Jonathan Tasini is the executive director of the Labor Research Association and the former president of the National Writers Union. He was the lead plaintiff in Tasini vs. The New York Times, the landmark electronic rights case that took on the corporate media’s assault on the rights of freelance authors. In 2006 he ran against Hillary Clinton for the Democratic nomination for the United States Senate in New York and recently launched another campaign to become New York’s junior senator. Mr. Tasini’s has written about labor and economics for a variety of publications including The New York Times Magazine, The Washington Post, Los Angeles Times, and The Wall Street Journal, and has appeared on CNBC and Fox News. Additional information on The Audacity of Greed can be found here.

The Public Record’s Zach Roberts recently conducted an on-camera interview with Mr. Tasini, which can be seen here.

Highway Robbery

The United States of America has just lived through the greatest looting of money in its history, a vast robbery that began in the late 1970s and has stretched to the present day. The perpetrators of this grand robbery didn’t just steal a few possessions, or a little bit of cash. Instead, they drained the economy of trillions of dollars, in the process skulking off with a vast fortune that defied imagination while leaving millions of people without jobs, in poverty or without their life savings.

It wasn’t a Willie Sutton kind of robbery, with guns drawn and a slip of paper passed to a bank teller. Sutton, you may recall, was a notorious bank robber who lives on in the public imagination because of a one-sentence answer he gave to explain his particular strategy of making money. When asked why he robbed banks, he supposedly replied (“supposedly” because he later denied ever ut- tering this memorable phrase), “Because that’s where the money is.” Since Willie was usually well-armed when he committed his crimes, his actions fit well with the classic definition of a robbery, which Merriam-Webster’s Dictionary tells us is “larceny from the person or presence of another by violence or threat.”

No, the robbery I am speaking about was pulled off without a single bullet being fired, and was, for the most part, perfectly legal (though many of the perpetrators actions spilled over into illegality). It was actually more like highway robbery, which Merriam-Webster’s defines as “excessive profit or advantage derived from a busi- ness transaction.” You have probably heard of some of the people involved in this highway robbery—Bernard Ebbers, John Rigas, Dennis Kozlowski, Edward Whitacre, Douglas Conant, John Thain, Jeffrey Kindler and David Farr, to name but a few. What do these people all have in common? They are, or were, corporate CEOs.

Over the past few decades, a small group of corporate executives, running mostly American-based companies, have carted off hundreds of billions of dollars—and stand to earn even more riches thanks to incredible pensions. With few exceptions, none of this cadre of executive officers used violence or physical threats (certainly not explicit, documented physical threats) to pull off a systematic looting scheme that is staggering in its scale and breadth across our economy. Instead, with the support of a vast array of accomplices— including academics, media talking heads and politicians across the ideological spectrum, who together helped create the myth of the great CEO, who, as the rap went, had to be paid vast amounts of money because he created so much value for both his company and the economy—pulled off the largest confidence scheme in this country’s history.

This great robbery was ideologically enabled by a three decades long flogging of a worldview that we now know is entirely bankrupt: that our society’s well-being is governed by the “free market.” The constant rhetorical praise, in newspapers, on TV and by politicians of both parties, of free market ideology—or market fundamentalism—allowed for public acceptance of the robbery, as people were told that the great riches of the CEO were part of the American system of free enterprise, and if they worked hard and played by the rules, they too would one day become wealthy. Ultimately, the free market myth went, we are all part of the big picture of endless American prosperity.

Instead of being based on any kind of sound economic theory, the “free market” was in reality nothing more than a marketing phrase, used to cover up the relentless plundering of our country’s prosperity, which was in turn funneled into a small number of hands, creating the deepest divide between rich and poor in more than a century. Look at the numbers; in 2005, the average Chief Executive Officer in the U.S. was paid 821 times as much as a minimum wage earner. Or to put another way—the average CEO earned more be- fore lunchtime on his very first day of work than a minimum wage worker earned during the entire year. And, in a further sign of how audacious the greed of these corporate elites was, at the same time that CEOs were jetting off in their G-5 corporate jets and plunking down $20 million for lavish New York City apartments, workers at their companies were being asked to sacrifice—either by taking a hit in their paychecks, or by being forced to pick up more of their health care costs (or maybe even losing health care all together), all the while looking down the road at the bleak prospects of spending their retirement years without a real pension.

