Two recent reports about upper-class salaries and bonuses illustrate the sharper stratification between economic classes in our country — between those who produce and those who manipulate.
The top five General Motors executives each received over one million dollars in salary and bonuses for the year 1985. These astronomical payments come at a time when these bosses are telling both the blue collar and white collar workers that their wages and salaries need to stay the same or be reduced to meet the foreign car competition. Omitted is the fact that the number five executive on the GM ladder gets paid more than four times what the chief executive of Nissan or Toyota receives.
What did these five GM executives do to deserve such money? They made profits for the corporation, to be sure, but at the expense of a sales strategy that may well plague GM shortly. GM’s leader, Roger Smith, has opted for selling fewer cars at higher prices. This pricing tactic is made possible by the Japanese auto import quota, which has required the Japanese car companies to raise their prices and push for importing larger cars.
After the dollar fell against the Japanese yen, thereby making U.S. car prices more attractive as compared to the vehicles from Japan, GM announced an increase in its car prices for the 1987 model year. This action prompted widespread criticism in the usually meek business press.
What is more deplorable is GM’s continued opposition to updated crash protection standards, its demand, accepted by Reagan, to weaken the bumper protection standard, resulting in higher insurance premiums, its indifference toward toxic exposures of its worker, in the factories, its demand, again accepted by Reagan, to reduce the fuel efficiency standard for its cars and its pressure to weaken pollution control requirements.
On top of all these malperformances is the relentless poor quality of many GM cars, starting with their Cadillac vehicles. But, the executive pay goes up and up shamelessly.
The second news item reported that the large New York law firm, Cravath, Swaine & Moore, is raising its base pay for law school graduates by $12,000, to the level of $65,000 a year. Still wet behind the ears, and green as can be, these so-called top graduates will be making, before bonuses, more than four times the average wage in this country.
For these dollars, they learn how to merge companies that shouldn’t be merged, and how to do the paperwork for corporate transactions that eventually bore them into an ever-more lucrative career rut.
Cravath observed that the salary hike, expected to be followed by other large New York firms, was necessary, because the investment banking companies, such as First Boston Company, were paying even more to lure these graduates.
The way investment banking’s go-go dealmakers are operating these days, mergers and acquisitions become desirable because of the huge fees garnered by the investment banking dealmakers and not because the mergers are good for the economy or even the companies’ employees and customers.
These law firms and investment banking companies are working to further concentrate corporate power in fewer hands. Many analysts believe this will weaken the economy, together with huge debt-replacing equity (e.g. junk bonds) resulting in deals fraught with future peril for the corporations involved.
At a recruitment meeting with college seniors, one investment banker candidly told the young eager beavers that investment banking was not very important on the scale of more important productive professions and occupations in the economy.
For such parasitic services, they are paid incredible sums. Meanwhile, the farmer, miner, steelworker, small shop owner, migrant worker, and salesperson trudge to work every day, producing the wealth for these fat cats to feed from.