. >> speeleven way into the publisher of "harper's" magazine in the proud part owner of a book that i

called a white hot center of resistance to amazon market domination as the attempt to put all players owed of business. and sometimes lean on those friendly publishers and those that are not only detrimental through those independent booksellers i think amazon is a culture keller vs. a purveyor inerrant jollity to buy 89 book because it is a great book but the tissue should pay full price for a book

never pay a discount because it is damaging to the book businesses to do the hard work and "harper's" magazine is very much engaged in the fight for grooming independent media and thought. and that continues the pace to close at the outlets which like this one aimed to foster a democratic debate. in to become a center for discussion and if you buy

the book of low-price we can keep doing that. so now i get to do two things. i am n/a a journalist diane of a c0 not that level but instead want to remind you that c-span is covering this event. and then just wait to be handed the microphone.

so those masses and those millions of watching on c-span can hear your question. >> you want to read an excerpt? techno i want to keep the audience awake. >> it is a remarkable book. >> scandalously of seen high ceo pay but the first association was a famous book the folklore of capitalism.

and then made fun of their pretensions of capitalism. so coming from a capitalist background. >> i believe capitalism is the best economic system and certain forms of capitalism but one of these are the insane co pay. or those that use it that it harms the employees it is terrible for the economy but one of those principal drivers it isn't just that

an athlete is paid a lot or the movie star is paid a lot but this is causing major are rare at. >> tell us how this started. i very much focused on that funny part. >> dell led me forget. [laughter] it used to be spayed once a year were never better get paid as most of the 4% company at their 4% the ceo pay did not increase any

faster then you had those pay consultants that started in the '80s and they started to learn what they paid the ceo and thought that was a great sales tool so they went to their comfort -- companies to say you should pay co pay based on others. there was no theoretical justification and there was no evidence. >> then it shifted from what

should relate based on what other ceos make so this was the tool and dye will take a little bit of time now and it is a little complicated but it is supposedly a group of other companies with complexity but then this becomes the basis for what this company sees. i know you will be shocked to learn that companies choose appears that highly paid ceo. but everyone has a highly paid ceo.

so let's say i m the sea with my peer group better hand selected july make $10 million? know. because the second step of the process is i have to be a benchmark to we are a superior company we are better than 75% so we should pay better than 75%. said every company i have researched the 50th or 70th the 90th percentile.

so to benchmark now i will not be paid 50 million that is the dogma of the bedrock so i get to negotiate targets with mike, the committee i in this deal with all the information so if i hit my targets i will make more so the more the ceo does the more you get so

i negotiate and surpass that by a two that is great that 40 million goes back into the group of all my peers. then they get raises. now they have a lot higher paper co that is a mathematical certainty it is a one-way ratchet escalator by ceo pay 1980 has increased tenfold. 1,000 percent. this is the same time in real inflation adjusted

dollars the same time the average american worker got a 4 percent raise in the bottom 90% has lost ground so trump will not do anything but that is where they came from with a cultural shift. >> but that is a different mentality so one of these gurus there is always say weirdo and you contrast with

all people mitt romney george romney was chairman of american motors the fourth largest car company so romney senior turndown in $100,000 bonus after he told the board'' mack no executive needed to make more than $225,000 per year that would be 1.4 million of today's dollars. he turned that down over five years that is 20 percent of his pay. what happened?. >> at the basic level of the company when george romney was the ceo you had shareholders but there were

employees, governments all these different people with a stake in the company to be cognizant of their needs then along came the disciple in jensen has the of philosophy that the only thing that matters is the share price. to be a sophisticated economist with these analytics but business took this and said that sounds right.

so over 20 years a complete shift with the business roundtable and in the '70s talking about the stakeholders with shareholder value that is a euphemism so don't give a share to about anything except yourself. that is the idea of shareholder value there was a cultural shift with the loss of shame and celebration of greed. george romney's son never turn down a raise. that was just a cultural change once the other people

start to make tens of millions why should you?. >> this is interesting legislation and not just with those regular suspects but with bill clinton with the regulatory measures which you have spent describing as well-intentioned i am not sure that i agree but talk about there is so much good stuff you really have to read beholding so talk about stock options and what happened in the tax reform bill 1982.

