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Winston has always been a free-market friendly watchdog. However, he also recognizes the corporate scandals undermine the economy and the country. Winston also knows that scandals can come in many forms.

An article in the October 28th issue of the New York Times (page C2), discusses the views of various economists concerning corporate scandals. The article was triggered by apparent wrongdoing by major insurance companies. The article notes that "many economists lean against financial regulation in general and have been in favor of only modest reforms in the wake of scandals." The article goes on to explain that the economists' general argument is that "free markets check corrupt behavior more than is realized, the courts can handle other disputes, and government regulations often serve business interests anyway."

Despite being a market-oriented dog, three statistics in the article caught Winston's attention. One number that Winston found disturbing was that, according to the article, the average pay for CEOs of large companies went from 140 times the pay of the average worker in 1991 to 500 times the average worker's pay in 2003.

More disturbing was that, according to a recent study by Professor Bebchuck of Harvard Law School and Professor Grinstein of Cornell Business School, the total compensation, including salary, stock options and pensions, of the five top executives of all companies "came to a stunning $260 billion over the last ten years."

The article notes that even the more than a quarter-trillion dollars in compensation "might be justifiable if there was ample evidence that it was based on market performance or corporate earnings." Instead, the Bebchuck-Grinstein study found that "since the early 1990's pay has risen twice as fast as the market value of stocks and much faster than corporate income."

The final statistic that caught Winston's attention and the most outrageous, is that by 2002 the total compensation of the top five executives of all public companies had risen to just under 10% of corporate income.

Winston does not pretend to know the solution to outrageous compensation for top executives. However, he does know that the current trend can not continue.


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