, historian
formerly
of Harvard and more recently with the City University of New York.
Lundberg - The-Rich-and-the-Super-Rich-by-Ferdinand-Lundberg
Only 9 per cent had sires who were farmers, and 15 per cent laborers.
The fathers of 8 per cent were owners of large businesses, of 15 per cent were major executives, of 18 per cent were owners of small businesses, of 8 per cent were minor executives and of 3 per cent were foremen. 19
This finding was widely at variance with the distribution of occupations in the population as of 1920, when 47 per cent of all adult males were classified as laborers. If big business leaders had been 47 per cent the sons of laborers, the mobility rate for laborers would be 100. As it was it was only 16, while that of sons of farmers was only 40. The upward mobility rate for the sons of owners of small business was 360, of sons of professional men 350 and of sons of foremen was 133.
Most significantly, the upward mobility rate of men whose fathers were business executives or owners of large business was 775, nearly eight times the statistical projection. The sons obviously either had friends at court or got proper coaching.
As the University of Chicago sociologist W. Lloyd Warner sees it, the "royal road" to high executive success was higher education. Whereas in 1928 only somewhat more than 30 per cent of big business leaders had a college education, by 1952 the quota was nearly 60 per cent. In 1928 only 15 per cent had some college study but by 1952 20 per cent had at least been to college. 20 Of 505 business leaders as of 1952 as many as 216 went to only 14 different colleges, and these same 14 colleges were mentioned 87 times as the ones attended secondarily, either for graduate work or in transfer. Yale, Harvard, Princeton and Cornell were named most often, with Harvard as the dominant choice for graduate work. 21 Very nearly a third went to Harvard and Yale as undergraduates or graduates.
In no fewer than 62 cases the men went to a second "select" group of 10 colleges, of which Northwestern, Pennsylvania State, Stanford, Wisconsin and Western Reserve were tied for first place. 22
"Education has become the royal road to positions of power and prestige in American business and industry," says Warner. "That this royal road is open to all men is given ample testimony by the large number of educated men from the bottom social layers who appear in our sample. " 23
That this royal road, so optimistically saluted, may not in fact be such is suggested by the continuing merger movement and the steady progress of computer analysis. Decision making, whatever its role in the past, is inevitably being narrowed in scope by the increasing refinement and elaboration of computers; live decision makers, whatever their role in the past, are becoming increasingly dispensable. Furthermore, the merger movement is continually reducing the number of top executive posts. Every merger, while it does not necessarily reduce the total of vice presidents and executive vice presidents, does reduce the number of chairmen and presidents. If all companies were combined into a single company there would be places for only one chairman and one president, and at most twenty-five members of the board.
That education is not the true gateway to the "royal road" is shown by the concentration of elite schools, long the special wards of the propertied. These schools,
eclipsing others, produced most executives because they were most patronized by the upper classes. In view of the fact that sons of members of the business elite, owners or big executives, were disproportionately represented and showed the highest index of upward corporate mobility, it would appear that belonging to the business in-group and the socially related professional group was a more significant factor than level or place of schooling in obtaining big-business position. Sons of owners, executives and professionals as a matter of course are more likely to go on to college, particularly to elite colleges, and after that into the higher executive posts. True, as Warner shows, men of lower social origins can and do make the grade, but in far lesser proportion than the incidence of low social origin in the population. Otherwise put, those who are already in at the beginning are more likely to be in at the final reckoning.
The typical business leader of the 1950's was 54 years old, had been with his firm 24 years, achieved his high position 24 years after entering business and had held his job for almost 7 years. Most men began business between age 21 and 22, freely shifted jobs and companies until about 29 years old when they joined their permanent firms. Typically, the man was 45 or 46 years old when he clearly emerged as a top dog. 24
But the longer his period of schooling the quicker he made it to the top. Graduate students made the very top in 19. 9 years, college graduates in 22. 9 years, college dropouts in 24. 5 years, high school graduates in 27. 9 years, high school dropouts in 30. 6 years and grade school products in 31 years. 25
So, the more schooling the successful entrants have (or the more affluent early circumstances) the quicker they make it to the top. At any rate, neither education nor in- group standing retard one in his ascent.
In beginning occupations, 43 per cent started as clerks and salesmen, 24 per cent as professionals, only 14 per cent as skilled or unskilled laborers. "Few at any point in their careers were entrepreneurs in the sense of owning or establishing their own businesses. Also, while there have been a number of cases of men moving from top-level military positions into key positions of late, these form only a minor proportion of the total business elite. " 26 So much for Mills's switchovers from the military to the corporate circuits.
The Horatio Alger hero, as Warner notes, is not very much in evidence.
"Careers are built largely on formal education, acquisition of management skills in the white-collar hierarchy, and movement through the far-flung systems of technicians and lower-level management personnel into top management. Traces of the legendary patterns remain, and spectacular examples of the type exist; they tend to be unique. " 27
Upward mobility toward the elite corporate level, Warner found, was especially marked in the area of marriage because most business leaders in all categories married above or below their levels of origin. Those of laborer origin married most frequently at their level of origin, 42 per cent; big-business people married next most frequently at their level of origin, 35 per cent. Professionals and white-collar people, exogamous at 77 and 81 per cent respectively, married most frequently outside their levels of origin, but nearly 20 per cent in both these cases married into the big-business class, took to wife a tycoon's daughter.
When a man marries above or below level of origin--and most of all categories did-- there is upward social mobility toward corporate elite status involved in marriage for the man or the woman. As the leaders all have elite status, it matters not how they got it, although women born below the elite obviously got there only through marriage. A woman is either in the elite to begin with, marries into it or marries a man who drags her along into it. 28
People who make it to the top or are born into the top are mobile in non-social ways. They are, first, geographically mobile, easily moving around the country from place to place. They are functionally mobile, readily adapting to a considerable range of jobs in which Warner detects much special educational stimulus; they are adaptable men. Those in the birth elite, however, tend to be less conspicuously geographical gadabouts.
External signs of steadiness and "stability" were most noticeable in the birth elite. The others, at least early in their careers, were more akin to rolling stones, willing to switch jobs and locations.
The number of men in the same firm as their fathers, compared with sons of the elite who achieve high position in other business organizations, is relatively small. There can be no doubt that each group of men was advantaged by being born to high estate. Only a few were directly aided by extra privileges and financial assistance; but the immediate factor of being born to families accorded high rank by the community provides such fortunate men with social and economic advantages, such as being in the higher levels of prestige where the powerful are, going to the "right" preparatory schools, having the right social relations and clubs and fraternities in college, and going with and courting young women of their own social set, knowing what to do and not to do (while the parvenu by trial and error is struggling to learn that there are such ways). They get a head start in life that can be overcome only by hard work, grim determination, and watchfulness of personnel offices, or the eager quest of great corporations for young men of promise. The birth elite are advantaged because their families learn "superior" values, goals, and standards by living in the subculture of an upper class. Their earliest adaptations from infancy on--nursing, weaning, cleanliness, likes and dislikes, admiration or dislike of intimate figures about them, later childhood goals and ambitions--are set within the learning maze of a "Superior" family. 29
It may be hypothesized that there are far more heart attacks among the nonelite upward strivers than in the birth elite: the Horatio Alger boys who never made it, dropped dead on the ten-yard line. I have found no studies of fatal illness in the candidates for success on the corporate ladder that compare the rate of such illness for groups of different social origin. One may surmise, however, that the man who makes it from laborer to retirement as chairman of the board has an exceptionally strong constitution. The road ahead somehow seems less rough with Scarsdale, Yale and Skull and Bones as take-off points.
Life around the Executive Suite
Life in the corporations, and in and around the executive suite, has been as closely studied as other phases of the executive terrain and has often been portrayed in best- selling novels and popular films. William Whyte's The Organization Man is one of the better known of the more mordant studies of the corporate bureaucracy and its foibles, and there are others. But for an impressionistic study of the headquarters office of the large finpolity there is nothing to excel Alan Harrington's Life in the Crystal Palace, written by one of its Harvardian denizens. Grimly forbidding to the Socialist, Communist and more generalized radical, the organizational generating point of human exploitation and debasement, the corporation on the inside is indeed nothing so much as a crystal palace, a place of shining light, elevated attitude and sweet benignity. "I think that our company resembles nothing so much as a private socialist system," says Harrington. 30
The whole of his book is a banteringly persuasive, penetrating embroidery on this theme.
What Marx suggested socialism might be like after it took over an irrational capitalism from a handful of selfish owners one finds here--at the headquarters of the
giant corporation. Here the byword is: From each according to his capacity without any great pressure, to each according to his needs in an ascending hierarchy of greater and greater privileges, boons and opportunities. Harsh voices are never heard in the Crystal Palace, nobody is ever bawled out, nobody is ever fired no matter how much he deserves it, everything is cushioned--benefits all around for everybody from day of employment until death.
