CEO pay 83 MIL A YEAR sets new record as economy tanks!
Average CEO compensation grew by 3.5 percent last year despite slowing economic growth, falling profits and mass layoffs, according to an Associated Press review published Monday. The review found that the S&P 500 CEO received an average yearly compensation of $8.4 million, up $280,000 (an average raise that is the equivalent of six times the US median household income).
News Sources (JUNE 2008 ) carried the story of TWO CEO's who got salaries in the 16 to to 83 million dollar annual range just now in spite of the fact that their CORPS TANKED! Merrill Lynch's John Thain has an 83-million pay package supercharged by a signing bonus and other enticements that lured him from the New York Stock Exchange to lead the investment bank as it was suffering its worst-ever losses. Rick Wagoner, chief executive of General Motors Corp., announced earlier this month the company had to close four plants that make trucks and SUVs because of lagging demand as fuel prices soar. That followed a $39 billion loss in 2007, a year when its stock price fell by about 19 per cent. And Wagoner? His pay rose 64 per cent, to $15.7 million.
The data render ridiculous those apologies for social inequality resting
on the idea that CEO pay is linked to ‘performance’ in some meaningful
way. The Associated Press review found that “CEO pay rose or fell
regardless of the direction of a company’s stock price or profits.”
The
report also notes that half of the 10 best paid CEOs—who collectively
hauled in half a billion dollars last year—presided over companies
whose
profits shrank “dramatically.”
The Associated Press reviewed disclosures filed by 410 of the 500
largest US firms. The top 10 earners included the heads of four
financial firms, four energy/commodities firms, as well as the heads
of
the retailer GAP and entertainment conglomerate CBS.
John Thain, the CEO of Merrill Lynch, ranks first on the list. He
received $83 million in compensation for the year, despite presiding
over a company that posted a $9.8 billion loss in the fourth quarter.
He
replaced former CEO Stanley O’Neal on December 1, 2007. O’Neal left
the
bank with a compensation package worth over $161 million, despite his
direct oversight of the bank’s gambling with mortgage-backed securities
that ultimately exploded in 2006-2007.
Likewise, John Mack of Morgan Stanley, also in the top 10, received
a
compensation package worth $41.7 million, even though his firm announced
the writing down of $9.8 billion worth of loans and a loss of $3.61
billion in the fourth quarter.
The housing bubble and the worldwide financial crisis it has created
were fueled by people like Mack and Thain, as well as the enormously
wealthy shareholders they represent.
In good times, financial executive compensation has been tied to
increases in stock value and short-term asset performance. But it does
not seem to track the downward spiral as these measures fall. In recent
years, financial executives have swelled their bonuses by buying up
huge
tracts of “mystery-meat” securities with high yields and intentionally
miscalculated risk.
This reporter recently attended a lecture by David Hartzell, a former
vice-president of Salomon Brothers, who played a role in the development
of the mortgage-backed securities that were instrumental in creating
the
current crisis. He noted that by repackaging bad mortgages as high
quality securities, his firm could generate previously unimaginable
profits. “When we first discovered this, it was like somebody turned
on
the cash spigot,” Hartzell said. Naturally, a great deal of this cash
made it into executives’ pockets.
The latest figures have already evoked calls from sections of the
business press for greater corporate oversight of CEO activities and
compensation. Much of this comes in the form of “shareholder activism,”
as if the biggest shareholders did not approve the policies implemented
by financial CEOs when they sent stock prices and dividends soaring.
Questions along these lines were raised at Hartzell’s speech at the
University of Delaware. The dean of the university’s business college
observed, “In accounting 101 we learn that high yields equal high risk.
We know the CEOs had an incentive to disregard this because they were
getting huge bonuses. But why didn’t the shareholders say anything?”
Hartzell did not have a ready answer, but it does not take much
soul-searching to find one. The wealthy shareholders—those with real
voting power—were perfectly happy to see the financial firms’ profits
and stock prices skyrocket, even at the expense of long-term stability,
and to give top executives tens of millions for making this happen.
Looking at the AP compensation report, one is struck by the apparent
correlation between a CEO’s pay and the amount of social harm his or
her
company inflicts. The bankers who triggered a worldwide financial crisis
got the biggest bonuses. Then we have the energy executives, whose
compensation shot up some 32 percent last year as gas prices breached
$4
per gallon, sharply reducing the real incomes of millions of working
people.
Bob Simpson of XTO Energy took home $50 billion in compensation in 2007,
ranking him at number four this year. Other energy executives on the
list included Eugene Isenberg of Nabors Industries and Ray Irani of
Occidental Petroleum, who took home $44 billion and $34 billion
respectively.
Other bonus hikes went to executives who succeeded in destroying jobs
and driving down wages. Rick Wagoner of General Motors received a
compensation package of $15.7 million, up 60 percent from the previous
year, despite presiding over a company that posted a $39 billion loss
in
2007. He was, however, successful in scrapping GM’s healthcare
obligations to workers and pushing through plant closures.
And what have been the social consequences of all this? Who has paid
the
cost of this enrichment of a tiny layer at the top of the social ladder?
According to the latest estimates, one in twenty Americans will soon
have negative equity in their homes, and millions already face
foreclosure. Energy prices have shot up by 17 percent in the past year
alone. Real wages have fallen by about 1 percent during the same period,
with far steeper declines threatened.
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