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The rich get richer
16 April 2006
[indent]A survey of salaries in the 1970s showed the average ratio of CEO wages to shop-floor worker wages was 30 to 35-to-one. So if you were making $20,000 in 1970 rivetting widgets, your company's top executive was making in the range of $600,000 to $700.000.
Business Week reported that a decade later, in 1980, the average CEO of a major corporation made 42 times the average hourly worker's pay. Another decade and that had almost doubled to 85 times the average wage of the worker. In 2000, the average CEO salary was 531 times more than that of the average hourly worker.
A survey of the same salaries in 2004 shows the ratio has grown to about 1,000 times. So if you're still only making $20,000, take heart that your top executive is making at least $20,000,000 and that, while you struggle to make the mortgage payments, he or she will easily be able to afford another yacht or two.
In 2001, Oracle CEO Lawrence J. Ellison was the highest paid CEO in the USA. He cashed in $706.1 million in stock options although the software company's stock plunged 57.4 percent, devastating small investors. Ellison’s compensation, was about 15,689 times the pay of a typical worker. Oracle cut 900 jobs in 2001, another 800 in 2002, 600 in 2003, and announced plans to lay off 5,000 more people in January, 2005.
Also on 2001, Cisco Systems awarded its CEO, John Chambers, stock options worth a potential $226.7 million. Chambers' pay - $131.8 million - is 5,276 times the pay of an average worker making $25,000 a year. At the same time, Cisco announced plans to cut up to 8,000 workers, or 16 percent of its workforce.
SBC Communications awarded CEO Ed Whitacre a package in 2001 worth $155 million, up 163 percent from 2000. Under his leadership, the company saw its stock price drop 18 percent in 2001. In 2002, SBC Communications announced it would cut 11,000 jobs nationwide, and in 2003 it announced another 4,000 workers would be dumped. In early 2005, SBC announced another 13,000 job cuts. No mention was made of cutting CEO salaries or bonuses.
It's not as if the CEOs today do more or have more responsibility for the money. Rather the opposite. It seems salaries have increased in inverse proportion to the actual amount of work executives do. There's a serious disconnection between pay and performance that only gets wider the higher up the management ladder you look.
Coca Cola paid CEO Douglas Daft, $105.1 million in 2001. That's 4,207 times the salary of a worker paid $25,000. And who pays for the CEO and his executive cronies? Right: you, the consumer. In 2000, Coke laid off 6,000 workers (2,500 in Atlanta alone), or about 15% of its workforce, adding a grand $0.06 value to each share. And the CEO was paid how much to put a small town's worth of people out of work? More than $105 million.
The economic gap between workers and the bosses has widened to an obscene degree that makes medieval kingdoms look like socialist wet dreams. The rich are getting richer, but the workers are still in the Red Queen's Race - running as fast as we can simply to try and stay in the same place. In part this is because a CEO's pay is generally set by the company's compensation committee, usually comprised of other chief executives, all with their snouts in the same trough.
In part it's due to that blind faith we have in capitalism that it's actually better than, say, feudalism. Capitalism is like a pit bull, a mean pit bull at that. It's fine when it's chained up in your yard, maybe even muzzled, but no one likes it when it's allowed to run loose.
And it's also because we've somehow allowed the shift from a market economy to a boardroom economy, where people in suits have determined that dividends, shareholder profits and executive bonuses are the driving factors in fiscal decisions, not the quality of the product, the needs of the marketplace, or the workers who actually make the widgets. That's why greedy corporations will close down a profitable plant and ship the work overseas to some sweatshop nation like China, without even a passing concern for the employees they've just let go.
And then they'll sell those goods back to the unemployed workers - cheap Chinese knock-offs that cram the shelves at places like Wal-Mart - because now the workers can only afford to buy the imports, since they've been impoverished by layoffs. However, nine times out of ten the CEO who dumped the domestic plant and had its workers fed into the unemployment lines will get a "performance bonus."