While, on occasion—especially when the excesses or criminal activities of one of the CEOs would be splashed across the headlines—for the most part, the totality of the amount of money these corporate elites took was, until recently, not well understood, nor was the great damage their robbery did to individual companies, the economy as a whole and, most importantly, individual workers. This book tries to capture the overall scale of the robbery, to look at how it was was undertaken and justified, as well as to explain how we can make sure it stops.

Greed is Good…For A Few

I actually began thinking about writing this book before the crash and burn of the financial industry in September 2008, when the world finally discovered that the poster boys for the new Gilded Age, a group of modern day Robber Barons who had pocketed large fortunes, puffing up their egos and their bank accounts largely by piling up huge mountains of debt for their companies, were really little boys with matches who ignited a global economic crisis, obliterating trillions of dollars in wealth in a matter of months.

Let’s be clear: greed is the precise reason that millions of people are suffering now and will suffer for years to come. If the CEOs knew one thing, it was how to do their math: the more their company’s stock went up or the more cash they could hoard to increase profits, the more their personal fortunes would skyrocket, either because of rich stock options or the personal stakes they held in their companies. Because of greed, many CEOs abandoned basic, sound business practices, building a mountain of debt on pure speculation and inflation of assets. Yes, some wound up losing money, and a few lost great fortunes because of their schemes. But mostly the sky fell in for ordinary people, as millions of jobs were vaporized, with millions more likely to disappear over the next few years; retirement funds, cobbled together over years by people who put off immediate gratification so they could kick back in their golden years, shriveled up.

Like a lot of Americans, I knew the individual stories—the $6,000 shower curtain purchased by Tyco CEO Dennis Kozlowski, the $70 million bonus check for Goldman Sachs’ Lloyd Blankfein, the crimes committed by Ken Lay and his cohorts at Enron. But, it wasn’t until a Sunday morning in early April 2008 that the enormity of the robbery was really driven home to me. On that day, the business section of The New York Times published its annual report on executive pay.1 There, spread across two full pages, were the sala- ries, benefits and accumulated wealth of 200 chief executives of large public companies that had filed their proxy statements by the end of the previous month.

As I went down the list, my finger kept stopping at an entry here, an entry there. Total value of equity holdings read one column…$137 million, $122 million, $42 million. The CEO of Occi- dental Petroluem, Ray Irani, had pulled in $33.6 million in salary and bonuses in 2007 while also adding millions more to his stock option fortune to bring his total equity holdings in the company to $676 million. John Finnegan, the CEO of Chubb, had pocketed almost $13 million in compensation and boosted his total equity holdings to $42.6 million; his competitor at MetLife, C. Robert Henrickson, had taken home even more in compensation, $14.2 million, with equity holdings of $25 million, all on top of a lump sum retirement pension of $23.3 million (up to that point).

While, at the end of 2007, 46 million Americans had no health care, millions more had inadequate coverage and everyone was paying higher prices for their prescription drugs, pharmaceutical companies such as Merck was paying its CEO Richard Clark $14.4 million; Wyeth was paying its CEO Robert Essner $20 million and Pfizer was giving $12.6 million to its chief executive, Jeffrey Kindler. Pfizer, like their competitors, also made sure that Kindler never sat in his executive suite worrying about his post-employment days, as he had $16.7 million in stock socked away.

By the time I had gotten through scanning the numbers, one thing was apparent—we were talking about a massive fortune that had been collected by a very small number of people. In 2007 alone, the pay and bonuses for those 200 CEOs totaled more than $2.3 billion. In addition, these folks had pocketed lump sum pension benefits totaling almost $1.6 billion and another $1.4 billion in deferred compensation (the pay that they would get after leaving the company, an arrangement that taxpayers are responsible for because there are tax advantages to deferring the compensation). Those 200 CEOs also rang up $1.3 billion in stock option gains and another $646 million in stock award gains. Add all those numbers up and you get a figure of over $4.2 billion in overall wealth. And their pay was just a miniscule portion of the wealth of these CEOs, as at the end of 2007, they held stock valued at $1.4 trillion.

