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Executive compensation packages

Updated: Saturday, August 3, 2013
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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 30, 2014 17:13 GMT

HOME PRICES

WASHINGTON (AP) -- U.S. home prices in July increased at the slowest pace in 20 months, reflecting sluggish sales and a greater supply of houses for sale.

The Standard & Poor's/Case-Shiller 20-city home price index rose 6.7 percent in July from 12 months earlier. That's down from an 8.1 percent gain in June and the smallest increase since November 2012.

Nineteen of the 20 cities in the index reported lower annual gains than in June. And a new national index of home prices compiled by S&P rose just 5.6 percent.

Lower price gains should make homes more affordable for would-be buyers. Sales of existing homes picked up over the summer but then dipped in August. Sales have fallen 5.3 percent in the past year.

CONSUMER CONFIDENCE

WASHINGTON (AP) -- U.S. consumer confidence dropped in September after hitting the highest level in nearly seven years in August.

The Conference Board says its confidence index fell to 86.0, the first decline after four months of gains. It fell from a revised 93.4 in August, which had been the highest level since autumn 2007 before the Great Recession officially began in December 2007.

Conference Board economists say the decline reflected a less positive view of the current state of the job market.

OBAMA-ECONOMY

WASHINGTON (AP) -- President Barack Obama will deliver an economic address this week, hoping to promote the recovery as the campaign season heads into its final weeks before midterm congressional elections.

Obama plans to deliver a speech Thursday at Northwestern University's Kellogg School of Management in Evanston, Illinois, drawing attention to economic advances since he took office. The White House says he will also press for additional steps that the government can undertake to create jobs and improve wages.

The speech comes amid polls that still show the economy is the top issue with voters and that a majority of voters disapprove of Obama's handling of the economy. The speech marks a shift from Obama's recent attention to international crises, particularly the start of a new bombing campaign against Islamic extremists.

EBAY-PAYPAL SPLIT

SAN JOSE, Calif. (AP) -- PayPal is splitting from EBay Inc. and will become a separate and publicly traded company next year.

The separation is expected to occur in the second half of 2015.

EBay says its board decided that the separation was the best path for growth and shareholder value creation for each business.

Dan Schulman, the president of the enterprise growth group at American Express, will be the new president at PayPal, effective immediately. The 56-year-old will become PayPal's CEO once the separation takes place.

EUROPE-ECONOMY

BRUSSELS (AP) -- Official figures show inflation across the 18 European Union countries that use the euro dipped further toward zero in September, a move that's likely to maintain pressure on the European Central Bank to back further stimulus measures.

Eurostat, the EU's statistics office, says consumer prices in the eurozone rose only 0.3 percent in the year to September against the previous month's 0.4 percent.

Inflation, which is at its lowest level since October 2009, is way below the ECB's target of just below 2 percent.

One reason behind the ECB's recent interest rate reductions has been to prevent a sustained bout of falling prices -- so-called deflation, which can make consumers delay purchases.

Eurostat also said unemployment in the eurozone was unchanged at 11.5 percent in August.

BRITAIN-ECONOMY

LONDON (AP) -- The U.K. economy grew faster in the second quarter than previously estimated, with official figures revising up the quarter-on-quarter growth rate by 0.1 percentage points to 0.9 percent.

The Office for National Statistics revision came at the same time as officials put into place data and methodological changes meant to make Britain comply with international norms.

Joe Grice says that despite the changes the country's long-term average growth rate is little changed, though the economic downturn ended about nine months earlier than thought.

He notes that "the recent downturn continues to be the deepest since ONS records began." Chris Williamson, analyst at Markit.com, says the new statistics show the economy is now 2.7 percent larger than it pre-crisis peak.

BRITAIN-RBS

LONDON (AP) -- Taxpayer-owned Royal Bank of Scotland says strong economic conditions are boosting its finances and that it expects to take a smaller hit from bad investments this year.

The bank, which was rescued by the British taxpayer during the 2008 financial crisis, issued an unscheduled trading update today to report it would "significantly outperform" its previous guidance of 1 billion pounds ($1.6 billion) in impairment charges. It says it now expects to put aside only half a billion pounds for bad loans.

Rising property prices in Ireland have helped its Ulster Bank unit. RBS Capital Resolution, which contains toxic investments, has improved with the economy. RBS says uncertainties remain, however.

The bank is undergoing a sweeping restructuring to focus on its core business in the U.K.

EUROPE-APPLE-TAX PROBE

BRUSSELS (AP) -- The European Union's competition watchdog says tax rebates that Ireland granted iPhone maker Apple appear to amount to illegal state aid and may have to be recouped.

Apple Inc. funnels the bulk of its international sales through subsidiaries in Ireland, where it benefits from low, negotiated tax deals.

In a letter to the Irish government published Tuesday, the 28-nation bloc's executive Commission said the tax treatment granted to Apple raises "doubts about the compatibility" with EU law.

The Commission says tax deals struck with Apple in 1991 and then 2007 show "several inconsistencies" and may not comply with international taxation standards.

The EU first announced the probe in June. It's now requesting further documents from Ireland before making a decision, which is likely to take several months.

EARNS-WALGREEN

DEERFIELD, Ill. (AP) -- Walgreen Co. (WAG) reports a loss of $239 million in its fiscal fourth quarter.

On a per-share basis, the Deerfield, Illinois-based company says it had a loss of 25 cents. Earnings, adjusted for non-recurring costs and amortization costs, came to 74 cents per share.

The results met Wall Street expectations. The average estimate of analysts surveyed by Zacks Investment Research was also for earnings of 74 cents per share.

The drugstore chain posted revenue of $19.06 billion in the period, exceeding Street forecasts. Analysts expected $19.02 billion, according to Zacks.

Walgreen shares have increased nearly 4 percent since the beginning of the year, while the S&P 500 has climbed 7 percent. The stock has climbed slightly more than 9 percent in the last 12 months.

JOHNSON & JOHNSON-ACQUISITION

Johnson & Johnson buying Alios for $1.75B

NEW BRUNSWICK, N.J. (AP) -- Johnson & Johnson is buying the biopharmaceutical company Alios BioPharma Inc. for about $1.75 billion.

Alios is a privately held company that focuses on developing therapies for viral diseases.

The deal includes Alios' portfolio of potential therapeutics for viral infections including compound AL-8176, an orally administered antiviral therapy currently in Phase 2 studies for the treatment of infants with respiratory syncytial virus. RSV typically causes only mild, cold-like symptoms in most children. But it is also the most common cause of pneumonia in U.S. infants.

The acquisition is targeted to close in the fourth quarter.

Johnson & Johnson is based in New Brunswick, New Jersey.

NEWS CORP-ACQUISITION

NEW YORK (AP) -- News Corp. is spending about $950 million to buy the online real estate business Move Inc., in a deal that aims to speed up the media company's digital expansion.

News Corp. says it will pay $21 per share in cash for each outstanding share of Move. That represents a 37 percent premium over the stock's closing stock price of $15.29 on Monday.

Move operates the website realtor.com and News Corp. says it displays more than 98 percent of all for-sale properties listed in the United States. The media company says Move's network of websites reaches about 35 million people per month.

New York-based News Corp., which is controlled by Rupert Murdoch, expects the deal to close at the end of the year. Move's board has unanimously approved the acquisition.

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