With the eurozone up against the ropes, all signs are that the U.S. economy and economic model reign supreme. Sure, the United States has its problems too, including a severe bout of long-term unemployment. But everything is relative, after all. Stephan Richter explains why, viewed on a global scale, the failings of the U.S. model are actually bigger.
Remember all the talk — much amplified by the mainstream media — that CEO talent is so rarified that its price can only be measured in double-digit millions per annum? That audacious proposition, trumpeted confidently from media towers in New York City and London, used to be a core tenet of the U.S.-UK consensus on the global economy.
The evidence, meanwhile, is undeniable that plenty of that presumably extraordinary talent is imbued with many shortcomings. CEOs aren't so superhuman after all. From launching failed corporate strategies, egregious errors of proper oversight, gross infidelities with staff, pumping up resumes in the style of blustery 19-year olds (who really do not yet know better), the C-suite increasingly seems like a comedy of human failings.
To be sure, CEOs are put under great pressure. But these are tough times for most people working in large corporations. The difference is that certain "talent" has been indoctrinated since the days of business school that they are something special — and, unlike the rest of the corporate workforce, certainly deserve something very special: namely, exorbitant compensation.
But on this front, the U.S.-UK alliance is finally cracking. Just as is the case in the field of banking, the "old country" is no longer prepared to toe the American line either on the uniqueness of the financial sector or the extraordinariness of executive talent.
A long time in the making, there is finally solid pressure on restricting top executive pay in London. That is long overdue, all the more so as the political cultures of both countries, Britain and the United States, traditionally pride themselves of being such exemplary democracies.
Wherever their special democratic character can be found, it certainly is not in the corporate world. U.S. CEOs often reign supreme in a near-autocratic manner, imbued with multiple titles — from Chairman to Chief Executive to President — and all-encompassing powers. No separation of powers here whatsoever.
How about annual shareholder meetings? You must be kidding. They are about as significant as rubber-stamp sessions in Soviet-style parliaments. Often lasting less than an hour, they are merely a perfunctory exercise so that the corporate secretary can tick off a box. "Annual meeting?" Done. Check.
Any real debate at shareholder meetings about items that are essential to the future vitality of capitalism in democratic societies are, as much as possible, prevented. A vote about levels of executive pay? Motion denied. Not debated here.
The prevailing mindset is this: "You, Mr. or Mrs. Shareholder, give us your capital and we then set our pay. You ought to be grateful that I serve thee as chief executive. It's your privilege, not mine." And they call that "shareholder capitalism?" SHT — or Shareholder Hostage Taking — would be more appropriate.
It's no better when one looks at the role of boards of directors. Ever since the days of Enron, it's been clear that these are important bodies that can — and should — prevent bad things from happening. But in the United States and Britain, they are still largely "friends and family" affairs, meaning they are packed with like-minded cronies, if not in fact the CEO's own friends.
The German model
The biggest battle over capitalism in the age of global democracy, quite irrespective of all the Occupy Movements, isn't even over preventing disasters like the meltdown of Enron. Rather, it concerns a proper weighting of the competing interests at stake between corporations and society at large.
If corporations largely act in a vacuum, if there is no real control over them from society's perspective, then things can become truly unhinged — such as in the case of exorbitant executive pay.
Read most news reports about U.S. corporations in the newspapers and you will find that it's almost always about reducing staff size, reorganizing the corporate structure and the like. Optimizing corporate strategy for the future, working with employees to make the most of existing or future business opportunities? Such things happen all too rarely in the largely top-down American corporate model.
With the media largely complicit (dependent as they are on corporate advertising dollars), corporations see any advances from society on issues such as executive pay and corporate strategy as untoward attempts to soil the heavenly domains of The Corporation.
Yet, the results are clear enough. The U.S. model of corporations, put in a global context, is better only in what it delivers to the insiders at the very top of the corporate hierarchy. For them, the corporate till is for the looting, provided the board has approved it.
Compare that, for example, to large German corporations. Historically, Germany hasn't been known as a bastion of democracy. And yet today it is — and nowhere more so than in its boardrooms. You are reading this right. In Germany, these august bodies are half filled with representatives of the workforce.
Little wonder then that they cast a much closer eye on corporate pay. In fact, the mere presence of company workers and unions representatives in the boardroom does much to prevent the more egregious, self-serving propositions from ever seeing the light of day which top executives, left to their own devices, might come up with. Whatever the "it" is, they realize it would never pass even the most basic smell test with the unions.
Nor does oversight in Europe end at the boardroom. Moves to reign in the C-suite are taking on steam in the European Parliament, which has increasingly become a reform engine for a more accountable capitalism globally. Just this month, the EU's top financial services regulator, Michel Barnier, launched initiatives to curb "morally indefensible" pay and to reduce the disparity between executive and ordinary work pay in Europe's financial institutions.
The United States has not yet caught up with (or caught on to) these efforts. The very self-absorbed and self-referential debate (or, worse, the lack of any true debate) that has become the hallmark of U.S. corporations has done much the weaken the case for capitalism in democratic societies.
If the practice of corporate power constantly exhibits core traits of the feudalist era, as it does in the U.S. case, rather than pursuing a more open, democratic and enlightened model, then it goes to show that the rot currently afflicting many developed economies has a lot to do with other nations still following, even aping, many elements of the autocratic U.S. model.
The relevance of society at large in that model is about as significant as the role of finance was, at least until recently, in the made-in-America macroeconomic models — that is, not at all. Both excel by their absence.
In short, it is high time to push the U.S. corporate model from the pedestal on which it still stands. To a large degree, its elevated status is no longer a function of actual performance and what it delivers in a larger societal context, but just a result of the benefits it offers to the insiders at the top of the corporate pyramid.