|CEO pay still on steroids
By Holly Sklar
Distributed by Knight Ridder/Tribune Information Services, May 9, 2005
Copyright (c) 2005 Holly Sklar
How would you like a 54 percent pay raise? That's how much pay jumped
last year for the chief executives of the 500 largest U.S. companies,
reports Forbes magazine.
Worker pay is shrinking, the economy is stalling, the trade deficit is
growing and the stock market is below 1999 levels, but CEO pay is still
he highest paid CEO in 2004 was Yahoo's Terry Semel, who hauled in
$230.6 million. That's more than $4 million a week.
Yahoo is on the "Lou Dobbs Tonight" list of companies "sending American
jobs overseas, or choosing to employ cheap overseas labor, instead of
American workers." It would take the pay of 7,075 average American
workers to match the pay of Yahoo's CEO.
William McGuire of UnitedHealth Group, the nation's leading insurer, was
the third-highest paid CEO on the Forbes list. His pay of $124.8 million
could cover the average health insurance premiums of nearly 34,000
"While executives are richly compensated, patients are tightening their
belts," Dr. Isaac Wornom, chairman of the Richmond Academy of Medicine,
wrote last year. "Premiums, deductibles and co-pays are up, while
benefits continue to shrink. One million Virginians -- that's one out of
seven -- have no health insurance at all, and this number is
increasing... Half of the uninsured work full-time for small businesses
that simply can't afford the inflated rates."
CEOs can win big even when the company loses. Merck, for example, had to
pull its Vioxx pain medication off the market because it increases
stroke and heart attack risk, and Merck stock was down 28 percent last
year, but then-CEO Ray Gilmartin got a supposedly performance-based
bonus. His total 2004 compensation was $37.8 million, he received new
grants of 90,000 shares of stock and 250,000 stock options, and he'll
make more annually in retirement than average workers earn in their
CEO pay averaged $10.2 million in 2004, counting salary, bonus and other
compensation such as exercised stock options and vested stock grants.
Full-time worker pay averaged just $32,594. That's 11 percent less than
1973's average worker pay of $36,629, adjusting for inflation, although
worker productivity rose 78 percent between 1973 and 2004.
In 1973, CEOs made 45 times as much as workers, according to pay expert
Graef Crystal. In 1991, when Crystal said the imperial CEO "is paid so
much more than ordinary workers that he hasn't got the slightest clue as
to how the rest of the country lives," CEOs made 140 times as much as
workers. Last year, CEOs made more than 300 times as much.
Executive pay now takes more than double the bite out of company
earnings it did a decade ago, report Lucian Bebchuk, Harvard Professor
of Law, Economics and Finance, and Yaniv Grinstein of Cornell
University's School of Management in a recent study. Looking at data for
thousands of publicly traded companies, Bebchuk and Grinstein found that
pay for the top five company executives rose from 4.8 percent of
aggregate net company income during 1993-1995 to 10.3 percent of
aggregate net income during 2001-2003.
While workers are having a tougher time making ends meet, CEOs are
getting perks worth more than worker paychecks. CEO freeloaders expect
perks such as lifetime use of company jets, chauffeured cars, company
apartments, club memberships, sports tickets, financial planning,
personal assistants and more.
In CEO World, the more money you make, the less you should have to pay
While worker pensions are increasingly unavailable or unreliable, CEO
retirement gives new meaning to "the golden years."
CEO robber barons are increasingly stashing their loot in guaranteed
pensions, deferred compensation, guaranteed consulting fees -- no actual
consulting necessary -- and other postretirement perks and compensation
to avoid shareholder scrutiny and sidestep the new rule for companies to
treat stock options as expenses.
As Lucian Bebchuk and Jesse Fried, co-authors of "Pay Without
Performance," explained in a 2004 report, "camouflaged compensation"
generates less outrage, is less tied to performance and "allows
executives to reap benefits at the expense of shareholders."
Making matters worse, CEOs earning more than their fair share are being
rewarded with huge tax cuts.
Workers and their families are paying the biggest price as CEOs milk
their companies and our country like cash cows.