9/10/2007

Is a CEO worth 364 times the average Joe?
























Here are four infuriating facts about the salaries and friendly tax rules that let executive fat cats cash in -- and what you can do about them.

In recognition of the just-completed Labor Day weekend, I'd like to offer a salute to American workers, who the United Nations just reported are second only to Norway's laborers when it comes to productivity.

And now, a bit of bad news for those same workers: You're not getting credit for that productivity. Instead, top executives at your companies are reaping the rewards in the form of increasingly fat paydays.

Here's a quick look at four ways in which workers are being shortchanged by their bosses.

No. 1: The chief executives at the biggest U.S. companies last year made as much money in a single day as the average worker made for the whole year.

No. 2: The managers of the 20 top hedge funds and private-equity shops made more every 10 minutes last year, on average, than the average worker made for the whole year.

The top bosses at the top 20 investment shops earned an average of $657.5 million for the year, according to data cited by the "Executive Excess 2007" report. Renaissance Technologies' James Simons led the way, earning $1.5 billion. Steven Cohen at SAC Capital and Kenneth Griffin at Citadel Investment Group ran neck and neck for second place. Each got $1.2 billion.

"We are back to the gilded age of a hundred years ago," concludes John Cavanagh, the director of the Institute for Policy Studies and a co-author of the report.

No. 3: True, many workers got a break on July 24, when the federal minimum wage was increased to $5.85 from $5.15 -- the first increase in the federal minimum wage in 10 years. But the minimum wage is still 7% below where it was 10 years ago, adjusted for inflation. Meanwhile, CEO pay has gone up 45%, adjusted for inflation, in the same period, according to the "Executive Excess 2007" report.

No. 4: U.S. CEOs enjoy supersized advantages in pensions and perks, too.

Thanks to generous contributions from their companies, CEOs at S&P 500 companies retire with an average of $10.1 million in their supplemental executive retirement plans, according to the Corporate Library. In contrast, only 36% of American households headed by someone over 65 even had a retirement account in 2004. Those accounts had an average value of $173,552, according to the Congressional Research Service.























4 ways you can fight greedy CEOs

What you can do -- Step #1: Contact the SEC and tell them you support the rights of shareholders to use the corporate proxy machine to propose changes in the rules on how board members are elected. "This should be on top of the list," says McGurn. Tell your representatives in Congress, too, since they have the power to influence SEC policy. The case involves American International Group (AIG, news, msgs) and the American Federation of State, County and Municipal Employees (AFSCME), which wants the bylaws change.

What you can do -- Step #2: Tell the regulators and your representatives that you want more detail about what targets CEOs have to hit to increase the size of their paychecks.

Companies hire compensation consultants to help determine how much to pay their executives. The question is whether that advice is objective. For instance, those same consultants try to get business from the companies to advise on their employees' retirement plans. If they give the CEO a healthy pay raise, does that help them land or keep other consulting jobs?

What you can do -- Step #3: Ask the SEC and your representatives to require disclosure of all relationships between compensation consultants and the companies whose executive pay packages they design.

What you can do -- Step # 4: As a shareholder, ask companies to put pay-related reforms to a vote -- or at least be sure to look for pay-related proposals from other activist shareholders and vote "yes."

For example, watch for proposals asking you to vote against excessive golden parachutes, excessive pay packages and the compensation committee reports that justify them, says Hitchcock, who also advises Amalgamated Bank's LongView index funds on how to use shareholder proposals.

Elson says proposals that require majority voting for directors are crucial. This change means that directors have to get a majority of all votes cast to win -- not just the largest number among several candidates. This makes it harder for boards and managers to get a rubber stamp on their favored candidates when the broader shareholder base is apathetic.

7 comments:

Cato said...

If you think you can do a CEO's job then apply for it and tell them you will do it for 1/30th of the money. If you have proven yourself to be able to handle such a position with the adequate experience, I'm sure you'll get the job.

CEOs are paid what they are paid because they are a rare commodity. There are plenty of teachers, for example. Anyone can be a teacher, it's about the easiest job in the world next to that job doing sleep studies.

But not anyone can be a CEO.

Average Joe said...

CATO:
Your comment is bullshit!

There's no doubt CEOs have talents well beyond the average worker. Maybe 40 times would be reasonable compensation, not 340 times. These guys walk away with hundreds of millions after they drive a company into the ground, there's no justification for what they receive. Your crowd always wants "accountability". Well lets make these guy accountable. Half the reason they get the packages they do is because their boards are stacked with their yachting club pals. Another reason they get rewarded is because they cut labor costs of people who actually do the work. Just look at Northwest. $20 million bonus to a guy that drove the company into bankruptcy. That's outrageous!

