Make Equality, Not Ineffectual Noises at Shareholder Meetings

Robert Reich


If you agree with me that CEO pay is outrageous on social and ethical grounds, I don’t understand why you frown on using the tax system to redistribute some of it. How and what a society taxes has every bit to do with social norms about fairness. (When you say the tax system shouldn’t be a vehicle for “confiscating” money from people who have too much of it, you sound like Sean Hannity.)

If you believe shareholders can and will do a better job constraining CEO pay than a higher marginal tax would, you need to offer some evidence for this dubious proposition. The Sanders and Hambrick study, which you repeatedly mention, suggests quite the opposite. It says stock options haven’t been good for shareholders. Yet, as you know, stock options continue to multiply. You say you “have to believe” stockholders and boards will wise up eventually. I say: Get real. Shareholder democracy is a sham. If you doubt me, do your own mental experiment. You probably have savings tucked away in some pension or mutual fund. How often have you actually voted the shares of the stocks you own through such a fund?

You note that 35 CEOs of large corporations gave their investors a healthy return on their investments last year despite receiving an average of $10.8 million, a relatively paltry sum as CEO pay goes these days. I’m not sure whether this proves that CEOs can be as motivated for this modest amount as they can be for twice as much, or that returns to investors have less to do with CEO performance than with other variables. But it doesn’t prove that shareholders are wising up to anything.

Kudos to Evelyn Davis for persevering at the age of 78. Kudos to anyone for persevering at whatever their passion may be, by age 78. But anyone genuinely concerned about social injustice ought to persevere at something that counts. Income and wealth inequality in America is a huge and growing problem—worth our attention and effort. Yet we’ll never make any headway on it if we continue to attend to the wrong things. Shareholders want a high return on their investments. Period. And notwithstanding the recent perturbations on Wall Street, shareholders have been doing just fine.

I’m going to continue fighting for quixotic causes, Tim, but shareholder rights isn’t among them. A fairer tax system is.

I’ve enjoyed this exchange. Many thanks.