Jeremy Goldstein has long been a major proponent of helping people who have ended up on the streets of New York get back on their feet. He has long been one of the city’s most-forceful voices for not just providing those who have no place to call home with a temporary roof over their heads but also going straight to the root causes of their unfortunate circumstances.
The National Coalition for the Homeless has estimated that as many as 64 percent of homeless people may suffer from addictions to drugs and alcohol. Additionally, as many as 25 percent suffer from primary mental illnesses. Although it is difficult to know the full extent of mental illness and addiction in America’s homeless population due to these conditions frequently overlapping, it is safe to say that a large majority of homeless people across the United States suffer, to some degree, from mental illness.
Even before he became a prominent NYC philanthropist, Goldstein long recognized that the majority of homeless people who have an underlying mental illness are vastly less likely to successfully make the transition to self-sufficient living and someday enjoying a home that they can truly call their own.
A cutting-edge mental health paradigm
With the largest homeless population in America, New York City would seem to be the perfect incubator for innovative mental-health solutions, especially when it comes to treating the often-severe conditions from which the homeless suffer.
And it turns out that the city has indeed produced a number of highly innovative care models for mental health that are not only highly original but that also have proven track records of success that are nothing short of astonishing.
One such example is Fountain House. Founded in 1944, Fountain House follows a highly unique treatment model that takes its inspiration from what has been known to work for thousands of years and that can still be seen in operation throughout areas of the world where civilization has not yet sunken its roots.
Travel, for instance, to the Andaman Islands in the Indian Ocean or to Papua New Guinea, and you’ll see primitive tribes happily living as they very likely did during the Roman Republic. What you won’t see there, however, are large numbers of individuals who suffer from crippling mental disorders. Although researchers don’t fully understand the reasons, it seems that people who are connected by an extremely strong sense of community, with iron social bonds, derive a sense of purpose and vitality that immunizes them against many of the mental illnesses from which people throughout the advanced world often suffer.
Fountain House recognizes this reality. While it is not possible to fully replicate the deep, lifelong bonds that form among primitive tribesmen, Fountain House has created a strong sense of purpose and community among its residents through involving them in meaningful work programs.
One of the root causes of homelessness is the extremely high rate of unemployment among those who suffer from mental illness, including from drug addictions and alcoholism. It has been estimated that more than 85 percent of people who are diagnosed as having a chronic mental illness are unemployed.
Fountain House has turned those statistics on their head. Nearly every resident of Fountain House is engaged in purposeful work of some type. But the really incredible accomplishment of the program has been the remarkable 42 percent outside employment rate that its residents have achieved. And this is not some once-off fluke. Since 1944, nearly half of all Fountain House residents, all of whom suffer from serious diagnosed mental disorders, have been employed in companies throughout New York City.
Fountain House residents also experience remarkably low rehospitalization rates. With just 10 percent of its residents having to return to the hospital for treatment, Fountain House has completely upended the more than 50 percent of mental-health patients that are readmitted to the hospital shortly after discharge.
Jeremy Goldstein’s wine dinner raises hundreds of thousands for Fountain House
On May 22, 2019, Jeremy Goldstein hosted a wine-dinner gala that successfully raised hundreds of thousands of dollars for this highly effective and inspiring mental-health facility.
Goldstein’s guests each contributed $5,000 to attend the event. They were treated to some of the most-delectable cuisine and finest wine that New York City has to offer. And the guests left with a smile on their faces, knowing that they had just made a magnanimous contribution to helping some of New York City’s most-vulnerable and downtrodden residents find hope and a path to normalcy, without having to endure the travails of life on the street.
As Jeremy Goldstein helps those on society’s lowest rungs, he is also indispensable to those who have climbed to the top
Jeremy Goldstein is much more than one of New York’s best corporate and executive-compensation lawyers. He is a keen observer of social realities.
Much ink has been spilled over the huge disparities between the pay of CEOs and the rank-and-file employees of many of America’s largest corporations. Far from an apologist for capitalism’s worst excesses, Goldstein fully recognized the grave threat that ever-rising income inequality poses to the continued health of the United States.
But he also cautions that a nuanced view must be taken. The tough reality for many people to swallow is that, as the system is currently constituted, corporations must offer their top people competitive compensation packages or risk losing the best talent to competitors. And the simple fact is that few people have the unique blend of talents that make a great corporate leader. Because the supply of these folks is so small and the demand is nearly incomprehensible — a good approximation is the total combined revenues of all Fortune 500 companies — the prices being paid for these rare and highly capable individuals often look obscene to casual observers.
Incentives matter
Goldstein’s take on the problems surrounding executive compensation almost defies categorization, other than to say that his approach is simply rationalist in nature.
