Our economy isn’t working as it should. There’s economic unfairness, unemployment remains stubbornly high, and there seem to be few political answers to the great mass of people feeling the pinch of hardship. There is an enormous and seemingly accelerating concentration of wealth at the top, and a questioning of whether our economic system serves the majority.

To misappropriate Churchill, capitalism is the worst possible choice of economic system – except for all the others. We do not, in any case, live in a purely capitalist world. All economies are mixed to some degree, by necessity. Without an independent arbitrator (The government) to control the relationship between economic actors, there could be no capitalism anyway, just a quick devolution to a system of monopolies, practically (and ironically) indistinguishable from communism.

This preamble isn’t meant to moan about how things are. It’s just useful to remind ourselves that the world as it is can be changed, if we keep a firm grasp on the obstacles preventing us from getting there. One of the biggest sources of rot in our current economic climate is the perception and reality of unfairness, and one of the worst exemplars is executive pay. Most of us have at some point heard some variant of these statistics: a CEO decades ago earned about 20 to 30 times what the average worker did, but now he earns hundreds of times more. Sure, apologists can quibble about how certain sectors see less of this effect than others, and how bankers, in particular, are now somehow exempt from ordinary industrial concepts of economic effort and reward, but it is indisputable that there has been a change in what constitutes wealth accumulation at the top, compared to the past.

Even worse, from the perspective of someone who wants to see a functional, efficient system of wealth creation spread across society, is the reward of incompetence, if not outright malfeasance, to corporate heads who run their companies into the ground, shortchange their workforces and damage the environment (Both literally and figuratively) in the quest for short-term personal reward. Much was made a few years back of how the mechanism of stock options was the culprit for much of this economic short-termism and bad leadership. Managers given stock options planned and managed the actions of the company just to make sure the stock was high at whatever point in time they could cash out those options, rather than managing with the goal of making sure the company could thrive long term. Cutting the employee count to the bone was one favorite method, since chopping off payroll shows up as profit on the balance sheet. Short-changing R & D another. But both those actions, and similar ones which trade off future investment for a better short-term balance sheet, incapacitate the company when it comes to future growth. How can a company make better products when there’s no investment in research and development? How can it meet future growth when employees with institutional knowledge have been sacked? That isn’t capitalism, it’s cronyism run rampant.

However, while stock options have been a destabilizing factor in high-level corporate management, they are just a mechanism of reward. If we take away options, people in charge of reward will find something else, similar enough to have the same effect, but different enough to escape complaints for a while.

No, to fix the problem you have to change who gets rewarded and by whom. Ivory tower economists, an unfortunate number of whom make a living apologizing for the real faults of capitalism without addressing their causes, make the argument that corporations are run for the benefit of shareholders. Pure horse manure. If that system ever really worked, it is demonstrably broken at present. Too many corporations in America are nowadays run for the benefit of the top managers and the board members themselves. In the idealized classic capitalism of Friedman et al, the board is supposed to represent the shareholders and see to it that managers run the corporation well. Which is why people could at one time claim with a straight face that a corporation’s only function was to maximize shareholder value. But what happens when the managers of one corporation are the board members of another? When they are all the same people, where is the incentive to ensure good management, an abstract ideal, rather than just pillage the corporation for personal pay and wealth (and the individual shareholder can go hang)?

Our American system of capitalism has become infested with corruption at the top, where the highest levels reward themselves at the expense of the company they are supposed to serve. And who can blame them, when there is no sanction against such behavior?

I propose a simple rule. No single person working for one company or corporation can serve on the board of any other. Period. And to prevent a revolving-door effect of cronyism, no person may serve on a board who has worked for any other company, until at least ten years have passed. The intent, of course, is that managers who retire will only be able to serve on the board of their old company. Might that have the effect of concentrating their minds on the long-term effects of their decisions? Might it also mean that companies are led by people who align their own interests with that of the company for the long run, rather than seeing it as a cow to be milked for short-term personal gain? Might boards then make decisions of executive pay and reward based on the best interests of the company as a whole, which is what they’re supposed to do?

One can certainly hope so.