Earlier this week I discussed the idea of new corporate behavior and its role in The Financialization Revolution, I said “Since the Financialization Revolution, the goal of satisfying shareholders instead of consumers has become the primary focus of corporations.”
A new Think Progress article by Alan Pyke demonstrates the idea perfectly. It discusses the bonus of over 17 million dollars – $17,000,000! – given to the CEO of Caterpillar Corporation even though sales of the company were down:
- “The way the company’s performance-based compensation systems are designed, the CEO got a $2 million performance bonus for a year when sales fell by 16 percent.”
- “The company justified its decision to Crain’s by pointing out that Oberhelman oversaw a good year for the company as measured on a per-share basis.”
This new corporate behavior plays a big role in the Financialization Revolution. If CEO’s are rewarded on the basis of stock prices, all sorts of problems arise. First, the American workforce loses the opportunity to invest in the system themselves. When corporate rewards are given for share and stock market performance only, then there is no incentive for a worker to create a new product or improve on the old one. There occurs a sense of participation and belonging when a workforce is part of the creativity and innovation process. Now however, American workers are only a number in the system and I would assert that the growing cynicism within our workforce is the result. Rewarding managers and CEO’s based on stock performance also changes managerial focus. Workers, their conditions, and overall company morale become secondary afterthoughts to any manager, instead the focus is fixed only on the stock price. That’s where their bonus is coming from, why waste their time with nurturing workers and providing a creative environment? America has lost its Industrial lead (except for it’s military complex, but that’s another article). While our corporations maintain their laser vision upon Wall Street only, other nations are out-inventing and out-engineering us, China for example is all about creating new, green, earth-friendly goods.
The Financialization Revolution is everywhere in our economy and the change we are witnessing in corporate behavior is a big part of the Revolution. Corporations no longer care about selling a product, they only care about how their Wall Street numbers add up. Caterpillar manifests this point perfectly, it “… earned its associations with American grit and ingenuity in its early decades of success, but its modern behavior is testament to the financialization of even the blue-collar segments of the U.S. economy.” The problem with this change in corporate behavior is that we lose our creative edge as a nation.
As we find ourselves building up to another national election, we must consider our new leader in terms of what he or she will do with the Financialization Revolution – otherwise we will become what John Perkins aptly describes as ‘the only non-banana producing banana republic’ (Hoodwinked). Change is possible and corporate behavior can be ameliorated, but we must first admit – and be aware – that we are in the midst of a Revolution.