"A mighty fortress is our Palace; I will not want for anything. I may live my days without humiliation. I will not be fired. It nourishes my self-respect. I am led along the paths of righteousness for my own good. I am protected from tyrants. It guards me against tension and fragmentation of myself. It anoints me with benefits. Though we pass through bard times, I will be preserved. These strong walls will surely embrace all the days of my life, if I remain a corporation man forever. " 31
And all this applies down to the lowliest clerk and office boy of the Crystal Palace, each of whom has in hand his plan of sure benefits until retirement and beyond. Everything is bland, bland, bland . . . and genteel, subdued.
But "As for the young man who has not gone to college, he is virtually untouchable so far as a middle-level job with a corporation is concerned. If Henry Ford were reincarnated he could never land a job at the Crystal Palace. In fact, on the technical side, an applicant will have quite a bit of selling to do if he can't produce a graduate school degree. " 32
"I suspect," says Harrington, "that most jobs in a corporation and elsewhere can be mastered in a few months, or at any rate in a year or two. What cannot be learned that quickly is the corporation minuet--the respectful dance with the right partners. The watchful corporation man gradually finds out who is important and who is not; what is acceptable and what is not; what type of project will advance his fortunes and what is not worth bothering about. The secrets of gauging and responding to the power of others--superimposed on a normal intelligence--will move him slowly upward. " 33
In the upshot Harrington found paradise boring. The hardest task was standing quietly on the escalator as it quietly swept one upwards toward the quiet stratosphere of quiet corporate power.
There was one cardinal sin at the Crystal Palace, Harrington found, and it could get one into serious difficulty. This was to be without the capacity for belief in the absurd, at least for believing in believing. Not to be a true believer of some acceptable sort stamped one as dangerous. As Harrington saw it, the hierarchy of acceptable beliefs from highest to lowest was as follows:
1. Belief in the product. "The highest and most satisfying form of commercial belief is the conviction that the product I am working for is essential, or at least helpful, to mankind. If I can't have that, I should be able to assume, at any rate, that our product is the best of its kind on the market. Lacking that, let me have faith that it is not positively the worst of its kind. Take even that away, and please assure me that it is not poisonous. Without such assurance, I will have to justify my job in another way. " The product, in short, is making the world a better place, at least not worse.
2. Belief in making money. "Money . . . measures the length and strength of my manhood. It is the skin of the dangerous leopard, the bacon from the wily pig that I bring home because I am strong, and know my way around the forest. . . . The possession of money makes men more masculine and women more feminine. Cash enlarges the soul. Money creates beauty where there was none before. It is positively erotic and can buy gaiety. When I have money I am a much nicer person, tolerant, kind
and understanding, and I forgive the sins of others. . . . " Moneymakers are great people, the greatest.
3. Belief in getting ahead. Attainment of status is the end in view here. You are what people think of you.
4. Belief in being a "pro" in doing a job professionally well whether one likes the job or not.
5. Belief in sheer process. "I believe in production. "
6. Belief in the company, whatever one's lack of belief in any of the foregoing. Not at the very least to believe in the company disqualifies one entirely.
For if I am lost in the split-level values of modern business, the High Corporation will serve as my High Church. Like the church, my Crystal Palace removes the burden of belief from me. It removes my need for decision. I have found my rock. I only believe in the company.
Like the church, our company is good and wise. In the context of business enterprise, it is the inheritor and vessel of a mighty tradition. Our company has achieved high ethics and kindness, and cares for me, and will see me through to sixty-five, and send me checks after that. Church and Palace alike are sanctuaries in the jungle of unbridled competition. At the head of the church is God. On the top floor of the Crystal Palace . . . it doesn't matter, since I will never arrive there. 34
The Big Money
The plush fortunes, few excepted, belong almost entirely to original owners of properties, mainly in the form of corporations, or their descendants. Leading executives, no matter how much they are paid, rarely put together overarching estates.
The way one becomes ultra-rich on the corporate circuit is to gain an early ownership participation in a rapidly developing company (preferably unnoticed) in a new field, precisely as in the nineteenth century. The trick is to see the new field opening up or to open it up. Most nonowner executives, as we have seen, make it to the top at about forty-five years of age, with only some twenty years to go before mandatory retirement. Even if they were able to put aside as much as $1 million a year out of cash salary, stock options and participation in undistributed profits this would guarantee only $20 million prior to retirement, not a pauper's portion by any means but still not up in the imperial range of the General Motors executives between 1920 and 1960 nor in the range of the $90-million estate left by Arthur Vining Davis of Alcoa.
In order to get into the really top money an executive must have taken his top position very early, which means that except in the case of an hereditary owner it must certainly have been a small or smallish little-known company when he took his position. Thereafter his fortunes became those of the burgeoning company; as a member of the inner family he becomes rich enough to arouse widespread envy.
Not many big new companies have emerged since 1920. Running down the Fortune list of the first hundred industrials we find International Business Machines, North American Aviation, Boeing, Radio Corporation, General Telephone, General Dynamics, Sperry Rand, United Aircraft, Allied Chemical, Minnesota Mining and Manufacturing, McDonnell Aircraft, Olin Mathieson, Textron, Celanese, Litton Industries, Douglas Aircraft, Reynolds Metals, Grumman Aircraft and United Merchants and Manufacturers. Even some of these embrace, through mergers, properties extant before 1920; most of them, however, are representative of new technology, mainly aviation, electronics and chemicals, and have been well served by war. Some started out rather big. It is in companies such as these that early executives who remain for many years
turn up with estates that are large but seldom within hailing distance of the big established fortunes multiply distributed among many family members. In this collection no fortunes have been produced to compare with the stupendous accumulations of Henry Ford and the General Motors crowd.
A rather fruitless running debate takes place desultorily between those who assert that the American economy is so developed that nobody can any longer scrape together a big fortune and those who claim there are as many opportunities for fortune-builders as ever. That there are lush opportunities cannot be denied. But that, in view of the great increase in population and the solidly established titles of hereditary wealth, the opportunities are nearly so many as once was the case is extremely doubtful. Concentration alone limits opportunities for financial devilment by newcomers.
While new technology does lift new men to positions of wealth, it should not be forgotten that old wealth-holders are usually careful to see that they are participants in the new technology. Thus, while the development of Polaroid made newcomer Dr. Edwin H. Land a very wealthy man--one of the few really wealthy inventors--he was in partnership with Harriman and Warburg money.
Corporation executives are the most highly consistently paid people in the American economy. If salary is a symbol of worth, as commonly supposed, they are the most worthwhile people in American society. In general, pay for administering large properties or organizations exceeds all other types of recurrent pay. The pay of top executives even in nonprofit organizations, such as foundations and national trade unions, also tends to be high, in the range at least of $50,000 to $100,000.
The most systematically, subtly and thoroughly trained people in the country, it will be generally agreed, are the scientists. Yet the median annual salary of 223,854 registered scientists in 1964 was only $11,000 a year, about the expense account of a middle-level salesman. 35
The highest median for highly experienced scientists was for those in the age range 50-54, where the figure was $13,400. Scientists employed in industry and business had a median salary of $12,000. In the management or administration of research and development scientists had a, median of $15,500. The median for the upper tenth of income receivers" among scientists was $18,000; for the lower tenth, $7,100. 36
The median for scientists in education, trainers of new scientists, was $9,600; in the federal government, $11,000; in other government, $9,000; in the military, $7,800; in nonprofit organizations, $12,000; and among the self-employed, $15,000. Scientists with a medical degree had a median of $15,500 compared with $12,000 for the holders of the Ph. D. 37
The highest pay as of 1965 reported for any pure scientist in the United States was $45,000 annually paid to Dr. C. N. Yang, Nobel physicist of the University of the State of New York. The highest salary reported for a non-scientist working scholar was $30,000 assigned to Dr. Arthur Schlesinger, Jr.
, historian formerly of Harvard and more recently with the City University of New York. 38
When Dr. Albert Einstein, one of the most fundamentally creative brains of modern times, just before World War II accepted an invitation to join the Institute for Advanced Study at Princeton, New Jersey, he was asked by Dr. Abraham Flexner, the director, to name his price. Einstein, writing that he was "flame and fire" for the position, suggested $3,000 a year. Flexner quietly set the pay at $16,000. 39
The salary of Dr. Yang would be considered barely adequate by any middle-range corporate executive. It would be a small "gift" for any legislator. It would hardly buy the gowns for one year for any one of scores of nubile heiresses who would probably
have difficulty threading a needle. Einstein's salary, even by pre-World War II standards, was that of a very lower-rung man.
