Executive compensation packages
Updated: Saturday, August 3 2013, 01:38 AM EDT
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.