They are paid as they are to guarantee proper
performance
by people who are anxious about that performance.
Lundberg - The-Rich-and-the-Super-Rich-by-Ferdinand-Lundberg
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. L. ], than outside talent. Also, there is always a feeling that one's own company is different and that intimate knowledge of its problems is important from the start. The president or chairman is likely to select his successor in advance and to groom him personally for the job. And loyalty to the company is stressed. Moreover, there is a sense of obligation to the officers with whom the chief has worked, and a conviction--which is doubtless justified--that morale will be higher and the chance of retaining able executives greater, if they are aware that the top offices will be filled from within. " 46
Corp-politan Vistas
To attempt anything like a complete survey of the executive and his sphere would be impossible short of encyclopedic format. Under the rubric Management the central reference room of the New York Public Library indexes nearly 4,000 volumes; under Executives, nearly 400. There is, too, some score of periodicals devoted to the topic.
So it is clear that the subject of management is a large one in a postulated democratic society where the individual is pretty much supposed to manage himself. Americans, in fact, are under constant political and economic management manipulation.
While many of the works on management are serious analytical and descriptive studies, the executive mystique, tending to show the superlative worth of the executive and his technique as such, occupies much attention. Management of property itself, it turns out, is an arcane science, worthy of graduate study in the universities.
For those who want a compressed view of the field there might be recommended the Reading Course in Executive Technique, published in eight volumes with many authors by Funk and Wagnalls Company, New York, 1948. The volumes are given a lengthy introduction, "Modern Executive Techniques," by the editor, Carl Heyel, who is president of Executive Techniques, Inc.
The books in this course are titled: Systematic Solution of Management Problems (how to think, operations control, management controls, manual of organization, use of statistics, charting the course); Human Relations (employee morale, employee suggestion systems, supervising women, hints on psychology, human relations in industry); Personnel and Industrial Relations; Creative Training Programs; Manufacturing Control; Distribution; Financial Control and General Office Management; and Public Relations. Thus armed, the aspiring executive can take over with confidence.
Management, it turns out, consists of a melange of many things, a smattering from many disciplines that turns into an ad hoc empiricism resembling a pseudo-science.
Much of the literature in management can be reduced to cautionary injunctions, applicable generally or in various specific situations to "Always do this," "Never do that," "Usually do this," "Usually do that," "Be very careful in doing this," etc. Concrete situations are cited from experience, sometimes careful observational studies such as those of Elton Mayo on how most easily to get maximum output from a work force. Taking all the injunctions together one is given what some writers term a "philosophy of management. " Troublemakers, so much sand in the gears, are especially unwanted and the place to spot them is at the personnel office, where the latest in psychological testing is put to use. Potential nonbelievers, doubters, scoffers, misfits and persons with "negative attitudes" generally must be weeded out lest they contaminate a basically sound work force and impede the smooth flow of profits.
Critics from time to time commiserate with the bureaucratic aspirant in the Leninist countries who must, before he arrives at the top, read the metaphysical works of Marx, Engels, Lenin, Stalin and many lesser dialecticians. The American executive, however, to judge by the tomes he must read, is much worse off. For most of these writings are at best stodgy, usually turgid. And beckoning the American is no future society of shining mirages but, at most, an office with wall-to-wall carpeting, a gold key to the executive washroom and membership in a country club.
Not only are there special periodicals devoted to the executive and his sphere, but magazines of more general appeal do not overlook him. Fortune rarely lets a month slip by without at least one article on executives, of which a few since 1950 have been: "The Case of Charles Luckman," "The Nine Hundred," "Boards of Directors," "Do Stock Options Pay? " "How Hard Do Executives Work? " "Can Executives Be Taught to Think? " "How Executives Get Jobs," "Is There an Executive Face? " "The Executive Bonus," "Are Executives Paid Enough? " "How Executives Invest Their Money,"' "How Top Executives Live," "The Executive Crack-Up," "How Much Is an Executive Worth? " "Young Executive in Manhattan," "Executive Qualities," "Life in Bloomfield Hills," "The Pirates of Management," "Those American Managers Don't Impress Europe, "Executive Compensation: The New Wave," "How to Pay Executives," etc.
