By William Pfaff
Switzerland just had a referendum in which it voted to give company and bank shareholders veto rights over the salaries, bonuses and overall compensation packages of senior executives and board directors.
Bonuses will be prohibited for executives being hired, those leaving, and for those present when a company is taken over. Pension funds holding stock in a company will be required to take part in these compensation votes. Violation of the new rules can be punished by fines worth up to six years of salary and prison sentences of up to three years. These requirements will be written into the Swiss constitution. In short, the Swiss want revolutionary change in the manner by which the modern European (and implicitly, American) corporation is managed, and in how it distributes its funds. This is a demand based on morality.
A majority of 68 percent of those voting in all the Swiss cantons approved this initiative. The Swiss citizenry, in short, is very angry about the current practices of Swiss corporations and financial institutions, even though the country is scarcely noted for past criticism of high finance and the practices prevailing in the international economy.
The Swiss are not the only ones angry at the pay practices of globalized capitalism. The European Union’s Commission, executive agency of the 27-member EU—whose combined economy is the largest and potentially most powerful in the world, dominating world trade—has just delivered a second staggering blow to international finance and the practices of bankers.
The Commission has ruled that all bankers and banking institutions anywhere within the EU, and also—here comes the knockout punch—all those executives working for EU-based banks worldwide, must have the bonuses they pay or receive capped at no more than existing annual salaries. This limit can be waived only if the bank’s shareholders agree, and then only to the level of double the executive’s current salary.
For a normal human being working in a normal enterprise, bonuses are usually connected to meritorious service. They are not a plutocratic competition in ego-display by a limited number of the very rich.
Today’s rich, though, are different from you and me. An executive’s pay sheet may identify bonuses as merited supplements to salaries, and stock option assignments and other monetary and material rewards as essential to keeping an immensely important individual in the company, preventing him or her from taking their invaluable talents elsewhere, but this is part of the game played by the new corporate rich. (The individual may actually be getting fired, and the money greases the exit.)
You can imagine how this draft EU law on banker compensation has been received in the City of London, the British Conservative Party and the community of New York-based executives of London and Scottish banks.
It is difficult to see how Britain can remain a member-state of the EU if this law is approved by finance ministers and the European Parliament—which will happen. Prime Minister David Cameron has already, for purely party-political and electoral reasons, promised the British electorate a referendum before the next national election on the U.K.‘s remaining in the Union (on what he assured them would be revised terms—but scarcely this revision).
The conventional political and journalists’ judgment today is that Britain is on the way out of Europe, for better or for worse. But wait—we have not yet counted in the weight of moral opinion not only in Britain and even, just possibly, in the United States, which now will become the only great business center in the world which practices this kind of mind-blasting greed. Interesting enough, though, the greedy lost the 2012 national election in America.
This greed has caused moral revulsion throughout the Western world—including in the United States, which started it all, and as a result now experiences radical inequality between rich and poor. Just since 2008, American disposable personal income has risen by 1.4 percent per year. Corporate profit has increased by 20 percent per year. The Barclays Bank’s chief American economist says nothing like this has been seen in 50 years.
America’s Puritan forefathers were Calvinist; their “errand into the wilderness” had been conceived as a re-enactment of the exodus of the Hebrews from Egyptian bondage and their Biblical covenant with God was understood as to build a new heaven and new earth. Until the American Revolution, their Presbyterian church, with its millenarian theology, provided the only organized link among the separate colonies.
However, the austere and frightening theology of Calvinist predestination and “irresistible grace” changed in America due to the influence of the Dutch theologian Jacobus Arminius (1560-1609). He argued that for hard-working men and women, predestination could be bestowed, and success and riches be seen as evidence of Heavenly Election. American Protestantism has always respected business success and wealth.
But this? The tea party movement, whatever its ideological aberrations, was seen in 2010 as a people’s revolt against big and intrusive American government, supposed “free riders,” welfare queens, Mitt Romney’s “47 percent” who would vote against him (or wouldn’t vote at all), and against academics, intellectuals and the mainstream media.
It was much more. It was a protest against secular and cosmopolitan forces in America and an affirmation of a traditional American religious culture. But what was not seen then was that it was an upsurge by America’s outsiders or abandoned: the precarious or jobless American poor and lower middle class, protesting globalization, American industry shipped abroad, American deindustrialization, American employment shipped to China, foreign immigrants living on American welfare rolls—and dead American towns, working farmers reduced to living in shabby house-trailers, their children facing perpetual debt in order to get an education.
All this while the rich get greedier.
Visit William Pfaff’s website for more on his latest book, “The Irony of Manifest Destiny: The Tragedy of America’s Foreign Policy” (Walker & Co., $25), at www.williampfaff.com.
© 2013 Tribune Media Services, Inc.