“You don’t need a Weatherman to know which way the wind blows.”
— Bob Dylan
Don’t look now but the political weather is changing, and it’s moving to the left.
The clearest indication is the July 2 Fortune magazine cover. It pictures Apple Computer’s Steve Jobs and announces a special report.
“Inside the great CEO pay heist.”
Yes, you read that right.
The editors of a major business magazine refer to executive pay as a criminal activity— a “heist.” As in: steal, lift, purloin, plunder, loot, boost, light finger, or just plain rob. That’s not the kind of language we’re accustomed to seeing in the same sentence with the erstwhile heroes of corporate America.
Nor does the magazine stop at a single article. They also explain why absurd executive compensation will continue. How boards can’t say no. And how the chief fuel of executive compensation— stock options— hurts investors. (You can read the article at: http://www.fortune.com/indexw.jhtml?channel=artcol.jhtml&doc_id=202914 )
One of the most striking fact sets in the lead article is a comparison of how CEO compensation has changed from 1990 to 2000 with similar figures for the common folk. While the minimum wage rose 36 percent, consumer prices rose 32 percent, and median household income rose 43 percent, executive compensation went through the roof.
The most extreme example defies imagination: Citigroups’ CEO Sanford Weill was paid $150 million in 2000 while John Reed was paid a piddling $1.2 million at Citicorp in 1990. That’s an increase of 12,444 percent.
A more common example is still beyond understanding. Michael Armstrong was paid $21.8 million in 2000 to lead an ATT that is smaller, without Lucent, than the ATT Robert Allen was paid $3.4 million to lead in 1990.
Most surprising, however, is what the article doesn’t say.
In Executive America it is more rewarding to fail in 2000 than it was to succeed in 1990. How’s that for a decade of progress?
With the exception of Steven Ross’s (Time Warner) $75.3 million in 1990, the top CEOs of only a decade ago were paid a fraction of what failed executives are now given if they will just leave the premises. Here are some examples of our new executive world, where the big dogs eat fois gras, not other dogs:
- In 1990, IBM chairman John Akers was paid $7.7 million to run the largest computer company in the world. In 2000, Jill Barad was given $47 million, exclusive of stock option value, to leave Mattel even though Mattel is miniscule compared to IBM, then and now. Indeed, her $47 million is more than the $37.7 million Louis Gerstner was paid to run IBM in 2000.
- In 1990 Wayne Calloway was paid $5.2 million to run Pepsico. Doug Ivester, however, was paid $166 million, according to Fortune estimates, to leave Coca Cola in 2000.
- In 1990 Robert Allen was paid $3.4 million to manage ATT. But in 2000 Robert Annunziata was paid $16.1 million to leave Global Crossing.
I could go on, but you probably get the idea: in Executive America, failure pays the Big Bucks as surely as success, a reality that won’t sit well with the millions of less baronial American workers now teetering on the firing line.
My prediction: Socialism in the Suites will bring it back to the streets. If you’re an above average earner— anyone earning over, say, $75,000— kiss your promised tax cut goodbye. Much of it will be redirected before you see it. If you’re a top exec, hunker down because a tax surcharge could be coming your way.
If you’ve been hoping to see a portion of Social Security privatized, forget it. It won’t happen this year. It won’t happen next year. It probably won’t ever happen.
Why?
America’s business leadership has scorched the territory of privatization with a ten-year blast of jellied self-aggrandizement. It is true that Congress has joyfully looted the Social Security trust fund ever since we started paying in a surplus. But why would we bother to trade elected looters for executive looters?
This information is distributed for education purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product, or service.
Photo: Drew Williams
(c) Scott Burns, 2022