Tag: corporations

The Moral Arithmetic of American Capitalism

Did you know that the average CEO compensation at large U.S. public companies now stands at roughly 280 times the pay of a frontline worker?

That represents a staggering shift from the 1960s, when CEOs earned 20 to 30 times what their workers made. Since the 1970s, the CEO-to-worker pay ratio has increased by over 1,000 percent.

This divergence did not occur by accident. One pivotal change came in the late 1970s, when American corporations moved away from a model centered on growth, stability, and shared prosperity toward one focused on maximizing shareholder value. Executive pay was increasingly tied to stock price rather than the long-term health of the firm.

With the rise of stock options and equity grants, CEOs could reap enormous rewards without raising wages, expanding productivity, or strengthening the workforce. Compensation ballooned even when companies stagnated.

Tax policy amplified the effect. In the 1950s and 1960s, top marginal income tax rates exceeded 70 to 90 percent, effectively discouraging runaway executive pay. That restraint largely disappeared in the 1980s, as marginal tax rates fell sharply, making extreme compensation both legal and cheap.

At the same time, labor power collapsed. Union membership declined, offshoring and automation accelerated, and job security eroded. Productivity rose; worker wages did not. Executive compensation absorbed the gains.

Business leaders defend this system by claiming that outsized pay is necessary to attract top talent. In practice, this has produced a self-perpetuating escalation, as boards benchmark CEO pay against ever-rising peer averages. In a globalized economy, profits flow upward, not outward.

Yet America’s extreme CEO-worker wage gap is not an inevitable feature of advanced capitalism.

Consider international comparisons:

Typical CEO-to-worker pay ratios (large firms):

  • United States: ~250–350:1
  • Western Europe: ~40–90:1
  • Japan: ~15–40:1

In much of Europe, workers sit on corporate boards, restraining excess. In Japan, adopting the American compensation model would be seen as collective irresponsibility, not enlightened management.

Public anger is justified—especially amid persistent inflation and decades of wage stagnation. Can the old restraints return?

There are tentative steps. The Tax Excessive CEO Pay Act of 2025, introduced by Rep. Rashida Tlaib and Sen. Bernie Sanders among others, would raise corporate tax rates on companies whose CEO pay exceeds worker pay by extreme margins, beginning at 50-to-1. But meaningful reform would require broad coalitions and a substantial shift in Congress. Change, if it comes, will be slow—and uncertain.

Transparency may be the public’s strongest immediate tool.

What has happened in America is not merely an economic evolution; it is a moral shift. Accumulation has replaced public responsibility as the dominant ethic, not only in corporate life but across society. Its most vivid emblem is the twice-elected billionaire president, Donald Trump, whose politics celebrate wealth while dismantling social safeguards.

Since 1990, the number of U.S. billionaires has grown from 66 to more than 800, while the median hourly wage has increased by only about 20 percent.

This is not efficiency.

It is not merit.

It is not inevitability.

It is obscene.

—rj

Blame Corporations, Not Consumers: Why Inflation Persists

The Federal Reserve keeps upping the interest rate in a concerted effort to reduce inflation. This risks inducing a recession, meaning fewer jobs and economic misery just in time for the 2024 election and Trump, either even or ahead of Biden, in current polling surveys.

Do you really like paying an extra thousand monthly on your anticipated new mortgage than a year ago or paying 84 months on your new vehicle?

Sadly, the Federal Reserve is operating on a false premise, pummeling consumers. The truth is that the major responsibility for inflation lies with corporate greed, using the cover of inflation to raise prices and augment profits.

According to the Economic Policy Institute (2023), corporate profits normally contribute 13% to prices. Currently, that figure has risen to twice that amount.

Plain evidence stares you in the face with every trip you make to your grocery store or opt for dining out and witness markups twice or more the rate of current inflation. Tyson Foods, our largest meat supplier, reported a doubling of profits from first quarter 2021 to first quarter 2022.

Chipotle Mexican Grill, has just announced it expects to increase its menu prices 15% by the end of 2023, despite reporting $257.1 million in profit in the latest quarter, a nearly 26 percent jump from a year earlier (NYT).

Sometimes, you’ll see wily corporations do the “shrinkflation” gambit: higher price, less content. They think you won’t notice. Gatorade, for example, redesigned its bottles, same height, but fewer ounces, 28 oz. vs. 32 oz, or a 14% content reduction.

Albertsons bought out Safeway, and now Kroger wants to buy Albertsons. Include Walmart, and you’ve got three firms controlling 72% of the market! (The Guardian).

No, it’s neither consumers nor unions fueling inflation, but corporate conglomerates that lie at the root of stubborn inflation, against which even the Federal Reserve’s raising interest rates have proven inadequate, ironically making it more difficult for consumers.

Lamentably, the corporate sector wields too much influence, lobbying in the Congress, and meddling in our elections. They shouldn’t enjoy the status of persons, as ruled by SCOTUS {2010), free to spend on candidates of their choice.

It’s time to play hardball: Impose a windfall profits tax on corporate profit above a reasonable margin.

Let government be suspicious of proposed mergers, with their inherent layoffs and reduced competition, heating the economy still further.

Break-up corporate monopolies too big for their britches!

—rj

Corporate Gauging and Rising Prices

The U.S. Federal Reserve continues to raise interest rates to slow raging inflation. The root culprit isn’t the consumer, but the greedy corporate sector, which is using inflation as cover to maximize its profit margins. We know this every time we shop and see goods priced double, or more, the rate of inflation. What’s needed immediately is a windfall profit tax.

Meantime, the average worker faces an insufferable erosion in purchasing power, and the plight of those living on fixed incomes exacts the ultimate cruelty.

Three principal parameters to assess market expense are labor costs, nonlabor inputs, and the “mark-up” of profits beyond the first two. Recent measurements (economic policy institute.org) reveal record profit margins over the former two, or plus 53.9% growth in corporate profits, as opposed to 38.3% for non-labor cost, which includes the supply chain crisis induced by the pandemic, and just 7.9% for labor costs.

Certain sectors of the economy have especially profited, averaging above 20% in profit margins such as information technology and fossil fuels. Exxon, for example, has just published a record profit of $17.9 bn for the second quarter (NYT).

Fueling inflation is the accelerating corporate buy outs, lessening competition. You’re aghast at rising meat prices? That happens because just four meat conglomerates now control the market. Since 1990, some 75% of corporations have consolidated and control as much as 80% of the market, reports the Official Monetary and Financial Forum (OMFIF).

And things may likely get worse as a looming recession makes itself felt and corporations cut expenses to stabilize profitability. Amazon has laid off 100,000 workers, even as profits bulge. Others include Twitter, Google, Netflix, Peloton, Best Buy, Tesla, Ford, General Motors and Exxon Mobil.

Corporations aren’t by nature altruistic. They exist to reap maximum profit for their CEOs and investors. They think in numbers, not individuals.

–rj