Monday, May 12, 2008
Mark Cuban on CEO Salaries
Here's an interesting tidbit:
• In 1965, U.S. CEOs in major companies earned 24 times more than an average (non-management) worker.
• In 1978, they earned 35 times more than an average worker.
• In 1989, 71 times more.
• By 2005, the average CEO was paid 262 times that of an average worker.
With salary discrepancies like this, it's no wonder the middle class in the United States shrinking. When the middle class shrinks, we all suffer. People stop buying cars, they stop buying houses and furniture, and the economy suffers. The CEOs are doing fine, though, don't worry about them.
Why have we seen such a shift in 40 years? It's more complicated than I can understand, but I think the bottom line is this: our economy used to be based upon making things (manufacturing), it's now based on speculation (financial services). Google, a company not even 10 years old, is worth $585.00 a share. Coca-Cola, founded in 1886, and as healthy and strong as a corporation can be, is worth $57.00 a share. It's more important to have Wall Street hype than to be financially sound.
This hyper-speculative environment led to the dot.com debacle of the 1990's, the current mortgage lending crisis, and will ultimately lead to the next Great Depression. No one will be able to stop it; anyone daring to suggest CEO pay is based on smoke and mirrors will be labeled un-American, a Marxist even.
Mark Cuban explains the situation, and tells us how to fix it. Read his take here.