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 May 22, 2015 17:17 GMT

FED-YELLEN

UNDATED (AP) -- Federal Reserve Chair Janet Yellen says she expects the Fed to begin raising interest rates later this year -- if the job market improves and it is confident that inflation will rise closer toward its target rate.

But she cautions that the economy is still facing a number of headwinds that could stall growth.

In a speech in Rhode Island, Yellen highlighted problems such as disappointing wage growth and a significant number of people working part time who would like full time jobs. She also mentioned a weak housing recovery and global economic weakness.

But Yellen says because the Fed's interest rate moves take time to filter through the economy, she believes further improvements in the economy will likely make it prudent to start raising rates later this year.

DEM 2016-CLINTON

HAMPTON, N.H. (AP) -- Hillary Rodham Clinton says Republicans in Congress and GOP presidential hopefuls are threatening tens of thousands of small-business jobs by seeking to cut a little-known government agency that guarantees loans to help U.S. exporters.

The Democratic presidential contender said during a round-table discussion at Smuttynose Brewery in New Hampshire that Congress should renew financing for the Export-Import Bank. She argues the GOP is risking up to 164,000 jobs supported by the bank.

She says Republicans running in the 2016 campaign would rather threaten the jobs than "stand up to the tea party and talk radio."

Conservatives have sought to eliminate the Export-Import Bank, arguing it gives the government too big a role in helping some large American companies sell products overseas at the expense of others.

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WASHINGTON (AP) -- U.S. consumer prices were up slightly in April, but overall gains were held back by another decline in energy costs that offset the biggest one-month jump in medical care in eight years.

The Labor Department says consumer prices edged up 0.1 percent last month compared to March, when prices rose a modest 0.2 percent. It was the smallest monthly gain since prices fell 0.7 percent in January.

Energy costs were down 1.3 percent and food prices were unchanged, keeping inflation low.

Core inflation, which excludes volatile food and energy, increased 0.3 percent. It was the biggest gain in 15 months. Core inflation was driven higher by a 0.7 percent rise in medical care, reflecting a surge in hospital costs.

Inflation pressures have generally been well contained since the recession.

OIL PLATFORM FIRE

Coast Guard: Fire on Gulf oil platform; 28 workers evacuated

NEW ORLEANS (AP) -- Twenty-eight workers have been evacuated from an oil production platform that is on fire off Louisiana's coast.

A Coast Guard news release says the fire was reported at 2:50 a.m. Friday near Breton Island, which is close to Louisiana's southeastern coast. Production was shut down, and no injuries have been reported.

The Coast Guard reported a light sheen of oil could be seen from the air along a more than one-mile stretch of water. Also, about 4,000 barrels of crude oil is stored on the platform. Authorities are working to put out the fire and keep that oil from getting into the water.

The cause of the fire was under investigation.

CALIFORNIA OIL SPILL

LOS ANGELES (AP) -- Federal regulators have ordered the company whose pipeline spilled thousands of gallons of oil across a California coastline to take a series of steps before it can restart the line.

The Pipeline and Hazardous Materials Safety Administration announced a so-called corrective action against Plains All American Pipeline on Friday.

The order requires the company to remove the damaged section of pipe, test it and empty the remainder of the line.

The agency says it still does not know the cause of the leak, which spilled up to 105,000 gallons of crude into a coastal ditch Tuesday. Thousands of gallons flowed into the sea northwest of Santa Barbara.

TOBACCO-HEALTH WARNINGS

WASHINGTON (AP) -- A federal appeals court says America's largest tobacco companies must inform consumers that cigarettes were formulated to increase addiction, but not that they lied about the dangers of smoking.

The ruling Friday from the U.S. Circuit Court of Appeals for the District of Columbia is a partial win for cigarette makers that objected to running court-ordered advertisements that would have the companies brand themselves as liars.

The ads would have begun with a statement that the companies "deliberately deceived the American public." The ads stem from a 2006 court ruling ordering the companies to admit they had lied for decades about the dangers of smoking.

The companies called that statement overbroad and misleading.

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NEW YORK (AP) -- Wal-Mart, the nation's largest food retailer, is urging its thousands of U.S. suppliers to curb the use of antibiotics in farm animals and improve treatment of them.

That means asking meat producers, eggs suppliers and others to use antibiotics only for disease prevention or treatment, not to fatten their animals, a common industry practice. The guidelines also aim to get suppliers to stop using sow gestation crates and other housing that lacks sufficient space.

They're also being asked to avoid painful procedures like de-horning or castration without proper pain management.

Wal-Mart wants suppliers to provide it with an annual report and publicly report their progress on their own websites.

