A guest post from (Roughly) Daily

 

Just about everyone on the planet agrees that CEOs earn too much. Except CEOs. But how much is too much? Let’s put it this way: the average American worker would earn almost $2 million a year if he were paid a fair salary based on the compensation of U.S. CEOs.

That’s just one of the many details to emerge from a fascinating post over at the Harvard Business Review, visualizing the pay-gap ratio between chief executives and average workers internationally…

CEOs are making a lot more than what people deem fair. In the United States, the average American CEO makes a whopping 354 times the salary of the average worker. But ask Americans what a fair salary for a CEO is, and the consensus is just 6.7 times the salary of an average worker.

That means that if the average American were paid the “ideal” fraction of the average CEO’s actual salary, he would rake in $1.8 million a year.

In 1984, legendary management guru Peter Drucker argued that paying any CEO more than 20 times the wages of the average American worker was anathema to the well-being of corporations. Pay your CEO more than that, Drucker argued, and all you did was increase employee resentment, decrease morale, and reward greed over responsibility. If Drucker could see the size of the paychecks of today’s CEOs, he’d be spinning in his grave…

Read more at “The Insanity Of CEO Paychecks, Visualized“; read the HBR piece (and see more charts) here; and then read this short piece at the Financial Times that unpacks the mechanics of greed– and its stifling effect on innovation and growth– here.

* Peter Drucker

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As we fume over fatted cats, we might take a moment to celebrate Ask a Stupid Question Day, celebrated by teachers and students on this date (or sometimes, the last school day of September).

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A guest post from (Roughly) Daily

 

The game Monopoly was created in the early 1930s as “The Landlord Game” by a Quaker anxious to illuminate the dangers of unbridled acquisitiveness.  But by 1935, when it was acquired by Parker Bros., it had been copied, re-titled, and remade into the paean to aspirational capitalism that’s been a huge success ever since.

But times have changed; the methods of wealth accumulation have morphed…  and now there is a new set of rules to reflect this new reality.

It would be hard to simplify capitalism further than Monopoly. The game attempts to express the ruthlessness of raw capitalism by declaring that whoever has the most money at the “end” is the winner. While it’s true our culture proclaims the rich as our greatest heroes, the method of financial gain in Monopoly is not a system that allows for any creativity. Roll the dice, buy a property, pay rent, pass go, and collect $200. Repeat.

Simple models have long been used to help understand complex ideas. With a few small changes Monopoly can be a space where we can play at being in control of the economic system. All it takes is a few new rules.

Rule Change #1: The Banker

In the original rules the role of the banker is simply a chore–the board game equivalent of taking out the trash. But in real life the banker is no passive entity. The banker is the center of the universe.

The Libor scandal, the UBS money laundering scandal, the SAC Capital scandal, FINRA suing Wells Fargo and Bank of America, TD Bank paying to settle charges of a ponzi scheme, Galleon Group’s insider trading scandal. This list could go on. The point is that banking is
exciting work!

The role of the banker is special. The banker should have no piece on the Monopoly board, but this person is in charge of the bank’s money. The success of the banker is judged the same as any other player: Whoever accumulates the most wealth is the winner. Of course, as in life, the banker has some advantages (like control of all the money)…

Read the rest of the new rules at “Rethinking the game of Monopoly“…  then roll the dice.

Playing this version of Monopoly won’t help you understand the details of a banking scandal. But you’ll have experience with a simplified model of the financial system that generates regular “scandals.” A game where arguing and backstabbing are part of the rules and the winner is hard to determine. This simple model recreates the same results found in the real world.

* Stephen Wright

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As we wonder why no one’s done time, we might recall that it was on this date in 1882 that the San Francisco Stock and Bond Exchange was formed;  it later merged with with Los Angeles Oil Exchange to become the Pacific Stock Exchange.  In 1999 it became the first stock exchange in the U.S. to demutualize, and in 2003, closed its trading floors and went to electronic transactions. The PSX, as it was known, merged into the New York Stock Exchange in 2006.

