Workplace Fairness

Menu

Skip to main content

  • print
  • decrease text sizeincrease text size
    text

Unfinished business of executive pay reform

Share this post

Sarah AndersonMost analysts of the high-finance meltdown that ushered in the Great Recession have concluded that excessive compensation was a key causal factor. Outrageously high rewards gave executives an incentive to behave outrageously, to take the sorts of reckless risks that would eventually endanger our entire economy. Our nation’s leading political players have sought, sometimes with grand fanfare, to confront this reality. The financial reform package enacted this July, for instance, codifies several long-term goals of executive pay reformers, most notably a “say on pay” provision that hands shareholders the right to take nonbinding advisory votes on executive compensation.

This reform could become a valuable tool for shareholder activists, particularly if such votes are required on an annual basis. However, there is little evidence that “say on pay” has had an impact on overall compensation levels in nations where it has already been in practice.

To bring executive pay back down to mid-20th century levels, we need reforms that cut to the quick, which recognize the dangers banks and major corporations create when they dangle oversized rewards for executive “performance.” Some reforms that would move us in this direction are now pending in Congress.

One of the most promising would eliminate a perverse incentive for excessive pay in our tax code. Under current rules, there are no meaningful limits on how much a firm can deduct for the expense of executive comp. Thus, the more a firm pays its CEO, the more that firm can deduct from its taxes. The rest of us bear the brunt of this loophole, either through increased taxes needed to fill the revenue gaps or through cutbacks in public spending.

The Income Equity Act, introduced by Rep. Barbara Lee (D-Calif.), would deny all firms tax deductions on any executive pay (including stock options) that runs over 25 times the pay of a firm’s lowest-paid employee or $500,000, whichever is higher.

The Troubled Asset Relief Program (TARP) and the 2010 health care reform bill set important precedents for this reform by applying $500,000 deductibility caps on pay for bailout recipients and health insurance firms. Treasury Secretary Timothy Geithner has said he would consider extending the tax deductibility cap in TARP to U.S. companies generally.

Another practical proposal would use the power of the public purse to encourage more rational pay levels. Rep. Jan Schakowsky (D-Illin.) has introduced the Patriot Corporations Act to extend tax breaks and federal contracting preferences to companies that meet benchmarks for good corporate behavior. Among the benchmarks: not compensating any executive at more than 100 times the income of the company’s lowest-paid worker.

By law, the U.S. government denies contracts to companies that discriminate in their employment practices, by race or gender. This reflects clear public policy that our tax dollars should not subsidize racial or gender inequality. In a similar way, this reform would discourage extreme economic inequality.

Congress should also revisit the proposal that passed the Senate last year which would’ve capped total pay for employees of bailout companies at no more than $400,000, the salary of the U.S. President. Such a restriction could be enacted today for application in the event of future bailouts. Given a clear warning about the consequences for their own paychecks, executives might think twice about taking actions that endanger their future – and ours.

Congress should not shy away from bolder action on executive pay. Lawmakers mandate limits on other types of corporate behavior all the time. They limit how much pollution corporations can spew out. They limit the chemicals companies can sneak into their products. They limit the hours they can force employees to labor. They set these limits because they recognize that irresponsible corporate behaviors threaten our communities.

Excessive executive pay, the Wall Street meltdown has demonstrated ever so vividly, endangers our public well-being as surely as any other pollutants.

Sarah Anderson is a co-author of the new Institute for Policy Studies report, Executive Excess 2010: CEO Pay and the Great Recession.

About The Author: Sarah Anderson is the Institute for Policy Studies Global Economy Project Director. He work  includes research, writing, and networking on issues related to the impact of international trade, finance, and investment policies on inequality, sustainability, and human rights. Sarah is also a well-known expert on executive compensation, as the lead author of 16 annual “Executive Excess” reports that have received extensive media coverage.


