Competition: The Heart of Capitalism
I want to talk a little about competition. After all, it was more than a century ago that it took an act of Congress to keep those nasty captains of industry like Rockefeller and Carnegie and their ilk from raping and pillaging the public. The Sherman Anti Trust Act of 1890 pretty much prevented the likes of them from cornering one market or another and raising prices at will. It was thought that, without the government stepping in, the hapless consumer didn’t have near enough clout to fight back and keep from being raped and pillaged.
Now I like to consider myself an entrepreneur, or at least a creative capitalist. I believe strongly in the ability of American innovation and industry to find our way back from the brink —given the opportunity and not being hamstrung by a well-meaning and protective government. But…
This morning I read about the chief executive of a major utility company going before the Public Service Commission to seek a rate hike for his company. Bear in mind, of course, that a utility is a public service that has a monopoly on the service it provides. That monopoly is granted by the government, which seeks to protect the public’s interest through an entity like a Public Service Commission
This CEO was asked by the members of the commission whether he would consider reducing the $42 million that is paid annually to only 45 of its executives in order to cut costs. This CEO, who himself “earns” $3.6 million, said “no.” And, he justified his stand by submitting that such compensation packages were essential in order to compete in the marketplace for the skilled and experienced executives that work for his company!
As much as I believe in the system, that’s just obscenely arrogant! And this guy is the rule and not the exception!
If the members of the boards of most large companies were not either executives from within the companies themselves, or outside directors who are, or were, similarly overpaid executives from other companies, maybe the notion of competition would somehow enter into the executive recruitment process. By that I mean, competition to attract the lowest-paid, most highly qualified executives.
After all, if saving unnecessary costs for a company is a part of the job description of a CEO, how can one justify paying top dollar for one that can’t see he’s a part of the problem and not the solution!
Shareholders, it’s time for you to rise up and do something about this before those Congressional do-gooders make up their minds they’re going to have to. Oh, but then I guess those campaign contributions would dry up if it weren’t for the extra money these executives are getting paid.
Wow, this is very parallel to the ideas and comments by John Bogle, the founder of the Vanguard family of mutual funds, in his book “Enough.” His stinging indictment of the securities industry shares some of the same bases.