What Recession? CEO Pay Up 3.5% In '07

Half Of Highest-Earning Executives Headed Companies Whose Profits Shrank Dramatically

(AP)  As the American economy slowed to a crawl and stockholders watched their money evaporate, CEO pay still chugged to yet more dizzying heights last year, an Associated Press analysis shows.

The AP review of compensation for the heads of companies in the Standard & Poor's 500 index finds the median pay package added up to nearly $8.4 million. That's a comfortable gain of about $280,000 from 2006.

The 3½ percent pay increase for CEOs came even as the landscape for both workers and shareholders darkened considerably and the economy was choked by a housing market in free fall, layoffs and soaring prices for fuel and food.

At the top of the AP list: John Thain, who took the reins of Merrill Lynch on Dec. 1, 2007. His $83 million pay package was 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.

Collectively, the 10 best-paid CEOs made more than half a billion dollars last year. Yet half the members of this stratospheric club were leading companies whose profits shrank dramatically.

The AP examination of CEO pay in 2007 mined data from the 410 companies in the S&P 500 that filed compensation disclosures with federal regulators in the first six months of this year.

The AP's formula, based on data from the past two years, adds up salary, perks, bonuses, above-market interest on pay set aside for later, and company estimates for the value of stock options and stock awards on the day they were granted last year.

That provides a clearer picture than pay totals required by the Securities and Exchange Commission, compensation experts say, because the SEC totals include expenses companies book during the year for previously granted stock compensation and retirement benefits.

The value of stock and options given to CEOs may turn out to be significantly higher or lower if they are ultimately cashed out, but the numbers in the AP formula do reflect the board of directors' estimate of the likely eventual payout.

The median salary figure of about $8.4 million means half the CEOs in the AP analysis made more than that and half made less.

There were some signs companies were pulling back on pay at the top: Out of the 316 companies in the AP survey that had the same CEO two years running, about two-fifths lowered the total pay package for their CEOs. However, the primary culprit for some was falling stock prices that cut into the value of the shares included in pay packages.

In many more cases, overall pay ballooned.

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 the posting of a $39 billion loss in 2007, a year when its stock price fell by about 19 percent, without adjusting for dividends.

And Wagoner? His pay rose 64 percent, to $15.7 million.

Last year was rocky for the economy and the stock market, making it a useful test of a concept called pay for performance - a term companies use to sell shareholders on the idea CEOs are being paid based on how well the company does.

According to this concept, trotted out frequently by the compensation committees of corporate boards in their proxy statements, a big chunk of CEO pay is considered "at risk," meaning it could disappear if CEOs don't meet established metrics.

But the AP analysis found that CEO pay rose and fell regardless of the direction of a company's stock price or profits.

Take KB Home, battered by the subprime lending crisis and the weak housing market. According to the Los Angeles-based homebuilder's proxy statement, CEO Jeffrey Mezger is entitled to a cash bonus based on a percentage of KB's profit.

The problem was there was no profit. KB Home lost almost $930 million in 2007 and its stock lost 60 percent of its value. But Mezger still made $24.4 million, as valued by the AP, including a $6 million cash bonus.

He pocketed that bonus because he exceeded certain objectives the board had set out for him. Among them were improving performance on a customer satisfaction survey and developing senior leadership in his first year as CEO.

"Compensation has become a shell game," said Richard Ferlauto, director of pension and benefits policy for the American Federation of State, County and Municipal Employees, a Washington labor group representing government workers.

"So they take away the bonus," he said, "but then they still come up with ways to make sure the executive gets a big payout."

Pay packages were somewhat smaller in the financial industry last year - banks, investment firms, mortgage companies, insurers and other institutions, all were roiled by the subprime lending disaster.

For companies in the financial sector that had the same CEO two years in a row, median pay dropped 4¼ percent to $8.7 million in 2007. But that was still a smaller decline than the 6 percent drop in earnings and 15 percent slump in stock prices before dividend adjustments, according to Standard & Poor's Capital IQ data service.

In some cases, companies appeared at first glance to have kept their promise to base pay on performance - only to have a different picture emerge on closer inspection.

For example, Washington Mutual Inc.'s stock took a nosedive last year - almost 70 percent - because of fallout from the housing and mortgage crises. The Seattle-base banking and mortgage lender lost $1.87 billion in the fourth quarter alone, and $67 million for the year.