>> when bush went to japan in 1992 as the election coverage he left with a lot of american ceos instead of trying to make more trade with japan so at that time they were making 10 times with the average worker made maybe 175 times now was up depending on how you count so to decide this would be a campaign issue to say we

will clamp down on excess co pay anything over $1 million. previously that clinton got elected and business groups started to lobby that said if the pay is connected with performance and then this is america we want incentives or tax incentives so through lobbying and various other mechanisms to get clinton to revise his position in the thing over $1 billion is that related and by the way since stock options or obviously related, you can

give as many of those said she wanted. -- you want. it is ironic because it would open the floodgates with the reconciliation budget bill fighting tooth and nail for the republicans this past without a single republican vote once that was passed the lawyers wrote the for performance you have to have a committee of this many people. but once you meet the test

it is automatically unchallengeable. we have average ceo pay. that just shot through the ceiling. did clinton ever her express regrets?. >> clinton didn't express regret over monica. [laughter] that was the attempt at low humor on my part. >> let's get to the specifics with a great chapter my favorite is collective delusion maliki.

-- delusions'. but to be insane the overcompensated that they are paid these sums just for doing their jobs but of remarkable businessmen but then to get to others we have never heard of these sova who is your favorite?. >> the numbers are astronomical. >> making 142 million, 102 million, 14 5 million, that is just one year. >> isn't like we said to is

the most egregious? these are the four people. and it is quite astonishing but if i told you to say yes , i heard of them. but none of them had a particularly good year. but as i go through this, a couple of them even this their own targets and then they had to adjust the earnings.

but my favorite to adjust for those things far beyond his control. one was an avalanche on mount everest. [laughter] with discovery communications this may have interfered with the film schedule i have yet to see a case where a company reduced earnings.

[laughter] >> you have to read mitt he added some programs like dirty jobs, and a river monsters. and then with job creation. and with those massive amounts of money to be innovators since a great job creators. >> there also creative geniuses. >> they are accounting geniuses but let me make a distinction with the founding ceos or even mark

zucker. that starts the company to reflect their dna they stay with it for a long time. and they pay themselves a lot. to me $81,000 a year. they make their money on their stockholders but share -- so do the shareholders so they are getting a great deal. but the ceos like myself

the average fortune 500 works 4.six years that his job. so how many are you really going to create? also the fortune 500 as a whole, as job creation does not happen of fortune 500 companies soviet idea that they are job creators. >> a yacht salesman or maybe some others. >> you are very modest.

>> i have a lot to be modest about. [laughter] >> but to take management advice from the ceo was the right place at the right time to avoid the wrong place at the wrong time. and then this is good vice for adolescents also. but before we get back to the funny part talk about bad damage. i have heard arguments about the things that are damaging the economy. with a disproportionate amount of money but i have never heard it described specifically as excessive

ceo pay starving corporations or doing something useful. >> so first day wastes tens of millions of dollars sold zero with employee morale when the ceo makes 500 times what you make it is very hard to listen that we're all in this together. [laughter] but the real cost is short-term focus we needed

the ability to collect a $30 million bonus in one year to achieve a certain goal that takes up all of your thinking space you will not focus on anything else. . .

70% of them are businesses so

it's not highly paid sportspeople and it's not movie stars that are skewing the economy and as business executives, the amounts they make are highly correlated with the top ceos are correlated with what the top ceos make. >> now we get to the alignment illusion. steve is a good writer and the alignment illusion starts a this. our four companies described earlier are overpaid ceos are for companies cherished alignment and all of its hearings was ubiquitous. one of the primary objectives of unitedhealth group compensation plan was to quote align the economic interest of our expected of officers with those of our shareholders. the three goals for compensation

was quote aligning management interests with those stockholders unquote. they claim to have made changes that quote strength in the alignment of our executive interest with those of our stockholders unquote. he boasted that quote our executive compensation programs are designed as a result of payouts that are closely aligned with the shareholder and therefore our executive compensation program resulted in payouts that were closely aligned with company shareholder performance. discover leap to proclaim their competition was designed to align the management of their stockholders. where does this group thinks come from? this is also a cultural question. why do people talk such gibberish? while they are pulling the wool over her eyes and engaging in what you do say at one point is that in some cases.

