It’s Not Easy Being Ultra-Rich

On Labor Day we customarily give a nod to America’s underpaid and overworked blue and pink collar workers – janitors, flight attendants, forklift operators and the like. But this year let’s go a step further and salute the most reviled and despised of the people who make our economy happen, the mere mention of whom causes the average forklift operator to spit on the floor. You are thinking perhaps of telemarketers, human traffickers, and the fiends who answer the phone when you to try to make a claim on your health insurance. But I’m talking about our CEOs.

Just in time for the holiday, two liberal groups – United for a Fair Economy and the Institute for Policy Studies – have issued a gleefully malicious new attack on our CEO class. They point out that the CEOs of large companies earn an average of $10.8 million a year, which is 362 times as much as the average American worker, and retire with $10.1 million in their special exclusive CEO pension funds. They further point out that the compensation of US CEOs wildly exceeds that of their European counterparts, who, we are invited to believe, work equally hard.

And, in what they must think is their cleverest point of all, the UFE/IPS folks state that: “The 20 highest-paid individuals at publicly traded corporations last year took home, on average, $36.4 million. That’s … 204 times more than the 20 highest-paid generals in the U.S. military.” You know what we’re supposed to think here: Wow, but generals have all that responsibility! They’re responsible for national security, or at least for conducting the wars that increase the threats to our national security and thus help justify ever greater increases in our national security apparatus!

But someone has to speak up for our beleaguered CEO class, and let me begin with that spurious comparison to the top military brass. Could we put patriotic emotion aside for a moment and look at this in a hard-headed, bottom-line, sort of way?

Suppose you are the general responsible for all the service people currently in Iraq, about 130,000 in round numbers, and suppose you manage to lose every single one of them in some ghastly miscalculation. With the death benefit for the family of a dead soldier running at $100,000, your mistake will cost a total of $13 billion. Sounds like a lot, I know, until you consider that a hedge fund manager or financial company CEO can lose that much in a single afternoon, without anyone even noticing. Q.E.D., there is simply no comparison between a general and a CEO.

That’s a side issue though. The real point, which the CEOs and their usual defenders are strangely reticent about making, is that it’s damn expensive to be rich, and extravagantly expensive to be super-rich. Before you start playing your air violins, consider the costs of maintaining up to five different homes, some of them up to 45,000 square feet in size, most with swimming pools, tennis courts, guest houses, and wine cellars requiring constant supervision.

The poor whine about having no home at all, or maybe a two-bedroom apartment for a family of six. They should just think for one moment of the tribulations involved in running four or more mansions, each with its own full-time staff. There’s the problem of getting between them, for example. A friend of mine, of very modest means himself, consults for a billionaire couple who commute between London and Los Angeles by private jet, with their dogs following in a second private jet.

But much of what we know about the extreme costs of wealth comes from Wall Street Journal columnist Robert Frank’s recent book Richistan. The ultra-rich, who are drawn largely from the CEO class, require staffs of about 40-50 people, including not only cooks, maids and nannies, but “lifestyle managers” (to set up the entertainment schedule) and – in a throw-back to the original gilded age -- butlers. It’s the butler’s job, among other things, to deal with any issues that may arise from the proliferation of homes. For example, if the boss is in Palm Beach, Frank reports, “and wants to send his jet to New York to pick up a Chateau LaTour from his South Hampton cellar, the butler makes it happen, no questions asked.”

Nor are the ultra-rich in a position to cut back on their expenses – by, say, running down to the supermarket for a $12 bottle of chardonnay. If they were to do so, their friends would despise them. As Frank explains, the Richistani word “affluent,” meaning someone with less than $10 million in assets, translates into English roughly as “scum.”

A mean-spirited critic of the ultra-rich CEO class might grumble that the rich should simply find a new circle of friends. But who exactly might these new friends be? If you were in the $100- million-in-assets set, you could hardly consort with the class of people for whom a pittance like $10,000 might be a transformative sum, possibly allowing granny to get her insulin and the children to have warm winter clothes. People of that class could not be trusted not to pocket the silverware or rip out the gold fixtures in your powder room. They might even make a lunge for your throat.

