May 8, 2016 4:46 AM

Capitalism: A system in which workers are squeezed in order that CEOs may summer in the Hamptons

Marissa Mayer tells us a lot about why Americans are so angry, and why anti-establishment fury has become the biggest single force in American politics today. Mayer is CEO of Yahoo. Yahoo’s stock lost about a third of its value last year, as the company went from making $7.5 billion in 2014 to losing $4.4 billion in 2015. Yet Mayer raked in $36 million in compensation. Even if Yahoo’s board fires her, her contract stipulates she gets $54.9 million in severance. The severance package was disclosed in a regulatory filing last Friday with the Securities and Exchange Commission. In other words, Mayer can’t lose.

There aren’t many places in America where compensation isn’t tied to at least some small degree to performance. Bonuses are supposed to reward employees who go above and beyond by creating value and adding to a company’s bottom line. It’s about spreading the wealth, right?

Except that if you’re fortunate enough to be a CEO of a Fortune 500 company, you were no doubt smart and savvy enough to negotiate a contract that compensates you handsomely regardless of how the company performs under your leadership. Robert Reich is right; in today’s business environment, if you sit at the top of the corporate food chain, you’ll very likely be the beneficiary of what he calls “no-lose socialism.” Even if you fail spectacularly by presiding over a one-third drop in your company stock’s value, you can be sacrificed by the board of directors to satisfy dissatisfied shareholders…and still come away a big winner. That’s right, even if Yahoo loses big, Marissa Mayer still wins big.

Mayer may not be directly responsible for Yahoo’s precipitous dive, but it’s her hand on the tiller, which means that she’s the one who will be held to bear ultimate responsibility. Yahoo’s been in decline for years, having become something of an anachronism- a representative of the Internet of the early 2000s while struggling to stay relevant and above water in 2016. That doesn’t have to matter to Mayer, though. I have no doubt but that she wants to steer Yahoo back to relevance and profitability, but even if she doesn’t she’ll have a very soft landing when she’s forced to walk the plank.

And you wonder why the 99% is upset that the 1% continues to feed at the trough until they’re fat and happy…while everyone else is left to fight for scraps?

It’s another example of no-lose socialism for the rich - winning big regardless of what you do.

Why do Yahoo’s shareholders put up with it? Mostly because they don’t know about it.

Most of their shares are held by big pension funds, mutual funds, and insurance funds whose managers don’t want to rock the boat because they skim the cream regardless of what happens to Yahoo.

In other words, more no-lose socialism for the rich.

This is not how American workers live today. Today’s middle class lives with words like “downsizing,” “right-sizing,” “layoffs,” and “offshoring,” all of which are designed to reduce costs and increase shareholder value while giving a big middle-finger salute to the workers who’ve helped create that value.

In today’s hyper-competitive, compassion-is-for-losers-and-Liberals globalized business environment, workers have been reduced to “units of production” and “labor costs.” These considerations aren’t new, of course, and businesses certainly have a right to maximize their profits. Still, when people are responsible for putting a company in a position to be successful and profitable, it seems not at all unreasonable to think that those people should be rewarded. Very often, that’s no longer the case, with workers being squeezed for every drop of efficiency and profitability, only to be cast aside when management perceives their usefulness to have passed its expiration date.

I don’t want to pick on Ms. Mayer or the managers of the funds that invest in Yahoo. They’re typical of the no-lose system in which America’s corporate and financial elite now operate.

But the rest of America works in a different system.

Theirs is cutthroat hyper-capitalism - in which wages are shrinking, median household income continues to drop, workers are fired without warning, two-thirds are living paycheck to paycheck, and employees are being classified as “independent contractors” without any labor protections at all.

Why is there no-lose socialism for the rich and cutthroat hyper-capitalism for everyone else?

Why? Because the people making the rules are those who’ve been put in positions of power by the 1% and who have created a system designed to tilt the playing field in their benefactors’ direction. Those who stand to benefit the most are the ones who’ve purchased the politicians, lawyers, and bureaucrats necessary to ensure that the rules in place are ones which allow them to accrue as much wealth as quickly and easily as possible.

They’ve used their fortunes to purchase the loyalty of those whose employees surrogates have been able to convince the American Sheeple to consistently vote against their own best interests.

It’s not that “screw you” capitalism is the best and only successful model. There are those outliers who have shown, and continue to demonstrate, that ethical leadership and inclusive management doesn’t ipso facto sentence a company to mediocrity.

Hamdi Ulukaya, the CEO of Chobani, one of America’s foremost purveyors of Greek Yogurt, announced recently that Chobani will be giving employees a stake in the company.

[H]e’s giving all his 2,000 full-time workers shares of stock worth up to 10 percent of the privately held company’s value when it’s sold or goes public, based on each employee’s tenure and role at the company.

If the company ends up being valued at $3 billion, for example, the average employee payout could be $150,000. Some long-tenured employees will get more than $1 million.

Ulukaya’s announcement raised eyebrows all over corporate America. Many are viewing it an act of charity (Forbes Magazine calls it one of “the most selfless corporate acts of the year”).

In reality, Mr. Ulukaya’s decision is just good business. Employees who are partners become even more dedicated to increasing a company’s value.

The sad aspect of Ulukaya’s plan is that we live in a world in which his gesture is by default viewed as “selfless” and/or “charitable.” The truth is that it’s nothing of the sort. Ulukaya may well be a generous and kind-hearted soul, which is a very good thing. He’s also a businessman who understands that employees with skin in the game perform better and experience greater job satisfaction and sense of ownership. Increased employee performance in most cases translates to higher profits.

Some Chobani employees may very well become wealthy…as well they should. They’re the ones creating value. They’re the ones who’ve helped the company become successful and profitable. Why should such benefits be limited to shareholders and senior management? Ulukaya recognizes that his employees aren’t interchangeable parts to be used and then discarded when no longer of use. Chobani’s success is due to the hard work of its employees; recognizing and rewarding that contribution isn’t “charity” or “selflessness.” If anything, it’s a supremely selfish gesture by Ulukaya, a business decision based on the reality that employees who are partners feel important, work harder, and become more dedicated to increasing their company’s value.

Why this should be celebrated as such an unorthodox business move is difficult to comprehend…unless you believe that workers really are merely interchangeable parts, units of labor whose costs are to be squeezed for every ounce of efficiency and production. Then again, when you as a CEO know you can’t lose regardless of the results you generate, what incentive do you have to care about your employees?

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This page contains a single entry by Jack Cluth published on May 8, 2016 4:46 AM.

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