May 30th, 2012
No Austerity for CEOs
Lately, austerity implies demands for sacrifice by others but never by those calling for the austerity. On the international level, it is Germany, the IMF, and the World Bank telling Greece, Portugal, Spain and Ireland to make their people sacrifice job stability and promised pensions and to sell off public services to profiteering multinational corporations. Within organizations here in the U.S., austerity becomes an excuse to increase the gap between executives (the feudal masters) and non-managerial workers (the serfs, slaves, indentured servants).
Despite the recession, businesses are free to hoard money without sharing the wealth with employees. American corporations are holding a record $1.24 TRILLION. That stash is the equivalent of hiring 3.5 million people for five years at an annual salary of $40,000. To add disgrace to insult, American corporations are holding 57% of their cash outside the U.S. to escape taxation.
Inside the corporations where some people still work, the ratio between CEO compensation and worker salaries in 2011 mushroomed to 380:1. How can this be justified in an equitable world? What human being is worth 380 times what another person is paid?
High Pay – Lousy Corporate Performance
Corporate boards approve outrageous compensation packages (bonuses, stock options & benefits often outstrip the annual salary) according to the logic that “we have to pay this much to remain competitive” or we will lose the man (in all but 3% of corporations) without whom we cannot succeed. Really?
JP Morgan Chase CEO Jamie Dimon just lost between $2 – $3 billion in speculative trading, but risked nothing personally, including his own job security. In 2010 and 2011, he earned $46 million. He complains regularly that regulations hamper his firm’s success.
Former Merrill Lynch CEO, Stanley O’Neal, “led” the firm into $45 billion of losses but left with a personal $161.5 million severance.
Former Citigroup CEO, Charles Prince, “led” the giant institution into the ditch in 2007, losing 57% of its earnings and a quarter of its market value. His punishment was a payout of $68 million.
Lehman Bros.’ last CEO, Richard Fuld, walked away with $22 million.
Alan Fishman served as CEO for Washington Mutual for 3 weeks in 2008 only to sell the company to JP Morgan Chase. He earned $13 million ($928,571 per work day).
An Exceptional CEO
James Sinegal founded COSTCO, the wholesale retailer. His famously low salary was $350,000. His real money came from owning company stock. Even at retirement, his total compensation was $3.5 million, placing him at 317th on the Forbes Executive Pay list. But every employee gets company stock as part of her or his compensation, along with benefits.
Compare Sinegal’s “low” pay to the 2011 highest paid CEO — John Hammergren at McKesson — $131 million! According to Forbes, CEO compensation rose 16% while worker pay increased a dismal 3%.
That’s how inequality thrives, differential rates of growth. Inequality fuels resentment and disloyalty, if people are paying attention. The recession hit everyone. CEO average compensation in 2007 was at a 20-year high of $17.1 million, falling to a 2010 low of “only” $8.5 million. Certainly CEOs were hit, but not compared to their employees. They did not face foreclosure, loss of health insurance, denied access to health care, losing a roof over their heads with the prospect of living in their family car.
So, to paraphrase the title of Thomas Frank’s new book, let’s not “pity the billionaires.”
“When you’re rich they think you really know”
Credit Fiddler on the Roof lyricist Sheldon Harnick for that line (the song: If I Were A Rich Man). Because Donald Trump is filthy rich, he gets media attention even for stupid, non-business-related news (the lie that Obama was born in Kenya). He speaks, the media reports as if his blathering is newsworthy. We are guilty of CEO worship in this country. They are celebrities, second in luster only to Hollywood.
The one CEO-driven TV show I watch is Undercover Boss. The premise is that CEOs visit workers in the trenches in disguise to check on operations. Thanks to the editing process, the showcased workers have extraordinary heart. They describe how difficult it is to live on low wages and raise and educate children while working there. Poor working conditions are often uncovered. At the end of each episode, the CEO gives the featured workers vacations, raises or cash gifts, sometimes promising needed changes in work processes.
The real lesson of the show to me is how dumb these CEOs are. Most have absolutely no experience in the business they head. It should be embarrassing to them how ill-equipped they are to lead. Nearly every CEO has created a budget-trimming plan that backfires when implemented by workers. And they had no clue! All elect to increase automation to speed up production, and until the CEO personally tries to keep pace with the machine (which she or he never is able to do), the impossibility and health injuries such work creates are never anticipated.
CEOs live in a bubble. They are isolated. They have defenders who surround them to block information about reality in the trenches that is considered irrelevant. When one reads the CEO data in Forbes, the measures of CEO success focus exclusively on return to investors. Investors are the true customers. Workers are merely expensive assets whose costs have to be minimized to maximize dividends for investors.
It’s little wonder the sky’s the limit for CEO compensation while costly bothersome workers are disappeared to increase those bulging cash reserves.
Where is the public outrage over this proven inequality? Doesn’t it upset your sense of fairness?
This entry was posted on Wednesday, May 30th, 2012 at 9:50 am and is filed under Commentary by G. Namie, Employers Gone Wild: Doing Bad Things, Fairness & Social Justice Denied, Unions. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.