Populist Democracy Declares War On CEOs
“Off with their heads!” bellowed the Red Queen.
Maybe not yet. But who can honestly pretend to be shocked if one day soon real blood gets spilled? Populist anger, egged on by rabid media, is shaking the rule of law. Does it frighten you to see elected officials outdoing each other to stay one step ahead of the mob, not content with passing punitive laws that mock the Constitution but going so far as to call for the mass suicide of corporate executives?
And who is the poster child populist sentiment has tagged as the root of all economic evil? The Chief Executive Officer.
Belligerent unions are making it a practice to take CEOs hostage in France as police stand idly by. Tour bus operators are taking gawking populists past the homes of executives in Connecticut so they can hoot and take pictures. When and how this behavior progresses from hurling invective to lobbing bricks, as has already happened in England, depends on whether our civic leaders insist on throwing gasoline on the fire. What will it take, a Corporate Crystalnacht, to wake them up to the danger they’re fomenting?
A little over 100 years ago William Jennings Bryan, in his famous “Cross of Gold” speech, asked his party whether it would come down “upon the side of the idle holders of idle capital, or upon the side of the struggling masses.” In the intervening century those masses have seen their standard of living rise faster than in any other period in human history. They owe most of this to the modern corporation, fueled by the capital Bryan condemned. And who was at the helm of every one of these corporations? A CEO.
If you think the world would be a better place if CEOs resigned their jobs, donned hair shirts, retired to the monastery, and turned executive responsibility over to a government agency acting on behalf of all the “stakeholders,” you are either delusional or a member of Congress. But I repeat myself.
Like 99 percent of my fellow man, I have neither the skills nor the talent to be a CEO. But I do hire and fire CEOs for a living, setting their goals and compensation plans, serving as coach or confidante, and watching carefully because my personal economic well being rides on their performance. While all of this occurs on a small scale compared to behemoths like General Motors and AIG, the underlying principles are the same.
Is it such an impenetrable mystery that good corporate governance and goal aligned compensation plans are critical to getting talented CEOs to build and grow thriving companies? If they succeed they generate wealth for themselves, their shareholders, and society while providing gainful employment for citizens that don’t have the gumption to start their own businesses. When CEOs fail they get replaced. If too many fail in a row the company folds, employees move on to other companies that can make better use of their skills, shareholders take a bath, and any remaining resources get distributed to creditors. Real CEOs work without a safety net. This is capitalism as it should be, and still is, for the vast majority of CEOs you’ll never see paraded before kangaroo hearings in Washington.
It takes bad corporate governance and misaligned compensation plans to create disasters like General Motors and AIG. The punishment for disasters like these should be corporate death, as meted out by the market and adjudicated by a bankruptcy court following pre-established rules of dissolution. This is capitalism as it should be but apparently is no more in our country.
Declaring companies “too big to fail,” justifying unconstitutional intervention with vague mumblings about systemic risk, bailing out the chronically dysfunctional with unending rivers of taxpayer money then feigning surprise when that money gets misused, parading chastened executives in front of the media for the entertainment of the mob, and launching an indiscriminate culture war against all highly compensated CEOs is not an example of Washington rescuing capitalism from its failures. It’s an example of Washington propping up and exploiting failures in order to create ever wider dependence on its quixotic largess. Disguising their lust for power with pure demagoguery, our political leaders have so panicked a confused citizenry that many are ready to grab torches and pitchforks in search of demons.
If we don’t put the brakes on this nightmare, we may wake to find that we’ve killed the goose that laid the golden egg. Is that what it’s going to take to get populists to realize that it’s impossible to share wealth that has not yet been created?