Should CEOs Be Concerned About the Income Inequality Issue?

Erratic economic growth, immigration, Benghazi, Iran, the Trans-Pacific Partnership, ISIS, over-regulation, reining in China, repealing Dodd-Frank, Syria—the list of issues potentially shaping the 2016 presidential election is long indeed.

But “income inequality” could become one concern that defines the race. What’s more, because they’re at the center of this issue, American CEOs should have a role in shaping it. Income inequality, of course, is one of those byproducts of capitalism, like technological innovation, job dislocation and household migration. It’s always been more of a description of one facet of Western market capitalism than an indictment.

But the disparities between the wealth of the top 1% of Americans and what’s left for everyone else are in the cross hairs of political critics more than ever before, as the gap has grown and as the newest generation of voters swings decidedly toward a more liberal—nay, even socialistic—perspective.


Top 3 issues facing the world today:

56% Social and economic inequality

42% Beating out climate change and environmental preservation

33% Education


Much of the new argument over income inequality, of course, has been fueled by the early-2014 publication of a 700-page treatise by the French liberal economist, Thomas Piketty, Capital in the Twenty-First Century. In it, the author basically argues that today’s high levels of economic inequality are an increasing problem because of how they challenge the underlying incentives in, and ideals of, democracy—that capitalism doesn’t self-correct toward greater equality and that governments can and should do some things about it all. He proposes a progressive, annual tax on capital rather than on income, arguing that it “will make it possible to avoid an endless in egalitarian spiral while preserving competition and incentives for new instances of primitive accumulation.”

Embracing Piketty as a new rationale for higher taxation may be hypocritical for progressive American politicians who have done just fine materially under current “inequality.” However, they have been able to leverage his freshly clothed argument to exacerbate the alienation felt by the millennial generation, which has come of age in an era of diminished expectations.

In fact, of all the issues facing the world today, “social and economic inequality” ranked as No. 1 amid the top three in a late-2015 survey of more than 1,000 millennials in 125 countries by the World Economic Forum, tabbed by 56%, beating out climate change and environmental preservation, named by 42%, and education, identified by 33%.

Meanwhile, capitalist apologists have fueled this issue by seeming tone-deaf to such concerns. In the run-up to the 2012 election, eventual Republican candidate Mitt Romney largely succeeded in dismissing the income-inequality issue as predicated on “envy” and “class warfare.” And the issue remained largely verboten for conservatives.

Now, however, Republicans are contributing to the discussion, largely by blaming rising income inequality on the Obama administration, which in their view has stagnated middle-class wages and overburdened business with the Affordable Care Act and other new regulations. In one GOP presidential debate, for instance, candidate Rand Paul, the U.S. senator from Kentucky, also blamed the problem on the Fed’s policy of “artificially keeping interest rates below the market rate, [so that] average ordinary citizens have a tough time earning interest, have a tough time making money.”

Yet, the same debate also indicated that a particular subset of capitalists might be vulnerable to bipartisan criticism as the entire politico-economic system deals with the income-inequality issue: CEOs. A moderator, no less than Gerard Baker, editor-in-chief of The Wall Street Journal, noted that 50 years ago, “the average CEO of a big corporation in this country earned 20 times the average salary of one of his or her workers. Today, that CEO earns about 300 times the average salary of a worker.”

New SEC rules requiring publicly held companies to publish the “pay-equity ratio” between CEOs and rank-and-file workers also are highlighting a sort of culpability of business leaders in contributing to the issue. All the attention is helping make CEO income Exhibit A in progressives’ arguments for greater economic equality.

CEOs have mostly been silent on income inequality; and when they do speak, often it’s been circumspectly, dealing with, for instance, the pay-equity issue inside their own companies but not with the broad implications of income inequality.

Read more here:

8 CEOs Weigh in on Income Inequality

 

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