“I’m so bored. I hate my life.” - Britney Spears

Das Langweilige ist interessant geworden, weil das Interessante angefangen hat langweilig zu werden. – Thomas Mann

"Never for money/always for love" - The Talking Heads

Thursday, October 20, 2005

not that deep

“J. T. Battenberg III, Chairman of the Board, President and Chief Executive Officer, Delphi Corporation, USA, said corporate governance has changed. Boards tended to be less attentive in the past, but they are now paying very close attention to financial reports and probing deeply into the organization. "I have to force myself to really guard my time accordingly,"he remarked. CEOs need to maintain focus on the entrepreneurial, risk-taking spirit necessary for growth.

Battenberg also said the board must have an intimate relationship with the CEO. He finds "few boards do a good job establishing a relationship with the CEO or even among themselves." He is working on ways to improve relationships among members of the boards on which he serves, but finds peer evaluations "difficult for old friends." -- from the World Economic Forum, "Do Ceos earn their keep?"

George Will has never been shy about his contempt for the working class, or his advocacy for the wealthy. So we read his column in the Washington Post with some amusement, the other day. His eagle eye has been attracted to the robbery of the UAW pension fund by General Motors, and of course he approves:

“GM has been forced to allow product development, pricing and other decisions to be driven by the need to keep sufficient revenue flowing in so it can flow out in fulfillment of GM's function as a welfare state. GM provides $5.2 billion in health care annually -- more than Harley-Davidson's revenue -- to 1.1 million workers, retirees and dependents. Retirees outnumber current U.S. employees 2.5 to 1. The $4 billion that goes annually to retirees does not go into developing products people want to buy.

Concessions by the United Auto Workers will provide GM with annual savings of $1 billion in health care costs. But GM's hourly workers, who pay no health care deductibles and only nominal co-payments, will still enjoy coverage better than most Americans have. Since 2000, the percentage of American businesses offering any health insurance to workers has declined from 69 to 60.”

That the workers have a good health insurance plan is such a shock that Will would probably approve of bringing the old ones into police stations, tasaring them, and throwing them in the slammer. Alas, by some oversight, health care for people who have actually worked all their lives hasn’t yet been ruled illegal. This is one of those occasions when I long for a time machine. Oh, to put Will’s column in it and set the dial for 1980! Remember 1980, all those Democrats-for-Reagan, voting to slit their throats because 400 hostages in Iraq weren’t rescued quick enough for their taste? (Reagan, of course, learned from that fiasco, and when some 260 embassy employees and marines went up in smoke in Beirut, later on, he did not agonize about surrender – he just did it, thus preserving his popularity unscathed. A lesson for us all… but I digress).

The year of the great Social Security Reform has turned into the year America pays its first tab on the high labor cost of CEOs. The papers are full of gloating reporters laughing over Delphi’s bankruptcy and the consequent ruin of the retirement of its work force. My, the gaiety in the business pages. Well, we know that is what the proletariat gets since they have ceased to allow themselves to be sold by the pound on the auctioneer’s block.

Funny, all that talk about pension costs and no talk about the cost of, well, that superb management group that led Delphi before CEO Miller, that much quoted man. We looked up previous CEO J.T. Battenberg III’s compensation package, and found it, as well as Delphi’s v.p., D.L. Runkle, for the 1999-2002 period. It was shockingly low. Why, Mr. Battenberg made a mere 13.4 million in that period. Mr. Runkle made peanuts, really. 6.4 million. Packages like that, why, a man gets ashamed to even show his face at the corner grocery store. Somehow, though, LI doubts seriously that you are going to read any stories about Delphi that mention Mr. Battenberg (such a kind hearted soul – peer evaluations being so difficult among friends, a lot of times it is best to just elevate them silently on the stock options, don’t you know?), although no doubt fully insured business journalists swilling liquor on their lunch hours with war criminals from the vice presidents office will assure us that the Delphi work force was being treated like royalty, and had it coming.

Well, it is turning out that there is a cost to paying top dollar for your top 5 percentile, even in America. If we are going to continue to pay CEOs 190 to 400 times the wage of the average worker, we are just going to have to cut down on the average worker’s benefits. The conventional wisdom is happily starting to gel.

We do wonder, though, how that wisdom is going to play out. The contradictions of the guarantor state are gathering. One dimension of the tension is starting to pound its way into a few conservative heads: Dwarves don’t guarantee giants. Or, to be less fancy pants about it, it is impossible for the private sector to extend its credit on the scale that would match the “ownership society” model without that risk being guaranteed by a third party – the state – of sufficient size to make the guarantor credible. And the size of the state is not a theoretic property – it will have to swallow some enormous failures. This lesson was brought home in the late eighties by the government takeover of S &L assets. It was a lesson that was surely not going to be lost on any man named “Bush”.

However, that contradiction barely breaks the surface. The conflict that is coming is predictable: just as we see with GM, just as we see in the gloating tones of the upper class flunky, Will, you cannot rely on the private sector to maintain welfare services. The reason for that is simple: the governing class in this country will, when the chips are down, rob the working class. In broad daylight. And the media will serve, not as a watchdog, but as an accomplice and jester for the occasion. You can’t afford everything. If we want to entertain ourselves with the lifestyles of the rich and famous at the current rate, we are going to have to start stripping out goods and services such as education and retirement and healthcare. And, even so, the rich and the famous depend on the great consumer class willingness to continue, year after year, with no net savings.

The competition to strip workers of their wealth retrospectively is just beginning. The movement to strip the upper management of its wealth retrospectively has not yet been started. It doesn’t have a party, it doesn’t have a leader, and it certainly doesn’t have a press. But it might just be the case that this robbery is a bit too much for the American people – our Deep Throat nation -- to swallow.

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