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 02, 2014 08:13 GMT

FINANCIAL MARKETS

UNDATED (AP) -- Financial markets got off to a rough start in October as disappointing economic news and Ebola fears drove stocks lower. Surveys indicated German and U.S. manufacturing had slowed last month.

Asian stocks fell Thursday amid similar anxieties.

Japan's Nikkei 225 index lost 1.7 percent to 15,815.45 points and South Korea's Kospi fell 0.9 percent to 1,973.31. Australia's S&P/ASX 200 declined 0.7 percent to 5,295.7. Stocks in Southeast Asia also lost ground. Markets in Hong Kong and China were closed for a public holiday.

In New York, investors dumped airline stocks amid concerns that travel will decline because of the Ebola threat, and bought a handful of drug companies working on experimental treatments for the deadly disease.

Nervous investors shifted their money to havens like bonds and gold.

The blue chip Dow index lost 238.19 points, or 1.4 percent, to 16,804.71. The Standard & Poor's 500 index lost 26.13 points, or 1.3 percent, to 1,946.16 and the Nasdaq composite lost 71.30 points, or 1.6 percent, to 4,422.09.

ECONOMY-THE DAY AHEAD

WASHINGTON (AP) --The Labor Department will report on the number of people who applied for unemployment benefits last week. Economists forecast that weekly applications rose a slight 5,000 to a seasonally adjusted 298,000.

Also today, the Commerce Department reports on U.S. factory orders for August. In July, factory orders rose 10.5 percent, the biggest one-month increase on record going back to 1992.

Freddie Mac will report on average U.S. mortgage rates for this week. Last week, the average for the 30-year loan eased to 4.2 percent from 4.23 percent the previous week.

EBOLA-AIRLINES

UNDATED (AP) -- The first reported case of Ebola in the United States has caused concern among airline investors and is raising the prospect that some frightened travelers might stay home.

Details of the man's 28-hour trip from western Africa emerged Wednesday. He flew on two airlines, took three flights, and had lengthy airport layovers before reaching Texas on Sept. 20.

Still, federal officials say other passengers on the flights are at no risk of infection because the man had no symptoms at the time of his trip.

Thomas Eric Duncan left Monrovia, Liberia, on Sept. 19 aboard a Brussels Airlines jet to the Belgian capital, according to a Belgian official. After layover of nearly seven hours, he boarded United Airlines Flight 951 to Dulles International Airport near Washington, D.C. After another layover of nearly three hours, he then flew Flight 822 from Dulles to Dallas-Fort Worth International Airport, the airline confirmed.

MINIMUM WAGE

WASHINGTON (AP) -- The Labor Department is following through on President Barack Obama's pledge to get the ball rolling on a higher national minimum wage in the absence of any congressional legislation to accomplish this goal.

Labor Secretary Thomas Perez has finalized a federal rule raising the minimum wage for employees of federal contractors to $10.10 an hour.

Wednesday's move puts in force a step that Obama announced last February. The Labor Department said nearly 200,000 American workers will benefit from the new minimum, which takes effect Jan 1.

The minimum federal wage is now $7.25 an hour. Obama has proposed the higher pay level for all workers, but that has drawn resistance from Republicans in Congress. In announcing the new rule, Perez says that by raising the minimum wage for workers on federal contracts, the administration "is rewarding a hard day's work with fair pay."

STOCKTON BANKRUPTCY TRIAL

SACRAMENTO, Calif. (AP) -- A federal judge dealing with the bankruptcy issue has struck at the sanctity of public pensions in California.

U.S. Bankruptcy Judge Christopher Klein ruled Wednesday that federal bankruptcy law allows the city of Stockton to treat pension fund obligations like other debts, meaning the city could trim benefits.

The city of Stockton argued that it must make its pension contributions for public employees before its creditors are paid the entire amount they are owned.

The case is being closely watched because it could help clarify who gets paid first by financially strapped cities around the nation -- retirement funds or creditors.

The ruling was prompted by a key creditor's contention that pension obligations should be treated like other debts.

DETROIT BANKRUPTCY

DETROIT (AP) -- Emergency manager Kevyn Orr has testified in bankruptcy court that when he took over Detroit's finances, he found a city with poor services for residents, next to no cash flow and significant neighborhood blight.

Orr, hired by the state in March 2013 to fix Detroit's finances, took the city into the largest municipal bankruptcy in U.S. history. He was called to the stand and questioned by a city lawyer in federal court in Detroit.

Judge Steven Rhodes is to decide whether Orr's plan to remove $7 billion in debt is fair to creditors. Orr has said Detroit's unsecured debt is about $12 billion.

Orr said Wednesday that before he filed for bankruptcy, every creditor wanted to be "paid in full."

DAIMLER ALLEGATIONS

PORTLAND, Ore. (AP) -- Oregon's labor commissioner has filed a complaint against heavy-duty truck and school bus manufacturer Daimler Trucks North America, alleging five employees at its Portland plant were subjected to racial slurs and threats.

A statement Wednesday from Commissioner Brad Avakian says the accusations will be investigated, and if they bear out, workers could be awarded damages including back pay if they've quit.

Among the allegations, according to the statement, is that a Daimler Trucks employee threatened a black co-worker with a noose, saying he'd drag the African-American behind a car.

A statement from Daimler Trucks said it doesn't tolerate discrimination and trains employees to avoid it. It also said the company is cooperating with the investigation and has hired an outside investigator to look into the allegations.

HEALTH OVERHAUL-RATES-MISSOURI

KANSAS CITY, Mo. (AP) -- A consumer group is suing the U.S. Department of Health and Human Services to obtain information used to justify insurance rates in Missouri.

The Consumer Council of Missouri filed the complaint Tuesday in federal court. The agency didn't immediately respond to an email to its press office seeking comment.

The consumer group says the new health insurance law requires the agency to make the rate information public so consumers have the chance to challenge the costs they pay for health insurance. But the suit alleges that HHS has denied its records request.

Missouri is one of several states allowing the federal government to run their health insurance exchange. The suit says Missouri is reliant on HHS for any information regarding health insurance plans to be sold in 2015.

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