Share this post

Shareholders Move to Curb Extravagant Pay for WellPoint CEO

Share this post

headshotWilliam H.T. Bush – a WellPoint board member and President George H.W. Bush’s younger brother — collapsed at the annual shareholder meeting the other day, just as the health insurer’s CEO, Angela Braly, was trying to explain to angry shareholders why profits are up but the company’s reputation is in the tank. Thankfully, Bush improved enough to go home from the hospital, but the meeting never recovered. Braly refused to continue after paramedics wheeled Bush out, so she got away without answering any of the tough questions about her company.

Shareholders never got to ask why WellPoint and its Blue Cross plans in 14 states look like a train wreck to 34 million uneasy customers. Before Bush collapsed, the AFL-CIO, Connecticut’s public employee retirement system and other shareholders criticized WellPoint for abusing consumers, funding a duplicitous campaign to block health reform, and misusing premium money to give indefensible compensation packages to top executives. In 2009, Braly’s pay jumped 51 percent to $13.1 million. Many of us didn’t get a raise at all last year. Ten percent didn’t even have jobs.

Shareholders at the meeting didn’t get answers to some other big questions on the minds of investors. Why did legendary stock picker Warren Buffett, the world’s third richest man, dump 1.3 million shares (worth about $70 million at today’s price) of WellPoint stock during the first quarter. Buffett knows a little bit about money. What’s the deal? And what’s up with the company’s outrageous submission of inaccurate data to get California regulators to permit premium increases as large as 39 percent for individuals this year? And why is the company driven to pursue sleazy policies, like targeting patients with breast cancer for fraud investigations, and then calling President Obama a liar for saying the practice should stop? Is that really in the interest of the owners of $23 billion worth of WellPoint stock? Most investors want WellPoint to make money, not enemies.

Maybe Braly wasn’t worried about how things would look because her P.R. team decided shortly before the shareholders meeting to drop plans to webcast the event. Only reporters who attended in person could observe. Just like the health insurer Cigna did at its annual shareholder meeting last month, WellPoint shut out the media to minimize the impact of embarrassing questions.

Greed has made WellPoint completely lose touch with the founding mission of the nonprofit Blue Cross companies it acquired over the last 15 years (in California, Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri, New Hampshire, New York, Nevada, Ohio, Virginia and Wisconsin). The Blue Cross plans, once seen as a refuge for each state’s sickest residents, have been transformed by Braly and her ilk into cash machines to satisfy the unbridled greed of Wall Street and corporate executives.

Rather than accept responsibility for the insurance industry’s unwillingness to slow the growth of health costs through tougher negotiations with doctors, hospitals and drug makers, Braly and her industry peers prefer to just keep raising prices, cutting benefits, denying care and boosting their profits and compensation. They serve the needs of the high rollers on Wall Street instead of millions of Americans.

The good news is that more shareholders are refusing to accept WellPoint’s unconscionable behavior and are taking action. The evidence of that came at the meeting when shareholders adopted a resolution to limit excessive CEO compensation by giving themselves an advisory vote on executive pay during the company’s annual meetings. Among the shareholders who demanded more “say on pay” was Connecticut State Treasurer Denise L. Nappier, who controls investments for the $23 billion pension plan for state employees. Similar proposals were defeated by WellPoint shareholders in 2008 and 2009, but the tide has turned.

The grotesque compensation paid to insurance CEOs costs more than the face value of their pay packages. It also exerts unhealthy influences on CEOs’ decisions about company finances and health care policy even when customers’ lives are at stake. That’s why shining a light on companies like WellPoint is so important.

Even by the standards of people who believe that it’s okay to do just about anything to make money, WellPoint consistently goes too far. Their turbo-charged greed is out of control, and their lack of any moral compass is shocking.

About The Author: Ethan Rome is executive director of Health Care for America Now and served as deputy campaign manager in HCAN’s 2009 successful campaign to win comprehensive health care reform. Rome has been a grassroots organizer, political activist, and strategic communicator for progressive issue and electoral campaigns for more than 20 years.