A bonus for decimating the national economy, for creating widespread unemployment, for being cold, heartless, bastards. They'll likely get a bonus even if they drive the company into bankruptcy, lie about earnings, ruin stockholders' lives and savings. And why not, after all,? Isn't that what capitalism is all about?
Carly Fiorina, Hewlett Packard's CEO, was paid $21.4 million when she was ousted from her post. That included $14 million in cash as severance pay - 2.5 times her salary and target bonus of her last year - and $4.2 million as a performance bonus. Twenty one million dollars to get fired seems like a lot of money to me, especially when the highlight of your career is laying off 15,000 people in one year.
In 2002, IBM laid off 15,600 workers, then another 1,000 in 2003 and 2,000 more in 2004. Internal documents revealed IBM's planned to send nearly 5,000 jobs to India, Brazil and other developing countries. In 2004, IBM's CEO, Samuel Palmisano, received $8.8 million in compensation, a 12 percent increase over 2003. His pay package included 250,000 stock options, a long-term incentive plan worth $1.7 million, and a bonus of $5.2 million. His salary rose $110,000 to $1.7 million.
Update: A BBC report on IBM says the company will lay off 13,000 workers, despite a $1.4 billion profit in the last quarter. IBM's workforce was its highest in 1985 when it reached 405,000 worldwide. It was its lowest in 1994 at 219,000. As of
December, 2004, IBM had 329,000 employees, but is staring to slash and burn its staff again. But IBM's CEO continues to get more money while his employees get the shaft:
From IBM CEO gets 12 percent raise in 2004
Remember Enron? Their executives received $320 million in bonuses only ten 10 months before the company went bankrupt. Did any of them suffer even a twinge of guilt for their deceit and their lies, for ruining so many lives, for emptying the bank accounts of so many others in order to pad their own wallets?
Enron's CEO Kenneth Lay was paid $153 million, including an $81.5 million loan. Think he'll reimburse all those people who lost their life's savings?
I doubt it. Capitalism has no conscience.
Remember WorldCom? In 2001, CEO Bernard Ebbers was handed a $10 million bonus to keep him on at the company for at least two more years. And if that weren't enough, the board granted him a $61.5 million loan and a guarantee for $100 million more in additional loans. In 2000, Ebbers' salary was more than $34 million, including bonuses, long-term compensation, including stock options.
WorldCom filed for bankruptcy protection in July 2002, rendering their stock worthless. They were caught in an $11 billion accounting scandal in which the company seriously overstated profits. Tens of thousands of shareholders lost their investments.
And what about Global Crossing? CEO John Legere was promoted the week Global Crossing's stock price dropped below a dollar, and while layoffs were in full swing. Global Crossing's board increased Legere's salary to $1.1 million, plus voted him an annual bonus of $1.4 million, PLUS a signing bonus of $3.5 million after taxes. And when they filed for bankruptcy four months later, they gave him a severance package of $3 million. On top of all that, Legere received $10 million after taxes because Global Crossing voted to forgive two-thirds of a $15 million loan from company, made in 2001.
How about Parmalat? Their executives stole $11 billion from shareholders. CEO Calisto Tanzi allegedly admitted siphoning off about €500 million of company funds, a figure that later soared to $990 million. Parmalat's CFO, Fausto Tonna, received a bonus worth €3 million. Tanzi-controlled companies received €2 million
after investing only €30,000 in a company linked to Parmalat.
In 2004, Wall Street's highest paid CEO was Stan O'Neal of Merrill Lynch. He received at $28.1 million that year. O'Neal is best known for eliminating 17,500 jobs since 2001.
Adam Smith, founder of modern economic thought and the patron saint of modern capitalists, wrote that there are five possible motivations for doing anything: Love, benevolence, selfishness, greed, and enlightened self-interest. Would Smith be surprised by today's immoral capitalism that merely pursues greed and selfishness? Or merely saddened?
