Save Capitalism by Limiting Executive Pay: Kathy M. Kristoff

Wednesday, April 01, 2009
James Sinegal, Costco CEO

Limiting executives’ pay isn’t just good political fodder for liberals—it’s also a matter of survival for the stock market and capitalism, insists Los Angeles Times business columnist Kathy M. Kristoff. What Wall Street and its defenders need to realize, Kristoff argues, is that if executives don’t start reigning in their gluttony, rank-and-file investors are going to lose confidence and “start making demands.” She continues: “Instead of trusting executives to share the profits when we give them our capital, for example, investors will start demanding contractual interest.” In other words, people will stop investing in stocks and look to corporate bonds instead, which has already begun, Kristoff points out, citing financials that indicate investors pulled $22.3 billion out of equity funds over the past two weeks while investing $6.5 billion more in bond funds.

 
Instead of maintaining the disparity between executive and workers pay (currently 350-to-1), more business leaders should follow the example of James D. Sinegal, CEO of Costco, who earns a healthy salary of $350,000 and bonuses that sometimes reach $200,000. “Costco’s board says it thinks Sinegal is underpaid compared with his peers, but he has asked to stay that way,” writes Kristoff, adding, “He told the board that higher pay ‘wouldn’t change his motivation.’ Meanwhile, the company brags that it retains workers, not only in the executive suites but also in the warehouses, for decades.”
-Noel Brinkerhoff
 

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