You make HOW MUCH??

When I look at the issues that have our country tied in knots today, it seems to me that every single one can be traced straight back to income inequality.  Its beginning predates Citizens United (the court ruling allowing unlimited political contributions by corporations), it didn't get this way overnight, and we won't get out of it with just a few new Executive Orders.  It's WAY more complicated than that.

Without doubt my all-time favorite corporate CEO was Herb Kelleher, the (now retired) Chairman of Southwest Airlines.  His business model was simple:  "Take care of your people first, your customers second, and your stockholders last."  If you take care of your people first, they will be happy and give impeccable, smiling service to your customers.  Happy customers will come back time and again, ultimately giving your stockholders a handsome return.  Win-win-win.  While the airline industry has been in constant turmoil for years, with bankruptcies, mergers, and layoffs common, Southwest has had an unbroken string of profitable years with no layoffs, ever.

That's Herb in the red shirt with some of his ramp employees, and the photo was not staged.  He would on a daily basis walk around and greet his people, swap a quick joke, do some back-slapping (the ladies got a kiss on the cheek....times were different then!), and just in general tell them how much he appreciated them....and they worked their asses off for him!

In 1965 the average CEO made 20-times as much as his average employee.  By 2015 the average CEO made 303-times as much as his average employee.  (source:  Fortune magazine) 

Here's where I'm going with this:  While most airline CEO's of the day were making handsome 7-figure salaries, Herb kept his salary at around $350K (?) per year.  He was seen by his people as well paid, but still with his feet on the ground.  He made sure that ALL Southwest employees received yearly profit sharing, real health insurance, a generous 401K, and stock options.  (That's where Herb made his very sizeable fortune.)  If the company made money, so did he, and his model worked....there was never an unprofitable year.

This is critical....right after 9/11, when planes were flying virtually empty and other airlines were laying off as fast as they could, top executives at SWA said they would work without pay until the crisis was over, while their employees were never asked for any wage concessions.  THAT'S how you show solidarity with your people!  (As I recall, American Airlines was at the time cutting employee pay, all while they were quietly giving generous bonuses to upper management.  The rank-and-file found out about it and the s__t hit the fan!)

Today we have a dangerous divide between workers and the "One Percent".  The upper class has never had it so good, while the middle class is actually shrinking.  Their inflation-adjusted income has been stagnant for 25 years.  Too many don't have health insurance, or if they do, they can't afford the deductibles.  Large companies are generally not expanding here, and many are moving operations overseas.  Employees are scared.  Small companies are where new jobs are being created today, but many of those have modest or even no benefits.

Too many of our new jobs that we use to pump up our high employment figures are low-paying positions.  Part-time or contract workers are popular because they allow companies to skirt offering benefits, among other things.  Workers feel estranged from their bosses, and bosses can't empathize with their workers.  Distrust and hostility is the norm.  This income inequality/attitude now permeates how our country operates from top to bottom, and it's unhealthy.

I'm not looking for some sort of instant Robin Hood "rob from the rich/give to the poor" income redistribution scheme, for that, too, would cause resentment.  But our rigged tax laws and subsidies and sweetheart breaks for the rich need to be reversed.  We all need to be on a level playing field, where everyone feels like they're getting a fair shake.  

All I'm hearing from our leaders is promises.  The "haves" are trying to get even more for themselves by taking away what little the working class has left.  This is not good.  We should look to Herb Kelleher as an example of how we can ALL thrive if we pull in the same direction.

S

A two-part-er.....

Tonight the top-10-polling Republican presidential candidates will bloviate in a nationally televised debate.  And front and center will be The Big Wind himself, Donald Trump, aka "The Donald".  He's a lightning rod for sure, but I must give him due credit for two things:  

First, I like the way he speaks his mind.  It's obvious he says what he thinks, and not just what this morning's poll numbers say people want to hear.  Whether I agree with what he's saying or not is another matter, but at least I never have to wonder what he's thinking. 

Second, I like the way he is paying for his campaign out of his own pocket instead of having to prostitute himself before the usual cesspool of special interests.  

