The Netherlands now seems to have a new claim to fame. The land of dikes, tulips, and Vermeer may now host the world’s unhappiest corporate CEOs. What’s making the Dutch execs so unhappy? These captains of industry run some of the world’s top companies. Yet they're taking home just a quarter of what their counterparts in the United States make.

The worst part of all: The Dutch people think Dutch executives are making too much. And the Dutch people aren’t just complaining about executive pay. They’re pressing lawmakers to do something. Amazingly, lawmakers are.

We have that story — and more — in this week's Too Much.

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Ten years ago, the speculative games that rich people play generated the dot.com stock market bubble. That bubble popped, as bubbles always do. The bubble action then switched to the housing market. That popped, too. So what’s bubbling now? Art. Earlier this month, in just one week, the world’s three most prestigious auction houses gaveled away $980 million in contemporary art, a new fine art record. Experts trace the current fine art bubble to 2004, when hedge fund manager Steven Cohen paid $16 million for a Bacon Pope painting. This month’s sales have made that transaction look trifling. Auctioneers at Christie’s, for instance, took in $28 million for a three-panel painting — a “triptych” — by Francis Bacon that had sold for just $5.2 million in 2005. A larger Francis Bacon triptych also hit this month’s auction block. Auctioneers expected the work to go for $70 million. The actual winning bid: $86 million, the highest sum ever paid at auction for a work by a post-World War II artist . . .

Janitors throughout California’s Silicon Valley walked out on strike last week. The janitors currently average about $23,000 a year, working for the contractors that Intel, Cisco, Oracle, and other high-tech powerhouses hire to clean their offices. These contractors had offered a 40 cent average wage increase. But a 40 cent raise, says SEIU Local 1877 president Mike Garcia, would still leave the valley’s 6,000 janitors over $6 an hour behind what janitors are making in nearby San Francisco. On Wednesday, strikers took that message to the Intel annual shareholders meeting. Intel CEO Paul Otellini pocketed $16.3 million in personal pay last year. To match that take-home, at current Silicon Valley wage rates, a janitor would have to work 709 years . . .

In a deeply unequal society, can progressives win justice for the poor without challenging concentrated wealth at the top? The leader of the top British labor federation, Brendan Barber, last week delivered a clear answer. In a London speech, Barber declared that the UK Labor Party won’t ever win “greater fairness for those at the bottom unless it discovers a new boldness in challenging the corporate and personal greed at the top.” In the UK today, the British Trades Union Congress general secretary noted, ordinary working people “feel an acute sense of unfairness.” They’re well aware “that the spoils of corporate growth, of record profitability, are being creamed off by a tiny elite” of “investment bankers, hedge fund managers, and private equity partners enjoying riches beyond the dreams of avarice.” The UK’s 1,000 richest people, the Times on London reported last month, have seen their wealth quadruple in the decade since the Labor Party gained a parliamentary majority in 1997 . . .

In Australia, the Labor Party has only enjoyed a governing majority since last December, but the new Australian prime minister, Kevin Rudd, seems quite a bit more willing to challenge concentrated wealth than his British Labor Party counterparts. His government’s latest move came last week when tax officials announced a sweeping campaign to catch wealthy tax evaders by matching tax records against lists of luxury car owners. The government, the tax office noted, will be looking at taxpayers who hold assets that would indicate “conspicuous wealth.” The most conspicuous of Australia’s wealthy now appears to be Allan Moss, the CEO of the Macquarie financial group. He retired Saturday with an exit package worth nearly $80 million in U.S. dollars . . .  

The world’s top CEOs may not be able to leap tall buildings in a single bound. But they’ll soon be able to fly faster than the speed of sound. The Aerion Corporation has just announced plans to start manufacturing a supersonic private jet, with delivery promised in 2014. The new 12-seater will zoom from New York to Tokyo five hours faster than the speediest current commercial flight. The price: $80 million. Aerion has so far collected 40 advance orders. Corporate chiefs not patient enough to wait for a supersonic ride are gravitating to the soon-to-be-available Boeing Business Jet 3, a souped-up private version of the basic Boeing 737. The BBJ3, with a finished cabin suitable for eight passengers, runs $84.5 million. Boeing already has eight orders. Also soon to be available: an in-depth report from the Institute for Policy Studies on the environmental, social, and economic impact of luxury private jets on society at large. Too Much will have more next month on this landmark new study.