Share this post

Bringing Overpaid Executives to Heel

Share this post

Photo by Martin Gardlin
Photo by Martin Gardlin

A recent Time magazine poll found that 71% of Americans who responded want the government to place limits on the executive compensation at firms that received bailout money. Yet accomplishing this task selectively is impossible to do.

The government did appoint a czar of executive compensation for these corporations, but he approved a $7-million salary/$3.5-million bonus plan for the head of AIG, 80% of which is now owned by taxpayers. Few workers, executives included, would agree to work for less than the going rate. Executives are simply used to earning millions of dollars, and there is little that either the czar or shareholders can do about it unless Congress limits all executive compensation. But the chance of such legislation passing is slim.

Why is limiting executive compensation so difficult? Because executives have a seemingly unassailable argument — market forces — that University of Chicago professor Steven Kaplan defended in an October debate: “Market forces govern CEO compensation. CEOs are paid what they are worth.”

Of course, market forces are cited not only to justify outsized compensation for executives but also poverty wages for workers. Textbooks claim that minimum wage laws and union wages create unemployment. Just what are these market forces, and should we let them determine executive compensation and wages?

When British economists David Ricardo and Adam Smith examined this question 200 years ago, they concluded that what a person earns is determined not by what the person has produced but by that person’s bargaining power. Why? Because production is typically carried out by teams of workers, managers and machines, and the contribution of each member cannot be separated from that of the rest. A driver and a bus, for example, generate $100,000 of income a year. The driver is paid $25,000. Is this because the driver had transported 10 of the passengers without the bus while the bus had transported 30 of the passengers without the driver? The driver’s pay is so small only because the driver is so weak at the bargaining table.

It was Smith who explained that the bargaining power of each party is determined by the laws that the government passes and the way that it enforces them, and that, as a rule, the government sides with employers against employees. He was particularly concerned with anti-unionization laws. Had he witnessed the largesse that boards of directors are permitted to offer executives, and the government’s behavior toward executives in the current crisis, he probably would have added that the government also sides with executives against shareholders and taxpayers.

Despite the logic of Ricardo and Smith’s explanation that it is power, not productivity, that determines what people earn, the notion that people earn what they “deserve” persists. It dates to the Haymarket riot of 1886 in Chicago — in which police and labor protesters clashed and several policemen and demonstrators were killed — and the labor unrest that followed. Concerned about this unrest, John Bates Clark, a Columbia University professor, warned in an 1899 book: “The indictment that hangs over society is that of ‘exploiting labor.’ If this charge were proved, every right-minded man should become a socialist.”

It was thus with a clear political agenda that Clark took it upon himself to prove that the charge of exploitation of workers was dead wrong. Clark’s “proof” was to ignore the fact that production is carried out by teams and that individual contributions cannot be measured. He simply declared that the contribution of each individual worker and each machine could be measured, and that the earnings of either workers and executives or machines are simply the values of these contributions.

In this view, if the government were to raise wages by law, employers would have no choice but to fire workers, because no employer can pay out more than the worker puts in. And if the government were to set limits on executive compensation, the bright and the talented would choose to work less or limit the level of their performance.

Evidence that Clark’s theory is wrong — that production is carried out by teams and that astronomical compensation is not a requirement for good performance — can be found everywhere. In 1941, Wassily Leontief, a Nobel Prize-winning economist, tried to alert economists to the fallacy of Clark’s theory. But Leontief, like Ricardo and Smith, was ignored. And Clark’s tale that earnings are determined by productivity alone is still being taught around the globe.

Corporate executives take a different approach: picking the argument that suits them. When it comes to their workers’ wages, Clark’s theory rules: The wage of each worker is equal to the value of his or her product, and raising wages will cause unemployment. When it comes to the executives’ own compensation, however, they hide behind the idea that an individual’s contribution can’t be measured. So even when the corporations they run lose big and their stocks decline, they still collect millions in pay. Executive compensation is now so large that executives’ work effort no longer has any relation to the level of their compensation.