If we take Dr. Yang's salary of $45,000 as an index of maximum sophisticated earning ability, it is clear as crystal that 75 per cent or more of the salaries of top corporation officials is paid for nonability factors--mainly loyalty. The salaries of scientists, academic and nonacademic, range far higher than those of college professors in general or even most college presidents, as shown in annual reports on salaries by the American Association of University Professors. Many professors as of 1967, even at what are taken as "good" schools, were paid down in the range of $7,000 and less. Most of the schools' teaching staff is paid far lower.
Professionals in general are paid on a similar low level. The most highly paid professionals are dentists, physicians, surgeons, lawyers and judges, and their median earnings in 1959 were somewhat about $10,000 annually, according to Statistical Abstract, 1964, page 229. The medians for other professionals were far lower--$4,020 for clergymen, $4,653 for musicians and music teachers, $7,207 for college presidents, professors and instructors, $5,827 for secondary school teachers, etc. Engineers, so vital to an industrial system, had a median of $8,361.
The reader should be reminded that the median indicates that half are paid below these levels.
Leaving aside the factor of scientific creativity, the man in science must have precise, detailed knowledge of thousands of minute and of all-enveloping aspects of his field, within which he must be able to reason subtly, usually mathematically, and he must maintain over long periods of time steadiness of purpose even though results are meager. He is rarely buoyed up by the great "breakthroughs" alluded to so facilely by journalists. Nor can these when they occur be patented and capitalized.
Neither in input of thought, effort, preparation or concentration is the work of any corporation executive remotely comparable. Indeed, on the basis of "inside" or friendly accounts the intellectual attainments of corporation executives appear to be slight. Fortune finds they do not do much reading, are weak in intellectual powers. 40 Others wonder how many of them have functional reading ability at all because so many seem poorly informed, constantly need assistance from public relations men (usually ex- journalists).
There is a great concentration of brains in a corporation. But it shows itself, not in the top executives as a rule, but in the lower-paid lawyers, engineers, scientists, market analysts and public relations men. These specialists usually work up the script for the trusted top men. When some of the executives decide to "go it alone" in public expressions of their conventional wisdom, one gets derisive reverberations, as in the case of Charles E. Wilson's what's-good-for-General Motors homily to Congress. Speaking out on his own, the top corporation man often sounds like a goof, a super- Babbitt, and the lower professionals in his company writhe uncomfortably. Indeed, in some companies the professional staff is under standing instructions to keep the top man so "boxed in" and isolated that he cannot put his foot in his mouth in public, cannot deliver himself of dazzling shafts of cracker-barrel wisdom.
It is sometimes argued that it is the vast concentrated responsibilities of the top corporate men that make them worth their pay; responsibilities of scientists and teachers, although not denied, are held to be more diffuse, less immediately decisive. Top military officers, however, certainly have organizational responsibilities that transcend those of any corporate officials. Their moment-to-moment decisions involve far more men, equipment, money and organizational niceties as well as the very safety of the nation. This is especially so in time of war.
Yet the Chief of Staff as of 1966 drew a maximum base pay of $2,140 a month or $25,680 per year. The men serving as Chairman of the Joint Chiefs of Staff, Chief of Staff of the Army, Chief of Naval Operations, Chief of Staff of the Air Force or Commandant of the Marine Corps receive basic pay for the grade of $2,019. 30 per month regardless of cumulative years of service. A Chief of Staff or Chief of Naval Operations also draws $4,000 per year in personal money allowance. A four-star general or an admiral gets $2,000 a year in money allowance and a maximum annual salary of $17,796. Corporately speaking, all this is taxable chicken feed.
When we ascend to the ineffable level of the Commander in Chief himself, the president of the United States, we find the salary is $100,000 a year and fully taxable. There is also a taxable expense allowance of $50,000 for officially connected duties and a nontaxable annual travel allowance of $40,000. Living quarters are also provided and an alert president can latch on to many free rides and free lunches. There now goes with the job a lifetime pension of $25,000 a year, $10,000 annually for presidential widows and up $50,000 a year (plus free mailing privileges) for the office help of ex-presidents. The maximum time a man may enjoy this comparatively modest salary and expense account is ten years.
Owing to the tax bite the in-pocket effectiveness of both the salary and the nontravel expense account is reduced by more than 50 per cent. For a, president like Lyndon B. Johnson, who was thriftily able to build up from hard-pan poverty an estate of some $13 million or more on his salary as a congressman, there was no particular problem involved. And for a big inheritor like President John F. Kennedy there was no problem.
This office carries with it vast responsibilities. Yet there is probably no president or chairman of any one of 750 or more of the largest corporations who is not paid far more. So much for responsibilities and the emoluments therefor.
The corporate executive, as I said, is no wizard. He is paid as he is because he is in a position to do much harm to big property holders. There is a further nuance that should perhaps be noticed. A big stockholder, everything else apart, wants his chief executives to feel identified as closely as possible with him. Hence he sees to it that their take- home pay is as close to $1 million a year as possible. He knows their expense account is phoney because he probably set it up himself and knows there is no such legitimate expense involved. It is all readily explainable as serving to keep up appearances.
The executives at various times must entertain foreign notables, public officials or other wealthy men. It would hardly do for them to entertain in meager surroundings. The residences of the top executives should say at a glance: The Super-Cosmos Corporation is an extremely rich and powerful entity, to be treated respectfully. Again, big executives must make political campaign-fund contributions.
No implication is here intended that executives, considering all circumstances, should really be paid less. They are paid by people who seldom overpay, who pay only what they feel they must pay in every situation. All I intend to say is that, despite all the ballyhoo about esoteric executive skill to cover up what the pay is really for, the executives are not paragons, are not superior people--superior to scientists, high military officers and pubpols--to the degree that their compensation might suggest. They are basically politicians, with all the popular connotations of the term. They are paid as they are to guarantee proper performance by people who are anxious about that performance.
The comparatively astronomic pay of corporate executives as stand-in overseers of large properties and manipulators of large numbers of employees, consumers and common citizens is shown in still another perspective when compared with the compensation, before taxes, of the entire American labor force. Here the pay of at least
some scientists begins to look pretty good, although at least half the scientists are paid on the level of the lower labor force.
The following chart-profile of family income in the United States from 1947 to 1964 in 1964 dollars is taken from Current Population Reports: Consumer Income of the United States Department of Commerce, issued September 24, 1965.
About 20 per cent of families as of 1964 had incomes above $10,000 a year. While only 10 per cent of individual incomes exceeded $10,000, with only 1 per cent exceeding $25,000, substantial family participation in plus-$10,000 income stems from the fact that some persons hold two jobs, some families have two or more wage earners and many families in this bracket own property. Nevertheless, 80 per cent of the families shown on this chart had incomes below $10,000, mostly from wages, no matter how many earners they had. From somewhat more than a quarter in the income-group under $3,000 in 1947 the families in this range by 1964 were slightly less than 20 per cent in dollars of 1964 value.
The United States is usually alluded to in the corporate press as a country of large incomes, high wages. And so it is in comparison with nonindustrial countries where incomes are very low. But in relation to the incomes of corporate executives and the owners of large inherited properties, and to American tax- padded price levels, Americans draw coolie pay. A few weeks out of a job and most of them are stony broke, on the relief rolls.
The careful reader should not suppose that the reference to "coolie pay" is hyperbolic.
Per capita "real" income from all sources in the United States in the first quarter of 1966--that is, income after personal taxes and in terms of the dollar stabilized at 1958 prices--was at an annual rate of $2,260, up from $1,900 in the first quarter of 1960 and from $1,831 in 1958. In terms of the 1966 dollar the rate was $2,490, showing an inflation of $230 or about 10 per cent over the "real" rate. 41
? These figures, of course, are averages, applicable to every man, woman and child. In order to have the latest figure applicable to members of his family, a married man with three children in 1966 would have required an income of $12,450, after taxes, in current dollars, which would yield a "real" income of $11,300 in 1958 dollars. If such was his income, though, he would have been well up among the upper 10 per cent of income receivers.
Owing to the very great incomes received by 1 per cent and less of the population, mostly from investments, the actual participation of some 90 per cent of the population in "real" income takes place at levels ranging far below the stated average of $2,260 per person.
Single persons who received from $2,490 and upward in 1966 after taxes were, of course, at or above the average. But a married man with a nonworking wife would have had to receive twice this much to be at the average and would need $2,490 of income in current dollars, always after personal taxes, for each of his children in order for them all to be at the average. Few persons participate at the "average" level!
This bedrock figure computed by the government, moreover, does not allow for the substantial taxes incorporated in prices.
