7gen Bloc

It takes a lot for Americans to be truly shocked by the Austrian-Afghanistan disparities in executive-employee pay. Perhaps, when we read that the hedge-fund manager John Paulson was paid an estimated $3.7 billion last year, we might raise an eyebrow in surprise. Or we get mildly irritated when we recall that Robert Nardelli, the former chief of Home Depot, got a $210 million golden handshake when he was ousted, even though the company’s stock declined by nearly 20% during his tenure. But across the Atlantic, people take business greed a bit more seriously.

Recently, the Financial Times reported than when Wendelin Wiedeking, the CEO of Porsche, last year became Europe’s highest-paid executive by earning a comparatively puny $120 million, the head of a rival German carmaker shook his head in disgust. “Everyone has the right to earn decent money. But $120 million? That is obscene. It goes against every principle of social equality we have,” the chief executive said. “I just cannot understand how he can justify earning so much more than the normal worker.”

The Financial Times went on to report that, “Horst Köhler, Germany’s president, recently described global financial markets as a ‘monster’ that must be put back in its place, criticising the ‘bizarrely high’ pay of some financial managers. Jean-Claude Juncker, Luxembourg’s prime minister and president of the ‘eurogroup’ of eurozone finance ministers, has denounced excessive executive pay as a ‘scourge.’ Nicolas Sarkozy, France’s president, has criticised ‘rogue directors’ and has been calling for a ‘re-moralisation’ of capitalism.

Here in the US, we know no shame. Even as corporate profits soared, climbing an average of 13 percent annually over the last six years, wages for the average worker remained flat. Steven Greenhouse, in his excellent new book, The Big Squeeze: Tough Times for the American Worker, writes that, “Employee productivity has outpaced wages, rising 15 percent from 2001 through 2007. Corporate profits have climbed to their highest share of national income in sixty-four years, while the share going to wages has sunk to its lowest level since 1929.” Economic studies show that the disparity between the haves and the have-nots in the United States is so great that it more closely resembles the income inequality of a third world country. But that hasn’t stopped CEOs from making, on average, more than 500 times what their employees take home. In fact, from 1979 to 2005,the wealthiest one percent of Americans (where most CEOs live), saw their incomes more than triple. So, you might ask, what about me? Well, I’m afraid I’m dragging down the average CEO’s pay packet. My base salary is less than 5 times what the average Seventh Generation employee earns; my total compensation (base, bonus, stock, and the rest) is less than 10 times what the average Seventh Generation employee earns!

To read the full story in the Financial Times, click here

photo: Tracy Olson