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Lord Brown, Chief Executive of BP will no doubt struggle to cope with life as his mortgage payments become due after with his paltry £63 million ($123 million) pay off.

http://www.dailymail.co.uk/pages/live/articles/news/news.html?in_article_id=428521&in_page_id=1770

A little throw away line in the Daily Mail report that grabbed my attention: ‘The entire potential pot of £63.1million would be enough to pay the annual state pension of more than 14,445 senior citizens.’

At the same time I read that the government cannot afford to pay for Dementia drugs for some old people who desperately need them. I am sorry if TP Blog is not the place to have philosophical discussion but this sort of thing gets me more frustrated with each passing announcement and they seems to come more frequently than they did. I am sure Lord Brown who spent his entire career at BP deserves to be properly acknowledged. I have no problem with that. Good luck to him.

However I somehow can’t help thinking there is fairness and then there is another state called ‘taking the p**s.’ (Forgive my English slang)

Posted by Trevor Gay at January 15, 2007 9:17 AM

Markets work only when there is transparency or equal information available to all participants. One aspect is that pay packets of execs are done without equal information available to all participants (i.e. the shareholders). Making all details of the pay packets publicly available with company shareholders able to vote down pay packets they feel are bad.

Posted by Simon at January 15, 2007 10:06 AM

1. In the new Seanworld as benevolent dictator I decree health and wealth for all that follow wise leadership = their own heart & soul

2. And the Mexican invasion class of front-liners shall build the southern border wall fueled by all the hi-protein tacos they can scarf

3. New middle class must become minimalists, thereby -

a. wealth assured because less is so much more
b. health benefit in that all are newly lean & serene
c. corporate-world becomes their lapdog since they vote with their feet & dollar - never buying Pfizer, BP, Home Depot, Mexican

Posted by sean_world_2.007 at January 15, 2007 11:57 AM

I think a lot of this goes back to your points on leadership and its detachment from the average worker. In my opinion we're regressing into an almost feudal model except that more and more of the merchant class is falling to the status of serf and they're starting to get agitated (ok, pissed off). Unfortunately, most of the nobles are blinded by their own personal success, income and hubris. Revolt is near if not already under way.

Posted by Andrew Hayden at January 15, 2007 12:26 PM

Simon and Andrew--let's see some facts. The merchant class falling to the status of serf? Are you serious? Markets only work when there is transparency? Really? Maybe the underlying anger about the fact that someone else is making a ton of money and you aren't is blinding all of you to the facts. Trevor, did the British gov't pay the BP exec that 63 million? If not, then why connect it to the lack of drugs for seniors? The reason the British gov't can't fund it's own programs is a lack of revenue due to an economic model that is based on falsehoods--i.e. socialism. If the British economy were to get off it's collective arse and get moving, tax revenues would climb and the gov't would have more money for programs. (Basic econ based on FACTS.) How much actual revenue for the British gov't--not to mention the US gov't--has BP generated through jobs, taxes, and etc? Over the years, it has to be billions, if not more. C'mon guys (Tom included), time to get real.

Posted by Mike at January 15, 2007 2:10 PM

Hi Mike – If by that you mean our UK healthcare system would improve by getting our economy in order on the lines of your US economy let me remind you of some ‘facts’ about your own US healthcare system in your ‘non socialist’ economy :

There are over 48 MILLION Americans with NO health insurance.

There are approx. 32 million others who are underinsured.

In the past four years the number of uninsured rose by 6 million people and more American's are forced each year to file for bankruptcy due to medical bills.

Source - http://americanhealthcarereform.org/

If that is how we end up with in the UK then I would rather stick with what we have now in our ‘socialist’ model. Our most ill, vulnerable and needy do still receive free of charge urgent and essential healthcare as well as non-urgent care. I suggest that is a good testimony for a nation and one that I would rather see than a system where almost 1 in 4 of our population do not know whether they can ‘afford’ healthcare – that is frankly scandalous in the country that is supposedly the most powerful in the world. In the words of the famous old parable ‘in the land of the blind the one eyed man is king.’

