Average worker salaries increased by about 2.8% in 2012, not even outpacing historically low inflation rates. CEO pay at most companies increased by about 6% in the same time period.
But there was one group whose salary, bonuses, dividends, and stock options increased - CEO's of Wall St. banks and financial institutions. Their compensation went up by about 20% over the previous year. And who did even better than that? Managers of private equity firms whose pay increased by 30%
Average workers' salaries stayed essentially flat from 2011 to 2012
Employees will get an average increase of about 2.8% in 2012 on average, up slightly from the 2.6% employers said they plan to shell out this year, according to a survey of 773 U.S. companies by Towers Watson, a consulting firm. Those figures include all types of workers, from executives to clerical workers, exempt and nonexempt, salaried and those paid by the hour.And while the gap between the increase in workers' salaries and CEO's (base pay) raises is shrinking, the one between them and Wall St. CEO's is expanding exponentially:
Companies “plan a small uptick in their funding for merit increases in 2012 versus 2011,” said Laura Sejen, global practice leader of rewards for Towers Watson.
“For employees, on average, that translates into salary increases that might not keep up with inflation,” she said.
The consumer price index for all urban consumers rose 3.6% in the 12 months ending July 2011. See the consumer price index data on the Bureau of Labor Statistics' website.
In fact, the gap between average pay hikes for executives compared with those for other workers is shrinking, Sejen said.Then there is one group whose pay and incentives increased wildly, out of all proportion to their companies' performance, and even as employee compensation suffered as a result. That group is the one inhabiting the rarefied world of the Masters of the Universe, Wall St CEO's.
“The planned increases are pretty much the same no matter what segment of the population you’re looking at — be it nonexempt, hourly clerical and professional up to executive,” she said.
About 8 or 9 years ago, she said, “there used to be a gap in funding of the base-pay increase of executives versus the rest of the population. It could be a couple of points greater, maybe more. Now it’s basically the same.”
Why? “My own opinion is that’s a manifestation of some of the pressure on executive compensation broadly,” she said.
But also, she said, “for executives, the base pay is really the smallest piece of the pie. It’s all about variable pay in the form of annual and long-term incentives.”
Last year was an awful one for many on Wall Street. But not everyone struggled. Some even partied like it was 2006.The two highest paid individuals on that list of top 50 are co-CEO's of private equity firm KKR & Co., Henry Roberts Kravis and his cousin George Roberts, each weighing in with about $30million in total annual compensation. 2011 may have been a bad year for banks but it was a fine year for their CEO's.
In fact, for the 50 people ranked in Bloomberg Markets' annual list of the best-paid chief executives in finance, 2011 was nothing to complain about. Those 50 people saw their pay rise by an average of 20.4 percent, even as Wall Street shed tens of thousands of workers, bank shares plunged and the greater economy foundered.
Kravis and Roberts, 68, lead a list of 50 financial CEOs whose compensation collectively rose by an average of 20.4 percent in 2011 -- a year when most big banks and brokerages saw their revenues, profits and stock prices plummet. The 2011 pay rise followed a 26 percent increase in 2010 for CEOs who held the same job in both yearsEven though KKR's stock slid 5.4%, they took home a lot morethan their $30mil salary
That captures only a slice of their total compensation, however. Because of their stake in the listed company, each took home an additional $64.2 million in dividends and other distributions, according to company filings.Another private equity manager that did pretty well was Stephen Swarchzman, head of the Blackstone Group
All told, Schwarzman received $148.5 million in pay and dividends in 2011.Another person high on the list is Jamie Dimon, famous recently for incurring a $2B trading loss at JPMorgan Chase through a series of 'egregious mistakes'
The highest-paid banker in the Finance 50 is Jamie Dimon of JPMorgan Chase & Co. (JPM) (JPM) His total compensation increased 11 percent, to $23 million, even as the bank’s stock sank 20 percent.Citigroup's Vikram Pandit leads the rankings of least shareholder value. Shareholders have rejected his pay award in a non-binding vote, thanks to a rule in the Dodd Frank law
Dimon is No. 9 on Bloomberg Markets magazine’s ranking of financial CEOs who provided the least shareholder value during the three years from 2009 through 2011.
Pandit’s pay made headlines when the majority of Citigroup shareholders, invoking the so-called say-on-pay provision of the Dodd-Frank financial-reform law, voted to reject it. The vote isn’t binding, but outgoing Citi Chairman Richard Parsons said the bank’s board would reconsider executive pay packages in light of it.So, we see exactly who is 'doing fine' in this economy - Mitt Romney's compatriots in private equity. I'd say this makes his claims that President Obama is out of touch for claiming the private sector is doing fine, just a tad hypocritical, and his claim that this experience 'living in the economy' as a qualification to be President of the US, even more so.