WaMu's board decided not to give CEO Kerry Killinger a bonus for 2007. But board members also eliminated real-estate foreclosures and mortgage defaults as factors in whether to award him a bonus this year. After a shareholder revolt, the board decided to revise the formula, though it has not yet announced what metrics will be used.

Profit at insurer XL Capital fell more than 80 percent last year, and its stock price slumped about 30 percent. But Chief Executive Brian O'Hara made $7.5 million, a raise of 23 percent.

In its proxy statement, the company called its profits "unsatisfactory" but said operating earnings, which exclude certain factors, were better than planned.

[payasyougo]

CBS should be an expert on this topic. Their CEO, that is the CEO of CBS, L. Moonves made $67.6M in 2007.

[rgmiron]

Many CEO''s must be laughing there a** off at how stupid the sheeple are, these criminals destroy companies, jobs, families cause tons of greef and sadness, yet get raises in the millions. They must think they are some kind of super geniuses to get away with this.

Just who are the morons giving them the raises and high salaries? Talk about sh*t for brains.

Every time I hear about this injustice I get upset, but it has been going on for years and years.

[oscarez]

"This is sheer and deliberate robbery in my eyes. Greed beyond imagination." This is George W Bush''s vision of America. The rich get richer and everyone else works to make the rich richer. The American dream is to be rich.

[jntlw-2009]

America has been hijacked by a bunch of Ivy League thugs who have subverted the law to their advantage at the expense of the worker. Both politcal parties cater to these thugs and both parties need to have a thorough cleansing to rid of those loyal to big corporate industry. Time to take back our country before they completey destroy it.

[oscarez]

I wonder what God thinks about this. Why isn''''t He doing anything/enough about it?

Posted by seezero1 at 03:23 AM : Jun 16, 2008

What make you think there is a GOD! If there is a GOD why did it let the 4 Boy Scouts in Iowa die?

[jntlw-2009]

I have come to see that corporations have steered into a direction never envisioned. They are now created to serve the CEO and corporate officers and board members on the pretext that is best for the shareholders. Because that takes up all the money of the Corporation, the product they make or the service they provide is a second thought and ususally lacks in quality. The shareholders may get a pitance and the workers are just slave labor to be treated like dirt. Who care what happens to the workers. It reads like Atlas Shrugged - the so called gods of industry vs. the pathetic dumb workers.
America was a much better coutry when businesses were privately owned and the owners cared about the product or service and the workers who loyally helped the owner in his goals. Not any more - they are just a bunch of Ivy League scum bags who come in claiming to be brilliant and how the can turn business around. In reality, they are more like thieves who stealthily, through cunning and deceit, change rules and laws to fit their agenda and then proceed to strip the business of all its money and sell it and the workers for peanuts.

It is time to bring them down and get back to individually owned businesses who are accountable to society, the community, the worker, and no shareholder *** to contend with.

[jntlw-2009]

This is sheer and deliberate robbery in my eyes. Greed beyond imagination. They care not nor do they see how the rest of us live. God will not look kindly on those who rob the poor to feather their already cush life style. Hell eagerly awaits them!

[hoodwinked3]

When you do business with big corporations you can bet that you paying way more that the product or service actually cost because of these execs living in excess off the people%u2019s hard earned paycheck. Big Business is BAD BUSINESS! If you don''t already have a boycott list made of businesses get used to having one and sticking to it!

[neo267-2009]

These scumbags are no better than embezzlers. They should be in prison along with their boards.

[lochlan-2009]

Greed, such blatant greed, to be able to tell tens of thousands of people who have worked their entire lives for a company, they''re fired, while saying they need $$$millions to come and take a job for a year or two, after the last $$$million dollar CEO didn''t have the fortune to be in charge of the company during an up trend.

I keep looking for these jobs in the classifieds, but have yet to find one.

[l00ker]

CEOs are in the same club as Congress and the President.

Their only priority are self interest, perks, compensation and ego. Very few really have an interest in working to benefit the corporation and workers, or in the case of politicians the country and its people.

