Of Concern? CEO Pay and the Economy

crossposted from unbossed

You bet! And here are some links to information on this important issue.

First up, the House Committee Committee on Oversight and Government Reform has been releasing documents related to CEO pay and the mortgage crisis. Each of these links will lead you to a, well, wealth of documents and written testimony.

Committee Committee on Oversight and Government Reform Memorandum on CEO Pay and the Mortgage Crisis  March 6, 2008

Committee on Oversight and Government Reform hearing, "Executive Compensation II: CEO Pay and the Mortgage Crisis" on Friday, March 7

I was particularly touched by testimony justifying a life that has contributed to our country's crisis and the immiseration of so many people by a grossly overpaid CEO who claims to be one of the little people because he came from humble beginnings.

Second, Open CRS has now provides access to an important research document. Executive Compensation: SEC Regulations and Congressional Proposals

The dispute concerns the gross inflation of executive pay compared to their performance and how best to ensure that the two are connected. There is also some concern over just the enormous pay these executives are receiving.

One theory is that if information is provided to shareholders, then the market will ensure that the pay situation will correct itself. That might work but for the fact that the executives have every incentive to hide what the true level of their compensation is. The problem is that, while mortals get paid a salary or wage and that is basically it, executive compensation includes salaries but their true wealth comes from a variety of sources. As we know, companies may be paying for executive houses, vacations, and more - things we mortals must pay for out of our own pockets - but not attributing these to the executive's pay.

Here is the summary of the report.

Concern about shareholder value, corporate governance, and the economic and social impact of escalating pay for corporate executives has led to a controversy regarding the practices of paying these executives. On July 26, 2006, the Securities and Exchange Commission voted to adopt revisions to its rules on disclosure of executive compensation. On December 22, 2006, the SEC announced that it had adopted changes in the July 26 rules. These December 22 changes have become somewhat controversial, with opponents saying that they obfuscate executive compensation and with proponents saying that the changes are necessary to give a truly accurate picture of executive compensation. Congressional proposals concerning executive pay have thus far not focused on the SEC rules. Instead, proposals have been made concerning additional disclosure of executive compensation and limiting the amount of deferred compensation for tax purposes. This report will be updated as warranted.

This level of pay is certainly important as a symptom of a system of corporate governance that is broken.

It is also a symptom of a larger problem - the sense of entitlement and disregard of the communal welfare that so many in power now have. In some cases it is virtually a kleptocracy.

We as a country are in big trouble when those in power lose all sense of the role they play in the fate of this country. They apparently have never heard: To those to whom much is given, much is expected.

No one is self made. None of us can exist but in community. These self-aggrandizers are poisoning the well from which they drink.

•  It's a long way to Tip-erary unless

  you can get a ride on the CEO express!

  by shirah on Thu Mar 27, 2008 at 05:24:06 AM PDT

•  The sense of entitlement that some of these CEOs

  have is obscene. They are entitled to million dollar bonuses, but their loyal employees aren't entitled to health care, pensions, whatever goes by the wayside, AND WE BUY IT. They say that shareholders care about nothing but making money, AND WE BUY IT, even though most shareholders (or at least this one) do indeed care about being decent people. It's time for this to stop.

  by Tenn Wisc Dem on Thu Mar 27, 2008 at 05:36:49 AM PDT

  •  I saw this on Wall Street years back

    Senior VP's would screw $20,000 a year clerks out of $2000 bonuses to keep THEIR multi-million dollar bonuses.......  the bonus pool was capped and allocation was at the discretion of Higher-ups who ALWAYS put their interests first.....

    The whole focus of upper execs was to hold onto their jobs at any cost because they knew that nobody else was likely to give them what they were getting for what they were doing....

    Of course once you got high enough it didn't matter....NOTHING matterred.

    The EVP in charge of operations was a total screw-up - NEVER got the new computer system he was charged with developing up and running.... he tried to 'smoke and mirrors' it but got caught....lol...... nonetheless he managed to talk his way into a CEO spot elsewhere for an insurance company based on his heavy 'operational management' experience.....lol

    But then the Chairman and part owner pulled the greatest con job of all.  First he sold the Japanese a huge stake for millions and then the whole company to the Swiss..... That pig was dressed up REAL pretty......  but foreigners were desperate to buy entry into the US financials industry. Boy were they played for fools...  Like the Japanese that overpaid for US Real Estate and sold it all back a decade later at a loss.

