November 27, 2014

WSJ on CEO Pay! Why They Hate The Truth, And Why We Should Spread It

[This article is by my friend John Lacny, a Pittsburgh-based activist. He possesses a pitiless eye for the mechanisms of domination employed by big capital, which make his pieces, like this one, a delight to read.]

By John Lacny

One of the first bitter lessons you learn as an activist is the fact that just because people know the truth does not mean that things are going to change. People have to actually do something about it -- and organizing them to do something about it is one of the toughest things in the world, not least because it requires you to inspire people to believe that it is possible to change things.

That said, our adversaries are well aware that mass-based knowledge is a dangerous thing for them, which is why they invest so much effort in obscuring the facts. An especially illuminating example of this can be found in an article that appeared in the house organ of capital, The Wall Street Journal, just before Thanksgiving. It is entitled "The Boss Makes How Much More Than You? Controversial New Rule Would Make Companies Disclose Data," and it is accompanied by an illustration in which the average CEO is represented as a gigantic pig. (The average worker is portrayed as a much smaller piggy bank, but what do you expect from the WSJ.)

The subject is a new rule by the Securities and Exchange Commission, which would require US companies traded on Wall Street to disclose the ratio of pay between their CEO and their median employee. This rule has been a long time coming, and is the result of 2010's Dodd-Frank financial reform act. Dodd-Frank was a mild financial reform that has more than a few shortcomings, but much like the Affordable Care Act -- which is of similar vintage -- even its mildly progressive features have a way of causing vested interests to break out in hives.

The Wall Street Journal notes that the proposed rule about the CEO-worker pay ratio attracted more than 128,000 comments. Think about this for a minute. Do you know of the obscure website where people can comment on proposed SEC rules? Do your friends? How many of the people you know are even aware of the SEC's existence? Then think about the effort it takes to get someone to comment, and to get that to happen 128,000 times. Is this a grassroots movement that you're unaware of? Not likely, but it is an action encouraged by people who have a hell of a lot of money. And the usual suspects in Congress have responded to the demands of their constituency: Texas teabagger Jeb Hensarling, who chairs the House Financial Services Committee, sent a letter along with two other Republicans calling on the SEC to delay implementation of the rule.

The Journal writes: "Critics say such pay ratios matter little to investors and could make executives easy targets for populist anger or hostile shareholders." Note the explicit values here: These people are quite clear that the purpose of the SEC and the disclosures it requires of companies is to protect investors, not the public at large, and certainly not the people who actually do the work that makes the profits for publicly-traded companies.

Nevertheless, bosses are resigned to the likelihood that they'll have to comply with the rule, and with the desperate determination to mount a defense before they are carted away on the tumbrels, they are putting resources where it matters: into pure PR and HR bullshit artistry. Witness the Journal: "Some employers are taking steps to plan for the possibility of internal morale problems, negative press and an investor outcry over the sizable gulf in pay between the top and the bottom. Among other things, they intend to expand employee training and shareholder outreach efforts."

The first step is no doubt a lot of board room Power Point presentations, many of them prefaced with an icebreaking joke illustrated by a Dilbert cartoon. You won't see that part. The part you will see is the various company handouts and press releases in which they try to defend the indefensible. Your job as an organizer is to see to it that they fail.

The really funny thing about this is that we already know how much corporate CEOs get paid, because the SEC has required companies to disclose that for years. You can look that up any time you want. It is on a website called EDGAR, hosted by the SEC. Each year, every publicly-traded company files a DEF 14A form, more familiarly known as a proxy statement, and the SEC website has all of these. If you're on a fast food strike, and you want to know how much the CEO of McDonald's makes -- in salary, stock and stock options, bonus, and everything else -- you can look that up. (It was nearly $9.5 million last year, by the way.)

So they're not really worried about the disclosure of CEO pay. What they're really worried about is that we will learn how little the rest of us make: "'Half of your workforce is going to [ask], "Why am I paid below the median?"' said Jill Kanin-Lovers, a retired human-resources executive, at a National Association of Corporate Directors conference. 'That's going to be really explosive.'"

We have a perverse culture in this country where workers are not supposed to discuss their pay with one another. This actually starts in the schools. The very same people who like to complain because "kids these days" get participation trophies for sports -- when trophies should really only go to winners -- are the very same people who endorse the idea that a kid should be circumspect about discussing with peers what actually matters in school, which is academic achievement or the lack thereof. This is because if kids know how other kids are being graded, they will be able to figure out if the grading system is unfair and the teacher is playing favorites. Discouraging schoolchildren from discussing their grades is therefore not a salve to the self-confidence of the children who are not as academically proficient as others, but in fact quite the opposite. It is training for an adulthood in the workforce, and intended to inculcate a cringeing, submissive attitude toward one's social "betters" -- masked as American "rugged individualism," of course, when really it is an extreme form of social atomization that actually leads to the opposite of freedom, a life of diminished expectations reinforced by fear.

It is actually illegal for employers in the United States to fire or discipline workers for discussing their pay and working conditions, but most people don't know that, and it doesn't stop managers from doing it even if they know the law. Vindicating a worker's formal rights under the law can be a long and painful process, which is why most people shut up when they're told to do so -- unless they're in a union shop and can therefore count on their coworkers to back them up.

But the statement of Jill Kanin-Lovers is not the last of the revealing statements in this nutrient-rich Wall Street Journal article. Here is another:

"Companies with staff around the world 'worry their pay ratios will mean little because the median employee may be a part-timer in India making a few dollars a day compared with their U.S. CEO, who makes millions a year,' says James D.C. Barrall, a partner at Latham & Watkins LLP who specializes in executive compensation."

There you have it, India: you don't mean shit to corporate America.

But of course, pay ratios mean a lot in the cases of companies with large overseas workforces, perhaps even moreso than with firms whose workforces are mostly domestic. They demonstrate that all the "populist" campaigners are right when they say that US companies lay off domestic workers in order to further exploit workers in the Third World and thereby further enrich the CEOs.

"Populist" is the most terrifying all-purpose curse-word that the business press can affix to someone these days. So when they say that something could be used to stoke "populist anger," it means we should take advantage of the opportunity to prove them right.

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