Wednesday, March 24, 2004

Wachovia and the concentration of wealth

Title: Wachovia CEO gets $16M compensation in 2003
Source: Charlotte Business Journal
Date: March 15, 2004

From the article:
  • Wachovia Corp. Chief Executive Ken Thompson received $16.1 million in total compensation in 2003... $1 million salary, a $5.3 million bonus, options worth $6.4 million and $3.1 million in restricted stock. He also received $354,266 in other compensation.

  • Benjamin Jenkins, who runs the general bank, received $7.8 million in total compensation last year, including a $3.2 million bonus.

  • Donald McMullen, who runs the bank's capital management operations, received $6.1 million in total compensation.

  • Chief Financial Officer Robert Kelly, and Stephen Cummings and W. Barnes Hauptfuhrer, who run Wachovia's corporate and investment bank, each received $5.3 million in total compensation.
These six executives received $45.9 million in one year. That means that each household in America paid an average of about 50 cents to these six executives.

Keep in mind that the President of the United States -- the most powerful man in the world -- makes $400,000 per year.

You might be thinking, "50 cents -- oh well -- no big deal." What you have to keep in mind is that this happens in every big company. Wachovia is just one big bank out of a dozen big banks. There are all the car companies, soap companies, food companies, retail companies, airline companies, fast food companies, advertising companies, entertainment companies, etc, etc., and they are all concentrating wealth in the same way as fast as they can.

Wachovia is the 90th largest company in the U.S. Therefore, let's assume that in the 200 largest companies in America, there are six executives who are concentrating wealth at the same level as these six people at Wachovia. We are simply using Wachovia as an "average large company". In that case, there are 1,200 top people in the top 200 companies.

That tiny group of 1,200 people is taking home roughly $10 billion per year. There are approximately 100 million households in America. That means that your household pays $100 per year to fund the unbelievable salaries paid to these 1,200 people. You pay your $100 each year through inflated prices on the products that these 200 companies sell to you.

Now let's take it a step further. There are a lot more than 6 "top executives" in these 200 big companies. Let's say that there are 100 people in each one who get paid more than $1 million each. That adds an additional $20 billion to the amount paid, or $200 per household.

Now we can go a step further. There are a lot more than 200 companies in America. They are smaller than the top 200, but they are still very big. Let's say there are 2,000 "big" companies in America. Together they triple or quadruple the $300 figure we have come up with so far. So we are up to at least $1,000 per household. And we have not even started to talk about unlisted perks -- the jets, the limousines, the huge offices, the "executive secretaries", the art, etc. (This article on Enron shows just how ridiculous executive perks and expenses can get.) And so on.

The point is simple. If we would rationalize just this one aspect of the concentration of wealth -- irrational executive salaries -- prices would be significantly lower. Your household would have at least 1,000 extra dollars to spend every year on the things that you and your family need.

That is the direct effect that the concentration of wealth is having on you, personally, each day. You and your family needlessly pay at least $1,000 per year so that a very small group of people in America's biggest companies can become obscenely wealthy. That is how the concentration of wealth works.

It is time for each American to actively fight against the concentration of wealth and power in our democratic society.


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