You are correct, the modern corporate structure has been used by the corporate elite to insulate themselves from the workings of the market. The 2008 financial meltdown is a prime example where very few of the Wall Street bank chiefs lost their jobs even though they had to go running to the government for a bailout to save their companies. A year later they were back to “earning” multimillion dollar bonuses only because their banks were borrowing from the Fed at 1% and lending to the federal government at 3%.
Look in contrast at the individual entrepreneur or small business person. These people rarely make 40 times the average worker’s salary, much less 400 time yet they are the employers of most people in the private sector. In this world, there is no government bailout if the company gets in trouble. The small business person retrenches, cutting payroll and other expenses and possibly selling off assets to survive. I the company fails, the entrepreneur pays the ultimate price and loses everything. If the head of Goldman Sachs fails and loses his job, he walks off with tens of millions of dollars.
The small businessman is fully accountable for his performance and pays a huge financial price for making mistakes that cost him his source of income. He loses everything. The corporate chief has limited accountability for performance. Even if he loses his job for poor performance he is rewarded with generous severance and benefits. Plus while on the job his pay and benefits are disproportionate to what most individual entrepreneurs can earn either on a percentage basis to the lowest paid employees or in real terms.
When I worked in senior management for a large corporation, the top levels executives spent more time discussing how financial manipulations would affect their bonuses for the year than they spent talking about customers, real investments in productive assets, or products. Most were financial MBA’s who thought any business could be modeled on a spreadsheet. Most of these corporate financial types also enjoyed higher salaries and bonuses than did the division presidents who managed the customers, managed the factories, created the new products, and were accountable for generating the sales and earnings.
Those who play on class envy do have a point when they describe the excessive salaries paid to corporate office executives who have little to do with the day to day creation of wealth for the company.
I don’t have the answer to this situation where market forces do not seem to be curbing the excessive pay at the top of the corporate pyramid. Unfortunately, if the market doesn’t either impose real accountability (i.e. when CEO’s depart they leave with nothing just like in the small business sector), the political world will impose some form of “social justice” on the corporate world.
That's a leftist talking point. It's remarkable how much of a company's success really does depend on the CEO. Look at Apple and Steve Jobs. When Jobs kicks the bucket, Apple will implode. Look what's happened to Microsoft, Wal-mart, GM, HP, on and on, now that their founders are no longer in charge.
The other problem you touch on is how public corporations and their stock option incentives encourage short term thinking rather than long. The Koch brothers on average grow their business 18% year after year because they have a huge advantage: they are a private company and are free to think long term. The stock options given to managers of public companies are defective incentives. There has got to be a better way.
You answer is in your first paragraph...
The 2008 financial meltdown is a prime example where very few of the Wall Street bank chiefs lost their jobs even though they had to go running to the government for a bailout to save their companies.
Let them fail. The problem is not too much free market, it's too little.
Problem is, those types always end up strongly supporting anti-business legislation that crushes the small businessman and entrepreneur and does little to affect large company management structures - because those large companies have bought enough legislators to ensure such laws are written the way they want them to be written. Any attempt made to redistribute income away from the bosses at Goldman Sachs will always end up wiping out Main Street first.