Noem Scheiber, the New York Times’ generally excellent labor reporter, had a lengthy background piece that really hit a nerve. The piece sought to answer why top executives at major corporations are so quickly caving into Donald Trump’s lunacy rather than banding together and fighting it.

Scheiber puts the root cause as a shift from a focus on stakeholder capitalism, where top executives sought to serve not just the company’s bottom line, but also the company’s workers and the communities in which they operated, to an exclusive focus on maximizing shareholder value. This is seriously wrong, and it is important to point out why it is wrong.

First and foremost, it is wrong to say that CEOs have an exclusive focus on maximizing shareholder wealth. There is very solid evidence that they are more focused on maximizing their own pay rather than corporate earnings. Much research shows that CEO pay does not closely reflect returns to shareholders. Lucien Bebchuk and Jesse Fried presented this case in their book, Pay Without Performance, two decades ago.

There are any number of CEOs who have walked away with tens of millions of dollars after doing serious damage to their companies and their shareholders. Most recently we saw the CEO from Boeing walk away from the company with over $60 million after bringing it to the edge of bankruptcy, that’s really maximizing shareholder value.

 The Bebchuk and Fried argument is that the corporate boards that ultimately determine CEO pay owe their positions largely to top management. (I made a modest contribution to this literature in a paper with Jessica Schieder. We examined CEO pay in the health insurance industry after the ACA took away deductibility in 2011. This change unambiguously raised the cost of CEO pay to companies, but no matter how much we beat up the data, we could not find any evidence it lowered pay, even after controlling for revenue, profits, share value, and everything else imaginable.)

As long as they maintain the support of their fellow board members, they can be almost certain of maintaining their seat. More than 99 percent of board members who are recommended for re-election win shareholder elections. Asking questions like, “can we pay our CEO a lot less money?” is not likely to endear a board member to their colleagues, so it seems this question is rarely asked. That means there is no effective check on CEO pay.

Since being on a corporate board is a very cushy job, typically paying several hundred thousand dollars a year for a few hundred hours of work, board members generally want to keep their jobs. Steven Clifford, a former CEO and corporate board member, outlines this case from the inside in his book The CEO Pay Machine.

This distinction matters for several reasons. First, most of the upward redistribution of the last four decades has been to high-end wage earners, not corporate profits. In fact, the bulk of the upward redistribution had already taken place by 2000, a point at which the corporate profit share was the same as its 1960s level.

The excessive pay of CEOs, by itself, may be a small part of that story, but if a CEO is getting $25 million or $30 million, then odds are the other people in the C-suite are getting $10-$15 million, and the third layer of corporate execs are likely pocketing several million a year. This is a very different world from one where the CEO might get $3-$4 million, as would be the case if the ratio of CEO to worker pay had remained at its levels of a half century ago. And more money for those at the top means less for everyone else.

And the change in rules and norms that allow CEO pay to explode also allowed for top end pay to rise in other contexts. Longer and stronger patent and copyright monopolies made many STEM workers millionaires or even billionaires. The abuse of bankruptcy laws by private equity companies, also created many millionaires and billionaires. This is a mix of wages and profits, since the private equity partners who get the big bucks are ostensibly working for their money. The bloated financial sector more generally has also made for many big paychecks.

This is my usual schpiel, but it is important to distinguish it from the line that Scheiber gives in his piece. According to Scheiber, there were benefits to the alleged shift to a focus on shareholder value:

“The economy became more efficient and dynamic. Consumers often benefited and American firms became the most innovative on the planet.”

These benefits are far more difficult to find in the world than in policy discussions. Here is what productivity growth looked like in the period of stakeholder capitalism compared with the period where corporations were ostensibly maximizing shareholder value.

The average annual rate of productivity growth was 1.3 percentage points higher in the former period. There are technical reasons, like the lower depreciation share in output in the earlier period, that would make the gap even larger. I left the seventies slump as a separate period since we can argue where it belongs. It was a period in which the economy was hugely shaken by two massive oil price hikes at a time when the U.S. economy was far dependent on oil than is the case today. In any case, putting it with the earlier period would not change the picture.

If we look at the international comparisons, contrary to Scheiber, we don’t get a story for the obvious superiority of the U.S. economy in the last 45 years. According to the I.M.F., in 1980, France’s per capita GDP was 85.7 percent of the U.S. per capita GDP. It had fallen to 74.3 percent by 2024. The ratio for Germany was 95.3 percent in 1980 but had declined to 85.6 percent by 2024.