Inequality
by the numbers

CEO pay:
the scorecard

Good reads
for your bookshelf

Quote of the Week

“The plutocratic revolution of the past 40 years, if we may give it its proper name, has stripped the gears of what was once the most powerful and in some ways the most hopeful society on earth.”
Robert Zaller, historian, Drexel University, May 23, 2008

New Wisdom
on Wealth

James Miller, Massachusetts Should Tax Harvard, Inside Higher Ed, May 19, 2006. How taxing the overflowing endowments of elite universities could help reduce inequality.

Lane Kenworthy, Inequality and Prices. An economist dissects the argument that low prices at Wal-Mart mean that inequality isn't really increasing.

Lawmakers in the Netherlands, news reports indicate, will shortly be enacting into law legislation that will heavily tax American-style CEO windfalls — and maybe set some global precedents in the struggle against executive excess.

Other European nations are already taking notice. Earlier this month, in Brussels, European Union finance ministers “applauded” Wouter Bos, the Dutch finance minister who’s leading his nation’s charge against executive excess. The chair of the Brussels session, Luxembourg Prime Minister Jean-Claude Juncker, called the “bloated payouts” going to corporate executives “a social scourge.”    

The legislation that Bos is pushing will impose a 30 percent tax on all Dutch executive severance packages that run over 500,000 euros, the equivalent of about $800,000. Last year, the CEO of the top Dutch baby food maker exited his executive suite with $124 million, a windfall that outraged the Dutch public.

Before that landmark payout, executive pay reformers in the Netherlands had been content to press corporate boards to disclose more info on what they were paying their top execs. That disclosure, they figured, would help shareholders blow the whistle on extraordinary executive earnings.

But this sunshine strategy hasn’t worked, in the Netherlands and other European nations as well, and angry lawmakers are looking at legislation that specifically targets executive excess.

The Dutch are leading the way. The executive pay reforms now pending in the Netherlands include, beside the hefty new tax on severance windfalls, one proposal that would limit bonuses and stock options to 100 percent of an executive’s pay and another that would raise the required employer contribution to company pension funds by 15 percent wherever companies hand executives over $800,000 in annual pension benefits.

In Germany, the Social Democratic Party is calling for a $1 million annual limit on how much companies can deduct off their corporate taxes for executive pay.

“We must consider placing a larger share of the tax burden on the income that grows the most quickly – and often without a great deal of effort,” explains Karl Lauterbach, a leading Social Democratic Party lawmaker.

The European Union parliament, meanwhile, is reportedly “eyeing curbs on stock options, bonuses, and golden parachutes,” a “clear sign,” says one British daily, “that the EU noose is tightening” on bankers, private equity funds, and “corporate elites that have enjoyed light-touch regulation.”

This upsurge in tax-the-rich action, new transnational polling documents, reflects a widespread public apprehension about concentrated wealth and income. In five European countries, at least 76 percent of the public feel that the gap between the rich and everyone else has grown too wide.

 “Income inequality has emerged as a highly contentious political issue in many countries,” the British Financial Times, the co-sponsor of this latest polling, observed last week, “as the latest wave of globalization has created a ‘superclass’ of rich people.”

The Dutch executive pay reform proposals have Europe’s “superclass” — and its business press apologists — absolutely aghast.

“We should not accept state interference when it comes to our pay,” UK economic columnist Damian Reece harrumphed earlier this month. “The precedent some in Europe, like the Dutch, want to set is intolerable. A minimum wage is one thing, a maximum wage is quite another.”

But don’t expect the pressure for “state interference” to ease anytime soon. Europeans have become too accustomed to living in relatively equal societies to tolerate American-style executive pay.