(Barbara Ehrenreich admits to being on the board of the Institute for Policy Studies.)

Comments

[A Canadian]

The human race never seems to learn from history do they? The birth of the modern age is characterized by revolutions througout Europe where the poor working class sought to overthrow the ruling elite due to their flagrant excesses. They had the balls to speak up and do something about it. Nowadays all we do is whine about the inequality. It's pathetic. When are we going to speak up and do something about it? I mean really do something about it. It's time for another revolution, I say. Off with their heads and clear their bank accounts!

[Dr. Steph (another Canadian)]

Problem is everyone wants to be the super rich and we're sold this "dream" every day through everything from lottery commercials to the old "if you work hard enough..." ideals.

All this affluence in the face of poverty and dire poverty is stomach churning.

[Chickensh*tEagle]

While we're giving a nod to working people, how about a special nod to those who work on Labor Day (and all other holidays) while the bosses are off? My hat is off to them.

[roger]

i went to united for fair economy website and read a portion of the executive excess 2007 report. it keeps repeating that the top twenty ceos earn compensation which the authors deem as excessive. on page eight is this quote:

The vast rewards that go to business leaders
in the United States
represent a marketplace
failure.

i am interested to know how creation of great wealth is charaterized as a marketplace failure and not characterized as a failure to redistribute wealth which apparently is the goal of taxes and government. the wisdom of taking from the wealthy and giving to the poor in contrast to maturing a fertile environment for creating relative wealth for the poor is an incidental question. the purpose of the marketplace is to create wealth. now if the wealth is not distributed in a fashion which various groups deem as fair/just/ethical, i am not seeing how the purpose of the marketplace is to correct this inequality. if you think the beast must be tamed because 20 or 200 or 2000 guys out of 300 million are making what you deem as too much money, dont turn to the marketplace and expect it to reprove these guys. tempest in a tea pot.

[buena]

I completely agree with A Canadian. We're overdue for a revolution because our values system is broken.

For every ultra-rich person there are thousands like Patricia. Read her story here:

http://www.unitedprofessionals.org/blog/2007/08/30/striving-to-attain-the-american-dream/

The disparity between people like her -- and most of us -- and the ultra-rich is obscene. These conditions will bring about the revolution. I'm ready for it.

[roger]

fine fine. what income level is the arbitrary line at which wealth become a flagrant excess and an obscene condition. what percentage of federal taxes does the wealthy pay. partial birth abortion is a choice but money is obscene and flagrant.

[Monica]

The problem is not that there are rich and poor. The problem is that people are not raised to be content with their station in life but want to be equal to their betters. A good system would be a class system based on birth, with some limited opportunity for improvement, the way it used to be in Europe before the French revolution, for example.

An essential difference was that the rich were less selfish and sometimes had a paternalistic attitude towards various inferiors whom they helped. For instance, a noble individual might develop a lasting bond with the child of his or her wet nurse, breastfed during the same period. That child was almost like a sister or brother, although likely to remain a social inferior (but one who might be helped by the noble, made a trusted servant, etc.). Or, if an important person become a child's godfather or godmother, that child was similarly guaranteed protection. Important people supported various attendants who were there mostly to keep them company and show off. Things like that alleviated economic problems and created links between members of the various social classes, and also taught everybody where they stand, socially. Moreover, families were close-knit and did not want to be embarrassed by having relatives who did not live, even if marginally, at the right socio-economic level.

This is probably the second-best system after a socialist or communist system. There is still no equality, but at least people know their place and may even be proud of their connection with the House of [insert the nobles' family name], even if they are just servants or unimportant members of the House.

