Golden Parachutes Denounced as “Social Plagues”

Cross-posted from The Global Sociology Blog.

Via Le Monde , the Ministers of Finances of the Euro Zone have issued strong statements regarding corporate executives compensations, calling them “scandalous” and they are looking at ways to curb such excesses.

Jean-Claude Juncker, the President of The Eurogroup (an emanation of the Euro zone for coordination of different countries in economic and financial matters) attacked in particular the golden handshakes and golden parachutes, and suggested their extra taxation. Currently, such bonuses are non-taxable. Mr Juncker called them a “social plague”. With this move, the countries of the Euro zone are following the example of the Netherlands, which was the first to implement such measures. According to Mr Juncker, it is a matter of fairness: the European Union, and the European Commission are constantly calling for fiscal responsibility and for limits to wage growth in the name of preventing inflation. To tolerate extravagant financial packages, especially when companies are not doing well, is incomprehensible and threatens the legitimacy of the whole system. This is especially the case as purchasing power has been stagnant across the European Union.

According to Le Nouvel Observateur , the Ministers would wish to make the European Union the model and the international norm in terms of financial regulation of excessive executive compensation. Belgium is even considering a cap on executive compensation (cue the prophets of doom whining that investment will leave Europe unless we allow executives to enrich themselves tremendously even if they perform poorly). So it Germany. In several Euro countries, some executive compensations jumped over 40% since 2007.

Welcome to the world of the Transnational Capitalist Class : Let me recycle what I have stated before about the TCC.

Who dominates the global system? Is there a dominant class at the global level? British sociologist Leslie Sklair (2001) coined the expression Transnational Capitalist Class (TCC) to describe such a dominant category in the global system. Sklair uses the term transnational to indicate that this class does not derive its power from any particular state or country but precisely from its cross-border capacity to mobilize different forms of capital (economic capital, such as financial assets; political and social capital such as power, influence and connections; technical and organizational capital such program design skills, drafting of trade treaties; cultural capital such as the production of content to promote the consumerist ideology, advertising)

The TCC is composed of four different groups. The corporate fraction is the dominant category in the TCC. It is composed of corporate executives of the major transnational corporations as well as major owners. This fraction’s power derives from its enormous economic and financial power. It is profit-driven and seeks to extend its dominance globally. The other fractions (state , technical and consumerist ) are akin to a supporting cast and provide other forms of capital necessary for the global reach of the global capitalist system on top of which the corporate fraction sits.

Leslie Sklair’s Four Fractions of the Transnational Capitalist Class and their Types of Capital:

  • The corporate fraction: Executives from transnational corporations and their local affiliates – Economic / Financial Capital
  • The state fraction: Globalizing bureaucrats and politicians – Political / Social Capital
  • The technical fraction: Globalizing professionals – Technical / Organizational Capital
  • The consumerist fraction: Merchants and media – Cultural Capital

The combination of economic, political, technical and ideological powers translates into the creation of a global system with global capitalism as dominant force. Based on this, Sklair outlines four basic propositions that define the actions of the TCC:

“A transnationalist capitalist class based on the transnational corporations (TNCs) is emerging that is more or less in control of the processes of globalization.”
“The TCC is beginning to act as a transnational dominant class in some spheres.”
“The globalization of the capitalist system reproduces itself through the profit-driven culture-ideology of consumerism.”
“The transnational capitalist class is working consciously to resolves two central crises: (i) the simultaneous creation of poverty and increasing wealth within and between communities and societies (the class polarization crisis) and (ii) the unsustainability of the system (the ecological crisis).”

The existence and power of the TCC is made particularly visible every year when the World Economic Forum (WEF ) meets at the exclusive ski resort in Davos, Switzerland. The WEF is an organization based in Geneva (Switzerland) that comprises business leaders (such as Bill Gates and the CEOs of the largest transnational corporations), past and present political leaders (such as presidents, prime ministers and other government officials), select intellectuals (Chancellors and professors from the most prestigious universities), journalists, and, sometimes, members of non-governmental organizations, in other words, it is a gathering of the TCC.

At the annual meeting in Davos, under very tight security, this elite discusses the economic and political issues of the world but it is also an opportunity to network and cultivate social capital as well as conduct business and shape policy on a global scale. The membership of the WEF clearly shows its exclusive nature: the vast majority of the membership is from the North America and Europe, with some representatives from developing Asia. One thousand companies, earning over one billion dollars are also invited, as long as they pay a $250,000 fee. Until 2001, there were no women represented to the board. Panels may be public but meetings are held behind closed doors.

The Davos meeting clearly illustrates that the TCC is indeed a class: a category of people who may come different parts of the world but think alike and share a common view of what the world should look like and what economic policies should be implemented. They all share a neo-liberal or globalist ideology.

Apart from the World Economic Forum, the TCC also exercises power through its membership in think tanks (such as the American Enterprise Institute) or corporate associations (such as the World Petroleum Council for the oil industry), and its control of the mass media (very large media conglomerate own most television channels, radio stations, internet service providers as well as book publishing companies), and countless charities and foundations as well as University boards.

As such, the TCC truly functions as a class, promoting its own interests through the various means at its disposal. It is quite new to see some pushback from the political sphere. Along with the oh-so mild questioning of the Washington Consensus I posted about yesterday, maybe there is something going on. In the context of the credit crunch and the food price crisis, we may be witnessing the strongest signs so far of a crisis of legitimation from above.

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