In order to show the splendor of American workers' incomes it is often shown how much longer one must work in Russia for a loaf of bread, a pair of shoes, a bottle of milk, etc. What is shown is true specifically, but misleading. For some costs in Russia, such as of available housing, are less. Again, many services are provided at no direct cost. In Russia and throughout Europe, no college tuition is charged and a variety of services, costly in the United States, are provided at low cost.
The median figure on real income would necessarily be much lower than this average, for the lower half necessarily includes many with zero income--the publicly institutionalized sick and delinquent. There are also the low-paid seasonal agricultural workers, the unemployed and the only occasionally employed.
Total income in the United States is, of course, great--the greatest in the world. But popular participation in this vast income ranges from zero to very little for substantially more than half of the populace. Most literate people, however, believe just the opposite is true, a tribute to the power of propaganda and statistical manipulation.
In the 1930's large sectors of the population suffered from deflation. In the 1950's and 1960's large sectors are suffering from inflation as well as elevated taxes. In terms of income most people are being "whipsawed. "
What inflation over the long term has done to income is shown in a 1966 study by the conservative National Industrial Conference Board. According to this study, a man with a wife and two children today must receive $13,324 annually to buy the same amount of goods he could get for $5,000 in 1939. The man who received $10,000 in 1939 must now receive $27,288 to match that year's buying power and the man who received $100,000 in 1939 must now get $307,734 to have the equivalent buying power. The Conference Board concluded that a very large part of the fivefold rise in per-capita income has been eroded by taxes and price inflation. 42
The family-income chart, too, is misleading if it is taken as a guide to absolute income. For these figures are stated before taxes. It should always be remembered that as labor productivity has risen through the application of technology, as real wages have risen, there has gradually been shifted onto the labor force, especially since 1940, the high income taxes originally designed for large income receivers, as well as new sales taxes. In Chapter Nine we saw some (a small part) of the ways in which taxes for the warfare-welfare state have been largely shifted onto the working population, scientists
and professionals of all kinds included. We also saw to what extent large receivers of income, salaried and investment, have managed to place themselves like Bourbon favorites in the tax-exempt class.
Bolstering Executive Egos
Yet, despite high pay, all is not well along the corporate chain of command. Owing to tensions, stress and, no doubt, the failure to extract a sense of meaning out of repetitious, essentially routine tasks such as the manufacture and distribution of soap, many executive egos are in constant danger of collapsing, and they need to be reinforced by heroic corporate measures. Obtaining little ego support from any solid achievement, they need constant emergency support.
According to Dr. Robert Turfboer, psychiatrist with the Yale University School of Medicine and consultant to several large corporations, "an executive must have emotional security like anyone else. Evidences of eminence, far beyond financial reward, help give him that sense of security. The president of a company can be as fearful of failure as the office boy or assistant sales manager is of being fired. "
Sagging executive egos are bolstered in two ways apart from money, says Dr. Turfboer: by special privileges and by special status symbols (although there are grave dangers in the utilization of the wrong status symbols).
Special privileges are of the following order: a $10,000 sauna in the executive suite of a new mid-Manhattan building for the sole benefit of the president and a few other top- echelon wizards; an $8,000 billiard room in the executive suite of another large corporation; in the Chase Manhattan Bank building $510,000 worth of fine art for private executive offices and executive reception rooms and, in general, office massage tables, office barber chairs, executive dining rooms, telephonic company automobiles (so that the great man need never be out of touch for an instant with GHQ), private executive planes, ultra-modern office furniture and plenty of service flunkies. There is, too, the expense account.
"Just as a king needs a crown for people to know he is a king, so an executive often needs the first-class symbols for his position as well as his self-esteem," says Dr. Turfboer.
How status symbols and special privileges are to be apportioned within the executive group is a problem; it is solved in accordance with an executive's putative importance. His importance is judged according to a criterion laid down by Dr. Elliott Jaques, British psychiatrist, who says, "The level of employment work can be measured in terms of the time span of discretion authorized and expected without review of that discretion by a superior. " Otherwise put, the more a man can be trusted to be on his own the more important he is. Thus, the corporation president need not report to his board for six months--very important. All who have to report to somebody once a month, once a week, once or more a day are obviously progressively less important. People under constant surveillance are of no hierarchic importance at all.
"Status symbols, therefore says Dr. Turfboer, "should be assigned or permitted according to a man's 'time span of discretion. '" The more discretion, the more costly the symbol. A company limousine costing $50 an hour should not, it is evident, be assigned to an office boy--or even to a junior vice president. Such a gadget can only be for Mr. Big himself.
Dr. Turfboer then goes into some subtle points of higher corporatology: how to distinguish at a glance among the guardians of big property. In the hierarchy of the average establishment, the third or lowest grade of vice president may be distinguished by Venetian office blinds and absence of carpeting. The second echelon generally
merits wall-to-wall carpeting (at $14 a yard) and draperies or curtains to the sill. For top executives, there are floor-to-ceiling draperies and carpeting at $17 a yard. As Vance Packard has pointed out, a mahogany desk outranks walnut, walnut outranks oak or metal. The man entitled to carpeting is likely to display a water carafe, which long ago displaced the brass spittoon as a symbol of flag rank. At one broadcasting company, only secretaries of executives above a certain specific level of advancement are entitled to electric typewriters.
What really determines the cost and number of status symbols is "the number of people an executive affects and the intensity with which he affects them," the doctor assures us.
But there are dangers in flaunting status symbols around indiscriminately, the doctor warns. "I refer to flashy office furniture and gold faucets, teak countertops, and Picassos in executive washrooms. The nonintellectual who displays books with fancy leather bindings, or the executive who hangs collectible art but does not appreciate what he has, may be marked as a fraud. A too-gadgety bar (except behind a sliding panel) should not be accepted as a proper status symbol. . . .
"The wrong kind of authoritative emblems can have negative consequences. In subordinates, they may inspire envy or ridicule. While an executive may make himself often inaccessible to subordinates as a symbol of his importance rationalized by his need for privacy, needless exclusiveness can arouse antagonism within his organization. "
Symbols are assigned or self-selected, and in both cases there are grave dangers. A minor executive, for example, may acquire a desk set exactly like the one used by the chairman of the board, which "may be permissible, but it may also turn out to be poor strategy. " Will the chairman, one wonders, feel burned up?
As to assignment of symbols, Dr. Turfboer cites the sad case of a marketing executive given a much larger and more palatial office; yet the man had the effrontery to say he felt uncomfortable in his new deluxe surroundings. "Evidently," says Dr. Turfboer, "his self-esteem had not had a chance to rise to the level of the symbol bestowed on him. "
Offhand, a strictly part-time curbstone psychologist would assume that the man had very little self-esteem to begin with if it depended on anything so contrived as an office and its furbishings. 43
All is not well, as it is readily seen, along the corporate chain of executive command. Many of the men have doubts--about their worth, their importance, the value of their presence, their identities in the scheme of things, perhaps even about their potency. They need to be bolstered in a world of basic achievers, such as scientists.
Another study, however, finds top executives to be "Basically sound, above-average in effective intelligence. These men deal best with practical or tangible data in relation to problem-solving situations. They are as a group only fair conceptual thinkers. They do not do too well in dealing with theoretical, abstract or conceptual thoughts or ideas. "
As students they had above-average grades and were in the upper 25 per cent of their class at college, although not all were college graduates.
Most of them had engaged in some form of commercial venture before age fifteen and they are "Generally not socially aggressive. None were 'big men on campus' although some held fraternity offices. However, they were as a group somewhat lacking in the degree to which they participated in traditional student activities. "
Most of them married late, had children, and their wives played little noticeable role in their business affairs.
One fact applied to all: None came from poverty-stricken backgrounds. In other words, none was a poor boy who "made good. "
These findings were made by Dr. Louis F. Hackemann, president of Hackemann & Associates, an international management consulting company with headquarters in San Francisco. 44
Professor Mabel Newcomer, near the conclusion of a study based upon a very large number of cases--882--of top executive officers, says:
"Although he [the typical executive of 1950] has specialized training, he has never practiced independently, nor has he at any time run a business of his own as his father did. He is a business administrator--a bureaucrat--with little job experience outside his own corporation. His investments in 'his' company are nominal, in terms of potential control--less than 0. 1 per cent of the total stock outstanding. He is a Republican in politics; he attends the Episcopalian church, if he attends church at all; and he served the federal government in an advisory capacity during the war. He was, in 1950, sixty-one years of age, and he will probably be seventy when he retires. " 45
Of note here, direct verification in a study of the top executives themselves of what has been indicated before, is that the corporate executive is not ordinarily much of an owner. He is a hired man, the tool of big owners, never the servant of myriad small stockholders as in the fable of "People's Capitalism. "
Professor Newcomer makes the important point that corporations rarely comb the field looking for what would objectively be considered the best or most capable man for the top job. Why, in other words, do they "promote from within so frequently? And why do they promote so late? The reasons appear to be first, that the talent within the company is better known, and to that extent safer [nota bene--F.