It is precisely because, instead of staying home and ruling over people on their lands, the nobles started to mingle with the other nobles in court circles that the feudal system broke down. If only the modern rich people had many servants but cared about them, even to the extent of having dinner together at a large table every day, and if poor people did not believe that they are as good as the rich and deserve to get rich, too, things would be much better.

This system could coexist with some benevolent slavery (not based on race, of course). That way, one way or another, the rich would have to care for the poor and the poor would know their place.

[Tim Worstall]

"The ultra-rich, who are drawn largely from the CEO class,"

Are they? And there I wsa, thinking that actually they made up a small proportion of it. Entrepreneurs, celebrities, movie makers, sportsmen, at least, according to the actual research, make up the majority.

[BW]

This being a consumer economy, it would seem we should boycott their product/services as much as possible. "Boycott" means not to give them money. We may not starve a monster, but do we have to feed it? Do we have any room for discretion here?

[Mr. Bojangles]

I'm sorry, but did I miss something here, Monica? Sarcasm doesn't always come through in electronic media; please tell me you're joking.

"Benevolent slavery?" You're kidding, right? You make it sound like there have never been tyrants—only kindly benefactors. That peasants have the good life (well, at least they ate their vegetables and got plenty of exercise, eh?). That people actually enjoy breaking their backs so "Massa" can have his clean, crisp linens.

So which caste would you be volunteering for, Monica? The "betters" or the "inferiors?" Would you prefer to be a member of an inbred, retarded elite (think King Tutankhamen, King George III or Paris Hilton), or the noble, down-trodden proletariat?

Sounds like you think you'd come out on top of the pyramid in the world you describe. It reminds me of those people who claim to remember a past life: they always insist they were somebody important—Napoleon's sister, or a pope, or the Duke of Wellington—when in reality (if you can call past lives reality) they would have been shit-shovellers like the other 98% of the population.

Good joke, Monica.

[Monica]

Rest assured: my ancestors were "middle-class" (priests, teachers, scholars, for example) in Moldavia and Romania, and I heard that my paternal grandmother's family was noble (a known Romanian person descended from one of her sisters is now bragging about that), which is why I'm going to try to find out more about my ancestry. I'm curious (but then, that may not be possible to find out) if any boyars in my family owned any gipsy slaves, as noble families in that area often did before slavery was outlawed.

[Larry In Lethbridge]

Barbara, no disrespect intended, but if your CEO or any hedge fund manager happens to lose 13 billion in any single afternoon, trust me, it will not go unnoticed.
There would be some serious repercussions when a melt down like that happens.

Ask Chris. He will be glad to share his thoughts I'm sure.

[chris]

larry-still-stewing-in-lethbridge:

Did you catch your flight to New York, Larry?

[chris]

Barbara writes:

"A friend of mine, of very modest means himself, consults for a billionaire couple who commute between London and Los Angeles by private jet, with their dogs following in a second private jet."

The preceding sentence is an outright lie. Actually, it's an Urban Myth. If it were true, the name of the billionaire would have appeared in the story.

A tale like this, if true, would have been repeated in reputable and credible news venues around the world. FACTS about the spending habits of billionaires sell newspapers. Phony claims about nameless "billionaires" populate the fantasies of people wishing such statements were true.

[Larry In Lethbridge]

Chris chirps away in a manner fueled by his Ritalin dependency:
"Did you catch your flight to New York, Larry?"

Sure thing Sport. I'm in Montauk right now chillaxing at my friends "cottage", laughing about guys whose lives evolve around harrassing bloggers with differing opinions.
You vehemently state to Barbara :
The preceding sentence is an outright lie. Actually, it's an Urban Myth
You continue to lose your composure by saying:

"A tale like this, if true, would have been repeated in reputable and credible news venues around the world".

Well, it is now obvious you don't know too many wealthy people nor are you privy to any even near this social circle. I thought you came from common stock. Some commoners don't know millionaires let alone billioniares.

The simple truth of this matter is billionaires can do just about anything they wish and do it very quietly.

