On July 14, 2023, Hollywood actors joined the writers in going on strike against the studios, which had changed the business model in ways, according to the Screen Actors Guild (SAG), that were leaving the vast majority of actors out financially. At the time, AI (artificial intelligence) was the red-hot buzzword, promising unheard of advances but also baleful clouds on the horizon. The president of SAG sounded the alarm on not only the threat of AI given the studios' new business models predicated on ubiquitous streaming and digital technology, but also the more long-standing and ingrained American corporate system of Capitalism wherein upper managements get away with not sharing the surplus of corporate wealth due to an inherent or institutional conflict of interest. Indeed, Fran Drescher, the president of SAG, was not far from calling into question the taken-for-granted assumption in Capitalism that residual profits should go to stockholders exclusive. Questioning that default (as well as claiming that CEOs get to set their own compensation by controlling their respective boards of directors) would have made Drescher's announcement of a strike truly revolutionary. She was so close.
Regarding AI, even Drescher's position can be perceived as short-sighted even though it was an improvement on the studios' new business model. The ability of studios to use the likenesses (images) of actors who have been bodily scanned (creepy) in one project for use as computer-generated “acting” in future movies in which the actors themselves are neither compensated nor participate was among the issues to be arbitrated in which the studios and SAG were far apart. To an actor, the loss of control over one’s image can complicate or even detract from one’s efforts to construct a public image. To be sure, not being paid for such extended likenesses being used was noxious to the actors even though no additional work on their part would be required. This just means, however, that royalties, or residuals, rather than pay for the use of the images would be appropriate, and thus fair. Furthermore, rather than being able to pressure actors on a project to agree to their respective likenesses being used in perpetuity, studios should be required to get permission for the specific uses (rather than a general permission) at the time of each future project. Actors would not feel that they might lose their existing work if they refuse to give a general permission in perpetuity. Even such an arrangement, incorporated into the studios' new business models, might not last long. A student of AI suggested to me that just as non-profit organizations have open-source libraries of written works, such organizations in the film industry might make available, royalty-free, images of volunteers that start-up film companies, students, and even Hollywood studios could use. Extras, or background actors, could conceivably be used only in shots in which mere images won't do.
Of greater significance, SAG’s position extended to challenge a basic tenet of Capitalism itself. Were the strike a true inflection point, as Fran Drescher, the president of SAG claimed, the union had an opportunity to make the dogmatic, or arbitrary, tenet transparent if for no other reason that Drescher was aware and critical of the long-held assumption that had long before become embedded as a “necessary” plank in the economic system.
I contend that it is arbitrary to
set the owners of a corporation as the receivers of the residual from the
surplus of revenues over expenditures (i.e., profit), whereas banks and labor
get only a fixed amount classified as expenses. All three groups can be thought
of as providing inputs, or resources, that a management can use to make a
profit. From this perspective, it seems arbitrary to say that only one of the
group has a right to the residuals from the profits. The philosopher John Locke
claimed that a person “mixing” one’s labor with land gives rise to a property
right on said land. Centuries later, the U.S. Supreme Court ruled that a maker
of wedding web-sites could refuse to have same-sex couples as clients because
she had expressed herself in her work. It seems rather obvious that
screenwriters and actors are also in an expressive profession. In “mixing”
their self-expressive labor in a film, writers and actors can be said to have
an ownership interest in what is typically referred to as art. Painters,
after all, sign their paintings. It is possible that the writers and actors of
a film have more of a claim on the profits than do the studios. In
depicting the strike as occurring at an “inflection point,” the president of
SAG had the opportunity to make such a claim, thus challenging the monopoly on
profits hitherto enjoyed by the owners of the studios.
In announcing the strike in 2023,
Drescher called attention to the large gap in compensation between the CEO’s of
the studios and 99% of the members of the SAG union who were struggling
financially. To be sure, the inclusion of “extras,” or background non-speaking
roles that are on a per-project pay basis, means that the 99 percent were not
depending on acting as a full-time job. Even so, the astounding pay of “A-list”
movie actors may give people outside of the industry the misimpression that
acting constitutes a wealthy profession.
The impression left by films
grossing hundreds of millions of dollars that studios are wealthy is more
accurate. The studios plead poverty, the SAG president exclaimed in
astonishment, and yet somehow they have the money to pay tens of millions of
dollars to their CEOs. In fiscal 2022, for example, the CEO of Disney made $24
million just before the company laid off 7,000 employees.[1]
Drescher could have added that Netflix co-CEOs earned $43.2 million and $39.3
million in 2020—when the company raised the monthly price of its subscription.[2]
Doubtless the management claimed that the company had no choice but charge
customers more. It is interesting that managements can so easily put their
companies in convenient straightjackets.
The union president must have
sensed an opportunity to challenge the greed of American CEOs more generally as
evinced in the increasing inequality between their compensation and the average
of their respective workforces. “High seven figures, eight figures, this is
crazy money that they make,” she said.[3]
Implying that a basic shift in wealth distribution between upper managements
and workers was justified, she stated, “What’s happening to us is happening
across all fields of labor. . . . When employers make Wall Street and greed
their priority, and they forget about the essential contributors that make the
machine run, we have a problem.”[4]
A basic problem in the American system of Capitalism.
The ratio of CEO compensation to
that of the average worker in the U.S. in 2020 was 299.[5]
Just one year later, the ratio was nearly 400, according to Statista.
Even as the coronavirus shuttered or hampered many businesses, which meant mass
layoffs, CEOs made out well nonetheless. Some CEOs made a thousand times that
of the average worker. The annual ratios in the E.U. were much lower than in
the U.S. That CEOs of American corporations had typically reached complete
control of their respective boards of directors, which are technically to function
in part as a check on their managements, presents not only accountability
issues more generally, but also a situation in which the CEOs can set their own
compensation and that of their managerial cadres. At one major corporation in
2023, the stockholders voted to deny the management’s proposed compensation
package. Astonishingly, the resolution was nonbinding and the board approved
the package anyway. This points to the existence of a major structural flaw in
corporate governance in the U.S.
In pointing to the greed of CEOs of American companies in general, Drescher expanded her union’s agenda beyond the immediate financial interest of the members. She was making a societal contribution in claiming that the huge disparity of wealth between managements and workers was by then so large that an inflection point had been reached wherein SAG would try to set an example for other unions to follow in objecting to the arbitrary feature of American Capitalism wherein CEOs do not have to share the surplus of corporate wealth. She could have gone a step further by taking the opportunity to question the underlying assumption that stockholders should get the residual of profits that are not retained or invested. Even though the business model of studios had changed due to AI, the greed of American CEOs and their ability to set their own compensation packages had existed for some time and was finally too much for workers to take. That is to say, it was time for an enduring yet arbitrary (rather than necessary) aspect of American Capitalism to be changed. The system had been broken for some time, and the advent of AI meant that the harm would soon become even more unbearable.
[2] Todd Spangler, “Netflix’s Ted Sarandos to Earn $40 Million in 2022, Read Hastings Pay to Top $34 Million,” Variety, December 31, 2021.
[3] Bergeson, “Fran Drescher Blasts Bob Iger’s Strike Comments: ‘I Would Lock Him Behind Doors.’”
[4] Ibid.
[5] Moira Ritter, “CEOs Made 299 Times More Than Their Average Workers Last Year,” CNN.com, July 15, 2021.