Someone has to get the pit bull of capitalism back into the yard and muzzled before it bites us all.
References:
Pigs at the Trough
Money for Nothing
The Genius of Capitalism
My Big Fat CEO Paycheque
Getting Paid for Being Ousted
Why our Form of Capitalism is Unpopular
The Moral Case for Capitalism
US Executive Pay Soars Again
CEO Greed
CEO Pay Soars as Stocks Plummet
The Long Fall
Corporate Crisis and Corporate Malfeasance
Parmalat Dream Goes Sour
The Betrayal of Adam Smith
IBM CEO gets 12% Raise
IT Facts
For CEOs, Offshoring Pays[/indent]
Business Week reported that a decade later, in 1980, the average CEO of a major corporation made 42 times the average hourly worker's pay. Another decade and that had almost doubled to 85 times the average wage of the worker. In 2000, the average CEO salary was 531 times more than that of the average hourly worker.
A survey of the same salaries in 2004 shows the ratio has grown to about 1,000 times. So if you're still only making $20,000, take heart that your top executive is making at least $20,000,000 and that, while you struggle to make the mortgage payments, he or she will easily be able to afford another yacht or two.
In 2001, Oracle CEO Lawrence J. Ellison was the highest paid CEO in the USA. He cashed in $706.1 million in stock options although the software company's stock plunged 57.4 percent, devastating small investors. Ellison’s compensation, was about 15,689 times the pay of a typical worker. Oracle cut 900 jobs in 2001, another 800 in 2002, 600 in 2003, and announced plans to lay off 5,000 more people in January, 2005.
Also on 2001, Cisco Systems awarded its CEO, John Chambers, stock options worth a potential $226.7 million. Chambers' pay - $131.8 million - is 5,276 times the pay of an average worker making $25,000 a year. At the same time, Cisco announced plans to cut up to 8,000 workers, or 16 percent of its workforce.
SBC Communications awarded CEO Ed Whitacre a package in 2001 worth $155 million, up 163 percent from 2000. Under his leadership, the company saw its stock price drop 18 percent in 2001. In 2002, SBC Communications announced it would cut 11,000 jobs nationwide, and in 2003 it announced another 4,000 workers would be dumped. In early 2005, SBC announced another 13,000 job cuts. No mention was made of cutting CEO salaries or bonuses.
It's not as if the CEOs today do more or have more responsibility for the money. Rather the opposite. It seems salaries have increased in inverse proportion to the actual amount of work executives do. There's a serious disconnection between pay and performance that only gets wider the higher up the management ladder you look.
Coca Cola paid CEO Douglas Daft, $105.1 million in 2001. That's 4,207 times the salary of a worker paid $25,000. And who pays for the CEO and his executive cronies? Right: you, the consumer. In 2000, Coke laid off 6,000 workers (2,500 in Atlanta alone), or about 15% of its workforce, adding a grand $0.06 value to each share. And the CEO was paid how much to put a small town's worth of people out of work? More than $105 million.
The economic gap between workers and the bosses has widened to an obscene degree that makes medieval kingdoms look like socialist wet dreams. The rich are getting richer, but the workers are still in the Red Queen's Race - running as fast as we can simply to try and stay in the same place. In part this is because a CEO's pay is generally set by the company's compensation committee, usually comprised of other chief executives, all with their snouts in the same trough.
In part it's due to that blind faith we have in capitalism that it's actually better than, say, feudalism. Capitalism is like a pit bull, a mean pit bull at that. It's fine when it's chained up in your yard, maybe even muzzled, but no one likes it when it's allowed to run loose.
And it's also because we've somehow allowed the shift from a market economy to a boardroom economy, where people in suits have determined that dividends, shareholder profits and executive bonuses are the driving factors in fiscal decisions, not the quality of the product, the needs of the marketplace, or the workers who actually make the widgets. That's why greedy corporations will close down a profitable plant and ship the work overseas to some sweatshop nation like China, without even a passing concern for the employees they've just let go.
