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Upstairs / Downstairs
"What we have in this country is socialism for the rich and free enterprise for the poor."
- Gore Vidal
"The only difference between the rich and other people is that the rich have more money," said literary critic Mary Colum during lunch with Ernest Hemingway in 1936. In truth, more money is hardly the only difference. No newsflash there. But what should be making headlines is the fact that the gap between what's going on upstairs in boardrooms, executive suites, and private planes and what's going on downstairs in office cubicles and on factory floors has become an abyss.
Upstairs: Former Kmart CEO Charles Conaway received nearly $23 million in compensation during his two-year tenure.
Downstairs: When Kmart filed for bankruptcy in 2002, 283 stores were closed and 22,000 employees lost their jobs. None of them received any severance pay whatsoever.
Upstairs: Former Tyco CEO Dennis Kozlowski made nearly $467 million in salary, bonuses and stock during his four-year tenure.
Downstairs: Shareholders lost a massive $92 billion when Tyco's market value plunged.
Upstairs: The CEOs of 23 large companies under investigation by the SEC and other agencies earned 70% more than the average CEO, banking a collective $1.4 billion between 1999 and 2001.
Downstairs: Since January 2001 the market value of these 23 companies nosedived by over $500 billion, or roughly 73%, and they have laid off over 160,000 employees.
Upstairs: In the year before Enron collapsed, about 100 executives and energy traders collected more than $300 million in cash payments from the company. More than $100 million went to former CEO Kenneth Lay.
Downstairs: After filing for bankruptcy, Enron lost $68 billion in market value, 5,000 employees lost their jobs, and Enron workers lost $800 million from their pension funds.
Upstairs: Wal-Mart CEO H. Lee Scott, Jr. received more than $17 million in total compensation in 2001.
Downstairs: Wal-Mart employees in 30 states are suing the company alleging that managers forced employees to punch out after an eight-hour work day, and then continue working for no pay. This is a clear violation of the Fair Labor Standards Act, which says employees who work more than 40 hours a week must be paid time and a half for their overtime.
Upstairs "Penthouse A": Citigroup provided Enron with $8.5 billion in loans disguised as commodity trades. The deals allowed Enron to artificially inflate cash flow and hide debt, which deceptively boosted share price and ultimately led to the company's collapse.
Upstairs "Penthouse B": Citigroup offered hot initial public offering shares to WorldCom CEO Bernie Ebbers and other telecom titans in exchange for their investment banking business. Ebbers is alleged to have made nearly $11 million on IPO shares sold to him by Citigroup.
Downstairs: Citigroup agreed to pay $215 million in fines to the FTC to settle allegations of "predatory lending," loosely defined as mortgage lending that preys on customers, especially ones with bad credit, through abusive practices like deceptive marketing and inflated fees on unnecessary refinancings.
Upstairs: More than a million U.S. corporations and individuals have registered as citizens of Bermuda to avoid taxes, a practice okayed by the IRS. Although the exact number is unknown, the IRS estimates that "tax motivated expatriation" drains at least $70 billion a year from the U.S. Treasury.
Downstairs: If you were poor enough to apply for the Earned Income Tax Credit in 2001, your chance of being audited was one in 47. If you made more than $100,000 a year, your chance of being audited was one in 208.
Upstairs: The richest 20% of Americans earn almost 50% of the nation's income.
Downstairs: The poorest 20% of Americans earn 5.2%.
Upstairs: The top 1% of stock owners hold 47.7% of all stocks by value.
Downstairs: The bottom 80% of stock owners own just 4.1% of total stock holdings.
Upstairs: In 2000, the average CEO earned more in one day than the average worker earned all year.
Downstairs: In 2000, 25% of workers earned less than poverty-level wages.
Upstairs: Between 1990 and 2000, average CEO pay rose 571%.
Downstairs: Between 1990 and 2000, average worker pay rose 37%. For more information about the disturbing disparity in wealth and privilege between the top 1% and the bottom 80%, open up the business section of your newspaper. Or turn on Court TV.
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