Editor's Note: Alastair Smith is a professor of politics at NYU, and is co-author of The Dictator's Handbook: Why Bad Behavior is Almost Always Good Politics. The views expressed in this article are solely those of Alastair Smith.
By Alastair Smith – Special to CNN
Wall Street executive bonuses are expected to be down by about a quarter this season. After two months of occupying Wall Street, can the 99% take credit for reining in the excesses of corporate America? In a word: No.
Even in the wake of 2008’s financial crisis, bonuses remained “shamefully” robust. The perceived injustice of executives rewarding themselves while their firms were propped up by the public purse helped create much of the anger that prompted the Occupy Wall Street movement. Even though many companies are expected to cut bonuses this year, Wall Street remains tone deaf to the cries of those outside their offices.
Indeed, it is the poor performance of firms that explains the decline in executive compensation. Those firms that did well are expected to announce a bumper year for executives. Ultimately, it is corporate politics, not greed or social awareness, that dictate bonuses.
Like any other political leaders, corporate CEOs need to keep their supporters loyal if they want to keep their jobs. These backers are not the masses of small shareholders, and they are certainly not the general public, so it should come as no surprise that a chief executive’s actions infuriate these groups.
In terms of the political organization of businesses, large publicly traded companies most closely resemble rigged-election autocracies. There are typically millions of people-shareholders with nominal say in the choice of chief executive. But the real power to depose the corporate leader lies with the senior executives, board members, and, in some cases, a few large institutional investors.
Executives who want to keep their jobs look after this group of insiders as their first, second and third priority. In good years, their compensation might infuriate those outside on the streets, but it poses little threat to chief executives.
So, while it might look like the Occupiers are having an effect this year, the truth is that the excesses of Wall Street will return just as soon as the earning do.
The views expressed in this article are solely those of Alastair Smith.
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