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.”


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 25, 2015 18:41 GMT


NEW YORK (AP) -- Stocks are slightly higher in midday trading as markets start to wind down ahead of the Thanksgiving holiday in the U.S.

Several stocks were moving on news.

Deere rose almost 4 percent after the maker of farm equipment reported earnings that beat analysts' forecasts. HP sank 13 percent after reporting weak sales of PCs, printers and commercial software.

U.S. markets will be closed Thursday for Thanksgiving. They will reopen on an abbreviated schedule Friday.


WASHINGTON (AP) -- The number of people seeking U.S. unemployment aid dropped sharply last week, the latest sign that businesses are cutting few jobs.

The Labor Department says weekly applications for jobless benefits fell 12,000 to a seasonally adjusted 260,000, not far from the lowest levels in four decades.

Applications are a proxy for layoffs. The four week average, a less volatile measure, was unchanged at 271,000.

Businesses are holding onto their staffs and adding jobs at a solid pace as steady consumer spending has bolstered the economy. The strong dollar and slower overseas growth have reduced corporate profits but so far there is no sign companies are responding by cutting workers.

Hiring actually rose to its strongest level this year in October, as employers added 271,000 jobs.


WASHINGTON (AP) -- Consumer spending posted a modest increase for a second straight month in October, while personal income rebounded after a sluggish September.

The Commerce Department says spending edged up 0.1 percent in October after a similar tiny gain in September.

Incomes jumped 0.4 percent in October, double the 0.2 percent rise in September. Wages and salaries rose by 0.6 percent. That was the strongest wage gain in five months and a reflection of the big surge in hiring that occurred last month.

The second straight month of spending weakness could signal trouble, given that consumer spending accounts for 70 percent of economic activity. However, economists are counting on the strong labor market to bolster the incomes needed to fuel spending in the months ahead.


WASHINGTON (AP) -- Sales of new homes recovered in October after suffering a steep drop in September, indicating that the housing market may be stabilizing.

The Commerce Department says new-home sales climbed 10.7 percent last month to a seasonally adjusted annual rate of 495,000. This rebound followed a 12.9 percent plunge in the sales rate during September.

The new-home sales report tends to be volatile from month to month. Home-buying surged 135.5 percent in the Northeast in October, while rising less aggressively in the Midwest and South. Sales dropped slightly in the West.

Purchases of new homes have surged 15.7 percent year-to-date, benefiting from the solid hiring gains and low mortgage rates.

But prices dipped last month. The median new-home sales price has fallen 8.5 percent from a year ago to $281,500.


WASHINGTON (AP) -- Average long-term U.S. mortgage rates slipped this week after they rose recently on expectations that the Federal Reserve may soon raise its key short-term interest rate.

Mortgage buyer Freddie Mac said Wednesday the average rate on a 30-year fixed-rate mortgage slipped to 3.95 percent from 3.97 percent a week earlier. The key 30-year rate was nearly unchanged from its level of a year ago, 3.97 percent. But the average has increased over the past months from 3.76 at the end of October.

The average on 15-year fixed-rate mortgages was unchanged at 3.18 percent.


WASHINGTON (AP) -- Orders for long-lasting manufactured goods posted a solid gain in October after two months of weakness, while a key category that tracks business investment plans advanced by the largest amount in three months.

The Commerce Department says that orders for durable goods rose 3 percent in October following declines in both September and August. The strength was led by a surge in demand for commercial aircraft but reflected widespread gains in a number of categories, from machinery to computers. A key category that serves as a proxy for business investment spending rose 1.3 percent in October, the best showing since July.

American manufacturers have struggled this year with weakness in many key export markets and a strong dollar, which makes U.S. goods less competitive.


WASHINGTON (AP) -- Americans were more optimistic about their incomes and personal finances this month, particularly among lower and middle-class households, lifting consumers' outlook.

