Usually I include a long prologue introducing the material, qualifying it before presenting it; this time I'll get right to it. The sub-topic in this ultimate of blog diatribes- corporate tax shelters and corporate CEO pay. I will summarize and connect the dots next time, after all of the evidence has been presented:
1) Terry Semel, Yahoo Inc.’s head received $71.7 million in total compensation despite the fact that the internet company he heads is getting killed by Google in both profit growth and stock performance, two big indicators of a company’s financial health. (his salary actually only totaled $250k, the other $71.4 million came from stock grants and stock options. I'm a novice in the economics, tax attorney business-I sure hope that all of the stock grant and option money is taxable at some point or another at the graduated rate, considering the scandalous amounts of money CEOs are receiving- if the answer is no, "why" would probably not be my only question);
2) according to a Congressional Research Service report, CEOs make 179 times, on average, as a typical worker, up from 90 to 1 in 1994. “By contrast, median household income edged up only 8.6 percent from 1990 to 2005, according to U.S. census data.”
3) Said one managing director for investment banking who advises corporations through the bank’s Activist Defense Group: “ ‘Compensation is only excessive when it exceeds industry norms and the stock performance has been underwhelming.’ ” Ah, wrong, compensation is excessive for corporate CEOs when corporations are tight-fisted about letting the rest of their employees, who may also aid in a company’s overall performance in on a bit of the action. Justifying CEO pay on the basis of the “well, that’s capitalism” defense, especially when CEO salaries are coupled with the tax shelter information I will provide below is perfectly criminal. Besides, plenty of the mismanagement at major companies, causing stock prices and profit margins to dwindle is directly attributable to a CEO’s incompetence. (After finding out that you unwittingly hired an asthmatic harmonica player for all of your prison blues music needs, wouldn’t you stop providing him with less than the golden parachute, improve his health care by giving him free albuterol without a co-pay and ask him to learn how to play anything but a wind instrument?);
4) Two CEOs who left Home Depot Inc. and Pfizer Inc. “left battered companies with golden parachutes worth $210 million and nearly $200 million respectively.” Ah, when I fail, I get a 2.0% raise, when I succeed 2.3% and that is often based on my immediate supervisor's objectivity, or lack thereof. The argument that the CEOs are paid a lot of money because there are only a certain number of qualified people willing and able who can run companies is as idiotic as using outdated marshmallows to make rice krispy bars- it just doesn't make sense to trot out that opinion, or the congealed marshmallows. By the way, if you are in need of some cement mixing compound, rice krispy bars made with expired marshmallows is a way to save a trip to Home Depot to purchase the cement mix. This concoction, because you aren’t gifted stock options worth a couple million dollars for failing so miserably, is an affordable alternative. People, thought to be qualified enough to run a company are just as likely to run a company into the ground as make it viable. Ironically, running a corporation into the ground is what PLENTY of CEOs are capable of, which is just what happens when a parachute doesn't open up- whether that parachute is golden or not. (Proof of Pfizer’s CEO failure: http://www.fiercebiotech.com/story/ceo-mckinnell-gets-the-boot-as-pfizer-struggles/2006-07-31; if you want proof of HD’s CEO failure, if you have the patience to suffer through these blog columns- you will be able to figure out how to obtain through a search engine. Incidentally, I read that one of the reasons for the HD failure was because of consumers and contractors complaints about their customer service- which can be tied to the types and number of employees a company in the service industry decides to hire- meaning, employees can have an effect on a company’s well-being);
5) “CEO pay isn’t set by markets, [said Richard Finlay, founder of the The Centre for Corporate & Public Governance] . . . Instead, it is ‘determined by a small clique of like-minded directors, most of whom are themselves past and current CEOs with a vested interest in perpetuating a failed, but to them, remarkably generous system.’ ” (And I already know all about those who favor the business industry's right to police themselves and for the most part, I believe that, just not in this case. They learned that approach, and are allowed to practice it, from/by the government . . . but have I already used the analogy about the pedaphile running the day-care? Damn, should’ve saved that one);
6) Warren Buffet, a man well-known for his generosity where his pocket book is concerned said, “ ‘too often, executive compensation in the U.S. is ridiculously out of line with performance.’ ” (objectivity and altruism- is there a pill form for that?)
7) For more from this article about shareholders having more of a voice in determining the pay of CEOs, shareholder activism, compensation committees, and SEC disclosure rules requiring companies to explain the reasoning behind executive pay packages see- http://www.msnbc.msn.com/id/19079624- which is where I gained the material from all six of the elements listed above.
8) My, to be fair moment comes to you courtesy of Rachel Zupek’s CareerBuilder.com article: “Will a Bigger Salary Make You Happier” http://www.careerbuilder.ca/CA/JobSeeker/CareerAdvice/ViewArticle.aspx?articleid=246 Really, anyone knows that acquiring wealth doesn’t bring happiness and we all joke that we’d like to have such a problem. Do some research on lottery winners and find out what they have to deal with once they turn in their winning ticket- but with middle class income salaries, I'm concerned with people who earn their money. Any freshman majoring in Sociology could have written it. I’m not equating money to happiness, I’m equating it, via the ability to afford a college education, to the increased ability to enjoy life, to be content. Again, I’m primarily concerned with the well-being of the middle class- and I haven’t even included all of the political and economic reasons for that concern.
Now, we've come to the tax shelter portion of the program:
Courtesy of: http://www.corpwatch.org/article.php?id=13884- “Having Their Cake and Eating it Too – The Great Corporate Tax Break” (2006)
9) “Companies as large as Boeing, Halliburton, Morgan Stanley, Pepsi, Citigroup and Xerox are either incorporated in tax havens or have a large number of subsidiaries there. This allows them to under-report their profits for the purposes of paying tax whilst at the same time benefiting from taxpayer money through government contracts.”