The fathers of 8 per cent were owners of large businesses, of 15 per cent were major executives, of 18 per cent were owners of small businesses, of 8 per cent were minor executives and of 3 per cent were foremen. 19
This finding was widely at variance with the distribution of occupations in the population as of 1920, when 47 per cent of all adult males were classified as laborers. If big business leaders had been 47 per cent the sons of laborers, the mobility rate for laborers would be 100. As it was it was only 16, while that of sons of farmers was only 40. The upward mobility rate for the sons of owners of small business was 360, of sons of professional men 350 and of sons of foremen was 133.
Most significantly, the upward mobility rate of men whose fathers were business executives or owners of large business was 775, nearly eight times the statistical projection. The sons obviously either had friends at court or got proper coaching.
As the University of Chicago sociologist W. Lloyd Warner sees it, the "royal road" to high executive success was higher education. Whereas in 1928 only somewhat more than 30 per cent of big business leaders had a college education, by 1952 the quota was nearly 60 per cent. In 1928 only 15 per cent had some college study but by 1952 20 per cent had at least been to college. 20 Of 505 business leaders as of 1952 as many as 216 went to only 14 different colleges, and these same 14 colleges were mentioned 87 times as the ones attended secondarily, either for graduate work or in transfer. Yale, Harvard, Princeton and Cornell were named most often, with Harvard as the dominant choice for graduate work. 21 Very nearly a third went to Harvard and Yale as undergraduates or graduates.
In no fewer than 62 cases the men went to a second "select" group of 10 colleges, of which Northwestern, Pennsylvania State, Stanford, Wisconsin and Western Reserve were tied for first place. 22
"Education has become the royal road to positions of power and prestige in American business and industry," says Warner. "That this royal road is open to all men is given ample testimony by the large number of educated men from the bottom social layers who appear in our sample. " 23
That this royal road, so optimistically saluted, may not in fact be such is suggested by the continuing merger movement and the steady progress of computer analysis. Decision making, whatever its role in the past, is inevitably being narrowed in scope by the increasing refinement and elaboration of computers; live decision makers, whatever their role in the past, are becoming increasingly dispensable. Furthermore, the merger movement is continually reducing the number of top executive posts. Every merger, while it does not necessarily reduce the total of vice presidents and executive vice presidents, does reduce the number of chairmen and presidents. If all companies were combined into a single company there would be places for only one chairman and one president, and at most twenty-five members of the board.
That education is not the true gateway to the "royal road" is shown by the concentration of elite schools, long the special wards of the propertied. These schools,
eclipsing others, produced most executives because they were most patronized by the upper classes. In view of the fact that sons of members of the business elite, owners or big executives, were disproportionately represented and showed the highest index of upward corporate mobility, it would appear that belonging to the business in-group and the socially related professional group was a more significant factor than level or place of schooling in obtaining big-business position. Sons of owners, executives and professionals as a matter of course are more likely to go on to college, particularly to elite colleges, and after that into the higher executive posts. True, as Warner shows, men of lower social origins can and do make the grade, but in far lesser proportion than the incidence of low social origin in the population. Otherwise put, those who are already in at the beginning are more likely to be in at the final reckoning.
The typical business leader of the 1950's was 54 years old, had been with his firm 24 years, achieved his high position 24 years after entering business and had held his job for almost 7 years. Most men began business between age 21 and 22, freely shifted jobs and companies until about 29 years old when they joined their permanent firms. Typically, the man was 45 or 46 years old when he clearly emerged as a top dog. 24
But the longer his period of schooling the quicker he made it to the top. Graduate students made the very top in 19. 9 years, college graduates in 22. 9 years, college dropouts in 24. 5 years, high school graduates in 27. 9 years, high school dropouts in 30. 6 years and grade school products in 31 years. 25
So, the more schooling the successful entrants have (or the more affluent early circumstances) the quicker they make it to the top. At any rate, neither education nor in- group standing retard one in his ascent.
In beginning occupations, 43 per cent started as clerks and salesmen, 24 per cent as professionals, only 14 per cent as skilled or unskilled laborers. "Few at any point in their careers were entrepreneurs in the sense of owning or establishing their own businesses. Also, while there have been a number of cases of men moving from top-level military positions into key positions of late, these form only a minor proportion of the total business elite. " 26 So much for Mills's switchovers from the military to the corporate circuits.
The Horatio Alger hero, as Warner notes, is not very much in evidence.
"Careers are built largely on formal education, acquisition of management skills in the white-collar hierarchy, and movement through the far-flung systems of technicians and lower-level management personnel into top management. Traces of the legendary patterns remain, and spectacular examples of the type exist; they tend to be unique. " 27
Upward mobility toward the elite corporate level, Warner found, was especially marked in the area of marriage because most business leaders in all categories married above or below their levels of origin. Those of laborer origin married most frequently at their level of origin, 42 per cent; big-business people married next most frequently at their level of origin, 35 per cent. Professionals and white-collar people, exogamous at 77 and 81 per cent respectively, married most frequently outside their levels of origin, but nearly 20 per cent in both these cases married into the big-business class, took to wife a tycoon's daughter.
When a man marries above or below level of origin--and most of all categories did-- there is upward social mobility toward corporate elite status involved in marriage for the man or the woman. As the leaders all have elite status, it matters not how they got it, although women born below the elite obviously got there only through marriage. A woman is either in the elite to begin with, marries into it or marries a man who drags her along into it. 28
People who make it to the top or are born into the top are mobile in non-social ways. They are, first, geographically mobile, easily moving around the country from place to place. They are functionally mobile, readily adapting to a considerable range of jobs in which Warner detects much special educational stimulus; they are adaptable men. Those in the birth elite, however, tend to be less conspicuously geographical gadabouts.
External signs of steadiness and "stability" were most noticeable in the birth elite. The others, at least early in their careers, were more akin to rolling stones, willing to switch jobs and locations.
The number of men in the same firm as their fathers, compared with sons of the elite who achieve high position in other business organizations, is relatively small. There can be no doubt that each group of men was advantaged by being born to high estate. Only a few were directly aided by extra privileges and financial assistance; but the immediate factor of being born to families accorded high rank by the community provides such fortunate men with social and economic advantages, such as being in the higher levels of prestige where the powerful are, going to the "right" preparatory schools, having the right social relations and clubs and fraternities in college, and going with and courting young women of their own social set, knowing what to do and not to do (while the parvenu by trial and error is struggling to learn that there are such ways). They get a head start in life that can be overcome only by hard work, grim determination, and watchfulness of personnel offices, or the eager quest of great corporations for young men of promise. The birth elite are advantaged because their families learn "superior" values, goals, and standards by living in the subculture of an upper class. Their earliest adaptations from infancy on--nursing, weaning, cleanliness, likes and dislikes, admiration or dislike of intimate figures about them, later childhood goals and ambitions--are set within the learning maze of a "Superior" family. 29
It may be hypothesized that there are far more heart attacks among the nonelite upward strivers than in the birth elite: the Horatio Alger boys who never made it, dropped dead on the ten-yard line. I have found no studies of fatal illness in the candidates for success on the corporate ladder that compare the rate of such illness for groups of different social origin. One may surmise, however, that the man who makes it from laborer to retirement as chairman of the board has an exceptionally strong constitution. The road ahead somehow seems less rough with Scarsdale, Yale and Skull and Bones as take-off points.
Life around the Executive Suite
Life in the corporations, and in and around the executive suite, has been as closely studied as other phases of the executive terrain and has often been portrayed in best- selling novels and popular films. William Whyte's The Organization Man is one of the better known of the more mordant studies of the corporate bureaucracy and its foibles, and there are others. But for an impressionistic study of the headquarters office of the large finpolity there is nothing to excel Alan Harrington's Life in the Crystal Palace, written by one of its Harvardian denizens. Grimly forbidding to the Socialist, Communist and more generalized radical, the organizational generating point of human exploitation and debasement, the corporation on the inside is indeed nothing so much as a crystal palace, a place of shining light, elevated attitude and sweet benignity. "I think that our company resembles nothing so much as a private socialist system," says Harrington. 30
The whole of his book is a banteringly persuasive, penetrating embroidery on this theme.
What Marx suggested socialism might be like after it took over an irrational capitalism from a handful of selfish owners one finds here--at the headquarters of the
giant corporation. Here the byword is: From each according to his capacity without any great pressure, to each according to his needs in an ascending hierarchy of greater and greater privileges, boons and opportunities. Harsh voices are never heard in the Crystal Palace, nobody is ever bawled out, nobody is ever fired no matter how much he deserves it, everything is cushioned--benefits all around for everybody from day of employment until death.