The University of Michigan's consumer sentiment index rose to 91.3 in November from 90 in the previous month. That is close to the average for the past six months of 91.6.

Steady hiring and rising wages and salaries are slowly lifting Americans' confidence in the economy, though it remains muted by historical standards. The modest increase suggests consumers could spend more over the coming holiday shopping period.

Among lower and middle-income households, 38 percent expect their personal finances to improve in the coming year, compared with just 29 percent of higher-income households. The outlook for wealthier families appears to have been tempered by recent swings in the stock market.


NEW YORK (AP) -- Hormel is announcing a two-for-one split a day after the company reported a strong fourth quarter and outlook.

The company is projecting higher sales from organic meats producer Applegate, which it bought earlier this year.

Chairman and CEO Jeffrey Ettinger said Wednesday that the split "demonstrates our confidence that we will continue to grow our sales and earnings."

Shares hit an all-time high Tuesday.

The stock split, which would increase the number of shares to 1.6 billion from 800 million, requires shareholder approval.

Hormel Foods Corp., based in Austin, Minnesota, set Jan. 26 as the record date for shareholders to be eligible for the split. It would be effective around Feb. 9.


BERLIN (AP) -- Volkswagen says it will take less than an hour to bring 1.6 and 2.0 liter turbodiesel engines in Europe into line with emissions rules.

The German automaker has pledged to fix 11 million vehicles worldwide that were discovered to contain software that enables them to cheat on emissions tests for nitrogen oxide.

Volkswagen said in a statement Wednesday that in Europe the 2.0 liter EA 189 engine will require only a software update taking half an hour to install.

It says the 1.6 liter engine will be fitted with a grid to improve the motor's efficiency, taking less than an hour.

Volkswagen says the measures only cover Volkswagen-branded models in Europe and should be completed by the end of next year. A proposal for the 1.2 liter models will follow.


BERLIN (AP) -- A strike at Germany's flagship airline, Lufthansa, has been averted after a cabin crew union announced it would hold further negotiations with the company.

The cabin crew union UFO said Wednesday that it would cancel previously announced walkouts for Thursday, Friday and Monday.

The union for flight attendants said there would be further talks leading up to a so-called jobs summit with Lufthansa on Dec. 2.

The labor dispute comes as Lufthansa is trying to cut costs amid rising competition from Gulf state airlines.

Earlier in November, the union went on strike for a week, causing the cancellation of 4,700 flights affecting some 550,000 passengers.


ALBANY, N.Y. (AP) -- New York's attorney general is dropping a lawsuit against a drug manufacturer after blocking what he said was an attempt to switch Alzheimer's patients to a newer patented drug.

Attorney General Eric Schneiderman (SHNEYE'-dur-muhn) had sued Allergan PLC to prevent the company from withdrawing Namenda, a popular Alzheimer's treatment, a few months before lower-cost generic drugs became available.

Schniederman's office argued the move was timed to force patients onto a new patented drug Namenda XR instead of the generics.

A federal judge agreed, requiring Allergan to continue distributing the older drug until generics were available.

Schneiderman said Wednesday the lawsuit has been resolved now that patients can choose between the new drug and generic alternatives.

Allergan, previously known as Actavis, confirmed the settlement. The company agreed to pay $172,000 in legal fees.


NEW YORK (AP) -- An ad campaign that featured Nazi imagery has been pulled from the New York City subway system.

Seats on the 42nd Street shuttle between Times Square and Grand Central Terminal were wrapped in Nazi regalia to promote an Amazon video series called "The Man in the High Castle." The show depicts the aftermath of World War II as if the Axis powers triumphed.

The region's transit network, the Metropolitan Transportation Authority, approved the ads, which first appeared earlier this month.

The agency also initially defended the ads, saying they met its guidelines.

But many public officials condemned them. Mayor Bill de Blasio called them "irresponsible and offensive."

Officials confirmed Wednesday that Gov. Andrew Cuomo ordered them removed.

Washington Times