In "Those American Managers Don't Impress Europe" (Fortune, December, 1964) we were given a story of disillusion. American companies entering the European market, either by merger or establishing new plants, necessarily sent along American executives. Keyed by all the hoop-la from the American corporate press about high- powered, lynx-eyed American executives, Europeans proceeded to pay very close attention. Now, they apparently thought, they were going to see the very soul of American puissance in action. Alas, it was once again the story of mighty Casey at the bat. For the American wizards were found to be very so-so, nothing remarkable. After watching them Europeans felt reassured.
It might be argued that the Americans did not send their first team to play in a strictly bush league, and this was probably true. To see the varsity all-stars in action the
backward Europeans will have to come to the United States. Once they glimpse the Picassos in the executive washroom they will know they are in the very uterus of the big time, at the altar of the executive mystique. Now they will see how big, really big, decisions are made . . .
Twelve
THE REPUBLIC OF MONEY: THE PUBPOLS
As everything thus far inquired into has obviously flowered under the benign providence of government it is evident that government and politics have more than a little to do with the gaudy blooms of extreme wealth and poverty in the feverish American realm. It has not, to begin with, prevented whatever is the case. What it has ministered to, and how and why, will now be our theme.
How the government of the United States functions in all its ramifying complexity is the theme of ponderous treatises running into the proportions of Sears, Roebuck catalogues--composed by academicians somewhat left-handedly known as political scientists. Whatever they say is almost invariably correct in a formal sense as anatomical description, apart from any decorative filigree provided by such heady words as "democracy" and "freedom. "
What we are really interested in, however, is process, function--political physiology, as it were. Although many political scientists profess to deal with this aspect as well, they all tend to lose sight of the actual ball in play or to avert their eyes in horror at the clinches. They are as physicists would be who had never been in a laboratory, as members of a vice squad who had never been in a brothel or taken money under the table from a madame. They themselves were never in the celebrated smoke-filled backrooms, never on hand when the price was set, the bodies buried, the papers burned, the ballots destroyed, the payoff made, the double entendre arranged, the people bilked.
Like nearly everyone else in this sphere, the political scientist is dependent on reports, rumors, memoirs, documents, statistics, interpretations, deductions and more or less shrewd surmise. And, like everyone else, he is limited by his position as a strict outsider. Journalists are far more privy to what goes on than he, and indeed he depends on journalists for much of his information. It is one field where certain participants know more about it in its nook-and-cranny aspects than those self-dedicated to its systematic study.
The difference between government as reported by political scientists and government as it actually takes place is much like the difference between learned descriptions of amour and amour itself. The difference is far greater than that between description in general and phenomena in general, between symbol and act. The political scientist is in much the same outside position as a biologist or psychologist studying amour. What each says may be entirely correct, moderately enlightening or even exhilarating; but what the dedicated acolyte misses are the nuances these experts haven't been able to encompass even by delicate imaginative projection. Their often assumed delicacy is elephantine. Again, they often misinterpret simple rutting for amour, intrigue for politics.
Even more than the theoreticians of amour, who sometimes have the advantage of being tentative practitioners themselves, the political scientist is at a disadvantage: For he has never actually been in the situation, does not occupy a privileged position denied, say, to the editors of the New York Times. The terrain, clearly, belongs in the particular jurisdiction of someone else, as amour lies in the jurisdiction of the poet or madman. A poet, even a madman, now and then has something revealing or poignant to say about amour; it would be astonishing if a political scientist ever said anything about government that approached a Machiavelli or a Hobbes who, be it noticed, were nonscientific "insiders. "
The indubitable experts I call upon to bear witness in this chapter (leaving to one side the delicate question of my own expertise) will all be far, far closer to what goes on than any political scientist has ever been, valuable though the compilations, commentaries, commonplaces and occasional insights of these gentry may be as aides-memoires and reference classifications.
As most people have some more or less accurate conception of the gross mechanics of the United States government, seen mostly in rose lights and soft-focus, I omit the citation of basic supposed facts on which we might be improbably supposed to agree in advance. Let us simply descend on the phenomenon oozing in its habitat.
