Executive compensation packages

Updated: Saturday, August 3, 2013
Executive compensation packages story image
KALAMAZOO, Mich. (NEWSCHANNEL 3) - The numbers are in, and they say that while unemployment rates remain high here in Michigan and across the country, executive pay keeps soaring.

Tonight, in Tom’s Corner, Tom Van Howe wonders how anyone can make the argument anymore that “we’re all in this together.”

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I have no objection to people being paid what they're worth.

Everybody wants that. Whether you’re making pickles in Holland, car parts in Grand Rapids, or working a checkout counter in Kalamazoo.

Trouble is, according to statistics, workers today are taking home less in real weekly wages than they did in the 1970s.

Meantime, Chief Executives of the 200 biggest public companies in the United States are doing somewhat better.

Their median compensation clocks in a something more than $15-million dollars a year—a 16 percent jump from the year before, eight times what it was in the 50s, and double what it was in the 90s.

The late Peter Drucker, a prolific author whose writings contributed greatly to the philosophical and practical foundation of the modern business corporation, said that once the pay ration exceeds 25 to 1, it becomes hard for management to make the case that 'we’re all in this together.' Particularly,” he said, “when it’s clear that company leaders have isolated themselves from any risk.”

In other words, if the company goes down the tubes, for bad management, or any other reason, they’ll walk away with their millions, smile, and ask “what’s next.” Not so for even the most loyal workers.

Modern corporate practice has left Drucker’s philosophy in the dust.

Talk about a disconnect!

Today’s executives are earning 200 to 500 times what their lowest paid workers are making. The word obscene pops in my mind.

In an editorial on Sunday, the New York Times asked if CEOs are overpaid, or worth every penny.

And while it didn’t really answer the question, it said we need more detail about the obvious gaps in pay because it could help policy makers and economists detect emerging asset bubbles and impending crashes, which generally correlate with rising income disparities.

But corporations resist offering such detailed information—even though the law says they must—because, they say, somewhat cynically, that coming up with it is a statistical nightmare.

These giant corporations are publicly held, which means management has to answer to stockholders.

But much of that stock is held by investment funds and managed accounts and its not likely that Harry and Mary Hotchkiss from Poughkeepsie are going to raise a fuss over compensation packages.

It's very likely they don’t even know they have any stock in this company or that one.

And that leaves a highly-paid board of directors—many of whom are there because they are like minded—to set the salaries, bonuses, benefits, stock and option grants.

It’s a club—a club of well compensated people making sure they all stay well compensated.

It's not a matter of what someone needs, it’s a matter of keeping score. It’s a club thing.

For the record, large companies in Europe often have worker representatives on their boards as a check against bloated pay packages.
 
Just for the sake of discussion, lets pretend the CEO at company “x” chose to take just $3 million a year instead of the median $15 million; he might have to sell his house in the Hamptons, or maybe one of his jets.
 
But there would be enough left over to give 600 employees raises of $20,000. Think of the ripples that would have on a local economy. If everyone did that, think about the ripples across the country.

I know that’s not going to happen. Wishful thinking. But it would go a long, long way toward establishing the thought that we, as working, caring, industrious Americans really are all in this together.

In this corner... I’m Tom Van Howe.

Business News

Last Update on October 21, 2014 07:27 GMT

ECONOMY-THE DAY AHEAD

WASHINGTON (AP) -- There's only one major economic report due today, but half a dozen U.S. companies are reporting quarterly financial results.

The National Association of Realtors releases its September report on existing home sales this morning.

Coca-Cola, McDonald's, Reynolds American and Verizon release their earnings before the market opens.

Discover Financial Services and Yahoo release their numbers after the market closes.

APPLE-IPHONE SALES

SAN FRANCISCO (AP) -- Apple says it sold 39.3 million iPhones in the last quarter, or 16 percent more than a year ago, which is a record for the quarter. That's partly due to excitement over new iPhone 6 and 6 Plus models that Apple began selling last month.

The surge in iPhone sales helped the company beat Wall Street's expectations for the three months that ended Sept. 27. Overall, the company's profit rose more than 12 percent from a year ago, to $8.5 billion. Total sales also rose more than 12 percent, to $42.1 billion.

While iPhone sales were up, Apple also sold 13 percent fewer iPad tablets than it did a year ago. That follows an industry-wide decline in tablet sales. But the company reported lower iPad sales than analysts had expected.

AIRLINES-FARE INCREASE

DALLAS (AP) -- U.S. airlines are raising base fares on many domestic flights even though they are getting a windfall from lower fuel prices.

