The Demise of Capitalism?

I haven’t been shy about criticizing executives for making too much money. We’ve seen one example after another for a long time. Lately, we’ve seen the results of what this kind of out-of-balance executive comp can have. The current economic crisis isn’t due entirely, of course, to executives’ greed and boards of directors’ failure to grasp reality, but these things are all part of the toxic mixture of what led us, we are told, to the brink of financial disaster and what puts workplaces of all kinds and their employees in a continuing precarious situation.

I’ve always thought that reining in executive comp would be difficult because of our capitalistic, free market system. Just as individuals are free to do stupid things, so are employers. But some are wondering — I think rightly so — if our system has been permanently altered by recent events.

It’s too early to know for sure. But what has happened during the past couple of weeks in terms of the federal government’s intervention in what used to be called the private sector is something we’ve come to expect in Russia and China. We’re not accustomed to seeing it — at least, not to this extent — in the U.S. It looks a lot more like socialism than capitalism.

If this kind of sea change has occurred, it’ll mean something for executive compensation, but it’ll mean something bigger than that. It’ll mean a different kind of workplace. Perhaps unions will be required. Perhaps mandated benefits will become the norm. Perhaps the baby will be thrown out with the bathwater. Perhaps it should be. Perhaps our long-admired model no longer works.

If I were you, I’d keep a close eye on what happens over the next six months. I’d keep a close eye on what happens when we have a new Congress and a new President. No need to panic. What happens may be good — or at least, better.

I may be wrong. Won’t be the first time. But things feel different. Time will tell as to whether they are in fact.

1. 

   ACU Frank says:

   September 23, 2008 at 2:01 pm

   Our society has long drifted farther from the concept of personal accountability. In the past few years, we’ve seen this lack of accountability excused and now formalized in the executive suite and in the board room.
2. 

   John Phillips says:

   September 25, 2008 at 4:17 pm

   ACU Frank,

   Thanks for weighing in. Accountabiity is a word often used in the C-Suite, but it always applies to someone outside the C-Suite.
3. 

   John Phillips says:

   September 27, 2008 at 9:58 am

   Thanks very much for the link. Managing Leadership continues to be a terrific resource for leaders in all walks of life.