In the boardrooms of corporate America, profits aren’t everything – they are the only thing. A JPMorgan research report concludes that the current corporate profit recovery is more dependent on falling unit-labor costs than during any previous expansion. At some level, corporate executives are aware that they are lowering workers’ living standards, but their decisions are neither coordinated nor intentionally harmful. Call it the “paradox of profitability.” Executives are acting in their own and their shareholders’ best interest: maximizing profit margins in the face of weak demand by extensive layoffs and pay cuts. But what has been good for every company’s income statement has been a disaster for working families and their communities.
..and the economy as a whole. What these companies, CEOs and corporate boards fail to realize is that by focusing on short-term goals, they are shooting themselves in the foot, cutting off their legs at the knees and congratulating themselves on loosing excess weight.
True recovery will only take place when businesses invest in their workers. Lower executive pay, golden parachutes and stock options in order to raise every employee’s base pay. This puts money into the hands of people who will spend it, putting it back into circulation and revving up the economy. The current method of making a few people multi millionaires will – as evidenced by our current economy and unemployment – leech money out of the economy and into an elite upper tier where it will stay.
If we want to keep government out of business, keep a small government and few regulations, then it is a priority that businesses act with Full Fiscal Responsibility. Profits must get out of the driver’s seat and let Sustainability drive. Otherwise, government will have to step in and make them responsible by regulation – pay ratio caps, perhaps, where the Executives can not be paid more than 100 times the entry level employee.
The Free Market requires the Free Movement of Money to function on a sustainable basis. Its not a question of “wanting” to bring more equity to the income scales – its a matter of keeping a Capitalistic Economy functioning.