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. L. ], than outside talent. Also, there is always a feeling that one's own company is different and that intimate knowledge of its problems is important from the start. The president or chairman is likely to select his successor in advance and to groom him personally for the job. And loyalty to the company is stressed. Moreover, there is a sense of obligation to the officers with whom the chief has worked, and a conviction--which is doubtless justified--that morale will be higher and the chance of retaining able executives greater, if they are aware that the top offices will be filled from within. " 46
Corp-politan Vistas
To attempt anything like a complete survey of the executive and his sphere would be impossible short of encyclopedic format. Under the rubric Management the central reference room of the New York Public Library indexes nearly 4,000 volumes; under Executives, nearly 400. There is, too, some score of periodicals devoted to the topic.
So it is clear that the subject of management is a large one in a postulated democratic society where the individual is pretty much supposed to manage himself. Americans, in fact, are under constant political and economic management manipulation.
While many of the works on management are serious analytical and descriptive studies, the executive mystique, tending to show the superlative worth of the executive and his technique as such, occupies much attention. Management of property itself, it turns out, is an arcane science, worthy of graduate study in the universities.
For those who want a compressed view of the field there might be recommended the Reading Course in Executive Technique, published in eight volumes with many authors by Funk and Wagnalls Company, New York, 1948. The volumes are given a lengthy introduction, "Modern Executive Techniques," by the editor, Carl Heyel, who is president of Executive Techniques, Inc.
The books in this course are titled: Systematic Solution of Management Problems (how to think, operations control, management controls, manual of organization, use of statistics, charting the course); Human Relations (employee morale, employee suggestion systems, supervising women, hints on psychology, human relations in industry); Personnel and Industrial Relations; Creative Training Programs; Manufacturing Control; Distribution; Financial Control and General Office Management; and Public Relations. Thus armed, the aspiring executive can take over with confidence.
Management, it turns out, consists of a melange of many things, a smattering from many disciplines that turns into an ad hoc empiricism resembling a pseudo-science.
Much of the literature in management can be reduced to cautionary injunctions, applicable generally or in various specific situations to "Always do this," "Never do that," "Usually do this," "Usually do that," "Be very careful in doing this," etc. Concrete situations are cited from experience, sometimes careful observational studies such as those of Elton Mayo on how most easily to get maximum output from a work force. Taking all the injunctions together one is given what some writers term a "philosophy of management. " Troublemakers, so much sand in the gears, are especially unwanted and the place to spot them is at the personnel office, where the latest in psychological testing is put to use. Potential nonbelievers, doubters, scoffers, misfits and persons with "negative attitudes" generally must be weeded out lest they contaminate a basically sound work force and impede the smooth flow of profits.
Critics from time to time commiserate with the bureaucratic aspirant in the Leninist countries who must, before he arrives at the top, read the metaphysical works of Marx, Engels, Lenin, Stalin and many lesser dialecticians. The American executive, however, to judge by the tomes he must read, is much worse off. For most of these writings are at best stodgy, usually turgid. And beckoning the American is no future society of shining mirages but, at most, an office with wall-to-wall carpeting, a gold key to the executive washroom and membership in a country club.
Not only are there special periodicals devoted to the executive and his sphere, but magazines of more general appeal do not overlook him. Fortune rarely lets a month slip by without at least one article on executives, of which a few since 1950 have been: "The Case of Charles Luckman," "The Nine Hundred," "Boards of Directors," "Do Stock Options Pay? " "How Hard Do Executives Work? " "Can Executives Be Taught to Think? " "How Executives Get Jobs," "Is There an Executive Face? " "The Executive Bonus," "Are Executives Paid Enough? " "How Executives Invest Their Money,"' "How Top Executives Live," "The Executive Crack-Up," "How Much Is an Executive Worth? " "Young Executive in Manhattan," "Executive Qualities," "Life in Bloomfield Hills," "The Pirates of Management," "Those American Managers Don't Impress Europe, "Executive Compensation: The New Wave," "How to Pay Executives," etc.