of shareholder values. >> these all come from the company profits and company proxies are written by pr so that's why they say we are aligned. everything is a best practice and everything they do as a best practice and they are aligned in what not so they are just used to this pr ees. how in the hell can you be aligned with the shareholders when you are giving a $115 million? [laughter] >> you have been around since, when were you ceo? >> i became ceo in 1987. >> if somebody had started talked about aligning or you started talking about aligning or lining your pocket, i'm sorry

, aligning your interests with those of the shareholders by paying yourself 50 million more than you did last year what would your board have said? >> well, my board on the company and they would have just said you are fired. this alignment, this comes a lot from the consultants who say these plans that we designed perfectly align with the shareholders. they perfectly align because we have given the ceo a tremendous amount of stock options and so this completely aligned to be the shareholder. they never mention that you pay for your stock and it goes down. if his goes down and by the way i use the mail pronoun because 95% of them are men and given what i have to say about them i hope you won't judge.

[laughter] so he's got a one-way bet and they called this alignment. it's orwellian. >> i'm glad you said it. have you ever heard of the nonalignment movement? you are aligned with the soviet union or the united states, france being one of them. >> india india was big. >> it makes me want to join the nonaligned movement if it's forming somewhere. one other interesting thing and i have a couple of more minutes for my question which you talk about in this is not occur to me. the compensation committee, the comp committee will argue we have to pay joe 50 million more than we paid him last year because some other corporation corporation -- and you say this is nonsense. there is no market in ceos.

this is a complete fiction. >> lebron james can take his skills and a basketball team, he will improve that basketball team said james we'll get to service. ceo is not like that. if you think of, to be a good ceo you need to know a tremendous amount about the company come about its personnel come its finances, it's marketing, it's competition on and on. that knowledge in those skills are worthless outside that company. so companies do not try in coach other company ceos. they almost never bid for another company ceo. ceo jumping from one fortune 500 company to another happens once a year. 2% of all ceos of all fortune

500 ceos were previously the ceo of a public company. 75% of them were internally promoted because they have this knowledge and skill so nobody is bidding for these seats. so that's why these peer group thinks are so ridiculous. you look at the peer group a red united health. he had two jobs come he worked for two people whose entire life, the accounting firm arthur andersen and united health so who was in his peer group? google, microsoft, goldman sachs , general electric. i mean the idea that google is going to hire some guy who does accounting and maybe health care

, and it's absolutely shameless and all they talk about, you go to the proxy and it looks like chico these guys are pretty offensive and -- all of this verbiage and the whole basis of this thing is we have got to pay him what his peers may exist there is a market. this is in the market, this is a racket. this is just a rigged system and i think i say in the book it's as much, it's about as market-based as paying soviet commissars under brezhnev. >> i'm in total agreement with this. we have two more minutes to talk about and i don't know if you are going to ask for solutions but i would like to hear about your solutions because you have

a chapter at the end, an alarming number of quotes from bernie sanders. it can't make you popular among your peers. >> i don't think that's going to make me popular. i'm not going to run for anything other than the business roundtable. >> talk a little bit about your last chapter without giving it away. there's one main prescription. >> i say for 35 years you have had newspaper editorials outraged. you have the fcc mandating disclosures and hearings. whatever you do the ceo pages keeps going up. nothing is going to change this except whacking them on the head there's not going to be reform by themselves. they are very happy doing what

they are doing. my blunt instrument is something stolen from major league race ball the luxury tax and we are going to have a luxury tax on all ceo pay in any way shape or form. there's a county this is this really isn't paying so include all pay and anything over $6 million there's a dollar for dollar luxury tax. i think this would stop it. i think it would end it. politically in the age of trump, you have to sit somewhere. >> last question and you can ask them to enlarge on this because he is adjusting things to say about it in the book. is there a cultural difference between the united states and

the europeans because i just happen to pick up the financial times the other day and i saw the headline harrison ford shareholders reject pay rise for chief executive fallin. fallin is having a bad year and i don't want to give him what he wants. our european companies comfortable with their ceos are there directors more vigorous than ours? >> they pay their ceos last for average work. in europe i think it's around 50 and in england, it's multiple. ercis 355 and five 50's with the average worker makes. europeans are probably between 50 and 100. what the laws are in each country whether you need shareholder approval or not i don't know. here you have a mandated say on pay vote which makes their

friends. that was part of dodd-frank. you have to have a say on pay every three years for. the hedge funds always vote for it. the biggest additional investors pay for it and so you get maybe three or four a year that are so outrageous that people get upset but 98% get immediate say on pay and it goes through. >> okay. don't forget to talk about aaron rogers. we have to talk about aaron rogers but let's go to the question and remember wait for the microphone to be handed to use a c-span can record your question. cody.