"A mighty fortress is our Palace; I will not want for anything. I may live my days without humiliation. I will not be fired. It nourishes my self-respect. I am led along the paths of righteousness for my own good. I am protected from tyrants. It guards me against tension and fragmentation of myself. It anoints me with benefits. Though we pass through bard times, I will be preserved. These strong walls will surely embrace all the days of my life, if I remain a corporation man forever. " 31
And all this applies down to the lowliest clerk and office boy of the Crystal Palace, each of whom has in hand his plan of sure benefits until retirement and beyond. Everything is bland, bland, bland . . . and genteel, subdued.
But "As for the young man who has not gone to college, he is virtually untouchable so far as a middle-level job with a corporation is concerned. If Henry Ford were reincarnated he could never land a job at the Crystal Palace. In fact, on the technical side, an applicant will have quite a bit of selling to do if he can't produce a graduate school degree. " 32
"I suspect," says Harrington, "that most jobs in a corporation and elsewhere can be mastered in a few months, or at any rate in a year or two. What cannot be learned that quickly is the corporation minuet--the respectful dance with the right partners. The watchful corporation man gradually finds out who is important and who is not; what is acceptable and what is not; what type of project will advance his fortunes and what is not worth bothering about. The secrets of gauging and responding to the power of others--superimposed on a normal intelligence--will move him slowly upward. " 33
In the upshot Harrington found paradise boring. The hardest task was standing quietly on the escalator as it quietly swept one upwards toward the quiet stratosphere of quiet corporate power.
There was one cardinal sin at the Crystal Palace, Harrington found, and it could get one into serious difficulty. This was to be without the capacity for belief in the absurd, at least for believing in believing. Not to be a true believer of some acceptable sort stamped one as dangerous. As Harrington saw it, the hierarchy of acceptable beliefs from highest to lowest was as follows:
1. Belief in the product. "The highest and most satisfying form of commercial belief is the conviction that the product I am working for is essential, or at least helpful, to mankind. If I can't have that, I should be able to assume, at any rate, that our product is the best of its kind on the market. Lacking that, let me have faith that it is not positively the worst of its kind. Take even that away, and please assure me that it is not poisonous. Without such assurance, I will have to justify my job in another way. " The product, in short, is making the world a better place, at least not worse.
2. Belief in making money. "Money . . . measures the length and strength of my manhood. It is the skin of the dangerous leopard, the bacon from the wily pig that I bring home because I am strong, and know my way around the forest. . . . The possession of money makes men more masculine and women more feminine. Cash enlarges the soul. Money creates beauty where there was none before. It is positively erotic and can buy gaiety. When I have money I am a much nicer person, tolerant, kind
and understanding, and I forgive the sins of others. . . . " Moneymakers are great people, the greatest.
3. Belief in getting ahead. Attainment of status is the end in view here. You are what people think of you.
4. Belief in being a "pro" in doing a job professionally well whether one likes the job or not.
5. Belief in sheer process. "I believe in production. "
6. Belief in the company, whatever one's lack of belief in any of the foregoing. Not at the very least to believe in the company disqualifies one entirely.
For if I am lost in the split-level values of modern business, the High Corporation will serve as my High Church. Like the church, my Crystal Palace removes the burden of belief from me. It removes my need for decision. I have found my rock. I only believe in the company.
Like the church, our company is good and wise. In the context of business enterprise, it is the inheritor and vessel of a mighty tradition. Our company has achieved high ethics and kindness, and cares for me, and will see me through to sixty-five, and send me checks after that. Church and Palace alike are sanctuaries in the jungle of unbridled competition. At the head of the church is God. On the top floor of the Crystal Palace . . . it doesn't matter, since I will never arrive there. 34
The Big Money
The plush fortunes, few excepted, belong almost entirely to original owners of properties, mainly in the form of corporations, or their descendants. Leading executives, no matter how much they are paid, rarely put together overarching estates.
The way one becomes ultra-rich on the corporate circuit is to gain an early ownership participation in a rapidly developing company (preferably unnoticed) in a new field, precisely as in the nineteenth century. The trick is to see the new field opening up or to open it up. Most nonowner executives, as we have seen, make it to the top at about forty-five years of age, with only some twenty years to go before mandatory retirement. Even if they were able to put aside as much as $1 million a year out of cash salary, stock options and participation in undistributed profits this would guarantee only $20 million prior to retirement, not a pauper's portion by any means but still not up in the imperial range of the General Motors executives between 1920 and 1960 nor in the range of the $90-million estate left by Arthur Vining Davis of Alcoa.
In order to get into the really top money an executive must have taken his top position very early, which means that except in the case of an hereditary owner it must certainly have been a small or smallish little-known company when he took his position. Thereafter his fortunes became those of the burgeoning company; as a member of the inner family he becomes rich enough to arouse widespread envy.
Not many big new companies have emerged since 1920. Running down the Fortune list of the first hundred industrials we find International Business Machines, North American Aviation, Boeing, Radio Corporation, General Telephone, General Dynamics, Sperry Rand, United Aircraft, Allied Chemical, Minnesota Mining and Manufacturing, McDonnell Aircraft, Olin Mathieson, Textron, Celanese, Litton Industries, Douglas Aircraft, Reynolds Metals, Grumman Aircraft and United Merchants and Manufacturers. Even some of these embrace, through mergers, properties extant before 1920; most of them, however, are representative of new technology, mainly aviation, electronics and chemicals, and have been well served by war. Some started out rather big. It is in companies such as these that early executives who remain for many years
turn up with estates that are large but seldom within hailing distance of the big established fortunes multiply distributed among many family members. In this collection no fortunes have been produced to compare with the stupendous accumulations of Henry Ford and the General Motors crowd.
A rather fruitless running debate takes place desultorily between those who assert that the American economy is so developed that nobody can any longer scrape together a big fortune and those who claim there are as many opportunities for fortune-builders as ever. That there are lush opportunities cannot be denied. But that, in view of the great increase in population and the solidly established titles of hereditary wealth, the opportunities are nearly so many as once was the case is extremely doubtful. Concentration alone limits opportunities for financial devilment by newcomers.
While new technology does lift new men to positions of wealth, it should not be forgotten that old wealth-holders are usually careful to see that they are participants in the new technology. Thus, while the development of Polaroid made newcomer Dr. Edwin H. Land a very wealthy man--one of the few really wealthy inventors--he was in partnership with Harriman and Warburg money.
Corporation executives are the most highly consistently paid people in the American economy. If salary is a symbol of worth, as commonly supposed, they are the most worthwhile people in American society. In general, pay for administering large properties or organizations exceeds all other types of recurrent pay. The pay of top executives even in nonprofit organizations, such as foundations and national trade unions, also tends to be high, in the range at least of $50,000 to $100,000.
The most systematically, subtly and thoroughly trained people in the country, it will be generally agreed, are the scientists. Yet the median annual salary of 223,854 registered scientists in 1964 was only $11,000 a year, about the expense account of a middle-level salesman. 35
The highest median for highly experienced scientists was for those in the age range 50-54, where the figure was $13,400. Scientists employed in industry and business had a median salary of $12,000. In the management or administration of research and development scientists had a, median of $15,500. The median for the upper tenth of income receivers" among scientists was $18,000; for the lower tenth, $7,100. 36
The median for scientists in education, trainers of new scientists, was $9,600; in the federal government, $11,000; in other government, $9,000; in the military, $7,800; in nonprofit organizations, $12,000; and among the self-employed, $15,000. Scientists with a medical degree had a median of $15,500 compared with $12,000 for the holders of the Ph. D. 37
The highest pay as of 1965 reported for any pure scientist in the United States was $45,000 annually paid to Dr. C. N. Yang, Nobel physicist of the University of the State of New York. The highest salary reported for a non-scientist working scholar was $30,000 assigned to Dr. Arthur Schlesinger, Jr.
, historian formerly of Harvard and more recently with the City University of New York. 38
When Dr. Albert Einstein, one of the most fundamentally creative brains of modern times, just before World War II accepted an invitation to join the Institute for Advanced Study at Princeton, New Jersey, he was asked by Dr. Abraham Flexner, the director, to name his price. Einstein, writing that he was "flame and fire" for the position, suggested $3,000 a year. Flexner quietly set the pay at $16,000. 39
The salary of Dr. Yang would be considered barely adequate by any middle-range corporate executive. It would be a small "gift" for any legislator. It would hardly buy the gowns for one year for any one of scores of nubile heiresses who would probably
have difficulty threading a needle. Einstein's salary, even by pre-World War II standards, was that of a very lower-rung man.