The San Francisco home of the Pacific Stock Exchange from 1930 to 2003

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A guest post from (Roughly) Daily

 


LittleSis– the opposite of Big Brother–is a free database of who-knows-who at the heights of business and government.

It’s a kind of “involuntary Facebook of the 1%”…

We’re a grassroots watchdog network connecting the dots between the world’s most powerful people and organizations…  We bring transparency to influential social networks by tracking the key relationships of politicians, business leaders, lobbyists, financiers, and their affiliated institutions. We help answer questions such as:

  • Who do the wealthiest Americans donate their money to?
  • Where did White House officials work before they were appointed?
  • Which lobbyists are married to politicians? Who do they lobby for?

All of this information is public, but scattered. We bring it together in one place. Our data derives from government filings, news articles, and other reputable sources. Some data sets are updated automatically; the rest is filled in by our user community.

The database is large; at this writing:

And as the explanation above suggests, it’s growing.

Readers might do well to browse.  If, as a recent Princeton study suggests, the U.S. is no longer a democracy, but an oligarchy, it’d be wise to meet the new bosses.

* Alice Walker

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As we contemplate cronyism, we might recall that it was on this date in 1884 that the brokerage firm of Grant & Ward, in which former President Ulysses S. Grant was a partner, failed under the weight of $16,725,466 worth of debts.  The firm, founded in 1881, had done well at first, bolstered by the salesmanship of Ferdinand Ward– “The Young Napoleon of Finance”– and by Grant’s name.  The former president bragged to friends that he was worth two and a half million dollars, and family members and friends poured money into the firm.  But Grant was largely disengaged from the company’s business (he later argued in his autobiography), often signing papers without reading them.  In the event, it turned out that Ward was running a Ponzi scheme (before Ponzi had given the technique its name).  Ward was eventually convicted of fraud and served six years at Sing Sing.  Grant was financially ruined, but was bailed out by William Henry Vanderbilt, who paid off Grant’s debts, and by Mark Twain, whose generous offer for Grant’s autobiography financed the ex-President’s final years.

Frederick Opper’s treatment of “Young Napoleon” Ward, published during Ward’s trial

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A guest post from (Roughly) Daily

 

 

As income and wealth inequality has grown in the developed world, so have the ranks of security guards—for gated communities, upscale residential buildings, corporate offices, exclusive events, and more. That trend– more inequality, more guards– seems especially apparent here in the U.S.  We now employ as many private security guards as high school teachers — over one million of them, or nearly double their number in 1980.  And that’s just a small fraction of what we call “guard labor.”  In addition to private security guards, that includes police officers, members of the armed forces, prison and court officials, civilian employees of the military, and those producing weapons: a total of 5.2 million workers in 2011– a far larger number than we have of teachers at all levels.

Samuel Bowles, a professor at the Santa Fe Institute, and Arjun Jayadev, of the University of Massachusetts- Boston, explore these findings in their Opinionator piece “One Nation Under Guard.”

In America, growing inequality has been accompanied by a boom in gated communities and armies of doormen controlling access to upscale apartment buildings. We did not count the doormen, or those producing the gates, locks and security equipment. One could quibble about the numbers; we have elsewhere adopted a broader definition, including prisoners, work supervisors with disciplinary functions, and others.

But however one totes up guard labor in the United States, there is a lot of it, and it seems to go along with economic inequality. States with high levels of income inequality — New York and Louisiana — employ twice as many security workers (as a fraction of their labor force) as less unequal states like Idaho and New Hampshire.

When we look across advanced industrialized countries, we see the same pattern: the more inequality, the more guard labor. As the graph shows, the United States leads in both…

Bowles and Javadev conclude by quoting an august Utilitarian…

“It is lamentable to think,” wrote the philosopher John Stuart Mill, in 1848, “how a great proportion of all efforts and talents in the world are employed in merely neutralizing one another.” He went on to conclude, “It is the proper end of government to reduce this wretched waste to the smallest possible amount, by taking such measures as shall cause the energies now spent by mankind in injuring one another, or in protecting themselves from injury, to be turned to the legitimate employment of the human faculties.”