That became clear at last month’s annual shareholder meeting of the Royal Bank of Scotland. RBS last year bought out a Dutch bank and then handed that bank’s departing CEO almost $50 million in goodbye pay. One shareholder at last month's annual meeting demanded — to loud applause — that the executives on the RBS board “reconsider” the company’s “entire remuneration policy.”

“You are being paid as if you are superhuman,” the shareholder angrily noted, “but you are not.”

Kevin Phillips, Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism. Viking, 2008. 239 pp.

Former Nixon White House strategist Kevin Phillips owns no crystal ball. But people tend to listen when Phillips starts talking about the future. Four decades ago, he boldly predicted that an “emerging Republican majority,” rooted in America's Sun Belt, would dominate U.S. politics for a generation. That majority promptly materialized — and has dominated U.S. politics ever since.

The young Kevin Phillips looked forward to this domination. The mature Kevin Phillips has spent the last 20 years decrying the inequality this domination — with ample help, along the way, from Democrats — has engendered.

Now, in his latest book, Phillips has returned with another peek toward tomorrow. By 2016, he muses, we just might live amid “rising seas and small islands going under, oil-linked civil wars in Africa, $8.75-a-gallon gasoline in California, abandoned housing in U.S. towns where commuting is no longer affordable.”

Sound scary? Phillips makes this scenario seem eminently plausible in Bad Money, his sprawling new status report “about the insecurity of America's future as the leading world economic power.” The United States, he argues, is rushing down the same road to ruin that declining world powers always seem to follow.

Money becomes bad, Phillips advises, when a nation “lets itself luxuriate in finance at the expense of harvesting, manufacturing, or transporting things.”

America’s most powerful economic players have done just that. They now make their money by moving money. They arrange “debt-dependent mergers, takeovers, and leveraged buyouts.” They exploit credit markets “to leverage bets in changes in asset prices.” They “securitize” debt into exotic investments.

In 1995, America’s financial sector generated $400 billion of new securities. By 2003, Phillips notes, “the annual volume of securitization issuance had jumped to $4 trillion.” Hedge fund bets now sometimes account “for as much as half the daily trading volume on the New York exchanges.”

This “financialization” of the U.S. economy, Phillips continues, has “led to extremes of income and wealth polarization.” Indeed, he adds, no one can really understand this financialization without taking into account “the greed factor,” the enormous rewards now flowing to those who trade in companies and debt.

Investment banks, private equity firms, and hedge funds haven’t been playing games with mergers, acquisitions, and reorganizations, says Phillips, to make Corporate America more efficient and productive. They’ve been playing these games “to goose the stock indexes and increase fees and profits.”

And the games have paid off. Between 1986 and 1996, the personal earnings of the top 10 earners on Wall Street soared from under $700 million to over $2.5 billion. Top CEO earnings, between 1981 and 2000, multiplied over 33 times.

Don’t look for good news in Bad Money. Phillips sees no courageous willingness to confront the nation’s economic realities in either major party. Last year, he observes, hedge fund players contributed nine time more to the Senate Democratic fundraising arm than they gave to Senate Republicans.

“In Republican and Democratic national politics,” sums up Phillips, “the notion of a breath of fresh air has almost become a contradiction in terms.”

That fresh air will have to come from outside the Beltway. Kevin Phillips, with Bad Money, has once again supplied a useful air freshener.

Stat of the Week

Some numbers to think about the next time you fill up your gas tank: According to a recent U.S. House of Representatives report, Exxon Mobil turned a $40 billion profit in 2007. Exxon last year also repurchased $31.8 billion of its own stock and parceled out $7.6 billion in dividends, two moves that handed windfalls to Exxon’s biggest shareholders. Five of those big shareholders, Exxon’s CEO and his four top executive aides, pulled in $76 million in pay for their 2007 labors. By comparison, Exxon last year invested all of $10 million in renewable energy.

Too Much is published by the Council on International and Public Affairs, a nonprofit research and education group founded in 1954. Office: Suite 3C, 777 United Nations Plaza, New York, NY 10017. E-mail: editor@toomuchonline.org.