy. We probably can't stop this CEO feeding frenzy. These are the guys in power and they'll do whatever they want while the rest of the country is suffering. But we can push our politicians to improve the lot of those who have less.

The federal minimum wage has remained at $5.15 an hour since September 1, 1997. In fact, after adjusting for inflation, the value of the minimum wage is at its second lowest level since 1955. If the minimum wage in 2005 was worth what it was worth in 1968 (its peak value), it would be $8.88 an hour. That's a 42% drop in value for the people who need every cent. This doesn't have to continue. We can show that the CEOs happily cashing their hundred million dollar retirement packages and backdating their stock option grants are the same people who don't want to give another cent to the guy on minimum wage. Reality is that if companies can get away with paying slave labor salaries, they will. We have to shame them all into changing this and to make this illegal by raising minimum wage. Last Sunday, the New York Times reported that--for the first time--" full-time worker at minimum wage could not afford a one-bedroom apartment anywhere in the country at average market rates."

http://www.huffingtonpost.com/dr-peter-rost/is-it-wrong-to-make-a-lot_b_18676.html

[RedEarth]

1. Interesting......thanks for posting.....

[msgadget]

2. Excellent

We're being ruined by CEOs hellbent on fattening their year-end goody bags - kleptocracy indeed!

[NewJeffCT]

3. but, but, but

if we raise the minimum wage by even a penny it will devastate the economy & bring about massive inflation & layoffs! :sarcasm:

I think I recently read that 25 years ago, the average CEO made about 30 times the average worker. Now, it's like 500 times the average worker. Yup, those rich are just taxed too much. :sarcasm: