Adam Smith and CEO’s compensations

Ratio of CEO compensation to manufacturer workers compensation, (source: FT)

Obama has made several public statements in relation to excessive salaries and bonuses received by the majority of senior bank executives in the United States. Even I can not understand how any leader of the world has not brought before the courts for certain executives and non-bank bank. I’m thinking about, at least, 30 cases in which its CEO or top executive has destroyed companies with more than 100,000 workers, causing disastrous situations and have sent unemployment to hundreds of thousands of workers. ¿Why Bush and Obama, Merckel, Sarkozy and Brown haven’t reacted yet?, ¿Why this CEO’s are not prosecuted for fraudulent practices causing this crisis?.

Recently, I found a very clear figure about excesses. Similar at what happened in  late 20’s in the USA.

José Berengueres explains me yesterday how salaries of executives of Toyota were about 10 times worker ones. Instead, Nissan executives were paid about 40 times more than a Nissan employee in Japan. Perhaps that’s the reason of Toyota excellence. He told me that when Carlos Ghosn arrived at Nissan, he increase executives salries. Carlos Ghosn had an enormous success in transforming Nissan, but lasts years bad Nissan results has provided us doubts about this success.

Historical ratio of CEO compensation and executives structure compensation, (souce FT).

Another interesting information, I just readed an interview with Wen Jiabao, Chinese prime minister to the Financial Times following his recent visit to England and his speech in Oxford. Wen Jiabao said he is reading the book by the famous Scottish economist Adam Smith, one of the more classical liberal economist and author of “The Wealth of Nations” as well as author of the theory of “invisible hand” in the economy. Wen is reading specifically “The Theory of Moral Sentiments” and explained that , “Adam Smith wrote that in a society if all the wealth is concentrated and owned by only a small number of people, it will not be stable,” he says.