Of course, following this logic, that would mean only billionaires should run for president, which is of course a complete other problem.  But as my lovely wife pointed out, it's either the billionaire who funds his own campaign, or the common man who is corruptible.  Maybe we should look at public funding of campaigns, taking fund raising and all it's corrupting influence out of the equation?

~~~~~~~~~~~~~~~

The Securities and Exchange Commission is expected to rule soon on whether publicly traded corporations will have to reveal what their CEO's make (in TOTAL compensation, not just salaries) as well as the gap between what they make and what their employees make.  The two Republican commission members are against it, the two Democrats are for it, and the lone Independent is expected to be the tie-breaking "yes" vote.

Big business interests such as the US Chamber of Commerce are steadfastly against it saying it will cost businesses $700 million to calculate and report the yearly numbers (the SEC says it shouldn't cost more than $73 million), and that it is simply an excuse to embarrass highly paid CEO's.

That last excuse seems self incriminating to me.  If you haven't done anything to be embarrassed about, why should you fear being embarrassed?

I have no problem seeing CEO's make big bucks IF THEY DESERVE IT.  But too often they make their money via smoke and mirrors.  Think of the 2008 financial meltdown and today's Greek debt fiasco....those were just giant shell games!  They tweaked things to make it look like they were masterful business people when they were just blowing up a property bubble that eventually burst, or were making loans to credit-worthy sovereign countries.  Their shareholders were left ruined, while they lived happily ever after (with their millions of $$$$ in ill-gotten compensation) in the Hampton's.

Legitimate, skillful management that builds a solid, long term company SHOULD be handsomely rewarded (former CEO's like Southwest Airline's Herb Kelleher and Costco's James Sinegal come to mind), but not these "skim all you can and move on" shysters.  

Maybe this new rule will shed light on the "too good to be true" CEO's.  If their company is a laggard, but their pay is at the top of their segment chart, why shouldn't it be brought forcefully to the attention of their shareholders?  What possible excuse can you use to justify NON-transparency?

S

It's deja vu all over again

I'm sure that's what Yogi Berra will say when he hears that Virgin America Airlines is vying for the right to fly from Dallas Love Field.  It would be a real coup as they are fighting the big kid on the block, Southwest Airlines, for those last 2 gates at Dallas' in-town airport.

Sitting there in Fargo, ND you might ask, "Why should I care about this?  I'm sitting here in Fargo, North #@$%^ Dakota?"  Here's why:

It was in 1971 from Dallas' Love Field that Southwest Airlines flew its first scheduled flight.  It was the "rebel with a cause" that stood the airline industry on its head.  For the next 30-something years it moved in to one airport after another and undercut the going airfare there by 50% or more.  We all benefited.

The airline execs said this caused much turmoil in the industry, causing some of the weaker carriers to go belly up.  Consumers said YEAH BABY!  

SWA's eventual CEO Herb Kelleher (now retired) is an absolutely brilliant, crazy guy who put sex appeal back in the air.  I like Southwest Airlines.  It's still based in Dallas, and is an absolute hoot to fly.  But it is no longer the precocious kid with big plans.  It isn't even a true "low cost airline" anymore. 

Now the Wright Amendment (the political deal that inadvertently pretty much gave Love Field to Southwest) is being repealed and other carriers are fighting for the right to go toe-to-toe with SWA.  Now the winner has been announced and it is......

 

....yes....Sir Richard Branson and his Virgin America Airlines.

It's like Herb Kelleher had an illegitimate son and he started his own airline, too.  Both are flamboyant, both love the airline biz, both love ladies in sexy uniforms, and both know how to treat customers.  Now we'll see if Sir Richard can set Dallas on fire today like Herb did in 1971.

Straight from Herb's playbook.

Do you see it?

I'm glad Dallas didn't cave and give the 2 gates up for grabs to the entrenched 500 pound gorilla.  SWA already has 97% of the business at Dallas Love.  That's enough too much.  Competition is good, and I think Virgin America will be good for us consumers and will keep SWA on their toes, too.

Welcome to Dallas Virgin America!  Now go out there and shake up the airline biz just like Herb did.  (Might you some day make it to Fargo, North #@$%^ Dakota?   I sorta promised.... :)

S

Learning about business from Herb

I usually spend my drive time listening to news / talk radio, and yesterday I heard something that really got me to thinking.  The topic was raising the minimum wage and of course the arguments were the same as we've heard time and time again:

The conservative speaker pointed out that raising the minimum wage would help some, but would cost many jobs in the process, making it a net negative to the economy.  He went on to say that no company can pay employees more wages if they don't make the company any more money along the way.

Then the liberal speaker said workers (inflation adjusted) pay, especially at the lowest level, hasn't gone up in 20 years, while the top tier execs have seen their pay go up 200%+ in the same time.  For these people the American dream is just a mirage.  Working even two minimum wage jobs won't support a family.

Both good points, and the argument ended just as it began....square peg, round hole.  

Wanna know what I think?  I think somebody needs to sit down with Herb Kelleher and pick his brain.

This self effacing, hard drinking (Wild Turkey) smooth talking "naturalized" Texan was one of the co-founders, and later the long-time CEO, of Southwest Airlines.  He grew a handful of employees and 3 leased airplanes into the low-cost (?) juggernaut it is today, with over 550 aircraft and 45,000 employees. And they all love him.  (At least the people do, not sure about the planes.)

Herb wasn't noted for throwing around mega paychecks.  In fact, his employees were traditionally some of the lowest paid employees in the industry.  And he was one of the lowest paid major corporate CEO's, too, never receiving a salary of more than a few hundred thousand dollars a year.  (That "good for the goose, good for the gander" thing.)

When their company did well, and it almost always did, they all shared the profits and received stock options, too.  And with that, they all did just fine.  Herb might come across as just an "aw shucks" kinda guy, but I promise you he is ALL business, he is brilliant, and his people trust him.  The unions worked with him because he was fair.

He took care of his employees, never laying off even one, and if they played their cards right, more than a few retired multi-millionaires.  True!  To this day people fight for a job there, positions are that coveted.

Oh, and Herb retired in 2008 filthy rich, too.  (He had juuuuust a few more options than the rest of 'em, rightfully so.)  Herb proved that business doesn't have to be a zero-sum game....for someone to win, someone else does NOT have to lose.

And I don't think many if any of those 45,000 employees give a damn if he's a liberal, a conservative, or a pink unicorn.  So why can't the rest of us figure it out?

S