NEW YORK, June 15, 2008
What Recession? CEO Pay Up 3.5% In '07
Half Of Highest-Earning Executives Headed Companies Whose Profits Shrank Dramatically
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John Thain (photographed last month in Mumbai, India) took the reins of Merrill Lynch on Dec. 1, 2007. His $83 million pay package included a signing bonus and other enticements. Meanwhile, the investment bank was suffering its worst-ever losses. (AP Photo/Gautam Singh)
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.
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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.Compensation has become a shell game. ... they take away the bonus, but then they still come up with ways to make sure the executive gets a big payout.
Richard FerlautoThe 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.
By AP Business Writers Rachel Beck and Matthew Fordahl
© MMVIII The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.
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See all 56 CommentsThis is called THE RICH GET RICHER, and SCREW EVERYONE ELSE.
And Wagoner? His pay rose 64 percent, to $15.7 million.
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What a Pure A** Corporate Ruled Criminal Country! The biggest crooks aren''t in Prison, they''re in CEO offices, and of course in the White House.
Time to wake up America - No one is worth this kind of money.
No-One!
We see it, we want it, we buy it, that simple.
When we''re making purchases, we don''t care where it comes from, who''s running the company and how much money they''re making--WE WANT IT NOW.
We sit here and blame the corporations, but we feed them everyday.
We are selfish, and lack discipline, and for the millions fo people who have a difficult time just buying what they need, we, in part are contributing to that.
Until Americans get really sick fo the corporate greed, they will be laughing all the way to the bank, with most products now made overseas, they are at 100% profit.
Posted by liberalme at 05:04 PM : Jun 15, 2008
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Please tell me what the lowly consumer can do about it? Stop buying products and move back into caves? The government needs to have the cahounas to stop the outsourcing and have better regulations on the products that do make it BACK into this country....
Posted by scotch41
Where would these big corporations be without comsumers??????
For starters, we can be more selective about what we buy and where it''s made!
There are NO regulations right now, but we out number the corporations---are you "another" one who''s going to wait until SOMEONE does something?? Whats wrong with you??
The "cave" thing is a bit ridiculous don''t you thing?
Posted by cantshutup at 06:59 PM : Jun 15, 2008
Unfortunately it takes more than just the two of us, it takes most of the country, I have been just as frustrated as you--too many love to complain about it but do nothing to help-all we can do is stop buying what we don''t need.
Party before country for the greedy old perverts.
Posted by liberalme
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Why bother? If we''re all going to end up homeless, why restrain? Indeed, why have morals or anything? Maybe because the future might not be as bad as how we might believe?
Posted by hypnotoad72 at 07:45 PM : Jun 15, 2008
The future is still up to US--we citizens are the majority, all this snuck up on us and I for one, am dammned mad!
People just haven''t gotten fed up enough-things like this don''t fix themselves, apathy doesn''t help either.
well what ARE we going to do???
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SIXTEEN YEARS OF BABY BOOMERS in the White House is what made this mess.
It isn''t the Democrats. It isn''t the Republicans. IT''S THE BABY BOOMERS.
NO MORE BABY BOOMERS in the White House.
The way we ''regular'' people can do this is support companies that don''t farm out jobs or goods overseas. Support small businesses without the ability to do these things, and let''s spread out the wealth some. They sure don''t mind spreading ours thin.
Keep it up America, the message is being heard!!!!
While many of these people will never suffer because of their wealth, some will. Even many ''wealthy'' live beyond their means in order to impress others or keep up with the Joneses.
We are winning this battle finally, America! Stand up for our brothers and sisters who are the fabric of our economy!!!
support companies that don''''t farm out jobs or goods overseas.
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Please post a list of these companies.
And none of their SUPPLIERS can farm out jobs or goods, either...
There are thousands of things our greedy politicians could be doing to correct these problems. We just saw what happened when they tried to "rescue" us from record profits in the oil business - PARTISAN ELECTION YEAR POLITICS CREATED GRIDLOCK, SO NOTHING HAPPENED.
The Democrats sent a "poison pill" bill up for vote, knowing Republicans couldn''t accept it. Republicans voted against it. COLLECTIVELY, CONGRESS FAILED TO ACT.