This venerable call to beat swords into plowshares resonates still in America and beyond. Addressing unjust inequality would help make this possible.

Read the whole piece here.  [TotH to The Society Pages]

*”Who will watch the watchmen” (or literally, “who will guard the guards themselves?”)  Juvenal, Satires (VI, lines 347–8)

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As we shore up our defenses, we might recall that it was on this date in 1967, at the close of a show in Astoria (Finsbury Park, North London) that Jimi Hendrix first set fire to his guitar.  Hendrix was treated for minor burns later that night (but apparently got the technique down quickly, as subsequent “lightings” didn’t require medical follow-up).  The slightly scorched 1965 Fender Stratocaster was sold at auction in 2012 for £250,000 (about $400,00).

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A guest post from (Roughly) Daily…

But to change it, you have to know what that organization is…

 click here, and again on the image, for larger version

With this 1855 chart, Daniel McCallum, general superintendent of the New York and Erie Railroad, tried to define an organizational structure that would allow management of a business that was becoming unwieldy in its size. The document is generally recognized to be the first formal organizational chart.

Historian Caitlin Rosenthal, writing in the McKinsey Quarterlypoints out that the chart was a way for McCallum to get a handle on a complex system made more confusing by the new availability of data from the use of the telegraph (invented in 1844). Information about problems down the track was important to have—it could help prevent train wrecks and further delays—but the New York and Erie’s personnel didn’t have a good sense of who was in charge of managing this data and putting it into action…

Read the whole story in the ever-illuminating Rebecca Onion’s “The First Modern Organizational Chart Is a Thing of Beauty.”

* Anthropologist Mary Douglas

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As we grapple with grapple with the Great Chain of Being, we might recall that it was on this date in 1937 that General Motors formally recognized the United Auto Workers as the collective bargaining representatives of GM workers.  The decision came on the heels of a 44-day sit-down strike that had begun in December, 1936, and that had idled 48,000 employees.  Still (to Dr. Douglas’ point), old habits die hard: two month later GM guards assaulted and beat UAW leaders at the company’s Rouge River plant.

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HI, Ho! Hi, Ho!…

January 24, 2014

A guest post from (Roughly) Daily...

Over the past several years, the job market has (obviously) been pretty grim. The recession ended four and a half years ago, in June 2009. But there are still 1.3 million fewer U.S. jobs than there were in December 2007, when the recession began.

Still, when you look more closely, the picture is more nuanced. Since the recession started in December 2007:

  • Health care has added 1.5 million jobs.
  • Restaurants and bars have added roughly 700,000 jobs.
  • The number of construction jobs has fallen by 1.6 million.
  • The number of manufacturing jobs has fallen by 1.7 million.
  • The number of government jobs has fallen by about 500,000.

For more on jobs lost and gained since the recession — and on average wages in different sectors — see Where The Jobs Are (And Aren’t).

Read the full story– and find a larger version of the chart– at Planet Money.

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As we remind ourselves that “career” is both a noun and a verb, we might recall that it was on this date in 1981 that millions of Polish workers boycott their jobs in support of a demand by Solidarity for a 5-day work week.  Formed the prior year, Solidariyy was the first non–communist party-controlled trade union in a Warsaw Pact country; by 1981, it’s membership was roughly 10 million– about one third of the total working age population of Poland.  It became a broader-based anti-bureaucratic social movement as the decade progressed, surviving authoritarian attempts to quash it, and by 1989 forced negotiations with the government, resulting in semi-free elections.  A Solidarity-led coalition government was formed; and in December 1990, Solidarity’s leader, Lech Wałęsa, was elected President of Poland.  Solidarity remains an active labor union.

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The South will rise again?

January 6, 2014

 

See a larger version at Business Insider.

 

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