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.”

=====================

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 August 21, 2014 17:21 GMT

UNEMPLOYMENT BENEFITS

WASHINGTON (AP) -- Fewer people applied for U.S. unemployment benefits last week, another sign the job market is improving.

The Labor Department says weekly claims for jobless aid fell 14,000 last week to a seasonally adjusted 298,000. The prior week's figures were revised up slightly to 311,000.

The less-volatile four-week average rose 4,750 to 300,750. It remains close to levels that predate the Great Recession of 2007-2009.

Applications are a proxy for layoffs.

Employers added 209,000 jobs in July, the sixth straight month job gains exceeded 200,000. The economy has generated 244,000 new jobs a month since February.

HOME SALES

WASHINGTON (AP) -- Sales of existing U.S. homes rose for the fourth straight month in July to their highest level in nearly a year, the latest sign that the housing recovery is picking up after stumbling at the start of the year.

The National Association of Realtors says home sales rose 2.4 percent to a seasonally adjusted annual rate of 5.15 million, the highest since last September.

More homeowners are selling their homes, mortgage rates remain low and home price gains have slowed this year. That's made home purchases more affordable.

Sales peaked in July 2013 and then fell as interest rates rose from low levels. Harsh winter weather also slowed sales earlier this year. As a result, July's sales were still 4.3 percent lower than a year ago.

MORTGAGE RATES

WASHINGTON (AP) -- Average long-term U.S. mortgage rates declined this week, with the 30-year loan rate hitting its low for the year.

Mortgage company Freddie Mac says the nationwide average for a 30-year mortgage fell to 4.10 percent from 4.12 percent last week. The average for a 15-year mortgage, a popular choice for people who are refinancing, slipped to 3.23 percent from 3.24 percent.

Mortgage rates have fallen in recent weeks after climbing last summer when the Federal Reserve began talking about reducing the monthly bond purchases it was making to keep long-term borrowing rates low.

Mortgage rates often follow the yield on the 10-year Treasury note. The 10-year note traded at 2.43 percent Wednesday, close to its low for the year of 2.41 percent.

LEADING INDICATORS

WASHINGTON (AP) -- A gauge designed to predict the economy's future health posted the sharpest advance in four months in July, indicating the economy is gaining traction headed into the last half of the year.

The Conference Board says its index of leading indicators rose 0.9 percent last month, the sixth straight increase and the best showing since a 1 percent rise in March. The index, composed of 10 forward-pointing indicators, had risen 0.6 percent in June.

A big rise in applications for building permits was a key source of strength in July.

Conference Board economist Ken Goldstein says while retail sales were a bit disappointing last month, the economy was helped by strong hiring gains and increased factory production.

BANK OF AMERICA SETTLEMENT

WASHINGTON (AP) -- The Justice Department has announced a $16.65 billion settlement with Bank of America over its role in the sale of mortgage-backed securities in the run-up to the financial crisis.

The deal announced Thursday calls for the bank, the second-largest in the U.S., to pay a $5 billion cash penalty and provide billions of dollars of relief to struggling homeowners. Bank of America says its cash payouts will total $9.65 billion.

The settlement is by far the largest deal the Justice Department has reached with a bank over the 2008 mortgage meltdown. In the last year, JPMorgan Chase & Co. agreed to a $13 billion settlement while Citigroup reached a separate $7 billion deal.

EARNS-SEARS

HOFFMAN ESTATES, Ill. (AP) -- Sears said Thursday that its second-quarter loss widened as it continues to deal with weak sales.

The retailer -- which runs Sears and Kmart stores -- lost $573 million, or $5.39 per share, for the period ended Aug. 2. That compares with a loss of $194 million, or $1.83 per share, a year earlier.

The Hoffman Estates, Illinois, company is still working to turn itself around, with efforts including lowering costs, investing in its loyalty program and improving prices and promotions.

Revenue declined 10 percent to $8 billion from $8.87 billion.

Sales at Kmart stores open at least a year fell 1.7 percent. At Sears locations, the figure edged up 0.1 percent.

Sears Holdings Inc. says it is still looking at options for its auto center business and Sears Canada.

FAMILY DOLLAR-DOLLAR GENERAL

MATTHEWS, N.C. (AP) -- Family Dollar is rebuffing Dollar General's takeover bid, citing antitrust issues. The discounter's board remains supportive of its existing deal with Dollar Tree.

Family Dollar Stores Inc. Chairman and CEO Howard Levine said in a statement Thursday that its board and advisers reviewed Dollar General Corp.'s offer and determined it wasn't likely to be completed on the terms proposed.

On Monday Dollar General -- the nation's biggest dollar-store chain -- offered about $8.95 billion for Family Dollar. The company said at the time that it believed it could quickly address any antitrust issues and was willing to divest up to 700 of its stores in order to get the necessary approvals.

Last month Family Dollar agreed to an $8.5 billion deal with Dollar Tree Inc.

TICKETFLY-WILLCALL

LOS ANGELES (AP) -- Ticketfly Inc., a San Francisco-based technology company among several posing a challenge to Ticketmaster, is acquiring WillCall Inc., a crosstown rival that turns your smartphone into a mobile wallet at live events.

The move is meant to expand WillCall's data-collection and payment service to more ticket buyers. Ticketfly has grossed some $400 million in ticket sales and sold 16 million tickets so far this year.

For comparison, Ticketmaster parent Live Nation Entertainment Inc. made $2.56 billion in concert and other ticketing revenue in the first half of the year.

WillCall CEO Donnie Dinch and Ticketfly CEO Andrew Dreskin say the deal is meant to make buying things at concerts easier while providing promoters with data to help them market to high-spending fans. Terms were not disclosed.

AIRLINES-FIRST CLASS MEALS

NEW YORK (AP) -- United Airlines is upgrading first-class food options and replacing snacks with full meals on some of its shortest flights.

The carrier has been looking for ways to woo back some of its frequent business travelers who defected to other carriers following a rocky merger with Continental Airlines. United lags behind American and Delta in the number of planes with Wi-Fi, its on-time performance has slipped and a series of computer glitches have left passengers angry.

The meal changes come as American Airlines goes the other way, eliminating hot meals on most flights under 1,000 miles starting Sept. 1.

For United, passengers on flights of at least 800 miles will get hot meals such as chicken and mozzarella on a tomato focaccia roll or turkey and Swiss cheese on a cranberry baguette. Currently, meals are only served on flights of 900 miles or more -- trips that usually last close to two hours.

LABOR DAY TRAVEL

UNDATED (AP) -- A trade group for the nation's big airlines predicts that air travel over the Labor Day weekend will rise 2 percent from the same holiday last year.

If correct, the forecast would be more good news for the airlines. Nine big U.S. carriers earned $3.8 billion in the first half of this year, allowing them to pay down debt, reward shareholders and order new planes.

Airlines for America predicted Thursday that 14 million people would fly within the U.S. in the seven days ending Sept. 2, the day after Labor Day.

Separately, the auto club AAA forecasts that 34.7 million Americans will travel at least 50 miles from home by car or plane over a 5-day period ending on Labor Day. That would be a 1.3 percent increase over 2013.

advertisement
Washington Times
advertisement