And then they'll sell those goods back to the unemployed workers - cheap Chinese knock-offs that cram the shelves at places like Wal-Mart - because now the workers can only afford to buy the imports, since they've been impoverished by layoffs. However, nine times out of ten the CEO who dumped the domestic plant and had its workers fed into the unemployment lines will get a "performance bonus."
A bonus for decimating the national economy, for creating widespread unemployment, for being cold, heartless, bastards. They'll likely get a bonus even if they drive the company into bankruptcy, lie about earnings, ruin stockholders' lives and savings. And why not, after all,? Isn't that what capitalism is all about?
Carly Fiorina, Hewlett Packard's CEO, was paid $21.4 million when she was ousted from her post. That included $14 million in cash as severance pay - 2.5 times her salary and target bonus of her last year - and $4.2 million as a performance bonus. Twenty one million dollars to get fired seems like a lot of money to me, especially when the highlight of your career is laying off 15,000 people in one year.
In 2002, IBM laid off 15,600 workers, then another 1,000 in 2003 and 2,000 more in 2004. Internal documents revealed IBM's planned to send nearly 5,000 jobs to India, Brazil and other developing countries. In 2004, IBM's CEO, Samuel Palmisano, received $8.8 million in compensation, a 12 percent increase over 2003. His pay package included 250,000 stock options, a long-term incentive plan worth $1.7 million, and a bonus of $5.2 million. His salary rose $110,000 to $1.7 million.
Update: A BBC report on IBM says the company will lay off 13,000 workers, despite a $1.4 billion profit in the last quarter. IBM's workforce was its highest in 1985 when it reached 405,000 worldwide. It was its lowest in 1994 at 219,000. As of
December, 2004, IBM had 329,000 employees, but is staring to slash and burn its staff again. But IBM's CEO continues to get more money while his employees get the shaft:
Quote
IBM Chairman and Chief Executive Samuel Palmisano received about $8.8 million in compensation for 2004, a 12 percent increase from 2003, according to the computer giant's annual proxy statement filed Monday.
Palmisano's pay package for both 2003 and 2004 also included 250,000 stock options. His increased pay in 2004 came from the company's long-term incentive plan, which awarded Palmisano $1.7 million, while his bonus was slightly smaller at $5.2 million. His salary rose $110,000 to $1.7 million.
Palmisano's pay package for both 2003 and 2004 also included 250,000 stock options. His increased pay in 2004 came from the company's long-term incentive plan, which awarded Palmisano $1.7 million, while his bonus was slightly smaller at $5.2 million. His salary rose $110,000 to $1.7 million.
From IBM CEO gets 12 percent raise in 2004
C/NET News said:
"Chief executive officers at the companies shipping the most U.S. jobs overseas seem to be pocketing some of the savings, according to a new report.
The study, published by two groups concerned with economic inequality, found that average CEO compensation at the 50 firms outsourcing the most service jobs abroad increased by 46 percent in 2003. CEOs at the 365 large companies surveyed by Business Week only saw an average raise of 9 percent, according to the report from the Institute for Policy Studies and United for a Fair Economy.
CEOs at top offshore outsourcers earned an average of $10.4 million in 2003, while average CEO compensation hit $8.1 million, according to the report. From 2001 to 2003, the top 50 outsourcing CEOs earned $2.2 billion while sending an estimated 200,000 jobs overseas, the report said.
"These 50 CEOs seem to be personally benefiting from a trend that has already cost hundreds of thousands of U.S. jobs and is projected to cost millions more over the next decade," the report said.
The study, published by two groups concerned with economic inequality, found that average CEO compensation at the 50 firms outsourcing the most service jobs abroad increased by 46 percent in 2003. CEOs at the 365 large companies surveyed by Business Week only saw an average raise of 9 percent, according to the report from the Institute for Policy Studies and United for a Fair Economy.
