Yesterday’s "Outlook" section of the Washington Post had an article that argued effectively, "[c]ontemporary business culture has distorted the spirit of American capitalism by rewarding mediocrity and even failure." The article is a must read although it was short on specifics as to how we can change that business culture.
"They’ll find a way around it," was the cynical reply of an economist friend to my suggestion that we find legal remedies to shape the culture. "If you restrict their pay, they will take stock options or devise some other mechanism to make more money." He correctly pointed out that shareholders have grown complicit in this corporate culture but it is difficult to see how, acting on their, any but the most organized, economically sophisticated and legally trained shareholders could mount an effective attack on a business class that thinks their companies exist to line the pockets of their CEOs.
I do believe that there are legal ways to shape the culture. As mentioned last week, we can change the tax code so that any compensation about 500k is not tax deductible as a business expense" companies can pay more than that, but it will come right out of the profit margin. Additionally, a law could require that the very first page of all reports to shareholders contain information about executive pay as a percentage of company profits, in comparison to average wages for all employees, and in relation to company performance. Efforts to hide remuneration through complicated stock options could be made a crime. Enforcement in the form of regular audits by government officials would certainly keep everyone on their toes.
Cultures do not change quickly, and the Augustinian in me suspects that a healthy moral culture declines faster than it can be re-created. But, the effort must be made and there is electoral gold in embracing populist measures that are also sound policies. America’s zillionaires do not need to be guaranteed more zillions for the economy to prosper. In fact, the economy will only prosper when the average American feels confident that the system is not entirely rigged against his interests. Having laws that begin to build a culture that values workers as much as capital, long-term viability as much as short-term economic gain, and the intrinsic worth of a business enterprise as much as its stock value fifteen minutes ago, these are the ways that we get the economy going again.