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 March 27, 2015 17:24 GMT

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But the slowdown is expected to be short-lived. Stronger growth is expected for the rest of the year as a recovering job market supports healthy gains in consumer spending.

The Commerce Department says the overall economy, as measured by the gross domestic product, grew at an annual rate of 2.2 percent in the October-December period, an estimate that was unchanged from a month ago. The economy had surged at a 5 percent rate in the third quarter.

The final look at fourth quarter GDP found consumer spending was stronger than previously estimated but business restocking was weaker.

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WASHINGTON (AP) -- Bad weather and rising gasoline prices pushed U.S. consumer sentiment a bit lower in March.

The University of Michigan's consumer sentiment index slipped to 93 this month from 95.4 in February. Richard Curtin, chief economist for the survey, notes that despite the monthly drop, consumer optimism was the highest in a decade for the first three months of 2015.

Sentiment dropped most this month among low-income households, which are especially sensitive to high utility bills in the winter. Confidence rose for mid- and high-income households. Curtin predicted that an improving job market would boost consumer spending the rest of the year.

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COPENHAGEN, Denmark (AP) -- Europe's aviation safety agency is recommending that airlines across the continent always have two people in the cockpit of a flying aircraft.

European airlines, including the Lufthansa Group that includes Germanwings, have been making commitments to implement the measure after it emerged that the co-pilot of Germanwings Flight 9525 had apparently locked himself in the cockpit to crash the plane.

U.S. airlines revamped their policies regarding staffing in the cockpit following the Sept. 11, 2001 terrorist attacks. But the procedure is not standard in Europe or Canada.

The European Aviation Safety Agency's executive director, Patrick Ky, says "while we are still mourning the victims, all our efforts focus on improving the safety and security of passengers and crews."

The president of the German pilots union Cockpit tells The Associated Press that his organization would support measures requiring two people in the cockpit at all times during flights, but he cautions that such a move wouldn't solve all security problems.

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WASHINGTON (AP) -- U.S. resistance to a Chinese-led Asian regional bank is leaving it isolated among its Asian and European allies.

That's giving some heft to China's frequent complaints that Washington wants to contain its rise as a world power.

One of America's closest friends in Asia, South Korea, announced Thursday it will join the Asian Infrastructure Investment Bank. The institution is intended to help finance construction of roads and other infrastructure.

The U.S. has expressed concern that the new bank will allow looser lending standards, undercutting the World Bank and Asian Development Bank, where the U.S. and Japan have the most clout.

But since Britain broke with Washington two weeks ago, other major European economies have signed up for the Chinese-led bank. Australia also appears poised to join.

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ATHENS, Greece (AP) -- Greece's alternate minister for international economic relations says his government is prepared for a "rupture" with the country's creditors if its current bailout negotiations don't go well.

Euclid Tsakalotos said Friday the government would not be negotiating properly if it didn't envisage a rupture with its partners, although he would not say what exactly a rupture might entail.

Greece's government is in talks with its creditors -- eurozone nations, the European Central Bank and the International Monetary Fund -- to unlock urgently needed funds from the country's bailout. It must present a list of reforms by early next week, which it hopes will lead to the disbursement.

Tsakalotos, speaking on private Star TV, said the government was intentionally creating ambiguity with its partners regarding its intentions as a negotiating tactic.

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SAN FRANCISCO (AP) -- Jurors deciding the outcome of a much-watched gender discrimination lawsuit against a prestigious Silicon Valley venture capital firm are set to enter their third day of deliberations.

The jury of six men and six women are due back in San Francisco Superior Court on Friday in Ellen Pao's lawsuit against Kleiner Perkins Caufield & Byers.

Pao says the firm discriminated against her because she was a woman and then retaliated by denying her a promotion and firing her when she complained about gender bias.

Kleiner Perkins denies the allegations and says Pao had a history of conflicts with colleagues that contributed to the decision to let her go.

The case has put a spotlight on gender imbalance and working conditions for women in Silicon Valley.

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The U.S. has drastically cut imports in recent years and transformed itself into the world's biggest producer of oil and natural gas by tapping huge reserves in shale rock formations. But the National Petroleum Council's study predicts that the shale boom won't last much beyond the next decade.

Exxon Mobil CEO Rex Tillerson chaired the committee that drafted the study. He says oil companies need to start probing the Artic because it takes decades of preparation and drilling to bring oil to market.

Geologists estimate the Arctic holds about a quarter of the world's undiscovered conventional oil and gas deposits. But environmental advocates say the Arctic ecosystem is too fragile to risk a spill.

OBAMA-CHEMICAL BOARD

WASHINGTON (AP) -- The U.S. Chemical Safety Board is operating without a permanent leader. Its chairman has been forced to resign, following accusations of mismanagement.

A White House official says Rafael Moure-Eraso (rah-fah-YEL' moh-RAY' eh-RAH'-soh) stepped down Thursday at the administration's request. The official spoke on condition of anonymity to discuss personnel matters.

The National Safety Council says the independent federal agency under Moure-Eraso repeatedly fell under scrutiny for board departures, delayed investigations and other issues. Members of the Senate Environment and Public Works Committee had accused Moure-Eraso of violating his oath of office and the law. Committee members had requested his resignation.

The board is responsible for investigating chemical accidents. Its members are appointed by the president and confirmed by the Senate.

President Barack Obama has nominated Vanessa Sutherland to succeed Moure-Eraso.

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