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 November 26, 2014 19:13 GMT

UNEMPLOYMENT BENEFITS

WASHINGTON (AP) -- The number of people seeking U.S. unemployment benefits jumped last week, pushing total applications above 300,000 for the first time in nearly three months.

The Labor Department says weekly applications rose 21,000 to a seasonally adjusted 313,000, the highest level since the first week of September. The four-week average, a less volatile measure, rose 6,250 to 294,000.

The increase is unlikely to raise concerns about the broader health of the job market. At least some of the rise occurred because of seasonal layoffs in businesses affected by the cold weather, such as construction. The department seeks to control for such seasonal factors but doesn't always do so perfectly.

Applications had been under 300,000 for 10 straight weeks, an unusually low level that indicates companies are laying off few workers.

CONSUMER SPENDING

WASHINGTON (AP) -- U.S. consumers picked up spending by a modest amount in October, a slight improvement after no gain at all in the previous month.

The Commerce Department says consumer spending rose 0.2 percent last month, while September was revised from a decline to a flat reading. Income grew 0.2 percent in October, matching the modest September gain.

Spending is closely watched because it accounts for 70 percent of economic activity. Solid job gains this year are helping to lift spending, which is giving a bolstering the overall economy.

Economic growth came in at a solid 3.9 percent in the July-September quarter. Economists are looking for growth of around 2.5 percent in the current quarter, and they believe 2015 will see further spending gains and growth of around 3 percent.

DURABLE GOODS

WASHINGTON (AP) -- Orders to U.S. factories for long-lasting manufactured goods rose in October, but a key category that tracks business investment plans declined sharply for a second straight month.

The Commerce Department says orders for durable goods increased 0.4 percent last month following a 0.9 percent drop in September and an even bigger 18.3 percent plunge in August. The two months of declines reflected big swings in the volatile category of commercial aircraft.

The small October gain was unimpressive, with declines in a number of categories including machinery, computers and primary metals such as steel.

A key category viewed as a proxy for business investment spending fell 1.3 percent in October after a similar 1.3 percent September drop. It was the biggest setback since a 1.4 percent May decline.

NEW HOME SALES

WASHINGTON (AP) -- Sales of new U.S. homes edged up modestly in October, led by a big jump in activity in the Midwest.

The Commerce Department says new home sales advanced 0.7 percent last month to a seasonally adjusted annual rate of 458,000. That followed a smaller 0.4 percent gain in September and put sales at the highest point since May.

The strength last month came from a big 15.8 percent increase in sales in the Midwest and a smaller 7.1 percent rise in the Northeast. Those increases offset a 1.9 percent fall in sales in the South, which accounts for half of the new-home market, and a 2.7 percent drop in the West.

Housing has struggled to recover since the recession ended in June 2009.

PENDING-HOME SALES

WASHINGTON (AP) -- The number of Americans signing contracts to buy homes fell slightly in October as tight credit and lagging wages remained financial hurdles for would-be homebuyers.

The National Association of Realtors says its seasonally adjusted pending home sales index fell 1.1 percent the past month to 104.1. The index remains below its 2013 average but is 2.2 percent higher than last October.

Pending sales are a barometer of future purchases. A one- to two-month lag usually exists between a contract and a completed sale.

Housing has struggled to fully rebound since the recession ended more than five years ago. Many potential buyers lack the savings and strong credit history needed to afford a home, causing them to rent or remain in their existing houses instead of upgrading.

MORTGAGE RATES

WASHINGTON (AP) -- Average U.S. long-term mortgage rates ticked down for the third straight week, a positive trend for potential homebuyers.

Mortgage company Freddie Mac says the nationwide average for a 30-year mortgage declined to 3.97 percent this week from 3.99 percent last week. Rates are now about a half-point lower than at the beginning of the year.

Long-term mortgage rates fell as low as 3.31 percent toward the end of 2012, partly because of the Federal Reserve's bond-purchase program, which was intended to keep rates low. That program has since ended.

