Sanford Weill, CEO of Citigroup, the giant multi-national financial conglomerate, took home the fattest compensation package among the nation’s corporate executives last year, $224.4 million. Weill may be the “poster child” for executive compensation excesses, but boards of directors of other major corporations have not been timid about dipping into their company’s treasuries to shower lucrative salaries, stock options and bonuses on their chief executives.
While the economy softened and many shareholders took their lumps in the market, the average CEO of a major corporation received $20 million in 2000 including 50 percent more in stock options and 22 percent more in salary and bonuses, according to the New York Times. In contrast, hourly workers averaged a three percent raise last year and salaried employees a four percent increase.
As a result of soaring executive pay, the gap between compensation for workers and executives is widening rapidly. In 1980, pay for corporate executives was 42 times that of blue collar workers. By 1999, executives’ compensation on average was 475 times that of workers and growing.
Beyond the annual news stories that follow the required corporate filings with the Securities and Exchange Commission (SEC), executive compensation gets little attention in the media. But, the AFL-CIO has made a dramatic move through its up-dated web site to change that and wake up not only its members, but the public to what is going on with these runaway compensation schemes and how they affect people who are saving for college, retirement and other needs.
Not only does this well-designed Executive PayWatch website (www.paywatch.org) provide links through which the compensation packages of major companies can be tracked, but it also contains a practical digital tool-kit loaded with ideas about how citizens can effectively challenge the excessive compensation at various points such as in board rooms, regulatory agencies, the Internal Revenue Service, Congress and the community.
The PayWatch web site has proven to be a huge success. It has become the biggest draw on the AFL-CIO web site with 11 million viewers (“hits” in Internet language) last year–a testimonial to the growing concern Americans have about the inside games that executives and boards of directors (often dominated by cronies of the executives) play to hike executive compensation.
The web site provides 50 different “e-tools” for limiting runaway executive compensation plans. Here are some areas where PayWatch believes citizens can be effective:
Pension Funds, Mutual Funds and 401(k) plans?Public and private pension funds own nearly a third and mutual funds almost 12 percent of corporate stocks. As managers of workers’ money, the entities, as shareholders, can have tremendous input on how corporations are governed. The directors and trustees of these funds, can be contacted to initiate and support shareholder proposals to limit executive pay. The web site provides data on which funds invest in companies with excessive compensation packages.
Rally Co-Workers and the Community. Organize allies in the workplace and community in campaigns against excessive executive compensation including distribution of fliers (automatic flier generator on the web site) contact the company’s board of directors, call in to radio talk shows, contact other media, initiate petitions, and urge public officials to support the campaign.
Contact IRS to tighten rules that limit corporate deductions for executive compensation. A 1993 law limits such deductions to $1 million unless the compensation is “performance based” and decided by an independent committee of outside directors. IRS defines both requirements loosely under current rules
Contact the SEC to require fuller disclosure of executive compensation packages.
The PayWatch web site has also injected some fun into the campaign. Visitors to the site can play a board game called “Greed” where they can win by grabbing a golden parachute, stacking the board of directors, cutting deals for extravagant perks and covering up poor performance. Players lose points when shareholders revolt and file resolutions or lawsuits. PayWatch also allows visitors to the site to compare their pay to their own CEO’s pay. The visitor can find out how many years it would take them to earn what their CEO earns.
Now that the rule that stock markets go down as well as up has been restored, and with the economic euphoria of the last few years wearing off, it is an opportune moment for sanity to be returned to corporate board rooms on executive compensation. The AFL-CIO Executive PayWatch web site is a first class tool with which mobilize public opinion against the corporate excesses. Every citizen who has a computer available should visit the site (www.paywatch.org).