If they can''t successfully address record oil profits while we''re paying $4/gal for gas, HOW DO WE EXPECT THEM TO SOLVE ANYTHING???
-I already gave one suggestion, support the local, mom and pop shops who do not have the ability to farm out jobs.
If you call customer service somewhere you have business, and you are unable to speak to someone who speaks English, this could be a clue.
If you buy goods from Mattel, and on the packages, it says, "Made in China" give your business to another firm that proudly proclaims "Made in USA."
I recently bought some items at Target, store brand items. EVERY single one of them states Made In USA.
These are ways even the average joe can exercise his vote to keep jobs at home without having to subscribe to the Wall Street Journal and such. Fairly simple.
But cumulatively, little steps by thousands and millions will send the message.
Posted by txgrouch2004 at 08:13 PM : Jun 15, 2008
-What is the reasoning and quantitative and/or qualitative value in doing this?
-I already gave one suggestion...
-What is the reasoning....
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Apparently you CHOSE not to READ what I wrote.
UP YOURS.
EVERY single one of them states Made In USA.
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Apparently you''re stupid, too.
"MADE IN USA" from foreign-made materials using foreign-made equipment - and most of the workers are probably here on H1-B visas...
BEEN THERE, DONE THAT.
This county is broken. We need a new one...
Posted by txgrouch2004 at 08:13 PM : Jun 15, 2008
-What is the reasoning and quantitative and/or qualitative value in doing this?
Posted by OneWorldUSA
It''s to cut the boomers from the equation. Basically the same as when the anti-establishment boomers in the 1960s said, never trust anyone over 30.
A few egos over the sustainability of modern civilization?
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Yah, that''s about it.
You can always tell if a guy is REALLY rich by how much cash he carries in his pockets. A rich person CARRIES NONE - he has an open account EVERYWHERE, he needs none.
This country is broken, we need a new one.
Posted by txgrouch2004
I think you are right frankly. Civil was taken out of the equation and "freedom for corporations from government regulation" replaced "freedom of the people from tyranny". Our Supreme court justices claim to live by the constitution but they are taking us on a bullet train back to old world Italy, Germany, France etc. elitist dictatorial rule.
-You are a grouch. Good moniker. So, if you don''t like my suggestions, then why don''t you tell us where you shop? Where do you buy your $4 gas? What are YOU doing to help solve any of the problems rather than simply complain about them????
Since you know so much, why not say so. Calling names against someone who has done you know harm really hurts what limited credibility you have, so either come up with some goods or shut up.
Basically the same as when the anti-establishment boomers in the 1960s said, never trust anyone over 30.
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You got that right.
The Boomers used to PROTEST the "rich get richer."
Now they ARE the rich...
This country is broken. We need a new one.
Posted by CALDWELLPTR
Leona, what a satanic witch. She''s dead. If only she could report back how real eternal hell is and how low her position is serving the demons.
what limited credibility you have
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Look who''s talking about "limited credibility."
BTW, learn to spell.
what limited credibility you have
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Look who''''s talking about "limited credibility."
BTW, learn to spell.
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Posted by txgrouch2004 at 08:55 PM : Jun 15, 2008
-Then, what would you care to change about my spelling, since you have no real solutions to offer??
Now they ARE the rich...
This country is broken. We need a new one.
Posted by txgrouch2004
The boomers are sell out hoes. Their parents spoiled them rotten after they themselves lived through the depression as children and then going through a brief but terrifying WWII in which modern society thought it might fall prey to the darkest of ideological regimes in modern times.
The main reason the boomers whined about Viet Nam is because there was a draft. Today they are indifferent to the young people in Iraq readily buying into the right wing view, better here than there. The boomers will pay a price for their crimes before they check out.
Posted by OneWorldUSA
Do you have some good suggestions? They are needed.
-Already gave some. Your turn.
Posted by OneWorldUSA--
Posted by l8c6 at 09:00 PM : Jun 15, 2008
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.
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.
Already gave some. Your turn.
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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.
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.
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.
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?
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.
I keep looking for these jobs in the classifieds, but have yet to find one.
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