Rates have fallen in recent weeks amid economic slowdowns in Europe and China and the start of a recession in Japan.

The average for a 15-year mortgage, a popular choice for people who are refinancing, was unchanged at 3.17 percent.

CONSUMER SENTIMENT

WASHINGTON (AP) -- Greater optimism about income growth and future spending pushed U.S. consumer sentiment to a fresh 7-year high in November.

The University of Michigan says its index of consumer sentiment rose to 88.8 in November from 86.9 in October. That's the highest since July 2007, five months before the Great Recession began.

The report adds to a mixed picture of U.S. consumers heading into the holiday shopping season. A separate measure of consumer confidence, released Tuesday, fell sharply after reaching its own 7-year high last month. And Americans are spending at a sluggish pace despite a pickup in job creation this year.

Still, the Michigan survey found consumers said they were more likely to spend on big-ticket items such as appliances and autos than at any time since the recession began.

AIR BAG RECALL DEMAND

DETROIT (AP) -- U.S. safety regulators are threatening fines and legal action against Takata Corp. for failing to admit that its driver's-side air bag inflators are defective and should be recalled nationwide.

The National Highway Traffic Safety Administration sent a letter to the company Wednesday detailing the threats, which include a public hearing and possible court action.

Takata of Japan has refused demands for the national recall, saying that a recall limited to high-humidity states is sufficient. But the agency says two inflators have ruptured in cars outside the high-humidity zone, injuring drivers by spewing metal fragments.

Transportation Secretary Anthony Foxx says Takata must act quickly or the agency will use all of its authority and resources to get the national recall done.

OBAMA-SMOG

WASHINGTON (AP) -- The Obama administration is announcing steps to cut levels of smog-forming pollution linked to asthma, lung damage and other health problems.

The Environmental Protection Agency is calling for a new, lower threshold for ozone pollution of 65 to 70 parts per billion. That's down from the current standard of 75 parts per billion, put in place by President George W. Bush in 2008.

But the EPA is leaving open the possibility it could enact an even lower standard of 60 parts per billion sought by environmental groups.

The EPA estimates that meeting the stricter rules will cost industry about $3.9 billion in 2025 if the government goes with a standard of 70 parts per billion. At a level of 65 parts per billion, the EPA said, the cost grows to $15 billion.

Industry groups say the cost would actually be far higher and that it would be nearly impossible for refineries and other businesses to comply. But EPA Administrator Gina McCarthy says lower ozone standards would actually spur more businesses, investment and jobs by making communities healthier.

The EPA was under a court-ordered Dec. 1 deadline to issue a new smog standard.

CONGRESS-TAXES

WASHINGTON (AP) -- A White House veto threat appears to have put on ice a congressional effort to permanently renew a handful of generous tax breaks for businesses and individuals. Officials say that the plan, brewing behind closed doors on Capitol Hill, favored corporations over the working class.

The unusual veto threat came before the parameters of a potential agreement were even revealed.

Speculation on Capitol Hill on Tuesday focused on a potential agreement to permanently enact tax breaks on business investments in new equipment and research and development, part of a plan that would renew dozens of expired tax breaks for businesses and individuals.

The White House immediately threatened a veto, saying Congress should also make permanent more generous tax credits for the working poor and people with children.

IMMIGRATION-BENEFITS

WASHINGTON (AP) -- Many immigrants in the United States illegally who apply for work permits under President Barack Obama's new executive actions would be eligible for Social Security and Medicare benefits upon reaching retirement age, according to the White House.

Under Obama's actions, immigrants who are spared deportation would be eligible to obtain work permits and a Social Security number. As a result, they would pay into the Social Security system through payroll taxes.

Not all such immigrants would be entitled to the benefits, however, because like all Social Security and Medicare recipients they would have to work 10 years to become eligible for retirement payments and health care.

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