>> why don't the people listed on the corporate boards do anything about this? it can be in their interest, this high pay. >> i believe it is in their interests. i have learned in my life but if you expect people to act in their self-interest you will seldom be disappointed. when boards do this is clearly in their self-interest. first of all you are not going to be invited to join another board if you are darn -- known to be a stickler on pay and it just so happens that ceo pay him board pay are highly correlated so as a ceo makes more, you make more but actually most people i don't think are doing it for the money. i think they are doing it first out of lightness because this is the way it's done.

the consultants told us to do it this way and by the way the really smart guy, and a ge they do it this way too. so, you know we are doing what they really smart guys are doing and we have these great consultants and they believe all of these -- i go into the delusions. they really believe that we pay for performance and we know how to get it. look at their performance and look what they are paying and they say gee we are not getting it. but they continue on the board. >> steve in terms of unintended consequences you talk about the rise of the consultant class at a time when the sec first

require disclosure of pay. before that it was a black box so the sec said our shareholders out there should really know what the company is paying these people so take the top five people and published all the disclosure on their pay. could you comment on that? it really helped the elite a lot because now you know everybody's pay and now when you wanted to pick your peer groups it's very easy to decide who is in your peer group. the fcc, the sec to then disclosure is like tax cuts are two republicans. whatever it is more disclosure and it hasn't worked. i mean they have been mandating

more and more. now they have mandated disclosure amount, what other business consultants are doing with the company and things like this. the pay goes up another 15%. >> steve m. wondering if you had come across any ceos or enlightened boards that ran counter to this? >> i know of some. a friend of mine, a person who was once a mentor to me and i mention him in the book, who is the head of the bank m. and g. bank and m. and g. stock has been the best stock in years. he pays himself or his board pays him a little less than $3 million which i think they are getting a very good deal for it.

he is kind of the old school. there is no reason that anyone should be stealing money from the shareholders but he is the exception and the other sections are the founders that i've talked about. i didn't do much research on what wards were responsible but it seems when you look at the list of the 500 highest-paid ceos you can say very few are. all are saying well this is the way it's done. and everybody does it this way. as a matter of fact we wouldn't have to pay this guy so much of the one for all those other companies throwing money at us. >> have you calculated what the impact would need on your dollar for dollar luxury tax on their system of capitalism?

>> that dollar for dollar isn't really the important issue. just that dollar for dollar. what's important is if you got rid of this whole system you would get rid of this highly short-term focus. that may give you one example of the harm done on short-term focus. ceos are very concerned with their stock price keeping their stock price high when they go to cash in their options. in the last 10 years fortune 500 has spent $4 trillion buying back their own stock. that's 50% more than they paid to shareholders in dividends. at the same time they cut are indeed by% and make that investment and equipment by 50%. so basically you have american industry eating the seed corn

because of this system while the amount of dollars you would raise is not significant. if you had $4 trillion being reinvested in america rather than used to be capitalized i think that would make a huge difference. >> i'm curious about companies like the one you mentioned were the ceo takes a symbolic salary like 1 dollar a year or 80,000 a year. is there a measured difference in the performance and company morale? >> well you know the companies i know of to do this are the high growing, the amazons, the googles, facebook so those are three that i know of. i'm sure there are places where a guy took 1 dollar year the company failed but certainly i think at an amazon or facebook

if you're working for amazon and you can see the just these those pays himself a $1000 a year and i know he made up promise with amazon but they have a pay system that i recommend. they give nothing but a very low salary to even the senior people and give them a lot of restricted stock. which they don't get their hands on for a long time so they are about as aligned with the shareholders you can be. i would think it would have to be, but i have no data on that and nobody keeps data on this ceo himself at 1 dollar a year. >> when it comes time to write the second edition would she bring to the attention the united states marine corps? they are very good at what they

do. the commandant commandant of the marine corps gets 50 times more, they get the same health care in the commandant gets the same health care in the same food basically but the spread in pay is not significant and they do a very good job and what they do. you could question their mission though. i in fact pick up on that analogy in the book because giving a ceo and annual bonus based on achieving certain things makes as much sense as giving a general in wartime a bonus based on certain things. think of its october of 1942 and you have got to think okay what are we going to bonus general patton on this? i mean that's what you are doing with the ceo.