Our healthcare system may well be screwed up but not screwed up as much as your system Mike.

One judgment we can make about how much a nation cares for its people is surely how we care for our most vulnerable and unwell. If that proposition is accepted then I am proud that we in the UK still have free care at the point of delivery for every citizen regardless of age, creed, gender or financial status. Sure that creates inequalities and not everything is affordable but at least we have total coverage for healthcare and not a situation where ‘outliers’ must be praying they never become ill for fear of being unable to 'afford' treatment. I have never suggested on this Blog that the UK National Health Service is perfect – far from it - I am one of its biggest critics. My original point was not intended to be an academic argument about the state of our economy it was merely that there is fairness and then there is taking the p**s. If we reward failure through massive pay offs how can we expect workers at the front line to feel valued and feel they are treated in an ethical way? If ‘getting real’ means insulting the intelligence of workers at the front line than I would rather stay in my idealistic unreal world.

A hearty discussion! Thank you!

Posted by Trevor Gay at January 15, 2007 5:03 PM

To the extent that there is a decline in social mobility, it is strongly related to the excessive reverence for higher education. Credential-worship has reached insane levels, particularly as pertains to credentials from "elite" institutions. The effect of all this is to deny opportunities to many eager and qualified people.

Smart companies will devote some effort to finding people from sources other than the K-12-to-grad-school conveyor belt. Military vets represent one such source, though by no means the only one.

Posted by david foster at January 15, 2007 5:05 PM

Tom

Interesting blog... My favourite bit of economics is "externalities"... My take on these particular externalities (positive and negative)are we are locked in pretty much by the emerging influences of mass collaboration, mass customisation, mass outsourcing. etc. The positive externalities we all share are the macroeconomic benefits of cheap labour in China, India, Korea, etc. which fuel the discounts at Wal Mart, Home Depot, etc. In China labour costs are held down by currency options, government subsidies to factory owners (often Western companies), etc. The deflationary effects of this helps to hold down US and UK interest rates at a time of massive spending on a War in Iraq, beginning of "peak oil" pricing, environment taxes, etc. The general standard of living is higher than it otherwise might be. The negative externality is the socio-economic effect of "compression" of salaries or wages for teachers, nurses, soldiers, etc. The people who help us raise our kids, help us get well, and help us by keeping our homelands secure. The big picture is horrific. The emergence of "the working poor" in greater and greater numbers - go figure! Also, as you allude to, a squeeze on the middle classes. As always this missive refers only to the tip of the iceberg and what I can see of it....

The Eagles said it so much better than I possibly can in their classic song - some of the words go something like this.

"Welcome to The Hotel California its a lovely place, what a lovely place (later in the song) some dance to remember some dance to forget (still later) you can 'check-out' any time you like BUT you can never 'leave'...."

Cheers
Richard.

Posted by Richard Lipscombe at January 15, 2007 6:05 PM

The widening gap between rich and poor, and the continuing squeeze on the middle class, are, indeed, problems that we don't seem to be taking all that seriously on a policy level. The question becomes, is democracy sustainable without a secure and stable middle class. Or, to do a bit of paraphrasing of Tom's observation: is "a perpetually pissed-off middle class... dry kindling for extremist "movements"?"

But, to borrow another phrase that Tom used, this seems to be just one piece of shit that is hitting the fan. Another is the fundamental question of - even with more income parity between the top and the bottom - whether we can and should all continue to consume far more "stuff" than we need. (There's sometimes a gem in sean's_world, and today's is "New middle class must become minimalists, thereby wealth assured because less is so much more.") Do we all really need 5 bedroom/4 bath homes? Flat screen HDTV in every room? I'm as big an offender as the next guy - I live in a condo that seems "too small" for two people but which is, in fact, as large as the house I grew up in with seven people. But I have to say, while our never-sated consumer lust never seems to end - and at times it seems like it better not, since it props up the economy - it doesn't seem economically sensible or environmentally defensible at this point in time.

