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 September 22, 2014 07:26 GMT

ECONOMY-THE DAY AHEAD

WASHINGTON (AP) -- Investors will gain some insight into the housing market during the first half of the week.

Today, the National Association of Realtors will release existing home sales for August.

On Wednesday, the Commerce Department will report on new home sales for August.

SIEMENS-DRESSER-RAND

HOUSTON (AP) -- German engineering company Siemens AG has reached a deal to acquire oilfield equipment maker Dresser-Rand for $7.6 billion.

Under the deal announced early Monday in Germany, Siemens will pay $83 per common share of Dresser-Rand Group Inc., $3.09 more than the company's closing share price Friday. The deal includes assumption of debt.

Dresser-Rand's board of directors unanimously recommended the offer to shareholders, and Siemens expects to close the deal by summer, according to a statement from the company.

Dresser-Rand, based in Houston and Paris, has annual revenue of around $3 billion. It said in a statement Siemens will operate the company as its oil and gas business under the Dresser-Rand brand and retain its executive team. It said the oil and gas business will be based in Houston.

GAS PRICES

CAMARILLO, Calif. (AP) -- A national survey says the average price of a gallon of regular gasoline has dropped another 9 cents over the last two weeks, to $3.37, bringing the decline to 34 cents over the last 13 weeks.

Industry analyst Trilby Lundberg said Sunday that falling crude oil prices drove the declines, but the drop was also heavily impacted by a crash in prices of ethanol and the fact that winter-grade gasoline costs less to produce. If crude prices don't rise, the average prices at the pump may drop a few more cents.

Jackson, Mississippi, had the lowest price among cities surveyed in the Lower 48 states, with $3.03 a gallon. San Francisco had the highest at $3.79 a gallon.

The average price for a gallon in California is $3.67, down 8 cents from two weeks ago, with Fresno the low average in the state at $3.56.

The average price for a gallon of midgrade gasoline was $3.59 a gallon, and premium was $3.74.

GENERAL MOTORS-RECALL

DETROIT (AP) -- General Motors is recalling 221,558 Cadillac XTS and Chevrolet Impala sedans because the brake pads can stay partially engaged even when they're not needed, increasing the risk of a fire.

The recall involves Cadillacs from the 2013-2015 model years and Impalas from the 2014 and 2015 model years. There are 205,309 vehicles affected in the U.S.; the rest of the vehicles are in Canada and elsewhere.

GM says the electronic parking brake arm that applies pressure to the back of the brake pads may not fully retract after use. If the brake pads stay partially engaged with the rotor, excessive brake heat may result in a fire.

GM says it knows of no accidents or injuries related to the defect.

GM will notify owners and repair the vehicles for free.

CHRYSLER RECALL

DETROIT (AP) -- Chrysler is recalling nearly 189,000 Jeep Grand Cherokees and Dodge Durangos in the U.S. to fix a fuel pump problem that can cause the SUVs to stall.

The recall covers some 2011 models with 3.6-liter V6 or 5.7-liter V8 engines. Chrysler says a relay can fail, increasing the risk of a crash.

Chrysler traced the problem to a spring that can deform because of heat.

The vehicles also might not start, and the fuel pump could keep working even when the engine is shut off. The company says that as of Aug. 25 it's not aware of any crashes or injuries from the problem.

Dealers will replace the fuel pump relay for free starting Oct. 24.

CHINA-SUSPECT MEAT

BEIJING (AP) -- A U.S. meat supplier is laying off most of the workforce of a Chinese subsidiary accused of selling expired meat to KFC, McDonald's and other customers.

OSI Group said Monday it will lay off 340 employees of Shanghai Husi Food Co., which has been under investigation since a Shanghai TV station reported in July it supplied expired meat.

Six employees were arrested in August on suspicion of producing substandard products.

OSI Group said a small number of employees would be kept on in Shanghai while the investigation is underway. It said production was unlikely to resume in the near future. It said the company suffered "significant financial and customer losses."

CLIMATE EMISSIONS

WASHINGTON (AP) -- Scientists estimate that the world spewed far more carbon pollution into the air last year than ever before.

That was mostly because of increases from the three biggest polluters -- China, the United States and India.

The reports released Sunday come as world leaders gather at the United Nations to talk about how to reduce heat-trapping gases.

According to the calculations, the world pumped more than 39 billion tons of carbon dioxide into the air last year by burning coal, oil and gas. That was 2.3 percent more than the previous year.

The International Global Carbon Project team published their reports in the scientific journals Nature Geoscience and Nature Climate Change.

CLEAN AIR VEHICLES LAWS

SACRAMENTO, Calif. (AP) -- California Gov. Jerry Brown has signed into law several bills designed to boost use of clean-air vehicles in his state.

One bill signed Sunday allows 15,000 additional electric and partial zero-emissions vehicles, or 70,000 total vehicles, to get green stickers that allow driving in carpool lanes even when solo.

Another requires freeway high-occupancy toll lane operators to allow clean air vehicles to drive for free or reduced rates. Such roads exist in Orange and Riverside counties, and the San Francisco area.

Another bill requires a property owner, rather than the person leasing it, to install an electric vehicle charging station and its infrastructure in most cases.

California makes up 40 percent of the nation's electric vehicle sales and the governor's press office says it surpassed more than 100,000 sold earlier this month.

G20-FINANCE MINISTERS

SYDNEY (AP) -- Finance chiefs from the 20 largest economies say they are close to reaching their goal of boosting world GDP by more than $2 trillion over the next five years.

Australian Treasurer Joe Hockey is the host of the Group of 20 meeting in the northern Australian city of Cairns. He said on Sunday that the G-20 finance ministers and central bankers had agreed to more than 900 policy initiatives to meet the goal they set earlier this year.

The G-20 said an analysis of those initiatives show they should boost the combined gross domestic product of member countries by 1.8 percent above levels expected for the next five years. That's just short of the group's target of 2 percent.

LEAR PLANT-STRIKE

HAMMOND, Ind. (AP) -- Workers at a Lear Corp. plant in northwestern Indiana that makes automotive seats have approved an agreement that will end a two-tiered pay system.

The United Auto Workers said Sunday evening that members of Local 2335 had "overwhelmingly" approved the four-year contract. It did not give a specific vote count.

Workers at the Hammond plant make seats for the Explorer and Taurus models produced at Ford's Chicago Assembly Plant. The workers went on strike Sept. 13, but returned to work the next day after the tentative deal was reached.

The contract will end a system that locked newer workers into lower wages, and raise the top wage to $21.58 an hour.

Local 2335 President Jaime Luna says the deal could help thousands of autoworkers across the country.

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