Kleptocracy…Huh?

In a recent article, I was reminded that for every corporate chairman like Rich Kinder or Steve Jobs whose “salary” is $1, there are dozens (like Home Depot’s Bob Nardelli and Yahoo’s Terry Semel) whose compensation is in the hundreds of millions of bucks.

I am re-reading Guns, Germs, and Steel by Jared Diamond and just finished his chapters on kleptocracy, which is, broadly, “A government characterized by rampant greed and corruption” [from the Greek kleptein, to steal].

Specifically, Diamond is describing the ruling class of a nation state that transfers tribute from producers to an elite (p. 276-277, Norton trade paperback, 2003). I was struck by Diamond’s “four solutions,” the ones that rulers have used to gain popular support while still maintaining power (and riches)…and how much his model could be applied to the world’s current crop of humongously compensated CEOs.

I’m as capitalistic as any businessman. I work hard for my earnings and don’t – mainly – begrudge others’ higher salaries. But there’s a parallel between what Diamond’s ruling kleptocrats have done historically and what a number of C-level executives do with their corporations.

So very briefly, I’m putting down Diamond’s four solutions, and a corporate interpretation of each.

Disarm the populace and arm the elite. Well, think about what the corporations do to “disarm” their employees, like fostering dependence on healthcare benefits; and their stockholders, like forbidding them to ask pointed questions during shareholders’ meetings. Corporations arm their elites with similar (but smaller) executive compensation packages and privileges.

Make the masses happy by redistributing much of the tribute received. How about slightly better returns on share price, or bonuses for workers, or giving substantially to charity? Hmmm? Aren’t these ways of “sharing the wealth,” but not very much of it?

Use the monopoly of force to promote happiness. In other words, the company will fire your keister if you question its behavior. Isn’t that what happened to several of the Enron whistle-blowers? Or, the company will move offshore, depriving the community of much-needed jobs (which keep employees and their families happy).

Construct an ideology or religion justifying kleptocracy. This one’s pretty easy if you presume that capitalism is the reason and the justification. But since I am a capitalist myself – without the hefty salary – I would rather offer the “ideology of corporate entitlement,” which has been heavily displayed by Enron, HealthSouth, and a few other companies: we’re the best, so we deserve to be able to treat you like peasants.” This kind of attitude runs throughout a given organization…every employee feels the same way, no matter how little he or she is involved in corporate management.

None of this is new. Wasn’t it Al Capp who coined the phrase more than 50 years ago, “What’s good for General Motors is good for the USA?” Or was this from the musical version?

Think how often this subject has come up – like every time there’s a big corporate scandal, reaching back to Harry Sinclair and the Teapot Dome Scandal, the Robber Barons (no relation) of the late 19th Century, and beyond

I’m not biting the hands that feed me. I am grateful to be able to conduct my business with some of the country’s largest corporations.

I also know – and so do you – that there are thousands of American business leaders who do not make anywhere close to the kind of money we’re talking about here. Many of these thousands do indeed redistribute their wealth to shareholders, employees and charities, and are particularly worthy of respect.

But when I hear that somebody’s getting $100 million in compensation, I really do wonder if he or she couldn’t get along with $10 million or $1 million – and surrender the rest to the shareholders.

Cover: WW Norton & Company. All rights reserved.