Adam Smith got it right: The remedy for the rule of power is the rule of law. We need new laws to check the unfair distribution of the fruits of our labor. One such law could set a maximum ratio at any given company between the highest executive compensation and the lowest worker’s wage. Another could set a minimum ratio for the division of income between labor and shareholders. Still another could raise the minimum wage and tie it to the median wage, which would make the minimum wage a consistent living wage.

Overpaid executives take more than their fair share and leave too little for the rest of us, threatening our health — and that of society.

Moshe Adler teaches economics at Columbia University and is the author of “Economics for the Rest of Us: Debunking the Science That Makes Life Dismal.”

*This article originally appeared in The L.A. Times on January 4, 2009. Reprinted with permission from the author.

Image: Economics for the Rest of UsAbout the Author: Moshe Adler teaches economics in the department of urban planning at Columbia University and is the author of the just published book: “Economics for the Rest of Us: Debunking the Science that Makes Life Dismal.”


Share this post

The Good Looking Advantage at Work

Share this post

Image: Bob RosnerStudies show that good looking people have an easier time at work.

I still laugh when I remember the Daily Show’s segment on John Roberts Supreme Court hearings, entitled, “Judge Cutie” (with the same logo as Judge Judy). And that wasn’t the only press coverage that included a reference to the fact that Roberts was good looking.

And here I thought that the only candidates for high office who were selected on the “babe” factor were John Edwards, Dan Quayle and Sarah Palin. Before you jump to the conclusion that this workplace blog has been hijacked by a political commentary, studies show that good looks don’t only resonate in Vice Presidents and Supreme Court Justices; they also carry a great deal of weight back at work.

According to an article in the USA Today (a newspaper, by the way, well known for its appearance) male CEO’s were, on average, 3 inches taller than the average man. Another study found that an increase in a woman’s body mass resulted in a decrease in her family income and job prestige. And finally more than 20% of very overweight employees have low morale, double the average for employees with healthy weights.

Will the tyranny of the pretty ever end? The good looking people called the shots in high school and it looks like they’re still calling ‘em all these years later.

I decided that rather than complaining and criticizing people who are good looking, I would interview a bunch of attractive people to get their take on this issue (it’s a tough job and I decided to make this sacrifice for you, dear reader). What I learned was fascinating. Every good looking person I talked to admitted that there were many times in their lives that they had stuff handed to them. But they also described times where their ideas weren’t taken seriously or where there was retribution simply because of their looks.

These conversations were a revelation to this average-looking blogster. I knew from personal experience that not-pretty people suffered because of their appearance. I was fascinated to discover that pretty people also experience rejection for—yes, you guessed it—their looks.

So I’m making a plea. Let’s all move past high school and start to judge people for the content of their character and for the quality of their ideas. People Magazine’s best looking people issue may be a fun read—but it’s an ugly way to do business.


Share this post

Companies That Care About Workers’ Rights: Apply Now to be Named a 2010 Top Small Company Workplace

Share this post

Inc. magazine and the nonprofit I work for, Winning Workplaces, have partnered to find and recognize exemplary workplaces; those that motivate, engage and reward people. A model workplace can offer a critical competitive edge, ultimately retaining employees and boosting the bottom line.

Together, Inc. and Winning Workplaces will identify and honor those benchmark small and mid-sized businesses that offer truly innovative, supportive environments, thus achieving significant, sustainable business results.

“Growing, privately held companies have always excelled at competing based on the people they employ,” states Jane Berentson, Editor of Inc. magazine. “Their innate ability to innovate is woven throughout their cultures, including the way they manage and motivate their employees. Inc.’s partnership with Winning Workplaces is a great opportunity to fully recognize private company excellence in supporting their human capital.”

Click to apply for Top Small Company Workplaces 2010“Winning Workplaces is thrilled to partner with Inc. as we honor truly exemplary organizations who have created workplaces that are better for people; better for business; and better for society,” said Gaye van den Hombergh, President, Winning Workplaces. “These organizations are an inspiration to business leaders looking for ways to leverage their people practices to create more profitable and sustainable companies.”