10) People might ask- now, what percentage of missing taxes, misallocated tax money/government waste would you suppose could be gathered, and what could you do with the money once rescued from corporate tax havens, government waste programs, and legislative directed pork barrel spending if an independent panel of objective, engaged, honest citizens were employed to meander through the government’s ledgers (state and federal) looking for cash to fund more worthwhile ventures? Well, things such as focusing on crime reduction, minimizing health care premiums, etc.- to wit: “ ‘the amount of money that is lost to tax havens, from developing countries alone, every year is six times the amount that would be required to fund universal primary education,’ ” according to Guy Ryder, the General Secretary of the International Confederation of Free Trade Unions. (Though, I would probably wish to separate the government’s involvement in education some, but that is gloriously outside the scope of this topic);
11) Also from Ryder, “ ‘At a time when business is taking up more share of productivity gains than ever, when companies are reporting higher profits than ever and when employer-sponsored social safety nets [note: I think they mean the rising costs of health care passed onto employees] are being eroded, would it not be only fair to ask corporations to put something back into the public spending purse? After all, it is only due to government investment in infrastructure and education that these companies have been able to stay competitive.' ” I’ll get into this later, but the next paragraph from this article mentions that “there is no correlation between generous corporate tax breaks and an increase in investment,” which is something that directly contradicts everything I read in Friedman, and much of what Adam Smith wrote on the topic. As there is no study indicated from which the writer has gleaned his data, I cannot confirm or deny the veracity, but a war of facts is at any time likely to get us nowhere without a little objectivity. Suffice to say, a conservative might boil their argument down to Gordon Ghekko's/Michael Douglass' line from Wall Street “Greed . . . is good,” but that won’t win them this pissing contest. Ghekko was right about the USA being a malfunctioning company, but greed isn’t what will save it, but taxing the ever living hell out of all corporations won’t either; taxing them more, as they can afford it, will.
12) “if we eliminated corporate welfare, that alone would allow for the income tax to be reduced by nearly ½ for those making between $27,682 and $55,225 . . . this would benefit small businesses by eliminating the anticompetitive nature of corporate welfare spending.” (Again, I cannot corroborate this, as I don’t have the time to spend hours researching every sub sub-topic which produces a fork in the road, but a panel of reasonably paid, objective people who are only slightly qualified to do so- sure could, if it could fund programs to slow illegal immigration before completely stopping it, by instituting a national identification card program for starters. (Government oversight committees and Senate or House Permanent Subcommittees on Investigations taking on the task of holding politicians accountable for misuse of funds, some of which is already being performed . . . well, that would be like having a pedaphile run the . . . ah, huh);
13) “The much-derided Political Action Committees (PACs) were created by the 1974 federal election reform law, with the intention of reducing political corruption.” (You have two chances to figure out why this hasn’t happened- and one of them should probably involve the words "tax shelters", or a short phrase about politicians being in bed with businesses. I've heard our conservative talk-show host friend Bob Davis ask callers putting forth this argument to prove it, c'mon . . . is their a tonic to slow the progression of naivete? This happens PLENTY, and if you are looking for proof and its fairly overrated nature- see my first two offerings (parts 1 and 2) on this overall topic);
That’s enough for now, but I simply have far too much material and so I will include more on this specific sub-topic next time. Some may wonder- how many entries to this diatribe might there be? I have no idea, but I lit up another conservative talk-show host (Jason Lewis- FM 100.3 in MN) last week by telling him that conservatives were pretty good at putting social issues in a vacuum. Republicans tend not to see how one social issue might connect to another, and I mentioned that he must not have fared too well as a child in dot-to-dot drills in his ScoobyDoo exercise and coloring book. The reason I mentioned this is that he had been attempting to make a connection between the smoking ban and people who continually eat food that is unhealthy for them. See, smoking was banned because it is a public nuisance to non-smokers and has been directly tied to second-hand smoke inhalation deaths, despite what others might say. This may be disproven, as science may state next decade that the human lung has the capacity to funnel second-hand smoke to a gland that disposes of it with no ill effect to those not actually smoking the cigarette. But until that happens and until a fat person who eats a big mac and fries five meals a day is found to have the ability to breath cholesterol into my arteries, the comparison is a ludicrous one. The concern should have been restricted to the government's right to legislate against freedoms- how everyone else's health insurance rates might rise because of other people's obesity is the proper place to start.
The short answer to when will I be done with this topic- I don't know, just as I don't know how many cocktail weenies I'll consume at any of a variety of holiday parties this winter. After I've consumed as many as possible, I will breathe the aroma of barbecue sauce in the direction of anyone who might get easily offended- conservative or liberal and see who has the stronger arteries, testing my hypothesis about the correlation between excessive cholesterol levels and the clogging of arteries. See, just to, ahhhh . . . connect the dots, these last two paragraphs were included because at some point I will have to connect the dots between CEO pay, tax shelters for corporations and the overall major topic of this blog. I'm demonstrating my ability to do that.
From Last time- I neglected to include-
Another government waste article to check out from Business Week’s Howard Gleckman: “The Shameful Seven” (doing a search for- “angora goats mohair military coats business week” should get you to the right place. I have plenty of other examples of government waste, but I am taking for granted that you don’t need me to include all of them to take my meaning- ok, just one more- http://www.heritage.org/Research/Budget/wm839-list.cfm
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