If we take Dr. Yang's salary of $45,000 as an index of maximum sophisticated earning ability, it is clear as crystal that 75 per cent or more of the salaries of top corporation officials is paid for nonability factors--mainly loyalty. The salaries of scientists, academic and nonacademic, range far higher than those of college professors in general or even most college presidents, as shown in annual reports on salaries by the American Association of University Professors. Many professors as of 1967, even at what are taken as "good" schools, were paid down in the range of $7,000 and less. Most of the schools' teaching staff is paid far lower.
Professionals in general are paid on a similar low level. The most highly paid professionals are dentists, physicians, surgeons, lawyers and judges, and their median earnings in 1959 were somewhat about $10,000 annually, according to Statistical Abstract, 1964, page 229. The medians for other professionals were far lower--$4,020 for clergymen, $4,653 for musicians and music teachers, $7,207 for college presidents, professors and instructors, $5,827 for secondary school teachers, etc. Engineers, so vital to an industrial system, had a median of $8,361.
The reader should be reminded that the median indicates that half are paid below these levels.
Leaving aside the factor of scientific creativity, the man in science must have precise, detailed knowledge of thousands of minute and of all-enveloping aspects of his field, within which he must be able to reason subtly, usually mathematically, and he must maintain over long periods of time steadiness of purpose even though results are meager. He is rarely buoyed up by the great "breakthroughs" alluded to so facilely by journalists. Nor can these when they occur be patented and capitalized.
Neither in input of thought, effort, preparation or concentration is the work of any corporation executive remotely comparable. Indeed, on the basis of "inside" or friendly accounts the intellectual attainments of corporation executives appear to be slight. Fortune finds they do not do much reading, are weak in intellectual powers. 40 Others wonder how many of them have functional reading ability at all because so many seem poorly informed, constantly need assistance from public relations men (usually ex- journalists).
There is a great concentration of brains in a corporation. But it shows itself, not in the top executives as a rule, but in the lower-paid lawyers, engineers, scientists, market analysts and public relations men. These specialists usually work up the script for the trusted top men. When some of the executives decide to "go it alone" in public expressions of their conventional wisdom, one gets derisive reverberations, as in the case of Charles E. Wilson's what's-good-for-General Motors homily to Congress. Speaking out on his own, the top corporation man often sounds like a goof, a super- Babbitt, and the lower professionals in his company writhe uncomfortably. Indeed, in some companies the professional staff is under standing instructions to keep the top man so "boxed in" and isolated that he cannot put his foot in his mouth in public, cannot deliver himself of dazzling shafts of cracker-barrel wisdom.
It is sometimes argued that it is the vast concentrated responsibilities of the top corporate men that make them worth their pay; responsibilities of scientists and teachers, although not denied, are held to be more diffuse, less immediately decisive. Top military officers, however, certainly have organizational responsibilities that transcend those of any corporate officials. Their moment-to-moment decisions involve far more men, equipment, money and organizational niceties as well as the very safety of the nation. This is especially so in time of war.
Yet the Chief of Staff as of 1966 drew a maximum base pay of $2,140 a month or $25,680 per year. The men serving as Chairman of the Joint Chiefs of Staff, Chief of Staff of the Army, Chief of Naval Operations, Chief of Staff of the Air Force or Commandant of the Marine Corps receive basic pay for the grade of $2,019. 30 per month regardless of cumulative years of service. A Chief of Staff or Chief of Naval Operations also draws $4,000 per year in personal money allowance. A four-star general or an admiral gets $2,000 a year in money allowance and a maximum annual salary of $17,796. Corporately speaking, all this is taxable chicken feed.
When we ascend to the ineffable level of the Commander in Chief himself, the president of the United States, we find the salary is $100,000 a year and fully taxable. There is also a taxable expense allowance of $50,000 for officially connected duties and a nontaxable annual travel allowance of $40,000. Living quarters are also provided and an alert president can latch on to many free rides and free lunches. There now goes with the job a lifetime pension of $25,000 a year, $10,000 annually for presidential widows and up $50,000 a year (plus free mailing privileges) for the office help of ex-presidents. The maximum time a man may enjoy this comparatively modest salary and expense account is ten years.
Owing to the tax bite the in-pocket effectiveness of both the salary and the nontravel expense account is reduced by more than 50 per cent. For a, president like Lyndon B. Johnson, who was thriftily able to build up from hard-pan poverty an estate of some $13 million or more on his salary as a congressman, there was no particular problem involved. And for a big inheritor like President John F. Kennedy there was no problem.
This office carries with it vast responsibilities. Yet there is probably no president or chairman of any one of 750 or more of the largest corporations who is not paid far more. So much for responsibilities and the emoluments therefor.
The corporate executive, as I said, is no wizard. He is paid as he is because he is in a position to do much harm to big property holders. There is a further nuance that should perhaps be noticed. A big stockholder, everything else apart, wants his chief executives to feel identified as closely as possible with him. Hence he sees to it that their take- home pay is as close to $1 million a year as possible. He knows their expense account is phoney because he probably set it up himself and knows there is no such legitimate expense involved. It is all readily explainable as serving to keep up appearances.
The executives at various times must entertain foreign notables, public officials or other wealthy men. It would hardly do for them to entertain in meager surroundings. The residences of the top executives should say at a glance: The Super-Cosmos Corporation is an extremely rich and powerful entity, to be treated respectfully. Again, big executives must make political campaign-fund contributions.
No implication is here intended that executives, considering all circumstances, should really be paid less. They are paid by people who seldom overpay, who pay only what they feel they must pay in every situation. All I intend to say is that, despite all the ballyhoo about esoteric executive skill to cover up what the pay is really for, the executives are not paragons, are not superior people--superior to scientists, high military officers and pubpols--to the degree that their compensation might suggest. They are basically politicians, with all the popular connotations of the term. They are paid as they are to guarantee proper performance by people who are anxious about that performance.
The comparatively astronomic pay of corporate executives as stand-in overseers of large properties and manipulators of large numbers of employees, consumers and common citizens is shown in still another perspective when compared with the compensation, before taxes, of the entire American labor force. Here the pay of at least
some scientists begins to look pretty good, although at least half the scientists are paid on the level of the lower labor force.
The following chart-profile of family income in the United States from 1947 to 1964 in 1964 dollars is taken from Current Population Reports: Consumer Income of the United States Department of Commerce, issued September 24, 1965.
About 20 per cent of families as of 1964 had incomes above $10,000 a year. While only 10 per cent of individual incomes exceeded $10,000, with only 1 per cent exceeding $25,000, substantial family participation in plus-$10,000 income stems from the fact that some persons hold two jobs, some families have two or more wage earners and many families in this bracket own property. Nevertheless, 80 per cent of the families shown on this chart had incomes below $10,000, mostly from wages, no matter how many earners they had. From somewhat more than a quarter in the income-group under $3,000 in 1947 the families in this range by 1964 were slightly less than 20 per cent in dollars of 1964 value.
The United States is usually alluded to in the corporate press as a country of large incomes, high wages. And so it is in comparison with nonindustrial countries where incomes are very low. But in relation to the incomes of corporate executives and the owners of large inherited properties, and to American tax- padded price levels, Americans draw coolie pay. A few weeks out of a job and most of them are stony broke, on the relief rolls.
The careful reader should not suppose that the reference to "coolie pay" is hyperbolic.
Per capita "real" income from all sources in the United States in the first quarter of 1966--that is, income after personal taxes and in terms of the dollar stabilized at 1958 prices--was at an annual rate of $2,260, up from $1,900 in the first quarter of 1960 and from $1,831 in 1958. In terms of the 1966 dollar the rate was $2,490, showing an inflation of $230 or about 10 per cent over the "real" rate. 41
? These figures, of course, are averages, applicable to every man, woman and child. In order to have the latest figure applicable to members of his family, a married man with three children in 1966 would have required an income of $12,450, after taxes, in current dollars, which would yield a "real" income of $11,300 in 1958 dollars. If such was his income, though, he would have been well up among the upper 10 per cent of income receivers.
Owing to the very great incomes received by 1 per cent and less of the population, mostly from investments, the actual participation of some 90 per cent of the population in "real" income takes place at levels ranging far below the stated average of $2,260 per person.
Single persons who received from $2,490 and upward in 1966 after taxes were, of course, at or above the average. But a married man with a nonworking wife would have had to receive twice this much to be at the average and would need $2,490 of income in current dollars, always after personal taxes, for each of his children in order for them all to be at the average. Few persons participate at the "average" level!
This bedrock figure computed by the government, moreover, does not allow for the substantial taxes incorporated in prices.
In order to show the splendor of American workers' incomes it is often shown how much longer one must work in Russia for a loaf of bread, a pair of shoes, a bottle of milk, etc. What is shown is true specifically, but misleading. For some costs in Russia, such as of available housing, are less. Again, many services are provided at no direct cost. In Russia and throughout Europe, no college tuition is charged and a variety of services, costly in the United States, are provided at low cost.
