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.”


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 October 09, 2015 17:12 GMT


WASHINGTON (AP) -- Cheaper oil and less demand for autos and machinery weighed on wholesalers in August, as their inventories edged up just slightly while sales dropped.

The Commerce Department said today that wholesale stockpiles rose 0.1 percent, and sales fell 1 percent. Sales have slid 4.7 percent over the past 12 months. Inventories have increased 4.1 percent.

Falling oil prices account for much of the declining sales.

Oil inventories -- which are measured in dollars -- plummeted 4.6 percent in August and 36.6 percent over the past 12 months. Sales of autos and machinery also slipped. But rising inventories for equipment, pharmaceuticals and chemicals suggest that wholesalers still see ongoing demand heading into end of the year.

Wholesale inventories are at a seasonally adjusted $583.9 billion, 4.1 percent above a year ago.

Sales weakened as the broader economy began to cool in August, hampered in large part by the risks of a worldwide deceleration in economic activity.


NEW YORK (AP) -- A voting member of the Federal Reserve's policy committee says that he still thinks an interest-rate increase will be appropriate by year's end. But he acknowledges that the outlook for the economy appears cloudier than it did a few weeks ago.

Dennis Lockhart, president of the Fed's Atlanta regional bank, noted that the most recent economic figures have sent mixed signals, with higher risks than he had earlier forecast. Notably, the government said last week that employers cut back sharply on hiring in September and added fewer jobs in July and August than previously thought.

Lockhart said he will closely review consumer activity before deciding how to vote on whether to raise rates at one of the Fed's two final meetings of 2015.

For now, he said, he thinks the economy's progress remains "satisfactory."

Lockhart made his remarks to the annual meeting of the Society of American Business Editors and Writers in New York.


WASHINGTON (AP) -- The head of the Federal Reserve Bank of New York says that a Fed rate hike remains likely this year but that a final decision will depend on how the economy performs.

In an interview with CNBC, William Dudley says he expects solid U.S. economic growth to offset weakness overseas, which is hurting U.S. exports. But he says the economy will need to further improve for the Fed to raise rates from record lows.

The Fed's final two meetings of 2015 will be later this month and in December. Though Dudley says a rate hike could theoretically occur at any meeting, his comments seemed to favor December over October.

Some economists still think the Fed will delay a hike until 2016 because of pressures from overseas and excessively low inflation.


NEW YORK (AP) -- Wal-Mart has named Brett Biggs, an executive in its international division, as its next chief financial officer.

Biggs will take over on Dec. 31, though Charles Holley, who is retiring, will remain with Wal-Mart for a month to help with the transition.

Biggs has been CFO and executive vice president of Wal-Mart's international business since 2014. He has played a number of roles at Wal-Mart since joining the company in 2000.

Holley has been CFO for nearly five years and has been with the company for more than two decades.

Wal-Mart, the world's largest retailer, is trying to boost sales. It has increased spending on its online operations to compete with Amazon.com and other online retailers, and it is trying to improve its selection and customer service at stores.

Washington Times