Page 17


In a recent speech to the business students at The University of Texas, I opened with Karl Marx’s famous remark, “Workers of the world unite. You have nothing to lose but your chains.” Then I added a corollary, to wit: “Stockholders of the world unite. You have nothing to lose but your money.” As I dictate this I’m looking at the Tuesday, March 14, 2006, edition of the Wall Street Journal. One of the headlines on the front page reads: “North Fork Executives to Receive $288 million for Capital One Deal.” Now, the stockholders probably did well on this exchange, but perhaps they also wisely concluded that the executives’ bonuses were ridiculously excessive. Keep in mind, investorsnot the executives are the risk takers. Putting that aside, to my mind capitalism is the greatest economic system ever devised because it comports with the greed instinct. At the same time, nothing really works unless we willingly accept limitations, whether they’re limitations in our behavior or in our acquisitiveness. We have a situation in our country where we don’t have money for education; we don’t even have money for a good health program. And as anyone who has experienced the battle with the new prescription drug program understands \(or rather efits of the program are confusing, to say the least. I don’t know whether all this confusion is deliberately orchestrated to avoid having to confront reality, but whether it is or not, the fact is that we really don’t know enough to get a hold of the problem. Take, for example, the headline that I mentioned above. The article continues, “The tax gross-up payments to Mr. Kanas alone could be as much as $111 million.” This seems egregious to me. Whatever the tax Too Much is Not Enough by BERNARD RAPOPORT situation may be, I would bet that, while the stockholders may have benefited, certainly they were entitled to more than they got. For the few executives on the receiving end, however, too much is not enough. As the article states: The most unusual part of the package, according to Robert Salwen, a New York based executive compensation attorney and consultant, is North Fork’s decision to put all the personal income taxes that the three men would owe on their change-in-control payments. Companies are increasingly paying and grossing-up the so-called golden parachute tax, a 20% federal excise tax levied on most change-incontrol payments that exceed three times the executive’s previous taxable average on annual compensation. But, Mr. Salwen said, rarely do companies “pay all the executive taxes, rather than just the 20% penalty tax … That’s a handsome payday” I remember so well my father’s admonition, which he recited to me virtually every morning: First, protect your name; second, read a book every day; and third, have a sense of outrage at injustice. When I think about all the poor people in our country, I do have a sense of outrage. Although we AD COURTESY OF THE BERNARD AND AUDRE RAPOPORT FOUNDATION 5400 Bosque Blvd., Suite 245 Bernard Rapoport Chairman of the Board were very poor when I was growing up, we really had a marvelous school system. By the time I finished grammar schooland this applies to most of the kids in my classwe were about as well-prepared as most youngsters are when they finish junior high school today. When we finished junior high school we were as prepared as high school students are today. Those were the days when a child came home and his mother would say, “How do you feel? What did you learn today? Do you have any homework?” In my case, right after supper the radio would be turned off until I finished my homework. What was emphasized was that there were limits to our behavior; we had responsibilities, especially to our schoolwork. Today, we’re not willing to accept limitations. If you want to know why we are in the mess we are in, it’s because we don’t have the leadership that is willing to say, “when too few have too much and too many have too little, there is something cancerous in the system. And that will cause death wherever it is entrenched.” Thirty years ago the CEO made 30 times the salary of the lowest-paid employee. Just think, today it can be 1,000 times greater. Yes, if an employee’s salary is $30,000 the CEO could receive a salary of $30 million! What I love the most about capitalism is the predicate that risk-taking is its foundation. The top executives of major companies, in most instances, are not risk takers. Whether a company prospers or not, there is certainty in their own financial arrangements. Investors are the risk takers. Max Weber told us a hundred years ago that capitalism won’t work when we are a herd of sheep. There are a couple of examples in this short essay that indicate that we are heading toward being a herd of sheep. 12 THE TEXAS OBSERVER APRIL 21, 2006