you don't know what's going to go on. you don't know what events are going to happen and this idea of a bonus we don't have anyplace else but business. the clergy does not get honest on the number of souls they save the military works very well with the fix pay scale. this is the same fixed pay scale that america used to have. paying as ceo 50 times more was high they used to be this ceo as late as 1978 the ceo made 20 times what the average does now so historic leg it's not needed. you have a much more cohesive organization when the ranges are much tighter.

>> the gentleman back there. >> have business schools played any role in what you're talking about about with expanding ceo pay? >> i just bought a book and haven't finished it triggers a new book out at harvard business school which is where i studied and i know when i was in school, i got out in 68 and the cases we studied indicated smarts take care of all the stakeholders and i take it that is not the case today but i don't know. when i finished the book i will let you know. but it just came out a week ago. that's my excuse. >> you mentioned something that i'm too young to remember which is bill clinton campaigned against, and i believe the

phrase you used was through lobbying and other mechanisms and i'm just wondering if you can expand on other mechanisms. >> i know there was lobbying. i don't know what was said privately to mr. clinton. i expect something was said but i don't know and i probably shouldn't have implied that there was something nefarious going on but although given the players -- [laughter] >> the mechanism by which --. >> i think it's the standard lobbying you have in washington where the lobbyists are already paying for access. that's what they have paid

oregon and having paid for access they are able to make the argument that look this would hurt american industry. we have got to reward performance and the got to have the initiative and we have got to reward innovation. these guys are job creators and of course the other side doesn't have access. the other guys can't say none of that is true. so i think it's kind of the standard model. >> it has been well-documented that i only earned $100 to play a ceo for one day in the movie 100 years of people which made it all the way to youtube. [laughter] >> that's a hard one to follow. [laughter]

>> i will ask one more question. if a free market economists and milton friedman, somebody like that were here right now our friend jeff, is he still around? is he still spreading his wisdom and? what would they say now to you? c they would say i'm a trotskyite. >> would they still insist that the market is a rational mechanism and self-correcting etc., etc.? >> after 2000 that's a tough argument to make. i think that whole model of a rational economic actor has been phrase in academia but the whole idea of behavior economics, we are not rational, we are all crazy and the idea that you can

model an economy based on rational act there's is voodoo. >> steve i would have thought the best examples of egregious ceo pay were in private companies rather than public companies and you are saying that these egregious pay levels in public companies were one is stealing from shareholders and the other is a big gap from the shareholder which seems to be the match -- much bigger problem because the shareholder does have the ability to change ceo pay. not easy but the reason the private equity claims, one big reason they claim to be successful this because they can properly compensate a really talented ceo and they do think of ceos more like lebron james been an interchangeable none

that in the accounting department. >> i addressed that in the book and the one place i have seen huge ceo pay workers in private equity and the reason is you all know the company is going to be sold. when you have a single goal and a single date financial incentives can work very well because they are not getting a bonus for earnings per share are having completed this or having completed that. they are all aligned with the private equity partners, their investors and everybody wants to maximize sale on termination date which is usually five to

seven years. i think in those circumstances it can work area well and i don't think there's anything private equity people make. as a matter of fact they have made a lot of money but it's a very healthy contribution to the economy. i don't think we can begrudge what hedge fund managers make. they make money because their clients are fools. [laughter] if we legislated against that half of american industry would the done. [laughter] >> one more. okay, well this ceo pay machine machine -- "the ceo pay machine" i steven clifford i urge you to read it and for fun and to defend yourself against predatory ceos and companies that might actually destroy your

shareholder value their much ballyhooed shareholder value and i will remind you steve is going to sign books over there at the table and i'm sure he will dedicate one to your favorite ceo. [laughter] if you asked him to so thank you very much for coming. [applause] [inaudible conversations] [inaud