CEOs at top offshore outsourcers earned an average of $10.4 million in 2003, while average CEO compensation hit $8.1 million, according to the report. From 2001 to 2003, the top 50 outsourcing CEOs earned $2.2 billion while sending an estimated 200,000 jobs overseas, the report said.
"These 50 CEOs seem to be personally benefiting from a trend that has already cost hundreds of thousands of U.S. jobs and is projected to cost millions more over the next decade," the report said.
Remember Enron? Their executives received $320 million in bonuses only ten 10 months before the company went bankrupt. Did any of them suffer even a twinge of guilt for their deceit and their lies, for ruining so many lives, for emptying the bank accounts of so many others in order to pad their own wallets?
Enron's CEO Kenneth Lay was paid $153 million, including an $81.5 million loan. Think he'll reimburse all those people who lost their life's savings?
I doubt it. Capitalism has no conscience.
Remember WorldCom? In 2001, CEO Bernard Ebbers was handed a $10 million bonus to keep him on at the company for at least two more years. And if that weren't enough, the board granted him a $61.5 million loan and a guarantee for $100 million more in additional loans. In 2000, Ebbers' salary was more than $34 million, including bonuses, long-term compensation, including stock options.
WorldCom filed for bankruptcy protection in July 2002, rendering their stock worthless. They were caught in an $11 billion accounting scandal in which the company seriously overstated profits. Tens of thousands of shareholders lost their investments.
And what about Global Crossing? CEO John Legere was promoted the week Global Crossing's stock price dropped below a dollar, and while layoffs were in full swing. Global Crossing's board increased Legere's salary to $1.1 million, plus voted him an annual bonus of $1.4 million, PLUS a signing bonus of $3.5 million after taxes. And when they filed for bankruptcy four months later, they gave him a severance package of $3 million. On top of all that, Legere received $10 million after taxes because Global Crossing voted to forgive two-thirds of a $15 million loan from company, made in 2001.
How about Parmalat? Their executives stole $11 billion from shareholders. CEO Calisto Tanzi allegedly admitted siphoning off about €500 million of company funds, a figure that later soared to $990 million. Parmalat's CFO, Fausto Tonna, received a bonus worth €3 million. Tanzi-controlled companies received €2 million
after investing only €30,000 in a company linked to Parmalat.
In 2004, Wall Street's highest paid CEO was Stan O'Neal of Merrill Lynch. He received at $28.1 million that year. O'Neal is best known for eliminating 17,500 jobs since 2001.
Adam Smith, founder of modern economic thought and the patron saint of modern capitalists, wrote that there are five possible motivations for doing anything: Love, benevolence, selfishness, greed, and enlightened self-interest. Would Smith be surprised by today's immoral capitalism that merely pursues greed and selfishness? Or merely saddened?
Adam Smith, on Wealth of Nations, Vol 2, said:
"..being the managers of other people's money than of their own, it cannot well be expected that they should watch over it with the same anxious vigilance with which partners in a private copartnery frequently watch over their own. Like the stewards of a rich man, they ..... consider attention to small matters as not for their master's honour and very easily give themselves a dispensation from having it. Negligence and profusion therefore must prevail more or less in the management of such a company....Without an exclusive privilege.... (corporations) have commonly mismanaged the trade. With an exclusive privilege they have both mismanaged and confined it."
Someone has to get the pit bull of capitalism back into the yard and muzzled before it bites us all.
References:
Pigs at the Trough
Money for Nothing
The Genius of Capitalism
My Big Fat CEO Paycheque
Getting Paid for Being Ousted
Why our Form of Capitalism is Unpopular
The Moral Case for Capitalism
US Executive Pay Soars Again
CEO Greed
CEO Pay Soars as Stocks Plummet
The Long Fall
Corporate Crisis and Corporate Malfeasance
Parmalat Dream Goes Sour
The Betrayal of Adam Smith
IBM CEO gets 12% Raise
IT Facts
For CEOs, Offshoring Pays[/indent]