The problems of increasing wealth inequality are well known. They are also largely intractable without heavy intervention. Numerous studies have shown that nearly all free-market systems tend to produce what are known as Pareto distributions. Colloquially, such situations are known as the 80-20 rule: 20 percent of the people end up with 80 percent of the wealth. The problem with such wealth distributions is that they always seem to become increasingly extreme, eventually ending with a single person or entity owning all of the wealth, destroying the middle class in the process and utterly impoverishing every participant in the system except for the singular lucky winner.
While such outcomes are largely academic, massive evidence exists for the trend towards increasingly severe wealth inequality in the real world. And this is a particularly pernicious process because it threatens to annihilate the middle class and, in doing so, seize the country’s economic engine of consumer spending.
Taking all of this into account, Goldstein has stated that it should be a goal of every American to address the seemingly endless upward climb of the pay ratios between CEOs and everyone else. However, contrary to many others within the corporate and financial world, Goldstein has stated that addressing these issues will require carefully shaped government intervention. The trick, he says, is to reduce the pay ratio between CEOs and workers in such a way as to not give any domestic companies undue advantages and to safeguard against foreign companies successfully siphoning off the best of America’s managerial talent.
Extreme income inequality is a driver of homelessness
As someone who has a strong interest in alleviating the problem of homelessness in New York City, Goldstein has said that housing prices, especially in highly sought cities like New York and San Francisco, have been largely driven by the huge disparities in wealth between the members of the elite business class and everyone else. New York City has become one of the least affordable places in the country. And this is largely attributable to nearly all of the country’s economic prosperity over the last few decades being reaped by the 99th percentile and higher.
Goldstein says that, in 1960, the average CEO of a major corporation made just 18 times the salary of the average worker. It is no coincidence that housing affordability has plummeted throughout many of America’s largest cities since then. And lack of affordable housing is a major contributor to homelessness.
In his book “Coming Apart”, sociologist Charles Murray documents the profound changes that have occurred in the U.S. economy and society as a whole since the 1960s. In that decade, those same CEOs who only made 18 times the average worker commonly lived in the same communities and even neighborhoods as their corporate underlings.
Murray points out that there was a widespread sense of noblesse oblige, a feeling that the business elite had an obligation of sharing prosperity with their fellow citizens. Part of this entailed a sense of seemliness, which prevented the leaders of industry from adopting lifestyles that would have seemed excessive or ostentatious. Murray says that throughout the 1960s it would have been almost unthinkable for the typical CEO to live in a home that was worth many times the lifetime earnings of one of his workers. That change, Jeremy Goldstein has averred, is one of the key factors that has led to the enormous wealth disparities that we see today.
Goldstein explains that the vast majority of Americans’ actual wealth is tied up in their homes. Although he says that it is difficult to disentangle causality, Goldstein points out that the country’s elites are taking larger and larger shares of economic growth, vastly increasing home prices relative to median wages throughout most major cities and inflicting on younger Americans a complete inability to form wealth.
He says that the rapidly skyward-shooting home prices in cities like his native New York are pricing new homeowners completely out of the market while taking a higher portion of their income for rent. This prevents them from saving while simultaneously shutting these younger potential homeowners out of the primary means through which generations of Americans have built wealth: home ownership. The consequences are dire.
For the first time, an entire generation of Americans, the millennials, are significantly worse off than their parents were at the same life stages. And at the lowest end of the socioeconomic spectrum, the out-of-control unaffordability of rents throughout much of the country is conspiring with epidemic mental illness and addiction to fuel a homelessness crisis that threatens to turn some areas of the United States into facsimiles of Brazil.
Goldstein agrees that, although it may not be feasible to return to the halcyon days of CEOs living in the same neighborhoods as everyday dentists, lawyers and even their own employees, lowering today’s stratospheric pay ratio between CEOs and workers back down to the sub-100 level will go a long way towards alleviating wealth inequality and, by extension, the critical housing crisis and resultant homelessness that currently plagues such cities as San Francisco, New York and Los Angeles.
Rich-people problems affect us all more than we would like to think
While every decent society takes care of its most vulnerable citizens, every healthy society establishes the right incentives for its ruling elites.
As a corporate lawyer who has worked on some of the biggest mergers and acquisitions in recent history, as well as helping many of America’s largest firms establish the right incentives for their executive pay schemes, Jeremy Goldstein has had a front-row view of the massive damage that is often inflicted on employees, shareholders and society as a whole when incentives are poorly structured.
One of the abiding themes of Goldstein’s philosophy is that executive compensation must be tied to rational metrics of corporate performance. But far too often, C-level employees get paid based on spurious measures of growth, such as earnings per share. And this can lead to disastrous short-term thinking that has wrecked many corporations on its rocky shoals.