Delta Air Lines raised fares on many U.S. routes by $4 per round last Thursday. FareCompare.com CEO Rick Seaney and J.P. Morgan analyst Jamie Baker say other big airlines have matched them. Seaney says he's seen a few $6 and $10 increases, but mostly $4.

Delta has not responded for comment. United Airlines has confirmed matching the $4 increase. Seaney says American and Southwest also have raised prices.

UPS-RATES

ATLANTA (AP) -- UPS says it is raising rates for a number of its shipping services by an average of 4.9 percent for 2015.

The Atlanta-based company says it is increasing rates for its ground, air, international, UPS Freight, and UPS air freight rates within and between the U.S., Canada and Puerto Rico. The increase goes into effect on Dec. 29.

UPS had previously announced some size-related pricing changes that will also take effect at the end of December.

CHINA-ECONOMY

BEIJING (AP) -- China's economic growth waned to a five-year low of 7.3 percent last quarter, raising concerns of a spillover effect on the global economy but falling roughly in line with Chinese leaders' plans for a controlled slowdown.

The third quarter figures, released Tuesday, put China on course for annual growth somewhat lower than the 7.5 percent targeted by leaders, though they have indicated there is wiggle-room in their plan. The world's No. 2 economy grew 7.5 percent from a year earlier in the previous quarter and 7.4 percent in the first quarter.

Communist leaders are trying to steer China toward growth based on domestic consumption instead of over-reliance on trade and investment. But the slowdown comes with the risk of politically dangerous job losses and policymakers bolstered growth in the second quarter with mini-stimulus measures.

Employment, however, remained strong through the third quarter.

JAPAN-US-TRADE

TOKYO (AP) -- U.S. Commerce Secretary Penny Pritzker has urged Japan to be bolder in opening its markets to help reach a deal on a pan-Pacific trade agreement.

Pritzker, who is leading the Commerce Department's first trade mission to Japan in two decades, said U.S. and Japanese negotiators were closing the gap on trade in farm goods and vehicles but that there were still "tough issues" to work on.

She said the 12-nation trade pact, called the Trans-Pacific Partnership, could yield tens of billions of dollars a year in economic gains and increased exports for each side.

Executives from 20 U.S. companies, many of them leaders in medical and energy technologies, have joined the trade mission to Japan and South Korea. It is Pritzker's first visit to Asia as commerce secretary.

FANNIE-FREDDIE-MORTGAGE AGREEMENT

WASHINGTON (AP) -- A federal regulator says government-controlled mortgage giants Fannie Mae and Freddie Mac have reached an agreement with major banks that could expand lending.

The head of the Federal Housing Finance Agency, which oversees Fannie and Freddie, announced the deal Monday at a conference of the Mortgage Bankers Association in Las Vegas. FHFA Director Mel Watt says the deal clarifies conditions in which banks could be required to buy back mortgages they sell to Fannie and Freddie for misrepresenting the loans' risks.

Watt says the agreement in principle will help make more mortgage credit available without harming Fannie and Freddie's finances.

He adds that it's currently hard for banks to know whether they'll have to buy back loans. That can make banks skittish about lending to borrowers with less pristine credit.

DETROIT WATER SHUTOFFS

DETROIT (AP) -- United Nations human rights experts have called on Detroit officials to restore water to those unable to pay, including those with disabilities or chronic illnesses.

Two experts visiting Detroit to observe the effect of water service shutoffs say they affect the poorest and most vulnerable. They say it discriminates against Detroit's majority black population.

Leilani Farha and Catarina de Albuquerque say water should be affordable, not free.

The city says about 27,000 shutoffs were made between Jan. 1 and Sept. 30.

Most shutoffs were halted for several weeks during the summer to give customers a chance to enter payment plans.

Groups opposing the shutoffs appealed to the U.N. for support.

LAY'S-NEW FLAVOR

NEW YORK (AP) -- America is saying no to cappuccino flavored potato chips, but yes to "Wasabi Ginger." "Wasabi Ginger" has won this year's Frito-Lay contest that gives people a chance to create a new flavor.

Bags of the four finalist flavors hit store shelves in late July, and people have been going on Facebook and Twitter to vote for their favorites.

Some taste-testers described cappuccino flavored chips as "NASTY" and "gross." The other two finalists were "Mango Salsa" and "Cheddar Bacon Mac & Cheese."

Registered nurse Meneko Spigner McBeth of Deptford, New Jersey, came up with the wasabi ginger flavor, and she'll be awarded $1 million or a portion of a year in sales, whichever figure is greater.

The "Do Us A Flavor" promotion was held in other countries too, including Saudi Arabia, which voted for "Pizza" flavor and Serbia, which made "Pickled Cucumber" Number 1.

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