Shed no tears for the CEOs

A few of the bigger and more outlandish compensation packages for corporate executives may have declined last year in the wake of the Enron-style scandals and a falling stock market, but no one need shed any tears for the CEOs. They are continuing to do avariciously well at the pay window–in most cases much better than the investors in their companies.

Take the case of Michael D. Eisner, chief of Walt Disney. His total compensation in 2002 was up 498 percent to $6 million while shareholder return plummeted by 18 percent. And Leo F. Mullin of Delta Air Lines raked in $13.8 million last year, a 104 percent increase, but the shareholders saw their investment sink by 58 percent. So much for the theory of corporate pay based on performance.

Nonetheless, the pay envelopes of Eisner and Mullin look thin alongside the bulging compensation packages of many of the corporate high flyers.

Miles D. White, CEO of Abbott Laboratories, for example, took home a compensation package totaling $25,545,490 in 2002-including base salary, bonus, restricted stock. long-term incentives, and options That was an increase of 147 percent over his total direct compensation of a year ago. Stockholders saw their return fall 27 percent over the same period. Tracking the bloated pay packages is tricky. At first glance the $1 million salary of James Dimon, the chief executive of Bank One looks modest when compared with the multi-million dollar compensation of many executives. But a closer examination reveals a $3 million bonus, nearly $2 million in long-term incentives and almost $6 million in stock options.

Sanford Weill, the chairman of Citicorp, a company which was a major participant in the Enron scandals, collected total compensation of $8.9 million last year, but Robert Rubin, the chairman of the Bank’s Executive Committee and former Secretary of Treasury in the Clinton Administration, more than doubled his chief’s compensation with a bulging pay envelope containing $18.4 million for himself.

Departing chief executives often walked out with amazingly lush “goodbye” gifts. Honeywell International’s CEO, Lawrence Bossidy, received a $4 million bonus as he left the firm even though the shares of the company dropped 27 percent last year. The Clorox Company gave its departing chief, Craig Sullivan, three years tax-free use of the company’s plane plus other benefits.

A survey by the New York Times suggests that the focus of many of the company perks are being shifted under the glare of the accounting and other corporate scandals. The survey identified lucrative beefed-up pensions and life insurance policies, some worth tens of millions of dollars, as replacements for more direct compensation. Also on the favored benefit list were increased allowances for travel on private jets-rationalized by fears about terrorism and health of flying on commercial planes. (The rest of the American public presumably will just have to continue to live with those fears while corporate executives are kept safe and sound in their private jets.)

For many of the U. S. Armed Forces, including members recently called up from civilian life in National Guard and Reserve units, sent to Iraq in recent weeks the private jets and bloated compensation packages must seem strange, indeed.

With declared unemployment close to six percent, underemployment rising and job losses rapidly expanding, the AFL-CIO has launched a campaign to promote shareholder votes on executive compensation, including stock options, at the annual meetings of 150 corporations.

“We think that CEO pay still continues to be totally out of line with company performance,” Richard Trumka, secretary-treasurer of the AFL-CIO recently told the New York Times.

In the aftermath of the Enron and other corporate scandals, the move toward more stockholder democracy shows some encouraging signs. Last year, 33 percent of the 289 governance proposals voted on by shareholders won more than 50 percent of the votes cast, according to the Investor Research Center in Washington, D.C. A year earlier just 24 percent of the proposals that came to a vote won. The Center reports another increase in the number of corporate governance resolutions filed this year with compensation issues leading the list.

The Sheet Metal Workers National Pension Fund, which owns 44,800 shares of the San Francisco-based Charles Schwab and Company, has proposed that the company’s board of directors set a policy of expensing the cost of all future stock options on its annual income statement.

The Academy of Our Lady of Lourdes in Rochester, Minnesota owns 1,509 shares of J. P. Morgan Chase. It wants the bank’s board to prepare a report comparing the pay levels of the company’s top executives with the lowest-paid workers in the U. S. As of January 1, 1982,1992 and 2002.

Last year, 50.7 percent of the shareholders of Bank of America voted for a non-binding resolution asking that the board seek their approval on any severance agreements that would more than double an executive’s annual base pay.

These modest revolts against corporate excesses and the push for greater investor democracy are encouraging at the grass roots. But, the message isn’t reaching most members of Congress or the Iraq-absorbed Bush Administration which pay only lip service to reforms in the wake of Enron et al and continue to shamelessly push for greater tax breaks and generous welfare schemes for corporations and their top executives, in addition to allowing Bermuda-type tax havens for corporate tax escapees.