Then you have the gall to insult teachers. Get your ass in the classroom with some of those brats and try to get them to perform well on standardized tests. I'm sure YOU couldn't do it! And by the way even sleep studies take an education to analyze the results!

Anonymous said...

I would think you anti-capitalist, socialists on this blog would be complaining how much sports stars get paid. How hard is it to drive a golf ball, smack a tennis, spit snoose at 3rd base or drive a car around an oval track?

• Andre Agassi $26.2 million
• Lance Armstrong $28 million
• David Beckham $32.5 million
• Kobe Bryant $28.8 million
• Lindsay Davenport $6 million
• Oscar De La Hoya $38 million
• Jeff Gordon $23.4 million
• Matt Hasselbeck $22.8 million
• LeBron James $22.9 million
• Derek Jeter $25.5 million
• Walter Jones $23.2 million
• Michael Jordan $33 million
• Phil Mickelson $26.8 million
• Shaquille O'Neal $33.4 million
• Manny Ramirez $24.2 million
• Alex Rodriguez $27.5 million
• Ronaldo $23 million
• Valentino Rossi $28 million
• Michael Schumacher $60 million
• Maria Sharapova $18.2 million
• Annika Sorenstam $7.3 million
• Michael Vick $37.5 million
• Serena Williams $12.7 million
• Venus Williams $6.5 million
• Tiger Woods $87 million

Maybe if you losers spent less time with you hand out jerking off to the Communist Manifesto and more time creating something useful like wealth, you'd have a better understanding of the purpose of life.

Cato said...

I was talking about being a paid person in the sleep study (as in the person who is paid to sleep).

Teaching is not hard. If it was hard there wouldn't be so many teachers.

CEOs bargained to get that so even if they fail they still get paid... the company does not hire them with the intent that they will fail. And the CEO makes more if he does succeed.

"The problem is, we're living in a world where .220 hitters make $10 million, so look at what you have to pay when you finally find a .300 hitter."

Still... I do get your point. Actually, Jeb Bush is quite right when he said: "Large rewards for great results can still be attacked, but they're very defensible. But if the rewards for CEOs and their teams become extraordinarily high with no link to performance - and shareholders are left holding the bag - then it undermines people's confidence in capitalism itself."

The problem is that this is perceived by many people to be "wrong" and then they ask the government to help. And as more people perceive it as "wrong" they demand the government do something about it. Which is why it is a threat. I'll agree with you there, but, as I said, the CEOs bargained for and got those deals. Had they not then the companies would have gotten a worse CEO that could have left them in worse shape than before. Or perhaps they could have found someone who was really good but didn't demand so much pay. No one can know that. But if anyone is to blame it is the boards who hire the CEOs with these pay grades. I wouldn't fault a man for asking for money for his work if that's what he thought he was worth to the company. The company also felt he was worth those risks too, or else it wouldn't have taken it... but most people won't listen to that and just see the CEO as a greedy pig who doesn't care who sits on his ass all day raking in the millions which is why it is a threat.

Anonymous said...

Maybe Avg. Joke should understand that that liberal pansy period of socialism of the late 1960s and 1970s is over. If you want to make more money then get you ass in gear. Figure out where the financial action is and move to that part of the free market.

Teachers are not the best and the brightest in America. They get paid exceedingly well for the amount of work they do for eight months out of the year. If they were really cleaver, they took coaching minors in college and pull in even more money for blowing a whistle and motivating the lazy spawn of soccer moms and jet ski dads.

Wake up and smell the money! Life isn't fair. It never was and it never will be. There are runts in the litter and pups then suck the hind tit all their life.

above average joe said...

CATO:

Thanks for acknowledging some of my point. The stockholders and consumers and workers wind up holding the bag for poor performing CEOs. Corporate boards are too easily swayed by CEO B.S. They should drive a harder bargain for the owners of the company, the stockholders.

Anonymous,

Maybe you could market a Peanut sales kit for lazy asses like me who have a job and talent, who actually produce something instead of repackaging and rerouting internut orders through the mail.

Confucius said...

Anonymous Say:
"Maybe if you losers spent less time with you hand out jerking off to the Communist Manifesto and more time creating something useful like wealth, you'd have a better understanding of the purpose of life."

Confucius Say to Anonymous:

Man who think meaning of life is only to make money, sit on brain near wallet!