This Week

We cover a great deal of “battleground” in this week's Too Much, from war profiteering to the impact of inequality on war itself. Also in this issue: We go up close and personal on the wacky war the Business Roundtable has declared against attacks on CEO pay . . .

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Greed at a Glance: Ken Lay, Innocent Forever

Public service pays — at least for House of Representatives Speaker Dennis Hastert. The Illinois Republican entered Congress, in 1987, with a $77,400 salary and a $290,000 family net worth, about six times the net worth of 1987's typical American family. Hastert's net worth, the Chicago Tribune reports, currently totals over $6.2 million, over 65 times the net worth of today's typical U.S. family. How amazing has Hastert's climb been? He picked up nearly $6 million in net worth over a 20-year period that saw him put two kids through college — and Hastert has never made more, in annual salary, than the $212,100 he's now making as House speaker . . .

Former President George H. W. Bush and over a thousand other mourners turned out last week in Houston at a memorial service for Ken Lay, the embattled one-time Enron CEO who had died the week before. Lay, said one memorial speaker, “did not have a criminal bone in his body.” That will most likely be the law's final judgment on Lay as well. His felony conviction this past May for defrauding investors will likely now be vacated, since Lay's appeal against that conviction can now never be heard. Lay's death also complicates efforts to seize Lay's remaining assets and help Enron employees and retirees gain restitution for their $1.5 billion in lost savings . . .

The world's most discriminating motorists have a brand-new option: the just-released Bentley Azure, a hi-tech convertible that will retail, with tax, near $400,000. Over the next year, Bentley expects to move 150 of these 18-foot-long gas guzzlers worldwide, with most of the sales in the United States. But the company insists the new Azure won't add much at all to global warming. The average Azure buyer, Bentley officials point out, will already own eight other cars, a reality that means that the typical 10-mile-per-gallon 2007 Azure won't see terribly much time on the roads . . .

The lucrative reign of “America’s most ostentatious war profiteer” appears to have gone kaput. Last November, David Brooks, the CEO of bulletproof vest-maker DHB Industries, captured national headlines with a $10 million party he hosted at New York City’s elegant Rainbow Room. Last week, directors at DHB Industries showed Brooks the door. Brooks is now facing multiple criminal investigations, notes Sarah Anderson of the Institute for Policy Studies, with shareholders charging that Brooks and other DHB executives schemed to inflate company profits “before selling off a boatload of their stock.” Brooks, overall, took home $70 million in 2004. Meanwhile, the Pentagon continues to award hefty new contracts to DHB, despite having to conduct a massive recall of the company's vests . . .

Henry M. Paulson Jr., the former top exec at Wall Street's Goldman Sachs Group, last week began his tenure as U.S. secretary of the treasury. Paulson's current net worth, about $700 million, apparently makes him the richest American ever to run the Treasury Department. At last week's swearing-in ceremony, President George Bush “made it clear” that he expects Paulson to do his part to make the Bush tax cuts permanent. Paulson won't likely need his arm twisted to get right at that assignment. Few Americans, after all, have personally benefited more from Bush tax policy. The 60-year-old Paulson saved $2 million in taxes — on his dividend income alone — in 2003, the year the President's mega-tax cut on dividend and capital gains income went into effect.

The Business Roundtable's Mission Impossible

Corporate America's movers and shakers have just launched what may be their most ambitious public relations offensive ever. Their mission: convince the American public that CEOs aren't really overpaid, not even by a bit.

Has Corporate America taken on a mission impossible?

That certainly seems to be case. The new business campaign to make Americans stop worrying and love CEO pay appears off to a disastrous start.

The first salvo in this campaign — a new study designed to “set the record straight” on CEO pay — turns out to ignore several major components of executive compensation, including every single major stock option windfall that top execs have scored since 1995.

The $250 million in option profits Capital One Financial CEO Richard Fairbank pocketed last year? You won't find that quarter-billion in the CEO pay study just released by the Business Roundtable, the powerhouse lobby group that includes the top execs at 160 of America's biggest corporations.

The numbers that do appear in the new Business Roundtable CEO pay report have left even business-friendly media commentators distinctly unimpressed.

Last Thursday, a week after the report's release, nationally syndicated columnist Robert Samuelson noted that “public pounding of CEOs for their lavish pay packages” remains “amply justified.”

“CEOs have undermined their moral standing and their ability to be taken seriously on other issues,” Samuelson concluded. “They are slowly becoming a threat to the system they claim to represent.”

We have more on how the prestigious Business Roundtable has essentially “cooked the books” on CEO pay.

Who Wins Wars? A New Egalitarian Perspective

Societies that distribute income and wealth in a relatively equal fashion, researchers have documented repeatedly over recent years, just plain outperform more unequal societies — on nearly every yardstick that measures quality of life.

In societies that value equality, people live longer, face less corruption, suffer less violence, show more compassion, and go easier on the environment.

Last month, a trio of University of Texas researchers extended this research in a bold, new direction. Equality. their new work suggests, doesn't just impact how well we live. Equality powerfully impacts whether we're more likely to live — or die — in war.

Take any two countries at war, contend analysts James K. Galbraith, Corwin Priest, and George Purcell in their new paper, Economic Equality and Victory in War: An Empirical Investigation, and the winner will almost surely be the more egalitarian-minded of the two.

The three researchers, all connected to the University of Texas Inequality Project, came to that conclusion after pouring through global conflict and inequality data-sets for the 1963-1999 period. They also examined conflicts from earlier eras and epochs, using evidence from an assortment of sources.

“We find, all in all,” they note, “that the evidence for an egalitarian victory proposition is remarkably strong.”

Why should more equal societies prevail in war? The University of Texas scholars offer three plausible explanations. More egalitarian countries, they point out first, will likely have “stronger social solidarity” and, consequently, “better military morale.”

Inegalitarian countries, by contrast, often have to “structure their armed forces to handle internal regime security, at the expense of efficiency in meeting external threats.”

Finally, the three researchers observe, “deeply unequal countries face a problem of loyalty in the lower ranks.”

“An egalitarian adversary,” they explain, “will often be seen as a liberator by at least some substantial part of the home population.”

The fascinating Galbraith, Priest, and Purcell paper discusses conflicts both familiar and obscure — read anything lately about the Chaco Wars between Bolivia and Paraguay? — and currently appears online via the University of Texas Inequality Project.

Stat of the Week: The Emerging Gap within CEO Pay

Old news: The pay gap between corporate executives and workers in the United States is growing. New news: The pay gap within CEO ranks is growing, too.

In the Washington, D.C. area last year, the 100 highest-paid CEOs watched their median pay rise 21.2 percent, to $6.4 million. The area's next 600 highest-paid executives saw their pay fall, by 3.0 percent, to $642,543.

Quote of the Week: GM's Truly Generous Pensions

“You may have heard General Motors' complaint that the cost of pensions for its army of retirees drags GM down in the battle with foreign auto makers. What you probably have not read, however, is that the real drag on GM is not pensions for its rank-and-file workers, which are fully funded, but generous pensions for its rich executives, which are not.”

Editorial, Salt Lake Tribune (Utah), “Executive greed: Rich pensions for corporate chieftains drag companies down,” July 9, 2006

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