Matthew Yglesias floated a claim today about the nature of the modern economy that I have seen pop up from time to time:
That’s not just to make the banal point that someone like a Jeffrey Immelt does in fact do work, it’s to highlight the point that the concept of a class struggle between workers and capitalists was at the time it was created grounded in a specific contrast between workers and owners. Today relatively few companies are managed by their owners. What’s more, the kind of rich people least likely to prompt public resentment are the Mark Zuckerbergs and Bill Gateses — the entrepreneurial capitalists who did primarily make their money through equity stakes in the firms they founded. But your average workaday fat cat CEO is, in a way, just a very well-compensated wage slave.
This way of describing things bothers me. Sure, technically speaking CEOs are paid in salaries. They do not own the enterprises that they control: shareholders own them, and those shareholders exert their ownership through a board of directors. So, the classical Marxist picture that identifies profit as the focal point of exploitation does not strictly apply to CEOs. Under that picture, shareholders are the modern capitalist exploiters because profit is paid out to them, not CEOs.
But anyone remotely serious can see through the formalism of these arrangements. The reality is that CEOs are the de facto owners of corporate enterprises. Corporate governance in the United States is a complete joke. Executives hand-pick board members who subsequently give them enormous raises that are totally unrelated to performance. In the last few years, this phenomenon has been completely transparent. Firm after firm after firm that almost completely went under paid CEOs huge salaries and bonuses that were obviously unconnected to the firm’s success.
PBS put out a fact sheet a few years ago about some of the CEO excesses in the United States. CEO pay has exploded over the past four decades, and is far higher than CEO pay in other countries like Germany, UK, and Japan. The reality is that CEOs in the United States have basically captured jobs that give them the power to pay themselves whatever they would like totally out of proportion with their performance or marginal productivity.
To call them highly-paid wage slaves is really just silly. CEOs occupy a position in the modern economy that is no different than the villains of the old-school Marxist critiques of capitalism. Their positions allow them to dictate rules to subordinate workers, manage the means of production, and capture economic rents that are totally unrelated to the work that they do. It is the capturing of economic rents — tagged “surplus value” by Marx — that really pisses off the anti-capitalists. Financiers and owners are the traditional recipients of these economic rents, and they certainly still receive them. But these days CEOs capture them too, even if they do not technically own the factories anymore.