The promotion is well underway. 2022 highlights and 2023 predictions are piling up.
Last year as Russian troops amassed on the border with the Ukraine the predictors were predicting that Ukraine would be quickly overwhelmed. The predictor with skin in the game, Vladimir Putin, had told the troops to bring along their parade uniforms for a victory celebration. And, to repeat, Putin was not predicting what somebody else would do, he was the Conductor. And, said to be savvy.
I used to be drawn to the year-end wrap-ups and minor prophets and then I noticed that their batting average was at baseball’s minor league level. So, I pulled back. But not all the way because the turning of the calendar, the anticipation of a new year, is simply too enticing. This year, however, rather than predict the short-term I am going to go long.
There are two facts that should give all lovers of self-rule heartburn. Yet neither will, I predict, make many year-end lists. Because when faced with economic complexity most are prone to entertain themselves.
Two sets of numbers are edging up on a chronic illness. Indeed, the one, our national debt and accompanying liabilities, are already there. So let me start with the other and then provide context for our profligacy.
In 1965 the aggregated Chief Executive Officer (CEO) to worker compensation ratio for the 350 largest publicly owned companies in the United States was 20.4 times. If a worker in 1965 dollars was making $30,000 per year the CEO, on average, was making $612,000.
By 1995 the ratio was 118.8 and in 2021, 398.8. So, if the average worker compensation had doubled from the 1965 baseline to $60,000, the average CEO compensation in 2021 was $23,928,000. Statista.com provides the numbers.
In a celebrity age, statistics are not needed to sense the enormous gap. A range of media tease our voyeuristic culture with stories of wealth, privilege and the consequences. The latest sensation is Harry and Meghan; Netflix has devoted six hours to their story of royal behavior and betrayal (as they tell it).
Culturally when sizing up superstars, colorful writers speak of Unicorns and GOATs. The former is a talent that is so special as to be other-worldly. GOAT takes an enormous leap of faith as it translates to Greatest-of-All-Time. In the real world of making and transporting and selling, real Unicorns are as rare as, well Unicorns.
Recalling my days on corporate boards, executive search specialists insisted that Mr. X was a superstar, that he was much sought after, that he would accelerate the growth of the company while opportunistically using disruptive technology rather than becoming a victim of it. And by then CEO candidates had agents; think athletes. It was a clubby world.
Undoubtedly there are a few who deserve out-sized combinations of salaries, bonuses, stock options and perks that far exceed the people who make and serve, but as a class CEOs are just about as error prone as you and me. On both practical and moral grounds corporate allocation of revenue to top management needs to be re-balanced.
If this enormous gap persists or grows, the “stars” and their enablers who have fueled this excess will, overtime, undermine the economic system that has contributed so much to all our economic well-being. Fables need to be replaced by common sense.
Now, back to the other corrosive number. It is almost incalculable. How many can get their minds around the nation’s debt of $30 trillion? Or the fact we are adding about $1 trillion to the debt annually just in increased interest payments—debt on debt?
More broadly, as reported by The Economist: “In America…… the federal government has assumed huge contingent liabilities. It guarantees an ever-larger quantity of people’s bank deposits; it forgives student loans; it offers a wide variety of implicit and explicit backstops to everything from airports to highways. We have previously estimated that Uncle Sam is on the hook for liabilities worth more than six times America’s GDP.”
While we struggle with the enormity of the amounts, we certainly understand debt. Virtually all who are reading this column have at one time or another purchased expensive things by borrowing money.
Is America a wealthy country? Yes. Can a wealthy country become unhealthy? Yes. Can liabilities projected into the future be more than our offspring can or should have to shoulder? Yes.
Most of us do not lead corporate compensation committees where CEO salaries are set. And, most disturbingly, most politicians (our representatives) simply shower us with expensive short-term expenditures with little thought about the future.
Can we do better? We must.
Al Sikes is the former Chair of the Federal Communications Commission under George H.W. Bush. Al writes on themes from his book, Culture Leads Leaders Follow published by Koehler Books.
Tom Knight says
Here’s a “shout-out” for Al Sikes whose cogent and insightful view into our incalcuable dilemma should make sense to us all. Neither Al nor anyone else has a solution to the morass that has been created but the failure of our leaders to put a pause to the budgetary spiral leads to fears of dystopia and chaos.
So, three cheers for Al being the Paul Revere of our economic nightmare. There’s no ocean that can save us from this one.
Tom Knight
Liz Fisher says
Just finished an interesting novel by Lionel Shriver called The Mandibles: A Family, 2029-2047. It follows one family’s story through near-future chaos in the U.S. caused in part by default on our debt. Engrossing and disturbing.
Al Sikes says
Thank you for recommending.