In "Those American Managers Don't Impress Europe" (Fortune, December, 1964) we were given a story of disillusion. American companies entering the European market, either by merger or establishing new plants, necessarily sent along American executives. Keyed by all the hoop-la from the American corporate press about high- powered, lynx-eyed American executives, Europeans proceeded to pay very close attention. Now, they apparently thought, they were going to see the very soul of American puissance in action. Alas, it was once again the story of mighty Casey at the bat. For the American wizards were found to be very so-so, nothing remarkable. After watching them Europeans felt reassured.
It might be argued that the Americans did not send their first team to play in a strictly bush league, and this was probably true. To see the varsity all-stars in action the
backward Europeans will have to come to the United States. Once they glimpse the Picassos in the executive washroom they will know they are in the very uterus of the big time, at the altar of the executive mystique. Now they will see how big, really big, decisions are made . . .
Twelve
THE REPUBLIC OF MONEY: THE PUBPOLS
As everything thus far inquired into has obviously flowered under the benign providence of government it is evident that government and politics have more than a little to do with the gaudy blooms of extreme wealth and poverty in the feverish American realm. It has not, to begin with, prevented whatever is the case. What it has ministered to, and how and why, will now be our theme.
How the government of the United States functions in all its ramifying complexity is the theme of ponderous treatises running into the proportions of Sears, Roebuck catalogues--composed by academicians somewhat left-handedly known as political scientists. Whatever they say is almost invariably correct in a formal sense as anatomical description, apart from any decorative filigree provided by such heady words as "democracy" and "freedom. "
What we are really interested in, however, is process, function--political physiology, as it were. Although many political scientists profess to deal with this aspect as well, they all tend to lose sight of the actual ball in play or to avert their eyes in horror at the clinches. They are as physicists would be who had never been in a laboratory, as members of a vice squad who had never been in a brothel or taken money under the table from a madame. They themselves were never in the celebrated smoke-filled backrooms, never on hand when the price was set, the bodies buried, the papers burned, the ballots destroyed, the payoff made, the double entendre arranged, the people bilked.
Like nearly everyone else in this sphere, the political scientist is dependent on reports, rumors, memoirs, documents, statistics, interpretations, deductions and more or less shrewd surmise. And, like everyone else, he is limited by his position as a strict outsider. Journalists are far more privy to what goes on than he, and indeed he depends on journalists for much of his information. It is one field where certain participants know more about it in its nook-and-cranny aspects than those self-dedicated to its systematic study.
The difference between government as reported by political scientists and government as it actually takes place is much like the difference between learned descriptions of amour and amour itself. The difference is far greater than that between description in general and phenomena in general, between symbol and act. The political scientist is in much the same outside position as a biologist or psychologist studying amour. What each says may be entirely correct, moderately enlightening or even exhilarating; but what the dedicated acolyte misses are the nuances these experts haven't been able to encompass even by delicate imaginative projection. Their often assumed delicacy is elephantine. Again, they often misinterpret simple rutting for amour, intrigue for politics.
Even more than the theoreticians of amour, who sometimes have the advantage of being tentative practitioners themselves, the political scientist is at a disadvantage: For he has never actually been in the situation, does not occupy a privileged position denied, say, to the editors of the New York Times. The terrain, clearly, belongs in the particular jurisdiction of someone else, as amour lies in the jurisdiction of the poet or madman. A poet, even a madman, now and then has something revealing or poignant to say about amour; it would be astonishing if a political scientist ever said anything about government that approached a Machiavelli or a Hobbes who, be it noticed, were nonscientific "insiders. "
The indubitable experts I call upon to bear witness in this chapter (leaving to one side the delicate question of my own expertise) will all be far, far closer to what goes on than any political scientist has ever been, valuable though the compilations, commentaries, commonplaces and occasional insights of these gentry may be as aides-memoires and reference classifications.
As most people have some more or less accurate conception of the gross mechanics of the United States government, seen mostly in rose lights and soft-focus, I omit the citation of basic supposed facts on which we might be improbably supposed to agree in advance. Let us simply descend on the phenomenon oozing in its habitat.
