Abbie Hoffman, Noam Chomsky and other fringe critics of American capitalism must feel pretty smug right now.
Nearly 100 companies have undertaken programs that allow employees, many of them executives, to exchange sharply depreciated stock options for new awards with more generous terms.
The companies, from Google to Silver Spring-based United Therapeutics, argue that the exchange — which increases the chances that executives will be able to collect rewards even though the company stock has plummeted — is necessary to retain and motivate personnel.
Critics say the practice undermines the purpose of performance-based bonuses and puts the company’s executives and workers on a different plane from ordinary shareholders who have no choice but to hold on to battered stocks or sell them at a loss.
This time around “Black Tuesday” marks the moment when the traditional arguments for modern American business linked arms and jumped out a window. It has become hard not to conclude that the concept of ‘risk’, at least as it pertains to executives, is a lie. Remember how salary bonuses rewarded performance? In practice execs saw the same bonuses whether the firm was booming or spinning its wheels.
Now we know a firm can collapse into a smoking hole and bonus checks will still find their way to the executives responsible. That makes salary bonuses into something more like an attendance award, except compared with ordinary workers who get docked for each half-day they miss for an unscheduled cancer treatment it’s not even that. The general contours of the current crisis make the same point – lose some money and you’re screwed, but if enough firms lose enough money everyone gets to start over with public money.
The new argument that we have to treat wealthy earners even more lavishly or else the CEO might downsize himself may be true, but it sort of invalidates the original argument that bonuses represent some sort of risk. That leads more or less directly to the conclusion that Phil Grammish defenders of modern American capitalism were either lying or stupid (as always, both is an option). That does not make capitalism’s various malcontents automatically correct, but it does suggest that if you want observers who are consistently plugged into reality your search should start there.