The application process is open through January 22, 2010. To apply, go to tsw.winningworkplaces.org. The Top Small Company Workplaces will be announced in a special issue of Inc., which will be available on newsstands June 8, 2010, and on Inc.com in June. An awards ceremony, honoring the finalists and winners, will be held at the national Inc. On Leadership Conference in October 2010.

About Inc. magazine
Founded in 1979 and acquired in 2005 by Mansueto Ventures, Inc. magazine (www.inc.com) is the only major business magazine dedicated exclusively to owners and managers of growing private companies that delivers real solutions for today’s innovative company builders. With a total paid circulation of 724,110, Inc. provides hands-on tools and market-tested strategies for managing people, finances, sales, marketing and technology.

About Winning Workplaces
Winning Workplaces (www.winningworkplaces.org) is an Evanston, IL-based not-for-profit, whose mission is to help the leaders of small and mid-sized organizations create great workplaces. Founded in 2001, Winning Workplaces serves as a clearinghouse of information on workplace best practices, provides seminars and workshops on workplace-related topics and inspires and awards top workplaces through its annual Top Small Company Workplaces initiative.

About the Author: Mark Harbeke ensures that content on Winning Workplaces’ website is up-to-date, accurate and engaging. He also writes and edits their monthly e-newsletter, Ideas, and provides graphic design and marketing support. His experience includes serving as editorial assistant for Meredith Corporation’s Midwest Living magazine title, publications editor for Visionation, Ltd., and proofreader for the National Association of Boards of Pharmacy. Mark holds a bachelor’s degree in journalism from Drake University. Winning Workplaces is a not-for-profit providing consulting, training and information to help small and midsize organizations create great workplaces. Too often, the information and resources needed to create a high-performance workplace are out of reach for all but the largest organizations. Winning Workplaces is changing that by offering employers affordable consulting, training and information.


Share this post

How Things Really Get Done

Share this post

Image: Bob RosnerOne of the most creative bits of problem solving I’ve ever heard of came during Hurrican Katrina. In the French Quarter, Addie Hall and Zackery Bowen found an unusual way to make sure that police officers regularly patrolled their house. Ms. Hall, 28, a bartender, flashed her breasts at the police vehicles that passed by, ensuring a regular flow of traffic (from the New York Times).

I’m a fan of New Orleans. And let’s face it, if you had gone through the hell of hurricane Katrina, would you be able to draw on years of experience at Mardi Gras to get the police attention you needed? Ms. Hall, like so many residents of the Big Easy, has the most creative problem solving skills I’ve ever seen.

Ms. Hall also reminds us that there are the ways that things are supposed to get done and the ways that they actually get done. I’m not suggesting that flashing is a career enhancing move for most of us. But there are times at work, and in life, where creativity and bold action are not only called for, they’re a requirement.

This reminds me of a story that I heard as a graduate business student. Our professor told us that he wanted to talk to people who actually implemented programs in corporations. So he arranged a meeting with no consultants, authors or other hangers on. He only allowed corporate doers in the room. He asked them to tell success stories and he marveled at how the techniques for getting things done in the real world had little resemblance to what was being taught in MBA programs.

For example, there was the change agent who tried to get his program implemented for years with no success. He’d long since given up. Then one day he was having lunch with his friend, the company speechwriter. The topic of his failed program came up. He told the sad story of defeat after defeat on the corporate battlefield. Cut to the CEO two weeks later announcing his latest initiative, the change agent’s program. One conversation with the speechwriter breathed more life into his program than years of banging his head against the corporate hierarchy.

For every rule of how things should get done in organizations there are often at least two exceptions. That’s why it’s so important to get to know the network of doers in your organization. They’re in there, but chances are that they’re operating beneath the radar. So you’re going to have to go looking for them. Once you get their confidence, they’ll have many stories that will both surprise you and teach you new ways to get from point A to point B within your organization.

About the Author: Bob Rosner is a best-selling author and award-winning journalist. For free job and work advice, check out the award-winning workplace911.com. If you have a question for Bob, contact him via [email protected]


Share this post

CEO’s Home Isn’t Where Your Heart Is

Share this post

CEO used to equal rock star.
 