It''''s all about their own little world of greedy peers, and the people of the USA have been paying a hefty price due to the CEOs and pols lack of conscientiousness towards the big picture.
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Posted by cbsblogger at 11:29 PM : Jun 15, 2008
+ report abuse


Well, the good old framers threw us in an escape clause, and we the people can get rid of all of these ***, their illegal slaves included, and stop moaning about it. We have the guns and the law, our Constitution, to get it done. All that is required, is for the responsible, law abiding and truly patriotic citizens of all colors, creeds, occupations and heritage to come together and organize under the stars and stripes. Then, we the people ( and not these Julio come late-lies ) will have our country back.

[cbsblogger]

In Europe and Japan CEOS make about 20 times average workers compensation. In the USA CEOs now receive 400-500x average worker compensation (up from 50x 25 years ago) .

A strong case could be made that the European and Japanese corporations are at least as profitable and as their USA counterparts. Furthermore their employees are often better off in Europe and Japan. How then can this huge disparity in compensation be justified except for disgusting greed of USA executives?

[cbsblogger]

CEOs are in the same club as Congress and the President.

Their only priority are self interest, perks, compensation and ego. Very few really have an interest in working to benefit the corporation and workers, or in the case of politicians the country and its people.

It''s all about their own little world of greedy peers, and the people of the USA have been paying a hefty price due to the CEOs and pols lack of conscientiousness towards the big picture.

[oneworldusa]

Posted by txgrouch2004 at 09:24 PM : Jun 15, 2008

I only mentioned that I went to Target recently and purchased store items that said Made In USA. Find THAT at Walmart, huh?

Good, tune me out. You''re the one who invited the argument, and if I choose to spell something differently than you, by the way, you haven''t even bothered to point out my ''error,'' then so be it if that''s all you can scream about.

You''re just a lowly Walmart clerk making minimum wage and angry that you''re being paid the same as the illegal aliens. I can understand why you''d be angry about that. I would be too.

[txgrouch2004]

USAUberAlles wrote
Already gave some. Your turn.
----------------
Your only "solution" was to shop Target for "Made in USA." Then I pointed out the foolishness of this pathetic excuse for a suggestion.

You were the one who dove into this discussion by BLAMING THE PROBLEM ON ALL OF US. I had to DRAG ANY SPECIFICS out of you. And all you could come up with was TARGET.

SOUNDS LIKE YOU''RE THE POT-STIRRER IN THIS DISCUSSION, with NO REAL SOLUTIONS TO OFFER.

You''re all heat, but no light. And you can''t spell.

From here on, I''ll be TUNING YOU OUT.

[oneworldusa]

Yes, but if anyone does have some suggestions it anything would be a start. This country doesn''''t have leadership that advocates on behalf of the people. Freedom of assembly has been trashed by the labor union despising right wing unamerican neo cons. ---
Posted by l8c6 at 09:10 PM : Jun 15, 2008

As I was saying before I was so rudely interrupted by the grouch, was that there are many, many greedy CEOs that continue to make more and more millions while their companies fail due to their poor leadership skills, or lack thereof altogether, while they lay off the workers who are making their business happen all for their OWN pockets.

But they are ripping off the shareholders, too, and they are taking notice. If a company''s share value falls 70% and the CEO gets an 86% increase, then they are outright stealing from the shareholders, and they are taking notice.

This turn of events is good for the working people. They are firing left and right these people who are stomping all over everyone else for only their own benefit, and everyone''s getting tired of it, finally.

Watch where these criminal firees go, and don''t support their new businesses, is what I was originally saying.

[l8c6]

That was directed to the grouch, not you.

Posted by OneWorldUSA

Yes, but if anyone does have some suggestions it anything would be a start. This country doesn''t have leadership that advocates on behalf of the people. Freedom of assembly has been trashed by the labor union despising right wing unamerican neo cons.

[oneworldusa]

Then, what would you care to change about my spelling, since you have no real solutions to offer??

Posted by OneWorldUSA--

Posted by l8c6 at 09:00 PM : Jun 15, 2008

That was directed to the grouch, not you.

[oneworldusa]

Posted by l8c6 at 09:00 PM : Jun 15, 2008

-Already gave some. Your turn.

[l8c6]

Then, what would you care to change about my spelling, since you have no real solutions to offer??

Posted by OneWorldUSA

Do you have some good suggestions? They are needed.