    I was at the wedding of the Chairman of Verizon's daughter shortly after 9/11.  He'd just gotten a $26 million bonus - AND laid off 5,000 people.  Do the math.  His bonus would have covered the cost of those employees - and I don't care how good you are - NO ONE PERSON is going to make up for the loss of that many workers.   (and reality is they had to hire them back later because work was simply NOT getting done).  But the wedding was spectacular.  At the Pierre.  Flowers alone were $200,000 (at least).  The couple got an apartment on West End Ave as a wedding present.............ironic, huh?  especially considering that Seidenberg started as a lineman for MaBell.... guess he forgot his roots - or remembered them and was out to grab all he could, while he could.

    by xrepub on Thu Mar 27, 2008 at 05:56:00 AM PDT

    •  He got that bonus BECAUSE he laid them off

      - at least that is the norm in corporate thinking these days.

      by shirah on Thu Mar 27, 2008 at 06:10:15 AM PDT

    •  and private contractors who are the new

      robber baron class on the make. GAO just issued another report on the corruption of government in the use of private contractors at DOD. link

      by shirah on Thu Mar 27, 2008 at 06:16:34 AM PDT

•  My republican relatives are PISSED at this

  scandal, and for the right reasons. Whether this translates into a change in the way they vote, I don't know.

  by the fan man on Thu Mar 27, 2008 at 05:41:19 AM PDT

•  No real control is exerted by Boards

  Corporate Boards are often filled by friends of CEO'S..... a mutual back-scratching club..... you serve on my Board, I serve on yours...   No real control is EVER exerted on executive compensation unless some raider showsa up and makes noise after grabbing a large stake.

  Reality is that NOBODY holds enough stock in any corporation anymore to exert any real control over ANYTHING.

  We forget that in the days of the Robber Barons the "CEO's" often held controlling interests - or large positions with THEIR OWN MONEY at stake.  Many made and lost fortunes repeatedly.... of course many of those fortunes were based on manipulated markets but it was still THEIR money at risk.  Shares outstanding were FAR fewer in number as well.

  Nowadays CEOS only hold stock through options - often repeatedly reset to their advantage.  Senior Executives rarely helped found the company they run and are often there to get as much as they can out of their employer before they move on.

  The mindset is VASTLY different now.  

  I suspect that even guys like Gould would be horrified to see current corporate compensation levels and the focus on the ILLUSION of higher profits and greater efficiency - instead of REAL improvements.  

  Remember - most of the 'Robber Barons' STILL managed to build real and substantial businesses - PROFITABLE buisnesses.....  the exceptions were railroads - the 'subsidized' ventures of their day where the game was to get as much government support as possible.... those stocks were manipulated like mad.

  by xrepub on Thu Mar 27, 2008 at 05:42:38 AM PDT

•  Why don't we all just become CEO's? n/t

  by breezeview on Thu Mar 27, 2008 at 05:48:14 AM PDT

  •  You can be on my Board

    we can have annual meetings in Hawaii.....

    (as long as I'm on your board)

    by xrepub on Thu Mar 27, 2008 at 05:57:34 AM PDT

    •  Have you figured out PowerPoint?

      One of us should know PowerPoint.

      by breezeview on Thu Mar 27, 2008 at 06:38:01 AM PDT

      •  I'd rather go to Gitmo... (nm)

        by jkddude on Thu Mar 27, 2008 at 06:52:39 AM PDT

        •  Yea, the beaches are less crowded. n/t

          by breezeview on Thu Mar 27, 2008 at 07:28:44 AM PDT

      •  My 12 year old knows it cold

        they teach that instead of grammar now....

        he can be my Admin Assistant..... every senior Exec has an Admin Assistant whose sole job is producing PowerPoint dog and pony shows.

        REAL Executives don't do PowerPoint - or much of anything else for that matter

        by xrepub on Thu Mar 27, 2008 at 01:42:44 PM PDT

  •  See the book recommendation in my comment below

    It has eye-popping economic information - and lots on the crooks, thieves and miscreants who have found a perch at the heads of our corporations.

    by shirah on Thu Mar 27, 2008 at 06:14:37 AM PDT

    •  or above depending on your settings n/t

      by shirah on Thu Mar 27, 2008 at 06:17:18 AM PDT

•  Even Bad In NFP .

  http://www.wherethemoneygoes.com/...
  WhereTheMoneyGoes.com: Search Results

  by ArtfromMI on Thu Mar 27, 2008 at 05:49:00 AM PDT

•  Let me recommend a book for more facts

  on this issue. More Unequal: Aspects of Class in the United States. Edited by Michael D. Yates. New York, New York: Monthly Review Press, 2007. 205 pp. $14.95 paperback

  In particular, start with the essays by William Tabb and Michael Perelman and their exposes of wealth and power.

  The first couple essays are written for those who are proponents of and familiar with Marxist ideas. So skip them and get more into those on the economy and related issues.

  by shirah on Thu Mar 27, 2008 at 06:13:22 AM PDT

•  Nader addresses this...

  in his latest book.

  Good stats in there.

  by jkddude on Thu Mar 27, 2008 at 06:50:54 AM PDT