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Free Market Project

4/28/2006 10:31:39 PM

Updated 04/12/06
 


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CNN’s ‘In the Money’ Continues Love Affair with Class Warfare
Host calls CEO pay ‘mind-boggling’; guest adds that it’s ‘disgraceful.’

By Ken Shepherd
Free Market Project
Feb. 13, 2006

Send this page to a friend! (click here)     The weekend before Valentine’s Day, CNN business reporters showed their infatuation with class warfare as they courted a critic of corporate pay scales. None of the “In the Money” panelists, however, saved room on the dance card for a defender of corporate pay, which is set by market forces.

     Introducing Vanguard Group founder and “mutual fund legend” John Bogle for an interview segment on the February 11 program, “In the Money” co-host Jennifer Westhoven began by prompting Bogle to attack executive pay: “John, I want to ask you first about big CEO pay since the 1980s. This has skyrocketed. A CEO can now make something like 240 times what the average worker can make. That’s mind-boggling.”

     Bogle agreed with Westhoven, replying, “It's not only mind-boggling but it’s disgraceful.” Neither Westhoven nor her co-hosts, Fortune editor Andy Serwer or Jack Cafferty, questioned Bogle’s characterization. Later, Westhoven plugged the money manager’s book, “The Battle for the Soul of Capitalism.” Commenting on the title, the former Reuters reporter remarked, “We all hope that we all win it, right?”

     What Westhoven was missing – and plenty of economists and business leaders would argue – is that the soul of capitalism is the free market, which drives wages and prices paid by private businesses. While some observers may feel corporate executives are paid “too much,” ultimately the market decides wages and prices as consumers and shareholders vote with their wallets. One such market force in particular governs covering the labor cost of executives: economic rent, which is essentially is the cost of retaining unique talent apart from the cost of compensating that talented person for his/her labor. It’s the reason, essentially, why Westhoven is paid to report for CNN when a 22-year-old fresh from journalism school could perform the same task for much less pay.

     The Free Market Project has previously written on the media engendering class warfare via the issue of executive pay, including “In the Money” contributor Andy Serwer’s January 19 swipe at highly paid executives and media underreporting on corporate generosity following Hurricane Katrina.

 


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