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 November 30, 2015 18:18 GMT


WASHINGTON (AP) -- Slightly more Americans signed contracts to buy homes in October, in a modest rebound that suggests the real estate market has crested.

The National Association of Realtors says its seasonally adjusted pending home sales index rose 0.2 percent to 107.7 last month. The index has increased 3.9 percent over the past 12 months.

Healthy job gains and low mortgage rates boosted sales for much of the year, but rising home values and limited inventories have limited further growth in the closing months of 2015.

The number of signed contracts advanced in the Northeast and West, while dipping in the Midwest and South.

Pending sales are a barometer of future purchases. A lag of a month or two usually exists between a contract and a completed sale.


NEW YORK (AP) -- Retailers are rolling out online deals today, the so-called "Cyber Monday."

But since shoppers these days are online all the time anyway, the shopping holiday is losing some of its luster. Still, today is expected to be the biggest online shopping day ever, with estimates that it will rack up over $3 billion in sales.

The head of the National Retail Federation, Matthew Shay, says, "It's no longer about one day but a season of digital deals."

Online shopping is taking its toll on brick-and-mortar shopping. Frenzied crowds seemed to be a thing of the past on Black Friday -- the busy shopping day after Thanksgiving. According to preliminary numbers from the research firm ShopperTrak, sales fell to $10.4 billion this year, down from $11.6 billion in 2014.

But as online shopping grows more popular on Thanksgiving and Black Friday, that's causing less of a frenzy on Cyber Monday, too.

Retailers have been touting online deals since the beginning of November. And they no longer wait for Monday to roll out Cyber Monday deals, either. Amazon started "Lighting Deals" on Saturday and Wal-Mart beginning all of its Cyber offers on 8 p.m. on Sunday.


NEW YORK (AP) -- Amazon is providing new details on its Prime Air drone delivery program. But the timeline is still unclear.

The retailer says Prime Air will one day deliver packages up to 5 pounds in 30 minutes or less using small drones.

The drones will fly under 400 feet and weigh less than 55 pounds, according to details posted on its website Sunday. It says it will use technology and automation to operate safely.

Amazon says the program will start once government regulations are in place to support it. It has development centers in the U.S., the U.K. and Israel.

The FAA currently bans commercial drone flights except for a few dozen companies that have been granted waivers. It has granted Amazon approval to fly drones for research.


WASHINGTON (AP) -- Federal Reserve officials have moved to prevent the central bank from bailing out failing companies, a power it exercised during the 2008 financial crisis.

The Fed governors voted 5-0 Monday to downsize the Fed's emergency lending powers.

Only broad lending programs designed to revive frozen markets -- not loans to individual firms -- will be allowed. The Fed spent about $2 trillion on such a program to ease a credit crunch during the financial meltdown, aiming to spark lending to consumers and small businesses.

The 2010 law enacted by Congress overhauling financial regulation required the Fed to impose the restraints. Lawmakers of both parties had objected to the Fed's emergency aid to several big Wall Street banks and insurance giant American International Group.


WASHINGTON (AP) -- The International Monetary Fund says the Chinese yuan will join a basket of the world's leading currencies.

The IMF announced that the yuan "met all existing criteria" to be included with the U.S. dollar, euro, Japanese yen and the British pound as one of the currencies used for the global organization's Special Drawing Rights, which is used as the standard for dealing with its 188 member governments.

China is the world's second largest economy. Currency traders and economists say the move should encourage the government in Beijing to deliver on promises to make the yuan "freely tradable" and to open up its financial system.

The IMF's decision is set to take effect in October 2016.


PARIS (AP) -- President Barack Obama says the private sector needs to have a seat at the table as the world's governments attempt to curb global warming.

He says that governments will set the targets that nations will try to reach, but it will be scientists, private sector investors and workers who will largely determine whether those goals are met.

Obama's remarks come as part of an event in which at least 19 governments and 28 investors were announcing billions of dollars toward researching and developing clean energy technology.

Obama says Microsoft co-founder Bill Gates is correct in noting that improving energy efficiency will only help nations get part of the way toward reaching their targets. New inventions and technology will also be required.

He calls the partnership one of the most significant private-public partnerships even forged to accelerate energy innovation.

Washington Times