Limiting Exec Pay May Be Needed to Save Capitalism

[Wilms]

Limiting exec pay may be needed to save capitalism

When managers are free to rob corporate coffers, it shatters the trust of the investors who provide capital to grow the business.

By Kathy M. Kristof
March 29, 2009 in print edition B-3

~snip~

A study by Harvard professor Lucian Bebchuk found, for example, that pay and perks granted to the five most highly compensated officers at U.S. companies nearly doubled over a decade and now eat up an average of 9% of company profits. And that figure doesn’t account for the millions of dollars that companies pay in retirement benefits to executives.

At the same time, the gap between what chief executives pay themselves and what they pay their rank-and-file workers has widened. Where CEOs used to earn about 50 times what their average worker took home, now they’re taking home about 350 times that person’s wages.

~snip~

“We have no trouble understanding that somebody who walks into a bank with a gun is committing a crime,” he said. “CEOs who walk into boardrooms, armed with reports from compensation consultants, who have all sorts of conflicts of interest to push pay as high as possible, are committing grand theft against stakeholders.”

~snip~

To be sure, there is still plenty of money invested in stocks. Part of the reason is that some companies still do things right. Consider, for example, Costco Wholesale Corp., the Issaquah, Wash.-based retailer that operates warehouse stores.

Its CEO, James D. Sinegal, earns a salary of $350,000, while his warehouse employees earn roughly $17 an hour – about $34,000 for a 2,000-hour year. Sinegal can get a bonus of as much as $200,000, but typically recommends less – something akin to the bonuses paid to warehouse employees, according to the company’s proxy statement.

Costco’s board says it thinks Sinegal is underpaid compared with his peers, but he has asked to stay that way. He told the board that higher pay “wouldn’t change his motivation.” Meanwhile, the company brags that it retains workers, not only in the executive suites but also in the warehouses, for decades.

~snip~

http://articles.latimes.com/p/2009/mar/29/business/fi-perfin29

[LSparkle]

1. Isn't there a "tradition" in Japan that keeps executive pay in check?

I could swear that there's an unspoken rule that the
top executive in any company isn't supposed to earn
more than X times the salary of that firm's lowest-
paid employee. Of course, there's a tradition of
shame in Japan that we don't have in this country
(regrettably at times) ... but I wonder if that
"nobility" is what makes Japanese companies more
prosperous than their American counterparts.

[etherealtruth]

5. Here's an interesting link discussing "top exec" vs. worker pay worldwide

http://www.pbs.org/now/politics/executivepay06.html

[Wilms]

8. That puts it in perspective.

Thanks.

[Warpy]

2. That's one reason I keep my Costco membership

and the freezer to hold the bulk food I get once a month. I know it's a well run company. I've never met a sourpuss among the staff there, even when they're obviously having a bad day.

I've been calling those bloodsucking executives embezzlers for years. There is no other word to describe what they're doing to the companies, the workers and the shareholders even if they did get the laws changed to legalize theft.

Now I've inherited being a shareholder and I find myself even angrier about it. Shareholders are not consulted on much of anything beyond approving the board of directors via proxy vote. My proxy votes are always against them. I won't approve any board that votes for executive theft.

Only the government is powerful enough to end the influence of this executive cartel, which is what it is, executives in one company sitting on the boards of several others and all approving each others embezzlement.

If the government refuses to act, I await the tumbrils.

[Phoebe Loosinhouse]

3. The fact that executives have been looting their companies for private gain is FINALLY recognized!

in the MSM and is beginning to filter into the consciousness of the average investor. About time!

The execs and the BOD's have been feathering their nests at the expense of everyone else. I have long thought that it bordered on the outright criminal, as well as violating fiduciary responsibilities. I expect to see civil lawsuits as angry investors attempts to claw back some of the more outrageous compensations.

I always thought the most logical people to take on this mission would be the employee stockholders, since they are doubly screwn. The execs depress their(the workers) compensation in order to take more for themselves and also depress the value of the stock they own in company 401K's. Also, how about companies that have placed exec retirement in holding companies but leave the workers with the main company which they then declare bankrupt? The execs retirements are safe, but the workers are once again, screwn. So the workers get the shaft 3 times - as employee, as investor, as retiree.

[aquart]

6. Amazing that they couldn't see it before.

Firing Americans and hiring cheap overseas labor in order to pay huge executive salaries has NOT been healthy for America, never mind capitalism.

[soothsayer]

4. our crappy execs get 100 times more than they do any other county in the world

It's effing ridiculous

EAT THE RICH!!!!

[aquart]

7. Yes, but do it with a really good sauce.

[ladjf]

9. If the outrageous exec pay had been addressed and remedied

twenty years ago, America would still be in a prosperous state. Thanks Republicans for tricking the American public into believing that Republicanism had any other goals than to (1) enrich the already wealthy and (2) make sure that nothing threatened those ill-gotten gains.

[Wilms]

11. Don't laugh.

But twenty years ago there was a notion, perhaps not common, that the yuppie mentality of the eighties had given way to a greater of appreciation of simpler things.

Not that all yuppies are in the executive class. Hardly. But they're close. And enabling.

[Phoebe Loosinhouse]

10. I think it might be more accurate to say "American Laissez Faire Capitalism"

in the OP. I don't have anything against capitalism if there is oversight and regulation to protect consumers, workers and shareholders alike from the rapacious greed of the executive class.

[GeorgeGist]

12. Lest we forget ...

individual profit is the bottom denominator for greed capitalism.