Posted by Maureen Rogers at January 15, 2007 10:42 PM

Doesn't the fact that these people accept this money when failing to deliver mark them out as unsuitable for leadership

Posted by PaulH at January 16, 2007 3:22 AM

I thought the discussion could do with some light relief: - enjoy! – Keep smiling and warm regards from Trevor.

Billy was at school one morning and the teacher asked all the children what their fathers did for a living. All the typical answers came: fireman, policeman, salesman, chippy, captain of industry, doctor, etc. But Billy was being uncharacteristically quiet and so the teacher asked him about his father. My father is an exotic dancer in a gay club and takes off all his clothes in front of other men. Sometimes if the offer is really good, he’ll go out with a man, rent a cheap hotel room and let them sleep with him. The teacher quickly set the other children some work and took little Billy aside to ask him if that was really true. "No" said Billy. "He has just left his job as Chief Executive of a multi national company with a 200 million dollar pay off but I was too embarrassed to say"

Posted by Trevor Gay at January 16, 2007 6:08 AM

1. Trevor - the "facts' you site are faulty - USA is vastly health care insured to the max - there are special interests that - like you promote more TAX on citizens in the name of health care - .org's abound with lazy thinkers that claim lack of health care

2. England obesity & neglect of infants & seniors is the main challenge across the pond - Brit standard of living and quality of life radical dives - need free enterprise & anti-socialism boost to keep pace with Ireland, USA, Japan Inc.

3. USA health care is EVEN provided for illegal aliens in the 10's of millions - mainly Mexican illegals - USA must trim this and other socialist FAT

Posted by sean_USA_healthful at January 16, 2007 9:33 AM

Richard, I agree with everthing you said. My problem is what you didn't say. My concern re this issue is mostly not "reality" and economis analysis, but perception--economists are notoriously weak on this. "Feels fair" or "grotesquely unfair" is what brings us the likes of Hugo Chavez.

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Posted by tom peters at January 16, 2007 9:40 AM

The under insured and uninsured in the US are taken care of. To wit: it is law in most states that hospitals treat everyone, regardless of their ability to pay. Those of us who are insured understand that one of the key reasons our insurance premiums are high is that we are paying for the care of those who are uninsured. Many states finance health insurance for children, (in Michigan it is called MICHILD). It costs the parents $5 per month or $60 per year. People choose bankruptcy in the US as a means of escaping their obligations, not as a last resort--just look at the unsecured debt most are carrying as well as the easy bankruptcy laws. Many pharmacies in the US now give away antibiotics for free--no strings. Don't make the mistake of equating lack of insurance with lack of access to care.

None of which has to do with my post, Trevor, which boils down to what has the money paid to BP's CEO (or any CEO) got to do with it? It isn't like that 63 million had to either go to medicine for old people OR the CEO of BP.
Business drives the ability of the state or private enterprise to provide services and gov't is a poor substitute for business in this regard.

Posted by Mike at January 16, 2007 9:48 AM

Mike, business, for better or for worse, is the center of the universe. It was British business excellence (and that new middle class) which allowed the Brits (as I said, for better or for worse) to pay for Lord Nelson's ships.

Obviously the same holds today--it was overwhelming American economic might, not the CIA (with all due respest--and I mean that) or the B2, which brought the end of the Soviet Union

Posted by tom peters at January 16, 2007 10:06 AM

1. Richard - I disagree - 'working poor' never had it so good in Free World - big box stores - everything is less expensive & their standards raised

2. Mike - totally agree - city, county & State's pick up the gap & tab for health care - & emergency rooms may deny no one - even illegals

