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 20, 2014 07:27 GMT

BUSINESS SURVEY

WASHINGTON (AP) -- A new business survey finds hiring is healthy but pay raises, not so much.

The quarterly survey by the National Association for Business Economics finds that only 24 percent of companies increased wages and salaries in the July-September quarter. That's down from 43 percent in the April-June quarter and the first drop after three straight increases.

Yet the firms still added jobs at a healthy pace, which usually pushes wages higher as employers compete for workers. The figures suggest that the number of people out of work remains high enough that companies aren't under any pressure to raise pay.

And just one-third of respondents said they expect their companies will boost wages in the October-December quarter.

The NABE surveyed 76 of its member economists in late September

ECONOMY-THE DAY AHEAD

UNDATED (AP) -- Investors will have many more corporate earnings reports to look at this week.

Apple will report third quarter financial results today after the market closes.

Tomorrow, Coca-Cola, Reynolds American, Verizon Communications and McDonald's will report earnings before the market opens. Discover Financial Services and Yahoo will report results after the closing bell.

Also on Tuesday, the National Association of Realtors will release existing home sales for September.

SPRINT LAYOFFS

OVERLAND PARK, Kan. (AP) -- Sprint Corp. has cut 452 jobs from its Overland Park, Kansas, headquarters as part of a previously announced cost-cutting effort.

The nation's third-biggest cellphone carrier disclosed the layoffs in a filing with the Kansas Department of Commerce.

The report, which was filed Friday, covers the first installment of layoffs planned throughout October. The Kansas City Star reports that it doesn't cover any job losses outside the headquarters campus, although they are believed to be happening too.

The company said earlier this month in a filing with the Securities and Exchange Commission that it was cutting an unspecified number of jobs to better compete with AT&T and Verizon. Sprint said it would book a $160 million charge in its fiscal second quarter to cover the layoffs, which include managers as well as other employees. It may take more charges for future job cuts.

Another 477 Sprint employees in Overland Park were laid off earlier this year, bringing this year's job cut total to 929

Before the newly disclosed layoffs, about 7,500 worked for Sprint in the Kansas City area.

BOX OFFICE

LOS ANGELES (AP) -- The bloody World War II drama "Fury" blew past "Gone Girl" at theaters this weekend.

"Gone Girl" was tops at the box office for two weeks before Brad Pitt and his rag-tag group of tank mates in "Fury" blasted the film to second place.

According to studio estimates Sunday, Sony's "Fury" captured $23.5 million in ticket sales during its opening weekend. Fox's "Gone Girl" followed with $17.8 million.

Two other new movies landed in the top five: The animated Fox feature "The Book of Life" opened in third place with $17 million; and Relativity's Nicholas Sparks romance "The Best of Me" debuted in fifth place with $10.2 million.

Disney's "Alexander and the Terrible, Horrible, No Good, Very Bad Day" placed fourth, dropping one spot since opening last weekend.

JAPAN-TRADE MINISTER RESIGNS

TOKYO (AP) -- Japan's trade minister has announced her resignation after allegations that she violated election laws.

Yuko Obuchi's resignation on Monday is the first for the current administration of Prime Minister Shinzo Abe and could dent his efforts to raise the profile of women both in politics and business.

The questions over Obuchi's use of election funds are the latest in a series of uproars over activities by some members of Abe's Cabinet. Obuchi is one of five women Abe appointed to Cabinet-level posts in a reshuffle last month that highlighted his commitment to promoting women to leadership positions.

GERMANY-ECONOMY

BERLIN (AP) -- Germany's finance minister says he's confident he can keep promises to balance the budget next year and is rejecting anew suggestions that the country should borrow to finance greater public investment.

Chancellor Angela Merkel is determined to stick to plans to get by without new borrowing next year for the first time since 1969, though Germany's growth outlook has weakened and Berlin faces calls from abroad to pump money into the economy.

Finance Minister Wolfgang Schaeuble acknowledged in Sunday's Welt am Sonntag newspaper that Germany "must invest more and improve our competitiveness." But he added: "We just don't want growth on credit."

Schaeuble said it's important to keep to promises and says he's confident a balanced budget can be achieved because "tax income doesn't react so quickly to economic changes."

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