Sunday, February 11, 2007
Blame Greedy CEOs, Not Liberal Democrats, For Upcoming Tax Hikes
Conservative pundits—most notably Rush Limbaugh and Sean Hannity—warned before the November midterm elections that if Democrats regained control of Congress they would certainly raise taxes. Democrats are now firmly in control of Congress and conservative pundits were right. It’s only a matter of time before the tax debate begins in earnest.
Rush and Sean are already gearing up for the battle, rallying the troops on a regular basis. They should save their energy because this battle is already lost. Instead of wringing their hands they should start wringing the necks of their outrageously greedy CEO and corporate board friends who are the main reason why most Americans will support higher tax rates for highly compensated individuals.
There are plenty of greedy necks to wring, but Rush and Sean should probably start with the most recent poster boy for CEO greed, Bob Nardelli, the recently fired CEO of Home Depot.
You are probably familiar with Home Depot’s marketing slogan: “You can do it. We can help.” In Nardelli’s case, “it” must have been a personal project to rob the shareholders of Home Depot blind. He did it and Home Depot’s board of directors did indeed help.
They granted Nardelli a $210 million severance package despite job performance that was so lousy he needed to be fired. Add to that the $190 million in compensation Nardelli received from the board during his six years with the company and the end result is that $400 million that once belonged to the shareholders of Home Depot now belongs to Bob Nardelli.
Such outrageous greed is almost incomprehensible to the average American family, which somehow manages to get by on only $45,000 in compensation per year. It’s enough to provide for a comfortable life by most standards, including the ability to accumulate enough wealth to purchase one $200,000 house in thirty years and one $20,000 automobile every six years or so.
But contrast that with Nardelli’s purchasing power. Nardelli’s six year after-tax income from Home Depot was around $240 million. With that much money Nardelli could purchase 1,200 average American homes. If he wanted to spend it on transportation instead, he could buy 12,000 automobiles. That’s purchase. Free and clear. No mortgage and no car payments. The differential in purchasing power is both mind boggling and disgusting.
Nardelli is the CEO poster boy of the month, but he is far from unique. The most recent Forbes magazine report on CEO compensation concluded that CEOs of the largest 500 companies in America received an average annual paycheck of $10.9 million in 2005. And CEO looting of corporate coffers would not be possible without the thousands of similarly greedy corporate board members who serve on compensation committees that approve these outrageous CEO compensation packages.
Most Americans will support a tax increase on the wealthy not because they are against individuals making a lot of money. Quite the contrary. If CEOs were risking their own money and creating personal wealth because of their own individual skills, knowledge and effort it would be a different story. But they are not. CEOs are risking shareholder money and relying on the skills, knowledge and effort of thousands of employees to generate shareholder wealth. CEOs often contribute substantially to the success of the companies they run, but their level of contribution can’t possibly justify the disproportionate level of reward they receive. Americans are quick to applaud and reward individual financial success but not at the expense of fair play, teamwork and integrity.
Democrats shouldn’t assume that widespread support for a tax increase is vindication for their tax-and-spend tendencies. It isn’t. Most Americans are genetically predisposed to abhor taxes. The spirit of the Boston Tea Party is alive and well. But given the choice between government redistributing shareholder wealth or greedy CEOs redistributing it to their own wallets, most of us have concluded that government is the lesser of two evils.