3. Minimalism rules - stay lean & serence & wise consumerish = flourishing & wealthful lifestyle

Posted by sean_USA_healthful at January 16, 2007 10:36 AM

Yes, Tom, that was part of my point. I'm trying to figure out why it matters if a CEO gets a huge paycheck--unless he or she ruins the company and is paid to go away. I do not subscribe to the argument of inequality of economics currently making the rounds in academia and beyond. (That argument should be changed to deal with the inequality of OPPORTUNITY.) Trevor made it sound like there was a choice of who to give the money to and it was given to the BP CEO instead of poor old people who need medicine. That's an argument starting from a false premise. And, yes, business is THE engine driving the ability of public organizations and private enterprise to enrich and develop society as a whole. I think people like Lou Dobbs and Barney Frank are trying to make some kind of political hay over the "outrageous" pay of executives. They are pandering to an audience who say to themselves that "some rat bastard is getting millions for nothing, blah, blah, blah,...and I'm not getting mine." That is pandering to base emotions and has nothing to do with the facts. Please don't fall in to that trap, Tom.

Posted by Mike at January 16, 2007 2:46 PM

Mike – sorry for confusion. I was highlighting the pay off to the CEO in the same sentence as old people not getting drugs merely for illustrative purposes. I was trying to make a statement about morality when one individual gets all that money, for arguably screwing up BP, while 20,000 people will die today across the world – mainly children – due to extreme poverty.

Many will say mine is the rationale of a ‘woolly minded liberal thinker.’ As I am not academic enough to argue my point further I will leave it to the words of Archbishop Dom Helder Camara who summed up what I am trying to say so much better than me. He put it this way; “When I feed the poor, I am called a saint. When I ask why they are poor, I am called a communist.” He was assassinated a few days later.

Posted by Trevor Gay at January 16, 2007 3:17 PM

I wonder if a lot of this "wage gap" doesn't come from a change in the way people go about work. Back during Nelson's time, a lot of the "middle class" owned their own businesses, working for themselves, or at least worked in a small business. Now, we have the megacorps where a large number of people work -- businesses that don't (and can't, because of their size) value their individual minions as much as a small business.

Looking at the term "wage" in the original article sets off this discrepancy much more. You can't really compare the wages a worker generates at a megacorp with the income of the middle class tradesman or shopkeep from years back. The comparison should be made with the store owner, consultant, or craftsman of today... many of which can show continually increasing income while the wages of the wage slave stagnate.

Posted by Chris Hynes at January 16, 2007 3:19 PM

"(large) businesses that don't (and can't, because of their size) value their individual minions as much as a small business"....I don't think this is really true. There are huge differences from business to business, of course, but in many small businesses the income and status difference between owner and employee is very wide, and is much less bridge-able than in larger enterprises.

Remember, Scrooge & Marley was a small business.

Posted by david foster at January 16, 2007 3:47 PM

I don't know everything about the state of BP, but I know that since they bought Amoco, BP has embarked on an energetic program to remodel and upgrade their service stations in the US. Many that were neglected and disheveled are now bright, clean, and well managed. This has arguably made the experience for many customers better and will generate future revenue through WOM and repeat business. So why was this a bad idea and why label the outgoing CEO a failure?

And for those of you preparing to lay it on declining market value, please refrain. You are probably guilty of blaming CEOs for being "slaves to shareholder value and the next quarter's numbers" already and you can't have it both ways.

Posted by Mike at January 16, 2007 7:34 PM

Tom
One of those externalalities is what I call "leveling". It is our human nature to place a boundary on what is acceptable. A good example of the power of "leveling" is when the leadership of American Airlines voted themselves bonuses and raises while at the same time asking the pilots and stewards to take a pay cut or "the company will go under". The airline employees retaliated by voting against the pay cut...thus ending the company....rather than accept the behavior of the leadership. Outcome...leaders were "retired" and the bonuses were not paid out. People were willing to kill the company rather than accept such foolish behavior from their leaders.

People will even die to "level" the system. A truely powerful dynamic.

Posted by Phil Clark at January 19, 2007 11:08 AM