Wal-Mart is facing pressure from shoppers who want to know more about how their food is produced.

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MOLINE, Ill. (AP) -- Solid sales of its construction equipment offset a global agricultural slowdown for Deere, the company said Friday. It also raised its outlook for the year.

The Moline, Illinois, company said its second-quarter earnings fell 30 percent to $690.5 million, compared with $981 million last year, but it was still better than Wall Street had expected.

Deere said sales of farming equipment fell 25 percent from a year ago to $5.77 billion in the second quarter, while sales of construction and forestry equipment rose 2 percent to $1.63 billion. Deere's financing unit, which gives loans to customers to buy equipment, also improved, with revenue rising 14 percent to $653 million.

Profit for 2015 is now expected to be around $1.9 billion, the company said, up slightly from the $1.8 billion it had projected earlier this year.

FRISCH'S BIG BOY-SALE

CINCINNATI (AP) -- Frisch's Big Boy restaurants are being sold to a private equity fund, ending family ownership of the Cincinnati-based chain that dates to its first drive-thru in 1939.

Frisch's Restaurants Inc. says NRD Partners I will buy all outstanding shares for $34 each, or some $175 million. Frisch's shares closed Thursday at $28.12.

The regional chain with the iconic Big Boy mascot owns some 95 family restaurants in Ohio, Kentucky and Tennessee. Its website states it has another 26 operated in the region by licensees.

CEO Craig Maier and marketing Vice President Karen Maier will retire, but continue as franchisees.

The deal is expected to close by the end of September.

Frisch's last month reported $47 million in revenue for its fiscal third quarter, with 45 cents earnings per share.

EXPEDIA-SALE

NEW YORK (AP) -- Expedia is selling its majority stake in eLong, a Chinese travel service, to a group of businesses based in China for roughly $671 million.

The news sent shares of the online travel company up more than 5 percent in early trading Friday.

Bellevue, Washington-based Expedia said before the U.S. markets opened that it had sold its 62.4 percent share in eLong to a group that includes Ctrip.com International Ltd., Keystone Lodgings Holdings Ltd., Plateno Group Ltd. and Luxuriant Holdings Ltd.

ELong had reportedly been a drag on Expedia's earnings. The company said the transaction closed Friday.

Expedia's stock was up $5.62 to $111.45 early Friday, after rising as high as $115 earlier in the session.

VANGUARD NATURAL RESOURCES-EAGLE ROCK

HOUSTON (AP) -- Vanguard Natural Resources LLC will acquire Eagle Rock Energy Partners LP in a $474 million deal.

The agreement was announced Thursday by the Houston-based companies.

Vanguard Natural Resources will also assume $140 million of debt from Eagle Rock Energy Partners, which will become a wholly owned indirect subsidiary.

The agreement requires approval of the boards of both companies.

Vanguard Natural Resources deals in acquisition, production and development of oil and natural gas properties. The company has operations in Texas, Wyoming, Arkansas, Oklahoma, New Mexico, Montana, Colorado, Louisiana, Mississippi and North Dakota.

Eagle Rock Energy Partners is also involved with oil and natural gas properties.

EUROPE-GREECE BAILOUT

RIGA, Latvia (AP) -- German Chancellor Angela Merkel (AHN'-geh-lah MEHR'-kuhl) says after talks with her Greek counterpart Alexis Tsipras (TSEE'-prahs) that there is still "a whole lot left to be done" to avoid a financial meltdown in Athens.

Merkel and French President Francois Hollande (frahn-SWAH' oh-LAWND') spoke for some two hours with Tsipras at the Eastern Partnership summit and the German leader said Friday that "very, very intensive work is still needed."

The three met to pave the way for a special eurozone meeting of finance ministers late this month or early June.

The meeting came a day after a leading official from Tsipras' party said that Greece will not be able to repay a loan to the International Monetary Fund early next month unless a deal is reached with its creditors to unblock bailout funds.

EUROPE-ECONOMY

FRANKFURT, Germany (AP) -- European Central Bank head Mario Draghi (DRAHG'-ee) says governments that share the euro currency shouldn't wait for better times to push through reforms that would boost sluggish growth.

Draghi said tough measures to clear away bureaucracy and make hiring and firing more flexible are needed quickly to energize the economy.

He rejected arguments that looser hiring and firing rules only work over the long term and could hurt the hesitant recovery that is taking hold. He said that "the sooner they take place, the better."

Draghi spoke Friday at an ECB conference in Sintra, Portugal, where economists are discussing ways to lower unemployment. The jobless rate is 11.3 percent for the 19 European Union member countries that use the euro, and 50 percent for young people in Spain and Greece.

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