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 17, 2014 07:32 GMT

ECONOMY-THE-DAY-AHEAD

WASHINGTON (AP) -- The Federal Reserve concludes its latest policymaking meeting this afternoon, and analysts will be examining their statement for any changes in tone.

The Fed has held a key short-term interest rate close to zero for more than five years, making it cheaper for companies and consumers to borrow and boosting corporate profits. But investors widely expect the Fed to start raising rates in the middle of next year.

There are three economic reports of note this morning. The Labor Department releases its Consumer Price Index for August, while the Commerce Department releases the current account trade deficit for the second quarter.

A little later this morning, the National Association of Home Builders releases its housing market index for September.

And from the corporate world, FedEx reports its quarterly financial results before the market opens.

GLOBAL TRADE-SURVEY

WASHINGTON (AP) -- Americans, Japanese and many Europeans aren't sold on the benefits of trade. But people in China and other developing countries are far more convinced that it delivers jobs and higher wages.

That's according to a Pew Research Center international survey released Tuesday.

The center found that 50 percent of Americans say trade destroys jobs, while just 20 percent say it creates them. People in Italy, France and Japan are also far more likely to view trade as a job destroyer than as a job creator.

In China, Pew found 67 percent say trade creates jobs, and 61 percent say it raises wages. People in most emerging-market countries, from Vietnam to Tunisia, share that view of trade.

Pew surveyed over 48,000 people in 44 countries from March 17 to June 5.

NFL-SPONSORSHIPS

UNDATED (AP) -- A number of the NFL's biggest sponsors say they are not happy with the recent controversy that has engulfed the league.

Anheuser-Busch issued a statement on Tuesday saying it was "disappointed and increasingly concerned" by recent incidents and was not yet satisfied with the league's response. It says it has shared its concerns and expectations with the NFL.

The league has come under fire for its handling of former Baltimore Ravens running back Ray Rice's assault of his then-fiancee. The Minnesota Vikings have also been criticized for allowing Adrian Peterson to play while he faces a charge of abuse for spanking his 4-year-old son with a wooden switch.

McDonald's, Visa and Campbell Soup Co. say they have also voiced similar concerns to the league.

Sponsorship consultancy IEG says Anheuser-Busch's sponsorship fees alone are worth an estimated $50 million a year to the NFL.

COMMERCIAL SPACE-CREW

CAPE CANAVERAL, Fla. (AP) -- NASA is a giant step closer to launching Americans again from U.S. soil.

On Tuesday, the space agency announced it has picked Boeing and SpaceX to transport astronauts to the International Space Station in the next few years.

NASA Administrator Charles Bolden named the winners at a late-afternoon news conference at Kennedy Space Center in Florida. The news had been eagerly anticipated for weeks.

The deal will end NASA's expensive reliance on Russia. U.S. astronauts have been riding Russian rockets ever since NASA's shuttles retired in 2011. The latest price tag is $71 million per seat.

NASA has set a goal of 2017 for the first launch under the commercial crew program. Both companies will use crew capsules. Launches will originate from Cape Canaveral.

SUPERSTORM-HOSPITALS

TRENTON, N.J. (AP) -- A new federal report finds hospitals in New York, New Jersey and Connecticut were not prepared to meet the challenges of Superstorm Sandy.

The study from the U.S. Department of Health and Human Service's Inspector General Office was released Wednesday. It's based on surveys of 172 hospitals hit hard by the storm in October 2012.

It finds that hospitals had surges in patients that were unexpected as well as power outages and problems with backup generators and transportation to get employees into work.

It says nearly 90 percent of the hospitals faced "critical challenges."

In many cases, the issues had been identified in citations for deficiencies issued in the years before the storm.

ENDO-AUXILIUM

NEW YORK (AP) -- Endo International PLC says it is making an unsolicited offer for Auxilium Pharmaceuticals that values Auxilium at $28.10 per share.

The deal is worth $1.41 billion in cash and stock, based on Auxilium's shares outstanding. Endo values the offer at $2.2 billion. It comes at a premium of 31 percent based on the Tuesday closing price of Auxilium shares.

Dublin-based Endo says the two companies have complementary products and added that there are significant opportunities for savings.

Auxilium, based in Chesterbrook, Pennsylvania, is struggling with reduced sales of its testosterone gel Testim and said this month that it would cut 30 percent of its workforce as part of a plan to save $75 million per year.

Auxilium Pharmaceuticals Inc. shares are up about 4 percent for the year to date.

CALIFORNIA DROUGHT-GROUNDWATER

SACRAMENTO, Calif. (AP) -- California will no longer be the only western state with a pump-as-you-please approach to groundwater.

Gov. Jerry Brown signed legislation Tuesday requiring local agencies with depleted supplies to begin managing their wells. The state can intervene if necessary.

The worst drought in a generation gave momentum to three bills by Assemblyman Roger Dickinson of Sacramento and Sen. Fran Pavley of Agoura Hills, both Democrats.

Groundwater makes up nearly 60 percent of the state's water use during dry years but is not monitored and managed the same way as water from reservoirs and rivers.

Over-pumping of groundwater has led vast swaths of land to sink.

Republicans and Central Valley Democrats criticized the legislation, saying it punishes well-managed agencies and infringes on water rights.

AMERICAN AIRLINES-LABOR

DALLAS (AP) -- Customer-service agents at American Airlines are voting overwhelmingly to join a union and reverse a "no" vote in 2013.

Federal labor officials announced the results Tuesday in voting that covered about 14,000 employees at airports and reservations centers and home-based agents.

About 86 percent of those voting are favoring representation by the Communications Workers of America and the Teamsters. The CWA lost a previous election in January 2013 by about 150 votes.

CWA President Larry Cohen says the difference in the outcome is that unlike previous management, American's current executives did not campaign against the union.

Negotiations on a contract covering wages and other items are expected to begin this fall.

CORINTHIAN-CFPB

WASHINGTON (AP) -- Corinthian Colleges is being sued by the federal Consumer Financial Protection Bureau for what it calls a "predatory lending scheme."

The CFPB is seeking more than $500 million for borrowers who used the for-profit education company's private student loans. The CFPB says that Corinthian misled students about their job prospects, in some cases paying employers to offer temporary jobs to graduates.

The agency also says Corinthian charged as much as $75,000 for a bachelor's degree and pushed students into private loans with interest rates of roughly 15 percent, more than double the rate for a federal loan.

The agency says that more than 60 percent of Corinthian students with those loans defaulted within three years.

Shares of Corinthian Colleges Inc., based in Santa Ana, California, plunged almost 30 percent Tuesday.

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