by Not A.
Member since:
March 30, 2007

CEO Pay Bleeds Workers Dry

April 03, 2007 04:34 AM EDT
views: 31 | comments: 17

In my everyday life, I write market research. I sift through mountains of press releases and SEC filings. As you may suspect, when I took the job I was fairly fiscally conservative. Now, things are a bit different.


After being confronted day after day by financial reality, I can no longer deny a horrifying and widening wealth gap. As Proxy statements (form Def 14A) are beginning to come in for the year, it's clear that while these companies claim to be doing too poorly financially to give their workers health care and a living wage, they have more than enough to provide enormous renumerations to their executive officers. Mind you, these are not the officers of companies with stellar performances – they're companies that have seen their value tank over the last year.


If a minuscule fraction of what these people make were put towards healthcare, we would no longer be in the pitiful situation we find ourselves in. (The only industrialized nation in the world without universal health care.) According to (Forbes) CEOs as a group received a 54% pay increase in 2005. Full results aren't in for 2006, but it promises to be a blockbuster year. 10% - 20% of what a compensation committee dedicates to retaining failing executive talent would provide adequate, if not stellar, health care for the company's everyday workers.


If the Market (capital “M”) works – why hasn't it self-corrected this issue?

link to this page
Bookmark this post:
Facebook
Twitter
Delicious
Buzz
More

Comments: 17

Greg F. Apr 3, 2007, 12:02pm EDT
It is unfortunate that the American public are willing to be distracted and blinded to what is happening around them by what is happening 10,000 miles away.
We will suffer the consequences and then wonder why!
Don (are we Marxist yet?) H. Apr 3, 2007, 1:09pm EDT
I do agree that executive pay is out of line. They could take much of the executive slice and share it with the employees and STILL receive high compensation. They could also share it with stock holders.
Not A. Apr 3, 2007, 4:45pm EDT
Greg F. - You're absolutely right. According to the New York Times, we've already spent $1.2 trillion 10,000 miles away. For that money, we could have fixed the health care system, overhauled education and radically improved our own weak infrastructure.
Not A. Apr 3, 2007, 4:49pm EDT
Don H. - I sincerely doubt that executives would notice if their pay packages were sliced by double digit percentage points. (When you're making over $250 million in a single year, what's losing $2.5 million or even $25 million.) While it would be nice for stockholders to get a return on their investment, most know a company's dividend history before buying in. Do you think a company should begin paying dividends over providing employees with basic benefits?
Rex T. Apr 3, 2007, 11:27pm EDT
I don't begrudge anyone making a decent salary and bonuses if they are warranted but what some of these people make off the backs of thier front-line workers is obscene.
Not A. Apr 4, 2007, 1:02am EDT
Rex T. - I certainly agree! I think the question remains: what do we do about it? Does the government need to step in with regulation?

I would suggest that consumers exercise the power of the purse, but it's just not possible. If you work at Wal-Mart, making what Wal-Mart pays, you can only afford to shop at, well, Wal-Mart...
Rex T. Apr 4, 2007, 10:32am EDT
Addie, unfortunately, there is no broad-based, effective consumers union to appeal to. I don't really know alot about corporate structure or practice at the top levels but it's apparent someone is approving these gross salaries and bonuses. Perhaps, in many cases the stockholders are the ones with the power. Maybe if someone could convince them their dividends would increase and benefits for workers could be provided or improved if they weren't paying Mr. Big, and those close to him, such exhorbitant sums. The focus needs to be on those who slice up the pie.
Not A. Apr 4, 2007, 1:14pm EDT
Rex - Excellent observation. The problem with relying on stockholders is that most large chunks of stock are owned by the people who benefit from exorbitant salaries. The people who slice the pie are also eating the pie. Perhaps, a firm economic analysis showing concrete benefits (such as low turnover, increased productivity and the like) would generate the beginnings of change. Starbucks is a prime example - excellent benefits and pay for even part time workers. It seems to only have benefited them.
Braxton M. B. Apr 5, 2007, 12:38am EDT
Correct me if I am wrong but I believe a companies board of directors approve or disapproves compensation packages for its top executives. I used to work on the production floor of a Fortune 500 manufacturing company. Every you our healthcare premeums were increased by double digits and the biggest raise I ever got in the eleven and a half years that I worked for them was three and a half percent. One year they tried to give us a bonus check and no increase to our base-rate, which went over like a ton of bricks falling on us. Company wide the dissatisfaction with this idea was so widespread that productivity was dramatically decreased and they gave us another bones check at the end of the year. They were never dump enough to try that again. The reasons they would give for not giving up very big raises in the summer was that the markets were down and then by the end of the year the corperation would announce another record year. After a while what the said just went in one year and out the other.
Not A. Apr 5, 2007, 12:43am EDT
Boards do set pay. However, if you control the board, you control executive pay. An example of this is Carl Icahn, a so-called activist investor. He buys chunks of company stock and then forces changes in the company boards. (He was behind the recent firing of Home Depot's outrageously compensated CEO.)