While the 2008 global financial crisis eroded some of that value, tightening the belt in the elite crowd meant foregoing the fourth or fifth mansion, or perhaps hesitating on whether to plunk down mil- lions for a new Matisse or Picasso or waiting one more year to up- grade to a fully-loaded 757 Boeing jet. They were certainly not worrying about making their car payments or paying for health care.

Compared to the guys running the show in the hedge fund and private equity world, however, those 200 CEOs were practically paupers. According to Institutional Investors Alpha’s annual ranking of the top hedge fund earners, John Paulson, the president of Paulson and Co., ranked number one among his competitors, picking up a cool $3.7 billion in 2007 by betting against a segment of the mortgage industry—meaning that Paulson made a fortune hoping that the housing bubble would burst and millions of people would face foreclosure.2 To him, though, making money is all about sport and competition, and has nothing to do with human lives: “It’s like Wimbledon,” Paulson said. “When you win one year you don’t quit, you want to win again.”3

Some of the other large hedge fund earners in 2007 included George Soros, who earned $2.9 billion (which averages out to more than $100,000 per hour) partly by betting against other na- tion’s currencies.4 It was the same strategy Soros had employed back in the early 1990s, when he made as much as $2 billion speculating against the British pound, giving him the title of “the man who broke the Bank of England.”5 James H. Simons, who runs the hedge fund Renaissance Technologies, made $2.8 billion, while Philip Falcone earned $1.7 billion betting against the mortgage markets, thus making a ton of money hoping that people would lose their homes (though not Falcone personally, as part of his haul paid for the $49 million price tag on a twenty-seven room mansion, decked out with a theater and indoor pool, that he bought from former Penthouse publisher Bob Guccione). And while Kenneth Griffin, President and CEO of Citadel Investment Group, may not have gotten the largest individual paycheck, with an overall net worth of about $3 billion, he sat comfortably in the 117th slot on the list of richest Americans, was married in the garden at Versailles and was able to pay $60 mil- lion in 1999 for Cezanne’s “Curtain, Jug and Fruit Bowl.”

Even more illuminating than the names and numbers on the Institutional Investors Alpha list was how much the wealth of the top hedge fund managers had exploded in just seven years. When the magazine first started its hedge fund rankings in 2002, you needed to make at least $30 million in a given year to be ranked in the top 25. By 2008, however, you would be considered unworthy at that figure, as the privilege of making the top 25 now required you to make at least $360 million. Overall, the top 25 on the 2008 list earned an average of $892 million, an increase of $360 million from the average in 2006.

This greed was also contagious, creating distortions and inefficiencies throughout other industries, including universities, museums, not-for-profit hospitals and foundations. In 2006, the median salary for chief executives at 52 charities that were surveyed by the Chronicle of Philanthropy was $288,588, a 7.6 percent increase from 2005. During the same time period, the median base salary of chief executives at large, for profit companies went up just 0.1 percent, meaning that nonprofit executives achieved larger gains in pay as a percentage than executives in the business world.6

Among those in the non-profit sector who got in the greed game were Philippe de Montebello, director of the Metropolitan Museum of Art, in New York, who had the highest reported compensation among nonprofit executives at $4,557,342, and Lloyd H. Dean, president of Catholic Healthcare West, who came in second with a compensation of $4,001,892. (Dean’s total included a bonus payment of $2,738,656). Third on the list was William R. Brody, president of the Johns Hopkins University, who earned $1,492,220, which included a deferred-compensation benefit of $920,438 that had been accrued in previous years. The top five was rounded out by James J. Mongan, chief executive of Partners HealthCare System, who earned $1,341,650, and Peter Traber, chief executive of Baylor College of Medicine whose take home pay was $1,271,246 in 2006.