God, I thought you were a lot smarter Chris. I think you have run your course.

Have nice weekend sweating at Red Hook Fields.

[realpc]

Progressives like Barbara E. always complain about the excessive salaries of CEOs. But they don't seem to have any problem with the excessive salaries of Oprah Winfrey and other celebrities.

They probably think it's ok for Oprah, because she has special talent and it's hard to find anyone like her. Ok, well can't the same argument be made about CEOs? Aren't they paid outrageous salaries because someone has decided they're especially talented and unusual?

Barbara E. resents the rich and successful and admires the poor and the unsuccessful. I think we should admire the rich and successful, and maybe learn from their example, and we should feel compassion for failures and semi-failures and try to teach them by our own example.

I realize there is a lot of luck involved, not just talent. There might be millions who could do Oprah's job, while the lady who washes the floor might be a talented opera singer who never got a break. That is certainly possible.

But it is not all luck. Highly successful people usually have more drive and focus than average.

Barbara E. is herself an example of a highly successful writer, and my guess is that she's hardworking and dedicated to her career. She probably does ok financially. But she never tries to encourage unsuccessful people to be more like her, to work hard at something and improve their lives.

Just the opposite, she tells them that your attitude makes no difference and positive thinking will not help. Blame the system and fate for your failures and keep dreaming about a worker's revolution.

I agree that many things are wrong and unfair in our system, and many reforms are needed. I think we should respect ordinary people more and worship celebrities less.

But we are always, always going to admire and reward some individuals more than others.

[chris]

lying-larry-still-in-lethbridge, you wrote:

"I'm in Montauk right now..."

But Larry, you swore you were coming to New York City to confront me. Where you lying or afraid?

By the way, the gossip pages of many newspapers and a large number of glossy magazines run stories about the excesses of the wealthy in every edition.

As a canadian who lives in an out-of-the-way hamlet best known for its dumb-grin inducing sunniness, you wouldn't know about snoopy reporters who are well paid to discover and report on the private activities of billionaires and mere multi-millionaires.

It's easy to plant a story, Larry. You e-mail a reporter and mention you have something. Things take off from there.

[suham]

We were brought up in this country to believe the American dream and we believe it...although no one ever told us it had a price. To achieve it one has the opportunity to make a difference in your own life by going to school and achieving your dreams, although it not as easy if the means are not available. Today in a lot of communities the presence of discrimination still exist. For those that have less and the different social classes their communist use this to their advantage and cause dysfunction in the community by injecting envy and jealousy. They believe that by over throwing the current government is the only way for equality, they are brain washed into believing that we are all going to be equal when in reality the government will only get richer. They feed on the uneducated mind. Go to school and make your American dream a reality. You only get as far as you plan your life. Even if there a lot of rocks a long the way. Plan for it and make it a reality.

[Chickensh*tEagle]

"Aren't [CEOs] paid outrageous salaries because someone has decided they're especially talented and unusual?"

Yeah, someone on the board who's also CEO of a company whose board our own CEO sits on. It's called "interlocking boards of directors." Lots of hands mutually washing lots of others.

It's even gotten to where CEOs get paid hundreds of millions to go away after they've fucked up their companies:

http://ehrenreich.blogs.com/barbaras_blog/2007/01/home_depots_ceo.html

We've gotten way beyond talent, hard work and good luck here.

[Solo]

The Eagle has it right. No longer are hardwork and bright ideas encouraged and rewarded. Corporate America has become one big fraternity with the members making sure they each get an unusually LARGE share of the pie.

Unfortuantely, this frat house mentality runs rampant through our culture to the point where the slogan "He who dies with the most toys wins" has become a mission statement.

And, don't believe the BS that CEOs and other executives are "enhancing shareholder value." The only shareholders they care about are themselves.

[chris]

chickeshit eagle writes:

"It's even gotten to where CEOs get paid hundreds of millions to go away after they've fucked up their companies:"

Try naming ONE highly paid CEO who "fucked up his company".

