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 March 05, 2015 08:35 GMT

ECONOMY-THE DAY AHEAD

WASHINGTON (AP) -- The Labor Department will report today on the number of people who applied for unemployment benefits last week. The department will also issue its revised report on fourth-quarter productivity. And the Commerce Department will report on U.S. factory orders for January. Also today, Freddie Mac will release average mortgage rates.

The jobs market has been steadily improving in recent months.

And a private survey Wednesday showed that U.S. businesses added more than 200,000 jobs in February for the 13th straight month. It was the latest sign that strong hiring should boost the economy this year.

Payroll processor ADP says companies added 212,000 jobs last month, a solid gain, though down from 250,000 in the previous month. January's figure was revised up from 213,000. The figures come just before tomorrow's government report on the labor market, which economists forecast will show an increase of 240,000 jobs, according to a survey by data provider FactSet. The unemployment rate is expected to fall to 5.6 percent from 5.7 percent.

CHINA-ECONOMY

BEIJING (AP) -- China is setting a lower economic growth target for this year and is promising to open more industries to foreign investors as it tries to make its slowing, state-dominated economy more productive.

In a report to the National People's Congress, Premier Li Keqiang (lee kuh-TYAHNG') says the growth target of about 7 percent, down from last year's 7.5 percent, is in line with efforts to create a "moderately prosperous society." Actual economic growth last year was 7.4 percent, the lowest since 1990.

The ruling Communist Party is in the midst of a marathon effort to guide the world's second-largest economy to slower but more self-sustaining growth based on domestic consumption and services. It is trying to replace a worn-out model driven by trade and investment in construction and heavy industry that has left China's air and water badly polluted.

JOHNSON & JOHNSON-PHARMACYCLICS

Report: J&J close to deal to buy partner Pharmacyclics

UNDATED (AP) -- Health care giant Johnson & Johnson reportedly is close to buying biopharmaceutical company Pharmacyclics, its longtime partner in developing the blood cancer treatment Imbruvica.

London's Financial Times reports "people familiar with the matter" say Johnson & Johnson's anticipated offer would value Pharmacyclics of Sunnyvale, California, above its current $17 billion market capitalization. Those sources said a deal could be announced within days but might unravel.

J&J spokeswoman Amy Meyer declined to comment.

Pharmacyclics shares surged on the rumor, jumping 6.3 percent in regular trading and another 3 percent after hours to $237.48.

Johnson & Johnson, based in New Brunswick, New Jersey, usually makes mid-sized acquisitions worth several billion dollars, but paid $21.3 billion in 2011 for Synthes, a Swiss maker of orthopedic surgical equipment. J&J has annual revenue of $74 billion.

MANDARIN ORIENTAL-DATA BREACH

NEW YORK (AP) -- Upscale hotel chain Mandarin Oriental says it is investigating a potential credit card breach at its hotels.

"Unfortunately incidents of this nature are increasingly becoming an industrywide concern," the company said in an emailed statement. Mandarin Oriental said it is coordinating with credit card agencies and forensic specialists. The company didn't disclose how many hotels were affected nor how many customers reported fraudulent charges on their credit cards.

Mandarin Oriental operates hotels across the world including Paris, Shanghai, Hong Kong, London, New York, Miami, San Francisco, Prague, Boston, Las Vegas, Macau and Barcelona.

The breach was first reported by cybersecurity news website KrebsOnSecurity.

ACTIVISION-VIVENDI

WILMINGTON, Del. (AP) -- A Delaware judge is eyeing approval of a $275 million settlement in a shareholder lawsuit alleging that videogame maker Activision Blizzard was shortchanged in a $6 billion buyback of shares from French media conglomerate Vivendi SA in 2013.

Following a hearing Wednesday, the judge said he viewed the settlement favorably, and that the defendants were providing reasonable value to settle the claims against them.

An attorney for the lead plaintiff told the judge that the $275 million settlement is the largest ever in a derivative suit, in which shareholders sue on behalf of a company.

The lawsuit alleged that Activision executives and directors, working with Vivendi, breached their fiduciary duties by entering into a deal that improperly benefited CEO Bobby Kotick and co-chairman Brian Kelly.

EXXON MOBIL-SETTLEMENT

ELIZABETH, N.J. (AP) -- Democratic lawmakers and environmentalists are criticizing a proposed legal settlement between Republican New Jersey Gov. Chris Christie's administration and Exxon Mobil over oil and chemical contamination.

The state had sought $9 billion in damages. But a person familiar with the matter says the settlement is for about $250 million. The person wasn't authorized to speak before details were released publicly and spoke Wednesday to The Associated Press on the condition of anonymity.

Assembly Speaker Vincent Prieto is planning a public hearing. Senate President Steve Sweeney and Sen. Ray Lesniak have threatened a lawsuit.

A judge found Exxon liable in 2008 for contamination in Bayonne and Linden. But there's been no ruling on damages.

Irving, Texas-based Exxon Mobil Corp. had said damages should be capped at $3 million.

REVEL SALE

CAMDEN, N.J. (AP) -- A bankruptcy court judge says more time is needed to seek higher bids for Atlantic City's former Revel Casino Hotel.

Judge Gloria Burns delayed a decision Wednesday on the proposed $82 million sale of the shuttered gambling hall to Florida developer Glenn Straub.

She did so after Los Angeles developer Izek Shomof expressed interest in buying Revel, but for $2 million less.

Leo Pustilnikov, Shomof's partner, says he's interested in making a formal bid soon.

Burns says she's giving Revel AC and potential bidders time to work out the best possible deal for the shuttered casino.

A new hearing is set for March 12.

Two previous sales of Revel have fallen through.

The $2.4 billion casino closed in September after two years of operation, and never turned a profit.

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