The median figure on real income would necessarily be much lower than this average, for the lower half necessarily includes many with zero income--the publicly institutionalized sick and delinquent. There are also the low-paid seasonal agricultural workers, the unemployed and the only occasionally employed.
Total income in the United States is, of course, great--the greatest in the world. But popular participation in this vast income ranges from zero to very little for substantially more than half of the populace. Most literate people, however, believe just the opposite is true, a tribute to the power of propaganda and statistical manipulation.
In the 1930's large sectors of the population suffered from deflation. In the 1950's and 1960's large sectors are suffering from inflation as well as elevated taxes. In terms of income most people are being "whipsawed. "
What inflation over the long term has done to income is shown in a 1966 study by the conservative National Industrial Conference Board. According to this study, a man with a wife and two children today must receive $13,324 annually to buy the same amount of goods he could get for $5,000 in 1939. The man who received $10,000 in 1939 must now receive $27,288 to match that year's buying power and the man who received $100,000 in 1939 must now get $307,734 to have the equivalent buying power. The Conference Board concluded that a very large part of the fivefold rise in per-capita income has been eroded by taxes and price inflation. 42
The family-income chart, too, is misleading if it is taken as a guide to absolute income. For these figures are stated before taxes. It should always be remembered that as labor productivity has risen through the application of technology, as real wages have risen, there has gradually been shifted onto the labor force, especially since 1940, the high income taxes originally designed for large income receivers, as well as new sales taxes. In Chapter Nine we saw some (a small part) of the ways in which taxes for the warfare-welfare state have been largely shifted onto the working population, scientists
and professionals of all kinds included. We also saw to what extent large receivers of income, salaried and investment, have managed to place themselves like Bourbon favorites in the tax-exempt class.
Bolstering Executive Egos
Yet, despite high pay, all is not well along the corporate chain of command. Owing to tensions, stress and, no doubt, the failure to extract a sense of meaning out of repetitious, essentially routine tasks such as the manufacture and distribution of soap, many executive egos are in constant danger of collapsing, and they need to be reinforced by heroic corporate measures. Obtaining little ego support from any solid achievement, they need constant emergency support.
According to Dr. Robert Turfboer, psychiatrist with the Yale University School of Medicine and consultant to several large corporations, "an executive must have emotional security like anyone else. Evidences of eminence, far beyond financial reward, help give him that sense of security. The president of a company can be as fearful of failure as the office boy or assistant sales manager is of being fired. "
Sagging executive egos are bolstered in two ways apart from money, says Dr. Turfboer: by special privileges and by special status symbols (although there are grave dangers in the utilization of the wrong status symbols).
Special privileges are of the following order: a $10,000 sauna in the executive suite of a new mid-Manhattan building for the sole benefit of the president and a few other top- echelon wizards; an $8,000 billiard room in the executive suite of another large corporation; in the Chase Manhattan Bank building $510,000 worth of fine art for private executive offices and executive reception rooms and, in general, office massage tables, office barber chairs, executive dining rooms, telephonic company automobiles (so that the great man need never be out of touch for an instant with GHQ), private executive planes, ultra-modern office furniture and plenty of service flunkies. There is, too, the expense account.
"Just as a king needs a crown for people to know he is a king, so an executive often needs the first-class symbols for his position as well as his self-esteem," says Dr. Turfboer.
How status symbols and special privileges are to be apportioned within the executive group is a problem; it is solved in accordance with an executive's putative importance. His importance is judged according to a criterion laid down by Dr. Elliott Jaques, British psychiatrist, who says, "The level of employment work can be measured in terms of the time span of discretion authorized and expected without review of that discretion by a superior. " Otherwise put, the more a man can be trusted to be on his own the more important he is. Thus, the corporation president need not report to his board for six months--very important. All who have to report to somebody once a month, once a week, once or more a day are obviously progressively less important. People under constant surveillance are of no hierarchic importance at all.
"Status symbols, therefore says Dr. Turfboer, "should be assigned or permitted according to a man's 'time span of discretion. '" The more discretion, the more costly the symbol. A company limousine costing $50 an hour should not, it is evident, be assigned to an office boy--or even to a junior vice president. Such a gadget can only be for Mr. Big himself.
Dr. Turfboer then goes into some subtle points of higher corporatology: how to distinguish at a glance among the guardians of big property. In the hierarchy of the average establishment, the third or lowest grade of vice president may be distinguished by Venetian office blinds and absence of carpeting. The second echelon generally
merits wall-to-wall carpeting (at $14 a yard) and draperies or curtains to the sill. For top executives, there are floor-to-ceiling draperies and carpeting at $17 a yard. As Vance Packard has pointed out, a mahogany desk outranks walnut, walnut outranks oak or metal. The man entitled to carpeting is likely to display a water carafe, which long ago displaced the brass spittoon as a symbol of flag rank. At one broadcasting company, only secretaries of executives above a certain specific level of advancement are entitled to electric typewriters.
What really determines the cost and number of status symbols is "the number of people an executive affects and the intensity with which he affects them," the doctor assures us.
But there are dangers in flaunting status symbols around indiscriminately, the doctor warns. "I refer to flashy office furniture and gold faucets, teak countertops, and Picassos in executive washrooms. The nonintellectual who displays books with fancy leather bindings, or the executive who hangs collectible art but does not appreciate what he has, may be marked as a fraud. A too-gadgety bar (except behind a sliding panel) should not be accepted as a proper status symbol. . . .
"The wrong kind of authoritative emblems can have negative consequences. In subordinates, they may inspire envy or ridicule. While an executive may make himself often inaccessible to subordinates as a symbol of his importance rationalized by his need for privacy, needless exclusiveness can arouse antagonism within his organization. "
Symbols are assigned or self-selected, and in both cases there are grave dangers. A minor executive, for example, may acquire a desk set exactly like the one used by the chairman of the board, which "may be permissible, but it may also turn out to be poor strategy. " Will the chairman, one wonders, feel burned up?
As to assignment of symbols, Dr. Turfboer cites the sad case of a marketing executive given a much larger and more palatial office; yet the man had the effrontery to say he felt uncomfortable in his new deluxe surroundings. "Evidently," says Dr. Turfboer, "his self-esteem had not had a chance to rise to the level of the symbol bestowed on him. "
Offhand, a strictly part-time curbstone psychologist would assume that the man had very little self-esteem to begin with if it depended on anything so contrived as an office and its furbishings. 43
All is not well, as it is readily seen, along the corporate chain of executive command. Many of the men have doubts--about their worth, their importance, the value of their presence, their identities in the scheme of things, perhaps even about their potency. They need to be bolstered in a world of basic achievers, such as scientists.
Another study, however, finds top executives to be "Basically sound, above-average in effective intelligence. These men deal best with practical or tangible data in relation to problem-solving situations. They are as a group only fair conceptual thinkers. They do not do too well in dealing with theoretical, abstract or conceptual thoughts or ideas. "
As students they had above-average grades and were in the upper 25 per cent of their class at college, although not all were college graduates.
Most of them had engaged in some form of commercial venture before age fifteen and they are "Generally not socially aggressive. None were 'big men on campus' although some held fraternity offices. However, they were as a group somewhat lacking in the degree to which they participated in traditional student activities. "
Most of them married late, had children, and their wives played little noticeable role in their business affairs.
One fact applied to all: None came from poverty-stricken backgrounds. In other words, none was a poor boy who "made good. "
These findings were made by Dr. Louis F. Hackemann, president of Hackemann & Associates, an international management consulting company with headquarters in San Francisco. 44
Professor Mabel Newcomer, near the conclusion of a study based upon a very large number of cases--882--of top executive officers, says:
"Although he [the typical executive of 1950] has specialized training, he has never practiced independently, nor has he at any time run a business of his own as his father did. He is a business administrator--a bureaucrat--with little job experience outside his own corporation. His investments in 'his' company are nominal, in terms of potential control--less than 0. 1 per cent of the total stock outstanding. He is a Republican in politics; he attends the Episcopalian church, if he attends church at all; and he served the federal government in an advisory capacity during the war. He was, in 1950, sixty-one years of age, and he will probably be seventy when he retires. " 45
Of note here, direct verification in a study of the top executives themselves of what has been indicated before, is that the corporate executive is not ordinarily much of an owner. He is a hired man, the tool of big owners, never the servant of myriad small stockholders as in the fable of "People's Capitalism. "
Professor Newcomer makes the important point that corporations rarely comb the field looking for what would objectively be considered the best or most capable man for the top job. Why, in other words, do they "promote from within so frequently? And why do they promote so late? The reasons appear to be first, that the talent within the company is better known, and to that extent safer [nota bene--F.