From Enron to General Motors to Lehman Brothers, poor incentive structures that elevate ephemeral short-term goals over the long-term growth of a firm often lead to ruin. And when major corporations go under as a result of managers, executives or entire unions acting in personal-utility-maximizing but deleterious ways, it is often upper management, with their golden parachutes, who suffer least.
Employees, local towns and even federal taxpayers often find themselves unwillingly on the hook for the resulting costs. And ultimately, in a country that could reasonably be described as a corporatocracy, the proliferation of bad incentives weakens the nation itself by chipping away at the primary institutional form that comprises it.
Balance, in business as in nature, is the key to health
Homeostasis is the process by which all life is made possible. In fact, homeostasis is virtually synonymous with the term health. It is also a synonym of balance. That’s why almost every illness or disorder involves some sort of biologic imbalance.
In business, things are no different. Striking the right balance between the needs of many different stakeholders is crucial to maintaining a healthy company. But Goldstein points out that ideological differences often blind people to the legitimate role that certain aspects of business play, particularly when it comes to executive compensation.
Goldstein says that, like it or not, designing competitive executive compensation packages is an absolutely necessary step to succeed for any corporation that is not still run by its founder or owner. The simple fact is that the combination of intelligence, quick learning, spinning multiple plates and strong leadership that must be present in any CEO in order for them to be merely competent are extremely rare. With perhaps only a few thousand people in the entire country who really have the leadership, knowledge, ironclad work ethic and proven track record to lead a major corporation, companies must be prepared to put forth competitive executive-compensation offers. From WorldCom to Toys “R” Us to Radio Shack, the battlefield of American business is strewn with the rotting corpses of firms that failed to put the right people in key leadership positions.
Executive compensation that is tied to earnings per share is a socioeconomic landmine
But where executive compensation schemes are not properly designed, the results can be as poor as if any randomly selected felon were placed at the corporate helm. As one of New York’s leading executive-compensation attorneys, Jeremy Goldstein has had a close-up view of exactly how far south things can go when executive compensation packages are not properly tied to rational corporate performance metrics that align with long-term business goals.
One of the leading problems that Goldstein sees today with executive compensation is the extreme perverse incentives and society-wide moral hazards that exist with CEO pay that is tied to earnings per share. Such payment schemes have been one of the driving forces behind the massive stock buybacks that have elevated the U.S. markets to historic heights.
Goldstein says that the historically low interest rates, which have prevailed over the last decade, have put cheap money in the hands of corporations. And this money has been used, in many cases, not for capital investments but, instead, to buy back the company’s own shares. Under no economic theory does this make any real sense. However, it does lower the number of outstanding shares. All things being equal, this causes earnings per share to go up and executive bonuses to fatten.
But Goldstein warns that these activities have led to what is, by nearly every historic measure, a stock-market bubble. It also frequently fails to actually strengthen the companies themselves. If the stock buyback is being justified primarily as a means to boost the firm’s share price, it is highly questionable as to whether this goal has any real strategic merit from a long-term perspective.
Because both earnings per share and price per share are metrics to which executive compensation is often tied, stock buybacks that use cheap credit create a way for executives to boost their own salaries without actually accomplishing anything that contributes to the long-term growth of the firm.
Each executive-compensation package should be custom-tailored to the individual company
Each company is different. A startup that is using seed capital to grow to eight-figure sales numbers with the hope of an eventual acquisition will require a radically different strategy than an established hundred-billion-dollar financial institution that is trying to shore up market share in retail finance.
Because of the radical differences in both long-term goals and the strategies that best stand to achieve them, Jeremy Goldstein recommends that every company take a close and thorough look at exactly how its leadership is being compensated, tailoring a plan that makes use of rational performance metrics that are appropriate for that firm. While there may still be some room for partially tying executive compensation to things like earnings per share and stock price, other measures, such as reduction of outstanding senior debt, five-year market-share growth or per-employee productivity gains, are often superior. Because the ways that executive compensation can be designed are virtually infinite, hiring an executive-compensation expert like Goldstein is the best way for companies to ensure that the interests of their executives are well aligned with the long-term interests of all stakeholders.
Jeremy Goldstein can help corporations reach their performance objectives
Currently the senior partner at Jeremy L. Goldstein and Associates, Jeremy Goldstein has been in the world of corporate law for decades. He has helped hundreds of corporations, ranging from small, closely held firms to some of the largest businesses in America, design and implement executive compensation programs that are able to attract top talent while holding corporate leadership to account for their success or failure in attaining long-term company objectives.
In business, the difference between success and failure is often determined by whether or not company personnel are truly personally invested in the corporate mission. And the example to be followed always starts at the top.