Okay, it’s not as bad as it was in the ‘80’s when even non-business magazines had smiling CEOs on the cover, but I still think most of us want our CEO to have a certain amount of star quality. Call it the Trumpification of the corporate world. 
 
Who would you rather have leading your company? Casper the friendly ghost or a Genie who can make all of the company’s wishes come true (even if he does have a comb over)? Let’s face it, shy and retiring just doesn’t cut it when you’re responsible for the livelihood of lots of people. When it comes to effective CEOs, bigger always seems better. Or does it?
 
Arizona State University’s Crocker Liu and New York University’s David Yermack have a really interesting take on rock star CEOs and how much they can cost a company. Even better is the creative way that the two professors came up with to study this issue—they compared the size of the CEO’s home with corporate performance. Call it entitlement, focusing on the wrong things, an inferiority complex, short man’s syndrome or a bunch of guys spending other people’s money—this study found that we all pay when the CEO literally lives in a castle.

Let’s start with the numbers. In 2004, the median home price for CEOs was $2.7 million.
Compare that to the median price for all homes in U.S., $195,200. The average size of the CEOs home, 5,600 square feet. Heck, if you are a titan of industry, wouldn’t you want 4.5 bathrooms? Actually I’m shocked the number isn’t at least 7, if you are so darn important, how could you possibly use the same bathroom more than once a week? Come on, these are really important people. (Okay, I’ll attempt to reduce the sarcasm for the remainder of this blog.)
 
But the study gets really interesting when it examined 12 percent of the S&P 500 CEOs with homes that were larger than 10,000 square feet or were on at least 10 acres of land. The companies that were run by this group of landed gentry lagged the S&P 500 by 25 percent over the three years following the home purchase.
 
That bears repeating. The biggest CEO houses significantly increased the odds of poor corporate performance.
 
I’m guessing that those of you reading this article are in one of two camps right now. The first group is ready to storm the Bastille and scream about CEOs living large off the sweat and tears of the rest of us.
 
But I’m sure there are also readers who still believe that a big ego is a necessary part of the mix. That these two professors, and me, are making a mansion out of a molehill. I may be, but you may feel differently after you read this.
 
Approximately a third of CEOs exercised stock options and sold shares in the year before they bought a home. Consistently the shares peaked right before the purchase. Given the brouhaha over backdating stock options, I find it fascinating that the stock prices tended to peak so consistently just before a mansion was purchased. Maybe that big house isn’t something that was earned but rather something that was scammed.
 
Ironic isn’t it. Putting a CEO in a mansion, more often than not, puts you in the poor house. 

About the Author: Bob Rosner is a best-selling author and award-winning journalist. For free job and work advice, check out the award-winning workplace911.com. If you have a question for Bob, contact him via [email protected]


Share this post

Memo to CEOs: Your Employees Just Aren’t That Into You

Share this post

A few years ago Workplace911 did an online poll. It asked, “Which movie title best describes your relationship with your boss?” Sure, the question was light-hearted, but the results weren’t:

Little Shop of Horrors: 20%

It’s a Wonderful Life: 24%

But the #1 movie title describing the relationship between employees and bosses?

House of Games: 56%

To all the bosses out there, I have some bad news. In the “good old days,” your people didn’t like you that much. Given today’s economic meltdown that occurred on your watch, I’m sorry to say, it’s really hit the fan.

Welcome to “Velcro” management. Where every stupid statement uttered by the former Merrill Lynch CEO John Thain, sticks to YOU. Where every corporate jet sticks to YOU. Where every million dollar bonus payment sticks to YOU. Think about it, who was the enemy in the last movie you saw? Odds are it was a corporate villain. Is it fair? No. But populist anger against you is growing exponentially.

I discovered how angry people are on a recent flight to New York City to appear on OTM. I asked my seatmate if he minded if I practiced some of my observations on him. After doing a riff on the $35,000 executive commode, I paused and asked if I’d gone too far. He said, “NO. That is exactly what I’m feeling and so are most of my friends. Please speak up for all of those of us who don’t have a voice.”

