By Robert Pembroke
Many years ago, while going through my mail, I found a letter from the Internal Revenue Service telling me that our company had won their annual lottery. For the first time ever, our shop was going to be audited by the feds. We had been audited many times by the state for possible sales tax infractions, but had never been audited before by the big guys.
I had learned that the most prudent way to handle the state audits was to have them done in our CPA’s office. I called our CPA and told him to contact the IRS and set up the audit in his office. A couple of weeks had gone by when I received a call from our CPA telling me that the IRS was auditing our business because of “unreasonable executive compensation” to me. We were able to prove that my compensation was not unreasonable, primarily because I was also our company’s top salesman along with being its CEO.
Speaking of unreasonable executive compensation, have you seen that the head of Aetna is going to receive $500 million if the proposed buyout of Aetna by CVS goes through? To me, this is a classic example of unreasonable executive compensation — and let me tell you why: On average in America, if you are a manufacturer and your total cost of manufacturing a part is $10, then the list price will be $34. So, if this guy gets $500 million, then the customers of Aetna and CVS will be spending an additional $1.7 billion on goods and services purchased from Aetna and CVS.
Is it any wonder that millennials — those people reaching adulthood early in this century — are shifting their allegiance to socialism over capitalism? They have read in the press over and over about the income inequality that’s going on all around them. For example, three people, Bill Gates, Warren Buffett and Jeff Bezos, have as much wealth as the whole bottom half of our citizenry.
The heads of pharmaceutical companies, insurance company executives, healthcare administrators and even the CEOs at startups, all have unreasonable executive compensation, in my opinion — and keep in mind that for every extra dollar of unreasonable executive compensation, it’s going to cost you $3.40 more to buy their goods and services.
I decided to write this column after reading an article in The Wall Street Journal about a Harvard study that interviewed over 2,500 millennials. Along with the tendency toward socialism, the article also said that the millennials were more depressed about the future than previous generations.
“If something unites these young people,” said Harvard study author John Della Volpe, “it’s fear, driven by their perception that they have limited economic opportunities and that society as a whole has become more unequal.” To me, this is heartbreaking and somehow we’ve got to convince the millennials that life is pretty darn good in America.
My daughter, a psychotherapist who has been practicing for about a decade and a half, had an interesting thought as to why the today’s millennials are more depressed than previous generations. “It’s the smartphone, Dad.” She then emailed me an article from the September 2017 Atlantic magazine titled “Have Smartphones Destroyed a Generation?” that details the phenomenon.
The first smartphone was introduced in 1992 and by 2012 over 50 percent of the American population had them. When I grew up, people were gleefully forced to associate with others and build teepees in the woods or play tackle football on asphalt streets. My mom did not want me underfoot and kicked me outside. The millennials and today’s youngsters are also not underfoot but are sitting on a couch pecking away at a very small screen.
According to the article in The Atlantic, “There is compelling evidence that the devices we placed in young people’s hands are having a profound effect on their lives-and making them seriously unhappy.”
Have you ever seen two teenagers walk into the side of a car while texting? I have.
Robert Pembroke is the former chairman and CEO of Pembroke’s Inc. in Salt Lake City. He can be reached at pembroke894@gmail.com.