Your story about pay doesn't surprise me. It's the same story everywhere! And it has to change; otherwise, we risk revolution.
Braxton M. B. Apr 5, 2007, 2:45pm EDT
True.
Tyler W. Apr 6, 2007, 4:07pm EDT
It's not suprising, considering the psychology of corporations is officially psychotic.

Since they use the 14th Amendment for protection, they are classified as an individual (that is why you have to sue the company and not the person) and when Psychologists looked into the matter, their (companies) behavior was considered psychotic.

Remember, their only legal obligation is to make the stock holders money, should that change? Corporate Ethics - oxymoron.
Not A. Apr 6, 2007, 5:45pm EDT
True, their only legal obligation is to make stockholders money. However, this level of executive pay is certainly not meeting that obligation! (Returning it in the form of a dividend would work better, right?) I also think that this could be exploited - surely a corporation with happy, well-cared for employees is more profitable in the long term, right?
Rex T. Apr 6, 2007, 11:19pm EDT
You would think so, Addie. But if you look at it from the standpoint of those raking in the cake, a couple years at this rate and you could care less what happens below you. You can't see a business collapse in Cincinnati from a yacht in the Mediterranean.
Not A. Apr 6, 2007, 11:30pm EDT
Rex - You just hit the nail on the head, so to speak. In fact, this is exactly the reason why executives shouldn't be making as much as they do! An executive who makes a reasonable salary has to keep working...
Sandy F. Mar 15, 2009, 12:21pm EDT
Before I retired in the early 90's there were laws to control interest rates, usury laws and there were laws that held corporate boards in check, malfesence of office. Now it is 2009 and those laws seem no longer to exist. What do you know about that, Addie?
Sandy F. Mar 15, 2009, 12:28pm EDT
I do know that tax law requires "risk" of funds to take losses. and unjust compensation is taxed as a different sort of income, but most are taking deferred income in stocks etc to avoid having to pay that take in the year in which they are paid. So tax law needs to be overhauled to capture as taxable every ounce of "income" of any sort in the year in which it is received as compensation. Forget tax breaks for the rich, the country needs as much revenue as it can squeeze out of them to right this wrong. Neocons have pilferred the treasury and destroyed our way of life. The only thing that should save them is Foundations to help the world such as Buffett and Gates have set up. I think they should focus on their own country's needs right now. Our schools are in trouble and so is health care, they should fund non profit health care NOW. And fund overhaul of public schools as well.

Join the Conversation
Chime in! Become a Gather member to comment.
Already a member? Sign in
top
 
Gather | Friends | Groups | Share
About Gather | Engagement Marketing | Make New Friends | Gather Points | Advertise on Gather | Gather Press | Privacy | Terms of Service | Community Guidelines
Books | Celebs | Entertainment | Family | Food | Health | Moms | Money | News | Politics | Spirituality | Sports | Travel | Writing
Version 16961, "Pacino"; Copyright © 2009 Gather Inc. All rights reserved.