Wretched CEO excess isn’t reserved for just “a few bad apples” anymore; it’s the norm in the eyes of most of the people that I hear from today. I’ve got six words to help any CEO who is ready to lead and wants to really escape being tarnished by other CEOs: “One dollar a year in salary.” Only truly bold action will separate you from the tawdry norm that has become the CEO standard operating procedure.

And you ain’t seen nothing yet. According to a recent Associated Press poll, almost half of us now fear losing our jobs. And almost two-thirds of us are now concerned about being able to pay our bills. And more than seven in 10 of us know someone who has been laid off.

Mr. and Mrs. CEO, it’s time to smell the coffee. This economic mess didn’t happen despite your best efforts. It happened because of them. Same-old-same-old layoffs and lecturing everyone about tightening their belts won’t work anymore. You either need to lead, or you need to leave.

As more of us lose our jobs, I think we’ll start to see this anger spilling out into the suites, and the streets, if for no other reason than people suddenly have time on their hands to make their feelings known and little left to lose. It’s our job to speak out. Start with your next corporate proxy statement. That’s safe and won’t threaten your job. Anonymous blog postings are next. Look for every opportunity to add your voice of displeasure about our current crop of leaders.

However, there is a white knight out there for all of us: Donald Trump. When the peacock and The Donald are done with celebrities, the Apprentice needs to take on CEOs. Imagine the huge ratings as Trump says, “You’re Fired!” to executives from the banking and auto industries. The people are ready for someone to say those two magic words that you’re famous for to corporate leaders across the land. You go guy!

Bob Rosner is a best-selling author, award-winning journalist and contributor to On The Money. He has been called “Dilbert with a solution.” Check out the free resources available at workplace911.com. You can contact Bob via [email protected]


Share this post

The CEO Patriot Pledge: Just Say ‘No’ to More Layoffs

Share this post

CEO PATRIOT PLEDGE: As an executive my primary motivation is to act for the good of my company, not just my own financial gain. No one at our company will earn a guaranteed base salary more than 40 times of our lowest paid worker and we will offer the same health care and 401(K) matches to employees as we do for executives. We support pay for performance, so when our company’s performance serves investors and employees, we’ll share in the gains. When our company’s performance does not adequately serve our investors and employees, we’ll share in the sacrifice.

These are M.A.D. economic times. That’s M.A.D. as in Mutually Assured Destruction, the old Cold War strategy where no one would be left standing after that first nuke was launched. Economic experts, who agree on little else, agree on this: if our current vicious cycle of “layoffs-driving-down-purchasing-which-increases-layoffs” continues, no one will be left standing.

There is an exit strategy here that no one is talking about; billions of dollars that could be used to address the layoff cycle immediately. This is not a plea for legislation or government funds. In fact, not a penny would come from taxpayers. It’s simple, voluntary, and dare I say, patriotic. The “Chief Executive Officer Patriot Pledge,” see above, is a 95-word call to action for all corporate leaders, not just those in financial services, to rein in their own wretched excesses and voluntarily re-invest part of their lofty salaries and perks to keep employees on the payroll.

Entitlement and greed are the only words I can find to describe $18 billion in bonuses given during the last two months of 2008. At the same time that one million people were being laid off, including at these very firms that were giving bonuses to a select few. Who paid the bill that allowed these corporations to party like it was 1999? U.S. taxpayers, courtesy of former Treasury Secretary Paulson’s inability to ask for any accountability from the corporations receiving $350 billion in TARP funds. Who knew the “free market” could be so expensive? Heckuva job, Paulie!

I’m sure some will scream “socialism,” but socialism isn’t voluntary. No, the CEO Patriot Pledge is pure capitalism, rewarding people when they do well and refusing to grossly enrich failure any longer. I’m not disparaging wealth or begrudging anybody for achieving success, just asking for bonuses that are tied to real achievement.

