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A Modest Proposal to Help Starving CEOs

A Modest Proposal to Help Starving CEOs

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Published by Ian Williams
A "Speculator" column from IR Magazine showing how historical precedent showed the way to ensure adequate compensation for CEOs.
A "Speculator" column from IR Magazine showing how historical precedent showed the way to ensure adequate compensation for CEOs.

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Published by: Ian Williams on Dec 26, 2013
Copyright:Attribution Non-commercial


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Help Poor Struggling CEOs! Washington should step in to help out needy CEOs inShare December 18, 2013 | By Ian Williams The US has wage lessons to learn from England Back in 1795, when Britain was fighting Napoleon, there was a financial crisis entailing an oversupply of labor and a shortage of food: bread prices rose, and wages fell. The orthodox view was that the English peasantry were largely in earnest when they happily intoned,
God bless the squire and his relations/And keep us in our proper stations.
While some might have said that in church on Sunday, however, in reality many of them donned masks at night and went out with flint and tinder. In eighteenth-century England
and indeed in the US
 people had quaint traditional customs that included what one historian called
collective bargaining by riot
: if food prices went up, the local magistrates
mansions and hayricks also went up
in flames. By ancient law, the magistrates could fix the wages of local laborers, but the Justices of the Peace of Speenhamland in England, an area afflicted with serious rioting, decided not to. Instead, they used local taxes to supplement the wages of farm workers so that all taxpayers subsidized the payroll of the most affluent landowners, and paid extra cash to workers depending on the price of bread. Two centuries later, the jury is still out on the motives of the JPs. On the one hand, their policy did save  poor families from dire deprivation and actual starvation. On the other, magistrates tended to be rich farmers, so in effect they were subsidizing themselves while buying tangential arson insurance. These days, we often maintain old traditions. University of California researchers claim chains like Walmart and McDonald
s use public money to subsidize their Scrooge-like pay policies. The minimum wages they pay are not enough for their employees to live on and are feasible only if society as a whole  picks up the balance of the tab with food stamps, rent subsidies and state-provided healthcare; the researchers estimate that this government backing of the fast food industry amounts to $7 bn a year. Those numbers can be multiplied by much more, as it seems 60 percent of new US jobs since the recession have been similar low-paid service sector jobs. As with the gentleman farmers of yore, paying low wages and letting everyone else pick up the tab is good for the bottom line. But new times mean new problems. Nowadays, it is clear the bigger problem is that the growth of executive salaries is not accelerating the way it used to. Companies cannot afford, politically or financially, to keep executive compensation increasing the way management so manifestly deserves. If CEOs
those on whom our economic survival and continued prosperity depend
are paid less than their  peers, it reflects badly on the perceived prosperity of their companies and thus on their shareholder value. This in turn affects market indices and thus the financial prosperity of the nation. It is essential, therefore, that our industrial leaders are seen to be paid well. In view of such a national challenge, Washington must rise to the occasion just as those rural English magistrates did: it is imperative the government step in to supplement executive compensation. The essential
cost of ostentatious consumption increase
could be met by granting tax credits that would  provide needy CEOs with annual percentage increases tied to the rise in the average remuneration of their Fortune 500 peers.  Naysayers might argue that this is inherently inflationary, but it has sound precedents: most board compensation committees cite comparable CEO pay to justify rises for the boss who appointed them, and

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