IT'S ABOUT TIME – AT 9:56 A.M. ET:  You've all heard the term, "crony capitalism."  It's used more by conservatives than liberals.  It refers to the corruption of the free enterprise system when crony capitalists milk the system entirely for their own benefit, without too much regard for a company's employees or shareholders, especially the smaller shareholders.  It also refers to the casual dealmaking that allows boards of "directors" to vote vast compensation to executives, the better to increase their own arguments for higher pay at their own companies.  And it also refers to these "capitalists" rushing to Washington for their share of corporate welfare.

I'm happy to say that people on our side have often been quick to point out these corruptions, but they go on.  Average CEO compensation has just topped ten million dollars a year.  Some shrug that this is just the market at work.  No, it's a distortion of the market, and of common decency.  It's the same distortion that occurs when a baseball player is paid the equivalent of a teacher's salary for a year every time he comes to bat.  There are limits to our cheering.

Now, there appears to be a backlash building among shareholder groups.  It's long overdue.  (We hope the next backlash will be directed against our corrupt, inefficient, and fat universities.)  From the conservative Washington Times: 

The combined salaries of Chipotle’s co-CEOs could pay for an order of 7.5 million burritos.
The almost $50 million executive pay package proved to be something shareholders couldn’t swallow. Nearly 77 percent of shareholders at Chipotle Mexican Grill Inc.’s annual meeting voted against the compensation package.

While President Obama and congressional Democrats hope to make an issue of the minimum wage this midterm election season, the hottest topic at this spring’s slew of corporate annual meetings has been rising unhappiness with the maximum wages for many of America’s best-known executives.
Challenges, some successful and some not, were raised to pay packages for top executives at companies such as JPMorgan Chase & Co., McDonald’s Corp., Target Corp. and Abercrombie & Fitch.

Coca-Cola Co.’s board of directors, including investor Warren Buffett, faced heat from some of the company’s biggest shareholders for approving a compensation package that will award stock to senior managers over the next four years. During the shareholders meeting for McDonald’s, union activists wanting the company to raise the pay of entry-level workers protested at its headquarters chanting, “No Big Macs, no fries, make our wage supersize.”

Chipotle officials say they will take “seriously” such a strong expression of shareholder unhappiness with the pay at the Denver-based chain, even though the vote was only advisory. Among those criticizing the company’s compensation structure were the California State Teachers Retirement System, CalPERS, the New York City Pension Funds and the Florida State Board of Administration.

COMMENT:  There is a great deal of agitation on the left about "income inequality."   Very frankly, the agitation is justified.  The ratio between the highest- and lowest-paid employees of American corporations has reached obscene levels, matched nowhere else in the civilized world.  This is no longer free enterprise.  This is a racket, although legal. 

The problem with the "income inequality" people is that, while their complaint is just, their solutions are usually reckless.  It's time for thoughtful proponents of free enterprise to clean their houses.  Otherwise, they risk the kind of "peasant's revolt" we saw in Europe last week.  And they risk the rise of socialism. 

There was a time when executive compensation was far more reasonable than it is today.  Companies did just fine.  The warnings are out there.  But the question is whether the corporate pigs will listen.

May 28, 2014