The Corporate Library examined the paychecks of just the CEOs of the Russell 3000 (the 3,000 largest U.S. companies based on market capitalization) and calculated these executives were overpaid by $14.7 billion annually. This does not include the huge paychecks of COOs, CFOs, etc. It also doesn’t include tens of thousands of executives at smaller firms. My estimate is that up to $40 billion could be found to reduce layoffs just from excess executive pay.

Of course, some executives consider themselves worthy of any compensation, no matter how disproportionate or unwarranted. Just ask John Thain, former CEO of Merrill Lynch, who in a recent interview told CNBC that it was important, even in troubled times, to give top talent over-the-top paychecks.

Well, if these top executives at Merrill Lynch and thousands of other firms are so talented, then how did we end up with 626,000 new unemployment claims filed just last week…with half of our 401(K)’s gone…and with, my personal favorite, a $35,000 executive commode funded from the public trough. Do these corporate “leaders” have no sense of decency?

Fortunately, there are some executives who get it. For example, Thomas A. James, CEO of Raymond James. Sound familiar? They are the sponsors of the stadium of the most recent Super Bowl. Raymond James had almost $3 billion in revenue last year. Yet, Tom James’ guaranteed base salary was only $325,000, less than 20 times the amount of the lowest paid worker at his company. As compared with the average CEO salary, which is 262 times that of the lowest paid worker. [Please note: for every “average” salaried CEO who cuts back his or her base salary to a ratio of even 40 times the salary of the lowest paid worker, almost 200 workers would keep their jobs.]

While the S&P sank 22%, Raymond James had a positive return for its investors. With the bonus he earned, Tom James’ total compensation was slightly over $3 million. But the key word here is “earned.” It is no accident that Raymond James has a conservative compensation philosophy and the company also did well despite the carnage in the rest of the market.

Compare Tom James to Robert Iger, CEO of Disney. According to Graef Crystal, compensation guru, Iger received $51 million during a year when his company suffered losses and layoffs. Or to put it in Disney language, Iger received a king’s ransom for a pauper’s performance.

What is the CEO Patriot Pledge? It’s a plea to encourage American businesses to do what they have always done: lead the way with vision and creativity. Only this time the goal is not to just create a profit, but to keep people employed so there will be a market for our products and services.

In short, our turbulent times require a reversal of a famous quote: today “what is good for the country is good for G.M.”

You can call this initiative naïve, but remember that a similar pledge, the Sullivan Principles, played a key role in ending apartheid in South Africa.

Greed isn’t good, it’s a symptom of poor impulse control and leads us down the path to more Lehman Brothers-style implosions. David beat Goliath and we can put an end to this fat-cat behavior. My single voice can be easily dismissed, but all of our voices can’t. Put the pledge on the bulletin boards of your company, send it to the companies that you own stock in and ask your friends and colleagues to do the same. Also pass on link to the CEO Patriot Pledge video on YouTube. We need to all share in the sacrifice, but isn’t it time that our leaders actually led during tough times?

There is a saying, “To save one life is as if you have saved the world.” Executives, you hold the world in your hands. We can keep people employed and get our economy working again, but only if we work together to stop the madness.

About the Author: Bob Rosner is a best-selling author, award-winning journalist and contributor to On The Money. He has been called “Dilbert with a solution.” Check out the free resources available at workplace911.com. You can contact Bob via [email protected]


Share this post

Follow this Blog

Subscribe via RSS Subscribe via RSS

Or, enter your address to follow via email:

Recent Posts

Forbes Best of the Web, Summer 2004
A Forbes "Best of the Web" Blog

Archives

  • Tracking image for JustAnswer widget
  • Find an Employment Lawyer

  • Support Workplace Fairness

 
 

Find an Employment Attorney

The Workplace Fairness Attorney Directory features lawyers from across the United States who primarily represent workers in employment cases. Please note that Workplace Fairness does not operate a lawyer referral service and does not provide legal advice, and that Workplace Fairness is not responsible for any advice that you receive from anyone, attorney or non-attorney, you may contact from this site.