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 April 24, 2015 18:03 GMT

AMAZON-CLOUD COMPUTING BUSINESS

NEW YORK (AP) -- Amazon's profitable cloud-computing services business is growing by leaps and bounds.

That growth helped the e-commerce company Thursday post a 15 percent first-quarter revenue jump and a smaller-than-expected loss. The results sent Amazon's shares up 6 percent in aftermarket trading.

Investors have been growing restless with Amazon's long-term strategy of plowing most of the money it makes into new areas like cloud computing, streaming video and hardware -- leading to razor-thin profits or, in this quarter's case, a loss.

Because Amazon had never broken out details on Amazon Web Services before, it wasn't clear if it was operating at a profit or loss. But details released on Thursday show that surging revenue isn't coming at expense of a profit in that business, reassuring investors.

Amazon has rolled out a series of new offerings in recent months.

DEATH OF COMCAST-TIME WARNER CABLE

NEW YORK (AP) -- Comcast is dropping its $45 billion bid for Time Warner Cable after heavy regulatory pushback.

The combined company would have put nearly 30 percent of TV and about 55 percent of broadband subscribers under one roof, which would give the resulting behemoth unprecedented power over what Americans watch and download.

Competitors, consumer groups, and politicians have criticized the deal, saying it would lead to higher prices and less choice.

Even with the Comcast saying Friday that the deal was off, cable companies are likely to keep combining as costs rise for the shows, sports and movies they pipe to subscribers and video customers decrease.

Many analysts expect that Charter Communications Inc., which lost out on its bid for Time Warner Cable Inc. to Comcast Corp., to resurrect its effort.

DURABLE GOODS

WASHINGTON (AP) -- Orders to U.S. factories for long-lasting manufactured goods increased by the largest amount in eight months. But a key category that tracks business investment plans dropped for a seventh month, suggesting that manufacturing is still struggling through a soft patch.

The Commerce Department says orders for durable goods rebounded 4 percent in March after having fallen 1.4 percent in February. The strength was led by a big jump in demand for commercial aircraft. But outside of the transportation category, orders were down for a sixth straight month.

There was also a 0.5 percent drop in demand in the category that serves as a proxy for business investment plans. The decline followed a 2.2 percent drop in February. This key investment category has been down seven consecutive months.

EARNS-AMERICAN AIRLINES

FORT WORTH, Texas (AP) -- American Airlines Group Inc. (AAL) on Friday reported first-quarter earnings of $932 million.

The Fort Worth, Texas-based company said it had net income of $1.30 per share. Earnings, adjusted for non-recurring costs and pretax expenses, came to $1.73 per share.

The results surpassed Wall Street expectations. The average estimate of 11 analysts surveyed by Zacks Investment Research was for earnings of $1.70 per share.

The world's largest airline posted revenue of $9.83 billion in the period, also topping Street forecasts. Four analysts surveyed by Zacks expected $9.82 billion.

American Airlines shares have dropped 4 percent since the beginning of the year. The stock has increased 39 percent in the last 12 months.

GREECE-BAILOUT

RIGA, Latvia (AP) -- European creditors have been turning up the heat on Greece today. They're pressing Greek officials to deliver an economic reform program that the country will need in order to avoid a possible default -- and even an exit from the euro currency group.

At a meeting today in Latvia, Greece's finance minister heard a series of rebukes from his counterparts in the eurozone for failing to come up with a comprehensive list of economic reforms.

The eurozone's top official calls it a "very critical discussion."

Others spoke of being "tired" and "annoyed" with the way the talks were going. Austria's finance minister says they made those points "very vigorously."

Two months ago, Greece won an agreement from the eurozone under which it would get the remaining money in its bailout fund -- about $7.7 billion -- but only if it came up with a set of reforms that everyone could agree on.

There are just days to go before that deadline, and Athens has yet to present a full list.

EUROPE GM CROPS

BRUSSELS (AP) -- The European Union has authorized the use of more genetically modified food and feed amid a row over whether EU member states should be able to independently ban certain GM products.

The EU's executive commission said Friday that it has approved 10 GM foods, including strands of maize, soybean and cotton, after they "have been proved to be safe." Two kinds of GM cut flowers were also authorized.

The European bio-industries association expressed satisfaction that the EU has "finally decided to authorize imports of safe products."

The EU and its member nations have been locked in a dispute over whether countries should be allowed to individually ban GM produce that EU institutions consider safe.

DIET PEPSI-NEW SWEETENER

NEW YORK (AP) -- PepsiCo says it's dropping aspartame from Diet Pepsi in response to customer feedback and replacing it with sucralose, another artificial sweetener commonly known as Splenda.

The decision to swap sweeteners comes as Americans keep turning away from popular diet sodas. Coca-Cola said this week that sales volume for Diet Coke fell 5 percent in North America in the first three months of the year.

Executives at Coke and Pepsi blame the declines on perceptions that aspartame, first sold under the brand name Nutrasweet, isn't safe. That's even though the Food and Drug Administration says more than 100 studies support aspartame's safety.

Still, PepsiCo says it wanted to listen to its customers.

Andrea Foote, PepsiCo spokeswoman, says the reformulated Diet Pepsi drinks will start hitting shelves in August.

LISTERIA-ICE CREAM

WASHINGTON (AP) -- Major recalls from two well-known ice cream companies due to the discovery of listeria bacteria raise questions about how the pathogen could have contaminated multiple ice cream manufacturing plants -- and whether the discoveries are related.

Blue Bell Creameries of Texas and Jeni's Splendid Ice Creams of Ohio both took products off shelves this week after listeria was discovered in their products. Blue Bell ice cream is linked to 10 illnesses in four states, including three deaths. There are no known illnesses linked to the Jeni's recall.

The recalls are unusual: Listeria is rarely found in ice cream because it can't grow at freezing temperatures. A spokesman for the Food and Drug Administration says it has no evidence, for now, that the two recalls are connected.

TANNING LAWSUIT

ALBANY, N.Y. (AP) -- New York's attorney general has filed suit against two tanning salon chains, accusing them of downplaying health risks while playing up the allure of bronze skin.

Attorney General Eric Schneiderman (SHNEYE'-dur-muhn) filed the lawsuits against Portofino Spas and Total Tan Thursday. He says both franchises falsely advertise the health benefits of indoor tanning by promoting it as a safe alternative to tanning outdoors.

Schneiderman says there's nothing safe about indoor tanning. He accuses the two companies of supporting the opposite message.

Attorneys for Total Tan denied the allegations. Representatives for Portofino didn't immediately respond to requests for comment.

Schneiderman says lawsuits are also coming against Planet Fitness and Beach Bum Tanning.

A spokesman for Planet Fitness says the company is working toward a resolution. Representatives for Beach Bum Tanning didn't comment.

GENERAL MOTORS-EXECUTIVE COMPENSATION

DETROIT (AP) -- General Motors CEO Mary Barra's compensation more than tripled in 2014 to $15.8 million in her tumultuous first year in the automaker's top job.

Barra and other top executives got only 74 percent of the cash incentives they could have received, because GM fell short of goals set by the board. But her stock awards more than doubled from 2013 when she was senior vice president of for product development and purchasing.

GM reported its 2014 compensation Friday in its proxy filing with the U.S. Securities and Exchange Commission. The company also announced that its annual stockholders meeting will be held on June 9 at GM's Detroit headquarters.

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