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Commentary: The Gilded Age

By Lee Cullum, KERA 90.1 Commentator

Dallas, TX –

It's well known now that some American CEO's believe they are entitled to $100 million or more in good times and bad. Home Depot CEO Bob Nardelli has made $115 million since 2000 though the company's share price has fallen by 12 percent. Exxon-Mobil's Lee Raymond made $51.1 million in 2005 alone and has been awarded a pension worth $98 million. Of course, his corporation is raking in oil profits, so the board apparently felt this is no more than he deserved. New Treasury Secretary designate Hank Paulson earned $38 million at Goldman Sachs last year, which is beginning to sound moderate. That only shows how off-the-track the system has become.

We have reached the point where the application of public policy is impossible to avoid. However, the situation is trickier than one might suppose. I heard someone say, in defense of a foundation for which he worked, that we need as many decision points in society as possible. Not everything should be settled by the state. It's tempting to tax away compensation like that I've just mentioned, but "with money," this person pointed out, "goes the power to make a fact of an opinion."

Certainly Bill Gates has done wonderful things for world health with his proceeds from Microsoft. Dallas has benefited mightily from the Meadows, McDermott and other foundations. Hank Paulson has put $100 million of his $700 million fortune into a foundation to support environmental education and plans to give more. These entities are supporting projects that would have been impossible for government to accomplish.

Nonetheless, there is a legislative question involved here. Executive compensation has been rising to astonishing levels for more than ten years. Board directors have no interest in curbing this excess because they expect the CEO on whom they are showering riches to do the same thing for them. They all serve on each other's boards and the order of the hour is you take care of me and I'll take care of you.

Disclosure is causing some shareholders to revolt and vote against the election of offending directors, but don't count on that to curb the shamelessness of the situation. What is needed is a tax code that makes it inescapable to divert a large percentage of excessive compensation to the public good. Such a policy exists today, in estate taxes, but it needs to be sharpened in a way that moves that money into the commonweal sooner. A corollary provision might structure taxes to encourage investment in new business.

Robber barons are not unusual in America. But our current Gilded Age is getting out of hand. What is needed now is a careful approach, mindful of the freedom of the market, that takes certain CEO's, who may have run their companies but did not create them as Bill Gates did his, and convert those CEO's into philanthropists.

Lee Cullum is a contributor to the Dallas Morning News and to KERA.

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