Back in the mid-1980s, Wendy’s the fast-food hamburger chain, went head-to-head with Burger King and McDonald’s through its nationwide television ad campaign, which featured three little old ladies peering at an enormous hamburger bun with a teeny little burger inside. I still chuckle thinking about the 4-foot, 11-inch octogenarian yelling, “Where’s the beef?”

This image came to mind when I recently read an article in the New York Times that had the headline, “Top Hedge Fund Managers Earn Over $240 Million.” Compensation for managers of hedge funds has been lucrative for some time, but to make the list of the top 25 managers in 2006, a manager had to earn at least $240 million --- nearly double the amount it took to make the list in 2005. To make the list in 2002, hedge fund managers had to earn more than $30 million. All together, the top 25 hedge fund managers in 2006 earned $14 billion. According to the International Monetary Fund, that is more than the total gross domestic product of Bahrain, Jordan, Ethiopia, Jamaica, and many other developing countries!

Now before my friends in the business community think that I¹ve crossed over to the “dark side,” or that I’ve enjoyed a few too many beers before writing this article, let me say that I’m a firm believer in the American system of capitalism. But isn’t this getting a bit out of control? Excessive executive compensation has been a thorn in my side for some time, but I’ve always endured the pain quietly, hesitating to write about it for fear that I might lose credibility with the business leaders to whom I direct my monthly column. However, this list of wealthy hedge fund managers was the straw that broke this camel’s back.

Lest we think that oversized compensation packages are granted only in New York or Chicago, let’s consider some of our state’s business leaders, including executives at Northwest Airlines. The airline’s board of directors recently announced that it would reward its CEO for doing a good job of steering the airline through bankruptcy with $26.6 million in equity in the restructured airline. Executive vice presidents at the airline will receive almost $45 million in equity grants as well.

I’m usually not on the same side as the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), which at the time of this writing is planning to oppose Northwest’s executive pay plan in court. And I am aware that Northwest executives lost equity in the airline that they had earned before the restructuring. Nevertheless, the union’s position seems reasonable. Much of the burden of restructuring Northwest Airlines was placed on the backs of its employees and its customers. It is hard to see how the executive pay packages will improve employee relations --- and, in turn, how they will improve customer relations.

Now, I agree that most CEOs work very hard and deserve to be paid reasonably well. I also realize that to attract a top-notch CEO to your company, you have to offer an attractive compensation package that’s better than the one he or she could get somewhere else.

However, it seems that the compensation system and its governance is broken. The average CEO of a Standard & Poor’s 500 company received $14.78 million in total compensation in 2006. This put the average pay ratio of CEO to average worker at 411:1. Compare that to the CEO-to-worker pay ratio in 1980 of 42:1. Do you really believe that the value we’re getting from America’s CEOs has increased that much? I don’t.

American workers are losing jobs to outsourcing, losing benefits to rising health care costs, and losing pensions and retirement funds to outdated systems. Doesn’t it seem a bit inequitable that executives are getting super-rich --- especially in the instances where executive performance doesn’t correspond with executive compensation? Last year, departing CEOs Henry McKinnell of Pfizer and Robert Nardelli of Home Depot both received exit packages of more than $200 million, and both companies underperformed during their tenures.

Many business leaders say that highly paid executives result in high performance. That’s a myth. My experience shows that the opposite is true. To prove that I’m not just running at the mouth, I found a study that analyzed the performance of Australian companies, which showed that the more they paid their CEOs, the worse the company performed. That means excessive executive pay is more than a moral issue; it’s an issue for shareholders and employees, too.

Politicians may label my comments as liberal or conservative, but that’s not where I’m coming from. Rather, as an American business leader --- not a Democrat or a Republican --- I worry that our new economy is being built using smoke and mirrors, and is not creating real value. We are merely churning money, and a select few in the money value chain are getting filthy rich without adding anything of value that will help build the global economy.

For all the money being spent on excessive compensation, what new products have been created? What breakthrough product ideas have been discovered? Have any real problems been solved? Nope, it’s just money changing hands --- a reward for smarts and cleverness.

James J. Hill, John D. Rockefeller, and Andrew Carnegie built the rail, oil, and steel industries by creating tangible products and jobs. But there’s something different this time: Some say today’s super-wealthy people are the next generation of robber barons, using wealth to create more wealth, and leaving few products and jobs behind.

I have to ask: Where’s the beef? I wonder what Andrew Carnegie would say. When he retired, he had accumulated about $300 million by providing steel to America’s railroad system. By the time he died in 1919, he had given 90 percent of his wealth away through the establishment of foundations that are still active today in such areas as education and science, and by donating to libraries and churches. Carnegie also funded efforts to promote international peace. After World War I, the League of Nations was modeled after Carnegie’s peace efforts, which in turn led to the formation of the United Nations.

Since I can’t ask him directly what he’d think about this new generation of robber barons, I can only refer to some of his writings, which included these thoughts about stock market trading:

• “Speculation is a parasite of business, feeding upon values, creating none.”
• “Dollar making is not necessarily business.”
• “Nothing tells in the long run like good judgment, and no sound judgment can remain with the man whose mind is disturbed by the mercurial changes of the stock exchange . . . he cannot judge relative values or get the true perspective of things.”

That, my friends, is what is happening. We are losing the true perspective of things and are forgetting to add the beef to the bun. And if we don’t start putting some common sense back into this matter, we’re going to find ourselves offering empty buns to a global economy that’s finding beef somewhere else.