Does anyone really need two mansions in the Hamptons, Wall Street's favorite summertime watering hole? Lloyd Blankfein, the CEO at banking giant Goldman Sachs, has apparently decided he can get by with just one.
Blankfein recently sold his first Hamptons manse -- a seven-bedroom affair with a sunken tennis court that he bought in 1995 -- for $13 million. From now on, he'll have to make do with only his second Hamptons manse, a 7.5-acre spread that set him back $32 million in 2012.
A good many shareholders at Goldman Sachs would like to see billionaire Blankfein making do with less -- much less -- on another front as well. His paycheck.
At Goldman's May annual meeting, the bank's board of directors put up for a shareholder advisory vote an executive pay plan that cut Blankfein's annual compensation by $1 million, down to $23 million. Over a third of Goldman's shareholders voted their disapproval. They wanted to see a bigger cut.
Poor Blankfein may feel he's getting picked on. He shouldn't. He has company. We're now witnessing growing worldwide shareholder angst over executive pay excess. The day before the Goldman Sachs "say on pay" vote, a shareholder majority gave an executive pay plan at Germany's Deutsche Bank a similar advisory thumbs down. Over in France, government officials upset about companies ignoring shareholder votes against excessive executive pay are threatening to enact legislation that makes advisory shareholder votes binding. In the UK, notes one reporter, shareholders outraged by executive pay excess are "singing a song of angry men," voting down pay packages at a record rate.
And in the UK, unlike most other nations, shareholder pay votes actually do matter -- at least on paper. Shareholders have had the power to take binding votes on executive pay in Britain since 2013.
But that shareholder power hasn't turned out to make all that much of a difference. Overall executive pay in the UK has continued to rise, even as worker pay and shareholder returns have sunk and stagnated.
And that raises a larger question: Why are we relying on shareholders to fix executive pay?
We certainly don't expect shareholders to rescue us, as my Institute for Policy Studies colleague Sarah Anderson points out, when corporations misbehave in other areas. We demand tough government regulations -- or file lawsuits -- when corporations pollute our environment or discriminate in their employment practices.
So why don't we do the same on executive pay? The corporate flacks have a reason: Executive pay levels, they insist, have always been an internal matter. The public should keep its hands off.
But the executive pay decisions made inside corporate boardrooms have an enormous impact in the outside world. Outrageous pay gives top executives an incentive to behave outrageously. To hit the pay jackpot, they'll do most anything. They'll outsource and downsize and make all sorts of reckless decisions that pump up the short-term corporate bottom line at the expense of long-term prosperity and stability.
We can't rely on shareholders to call a halt to all this. Few shareholders, after all, have any long-term commitment to the corporations whose shares they hold -- or to the communities where these corporations do business.
Only the public can protect the public interest, and this public interest -- in matters of corporate executive compensation -- demands that we start setting limits on top executive pay. And we actually appear, as a nation, to be moving in that direction.Last summer, after five years of corporate resistance, the federal agency with watchdog responsibility over Wall Street finally promulgated new regulations that require corporations to annually disclose the ratio between the pay of their top execs and most typical workers.
The first of these disclosures will start appearing early in 2018. We'll know then, for the first time ever, exactly which companies are contributing the most to our rising inequality.
These disclosures just may open the door to all sorts of innovative new reforms. We could, for instance, deny lucrative government contracts to companies that pay their CEOs more than 25 or 50 times what they pay their workers.
Back in the middle of the 20th century, only a handful of major U.S. corporations paid their power suits more than 25 times than what their average employees received. Last year, CEOs in the United States averaged 335 times what their workers earned.
Shareholders can't change that. The rest of us can.