However, the Private Sector offers a more immediate opportunity. First, let’s separate it into its two principle components: Privately-held businesses and publicly-traded companies.
Even the Parties agree that small, privately-held businesses are the lifeblood of our economy. Rather than restricting that economic engine, let’s celebrate it by following these three rules:
- Get out of the way! Do not layer costs on these businesses by way of non-essential regulatory control. When licensing and regulation is appropriate, administer it responsibly (i.e., processing should not be monetarily burdensome nor should it be subject to undue delays). A business should be able to file the forms, pay the fees, and get a response in a timely manner.
- If the Government is going to attempt to stimulate job growth and economic expansion, do it here where access to capital is disproportionately restricted as compared to what is available to publicly-traded companies that are well-established and politically-favored.
- Do not tamper with the income of those who have taken all the risks and personally sacrificed significant aspects of their lives to build successful companies. Success in privately-held businesses usually reflects meritocracy at its finest.
Now, let’s consider publicly-traded companies and level the playing field. If legislative mistakes have permitted some industries to become “Too Big to Fail,” correct those mistakes so that every company competes under the same rules. Don’t reward failure in one case and punish it in another.
As an aside: Research which publically-traded companies (or their related unions) donate the most to political campaigns through their PACs or senior leadership. Then, compare that list to those entities that have been deemed “Too Big to Fail” or have benefited from stimulus money, subsidies, tax abatement, Quantitative Easings, or waivers from programs like the Affordable Care Act. If you find a correlation, you should at least be suspicious.
This brings us to an element that has gotten out of control within many publicly-traded companies: Executive compensation.
Boards have fallen prey to the same misplaced fear that paralyzes professional sports franchises (i.e., that salaries have to be escalated to retain “talent”). However, unlike owners of privately-held companies, executives at publicly-traded companies rarely, if ever, participated directly in the risk and sacrifice that led to the company’s success. So, consider the following scenario.
Let’s assume that a large publicly-traded company needed to replace its CEO, who was being paid $55 million a year. What would happen if the company found another talented individual for a still-generous $4 million a year, who could perform equally well?
The company would have freed $51 million, which could be used to hire 1,000 new employees (at the national median income level of $51,000) to improve productivity and service or to accelerate development. Each new employee would be accretive to the tax base and immediately contribute to economic expansion as a consumer.
Conversely, what if the company instead chose to spend the $51 million on state-of-the-art equipment instead of people? All things being equal: Profits go up or prices go down, either of which serves to stimulate the economy.
What if the company decided not to reinvest the $51 million and instead distributed it as a dividend? Shareholders would be taxed on the proceeds and have three options with regard to the balance:
- Spend it, which would stimulate the economy;
- Save it, which would bring capital into the banking industry to loan to others, which in turn would stimulate the economy; or
- Reinvest it in other companies, which would stimulate the economy.
If you want to help close the income gap, become a shareholder of a publicly-traded company. Then, organize other shareholders to bring pressure to bear on the company’s Board (or Compensation Committee) to bring executive compensation into alignment.
CEOs of publically-traded companies currently earn about 360 times the income of the average American. Yet, few have the impact of 360 additional employees or other investment options. Democrats should like this strategy because it conforms to the “kumbayah” sense of society they pretend to support. Republicans should endorse it because it leads to an increased return-on-investment, so there’s an element of “greed” attached to it.
The other benefit is that you don’t have to wait for an election to assert your influence. As a shareholder, you have the power today, and you can affect change without spending taxpayer dollars or creating a Government program.
Why don’t you hear these types of recommendations from the Parties?
It could be because their leadership lacks the private-sector experience to even recognize that such solutions exist. Then again, it is probably because absolutely no political benefit can be derived from fixing the problem without injecting the Government into the issue.
Our Nation is facing serious challenges that require serious solutions. Income disparity is one of them.
The Democratic and Republican Parties have enormous resources they’ve chosen to use to craft perpetual campaigns. As Albert Einstein once said, “We can’t solve problems by using the same kind of thinking we used when we created them.” It’s time to start thinking about solutions that don’t directly involve our elected officials… at least until we develop the courage to cast the informed votes that will be necessary to replace those who are responsible for the problems we are trying to solve.
A Civil Assessment has been designed to serve as an Op-Ed forum for you. You are invited to offer your opinion and to discuss your position in the Comment Section. Please be sure that your “assessments” remain “civil” so that they may earn the respect of others.
TJ O’Hara provides nonpartisan political commentary every other Tuesday on The Daily Ledger, one of One America News Network’s featured shows (check local cable listings for the channel in your area or watch online at 8:00 and 11:00 PM Eastern / 5:00 and 8:00 PM Pacific.