I suppose you'll start with the ridiculous example given by Barbara, namely, Home Depot.

However, because you have a fact-free mind, let me fill you in. Home Depot CEO Nardelli increased net income at HD by 160% during his years heading the company.

Is a 160%-earnings-increase your idea of fucking up a company? It must be since you claim that's what happened.

As for his severance agreement, well, the terms of the agreement were established -- by contract -- BEFORE he accepted the Home Depot job.

Meanwhile, the stock of Home Depot did not rise despite the huge earnings increase. But the price of the stock is not within the control of a CEO.

You wrote:

"We've gotten way beyond talent, hard work and good luck here."

Really? How about a little evidence to support your brainless claim?

[Barbara E]

Sorry about the unattributed quote re the dogs-in-private-jet. This had to be off the record so as not to jeopardize my friend's consulting job.

Also, Sarah Anderson at IPS poins out that, in my eagerness to defend CEOs, I understated the ratio of their compensation to the average worker's earnings. It's 364:1, not 362:1.

[Anarcissie]

chris: '... Home Depot CEO Nardelli increased net income at HD by 160% during his years heading the company. ...'

I think you mean HD increased net income by 160% while Nardelli was heading the company. We don't know that that was Nardelli's doing -- there was at the time a real estate bubble producing a lot of funny money for homeowners who then spent some of the money at HD, apparently. HD's Board didn't seem to think Nardelli was very good; they got rid of him even though it cost them many millions to do so. He was said to be poorly suited for running a retail company. Now he's running Chrysler -- there must be another story in that. In any case, the fact is, we don't really know exactly what Nardelli's share of HD's production was -- the causes of and influences on production are too many to count and too complex to calculate. We can only guess. HD's board guessed he was a drag.

The "market failure" here is in regard to whether the market for CEO labor is pricing their talents correctly. In theory, competition in a free market should tend to depress the rewards of higher management. But the talent of higher management is precisely that of manipulating other people in ways conducive to one's own benefit and not necessarily in the interests of those manipulated. The very talent which the market is supposed to judge is a talent for neutralizing that judgement.

Agreed, however, that the reason CEOs and other high-management types can do this is, as Dr. Steph says, "everyone wants to be rich are we're sold this 'dream' every day...." Just as the con man works on the mark's greed, so the overpaid CEO (and celebrity) works on people's desire to be rich and famous if only vicariously. They're paying people to be rich and powerful for them, at the expense of their own lives and interests. I guess that's what they want to do.

[buena]

A lot of us went to college and worked hard, and our labor did create wealth and opportunity. Not for us, but for the shareholders and CEOs of the corporations we worked for. What we got was layoffs and disappearing pensions.

[Andrea]

I pity the CEO's, too. One line really hit me hard. The line about the CEO's social prohibition against enjoying a $12 bottle of Chardonnay nearly wrung tears from me. Next someone is going to tell me that billionaires never stop by small local bodegas and buy a mango juice and a bag of chicharrones and munch them on the way to the park, where they can throw the crumbs to the pigeons. Probably someone is going to go further and inform me that these billionaires -- purely due to peer pressure -- have never played five-on-five soccer in the field behind the warehouse, with a shoe and a bottle as one goal and two shirts on sticks as the other goal.

Oh, I just had a dreadful thought. I bet those billionaires have never gone down to the animal shelter and picked out the friendliest mutt in the bunch and taken it home and loved it for years and years, and wept for days when it died. All because of the fear of the stares and whispers of their billionaire friends.

I thought teens suffered devastating damage from peer pressure. I had no idea the CEO's and billionaires and other assorted rich people didn't have enough money to escape it. I thought money was supposed to create possibilities. Apparently all it does is land you with a crowd of people who don't care about real happiness or finding joy where you look for it, but rather who look only at price tags and labels.

I do feel sorry for those rich people.