However, before anyone sees this as a victory for U.S. capitalism, consider that average annual hours worked declined by 17.4 percent over this period in France and 23.8 percent in Germany. That compares to a fall of just 3.4 percent in the United States. The rest of the world chose to take the gains of productivity growth in longer vacations and shorter workweeks. That doesn’t make for a victory of U.S. capitalism, it just means workers who put in more hours get higher annual wages.

A full international comparison is more complicated, but the vigorous handwaving by Scheiber and others is not convincing. The U.S. economy is obviously ahead in some ways, but the fuller picture is far more ambiguous.

The distinctions here matter in terms of how we view the legitimacy of a system that has shifted a massive amount of income upward. There is some amount of integrity in saying that we just want to leave things to the market. There is much less integrity in saying we are rigging the deck to give all the money to the rich. We have done the latter, it is understandable that the beneficiaries of this upward redistribution want to conceal this fact, but it is mindboggling that people opposed to the upward redistribution also conceal the reality.

The rationale that there has been a payoff in better economic performance also needs to be attacked. At best we can say by some measures the U.S. economy has performed better than its peers over the last forty-five years, but it is far from a slam dunk case, and it is easy to show statistics, like gains in life expectancy, where it has done far worse.

Why the CEOs Genuflect to Donald Trump

If we don’t buy Scheiber’s story for the mass capitulation to Trump, then we need an alternative. To my mind the story is a lack of an institutional structure that supports a challenge to Trump. The most important part of the story here is the reduced power or organized labor. In the fifties and sixties, one-third of the workforce was in unions. Today, the figure is just 10.0 percent overall and only slightly over 6.0 percent in the private sector.

Unions were a serious part of the national dialogue in the fifties and sixties, with leaders of unions being a regular part of major policy debates. Today they are an after-thought even for the Democrats and largely an enemy to Republicans. They still have some clout, especially in states where they represent a substantial share of the workforce, but their political power is radically diminished compared to a half-century ago. That was not an accident, the Republicans, and some Democrats, deliberately pushed policies to weaken unions.

The media also provided an effective check to the sort of authoritarian nonsense being pushed by Trump in a way that is no longer the case. We shouldn’t idealize the media of the early post-war decades, they helped to conceal the reality of U.S. interventions in places like Iran, Guatemala, and Vietnam, although eventually their truth-telling helped to bring an end to the war. But the key point is that they were a major institutional voice prepared to intervene on the side of reality in way that is no longer true.

Back in the 1960s, nearly 30 million people watched Walter Conkrite on CBS news every night in a country with half the current U.S. population. Today the combinedviewership of the network news shows is less than 18 million. And that viewership tilts hugely older, less than 3 million are under age 55.

This means that insofar as the television news outlets could be counted on to be truth tellers who would expose lies from politicians and their allies, they are much less effective today. Relatively few people are paying attention. And even this limited truth-teller role is being put into question as the networks are taken over by far-right wing billionaires who are happy to go along with whatever nonsense Donald Trump says. The story with newspapers is even worse, as the Internet, as well as the dominance of Facebook and Google, has devasted the ad revenue that was their primary means of support.

While the Internet does offer low-cost means of communication there is virtually no institutional support for a progressive presence on it. The broad liberal-left has largely ignored the media even as traditional mainstream outlets were collapsing and the right was openly building up Fox News and other alternatives. This includes taking over huge platforms like Twitter and now TikTok, and bringing over Facebook now that Mark Zuckerberg has joined the team.

This means that a corporate CEO, who might have been ridiculed into retirement by endorsing some of Donald Trump’s deranged comments, can freely push utter nonsense and know that in most cases it will not matter to them personally or the companies they run. The checks that existed forty or fifty years ago are gone.

There were and hopefully still are alternative routes that the center and left could have taken. In addition to the broad economic issues that I discuss in Rigged (it’s free), it could have pushed for alternative support mechanisms for the media, such as individual vouchers or tax credits. It also could have tried to structure the rules for social media so as to make it less conducive to the sort of concentration we see with the huge platforms like X or Facebook, most importantly by not granting them special protection with Section 230.

Unfortunately, the center and left largely ignored the media world changing around them, adopting a strategy of “we have been losing for fifty years, why change now?” It is very late in the game at this point, who knows if democracy can be saved. But maybe, maybe, maybe, we can get some people to look at the situation with clear eyes and not just keep repeating the same nonsense that passes for wisdom in policy debates.

This first appeared on Dean Baker’s Beat the Press blog.

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This post was originally published on CounterPunch.org.