During this recession, there’s nothing like excessive CEO pay to get the blood boiling – particularly when viewed alongside widespread layoffs and the highest levels unemployment in decades (10.6 percent in January) . Yet that’s the reality the Institute for Policy Studies documented in its highly anticipated Annual Executive Compensation Survey, released yesterday. In its 17th year, the report (entitled CEO Pay and the Great Recession) identifies the 50 firms that laid off the most workers since the onset of the economic crisis in November 2008 –at least 3,000 workers at each through April 2010. The fifty top CEO “Layoff Leaders,” as IPS dubbed them, took home 42 percent more pay in 2009 – an average of $12 million –than their peers at S&P 500 firms, who pocketed an average of $8.5 million, according to an IPS press release. Pouring salt on the wounds, most announced these layoffs when reporting positive earnings.
Among the highest paid “Layoff Leaders”:
- Fred Hassan of Schering-Plough: Hassan received a $33 million golden parachute when his firm merged with Merck in late 2009, while 16,000 workers faced pink slips;
- William Weldon of Johnson & Johnson: Weldon took home $25.6 million, more than three times as much as the S&P 500 CEO average, at a time when his firm was slashing 9,000 jobs; and
- Mark Hurd of Hewlett-Packard: Hurd’s 2009 pay package totaled $24.2 million, before the $28 million severance given in exchange for his resignation earlier this month after controversy surrounding expense reports (a sign of graver governance problems).
“Our findings illustrate the great unfairness of the Great Recession,” says Sarah Anderson, lead author of the study (along with co-authors Chuck Collins, Sam Pizzigatti, and Kevin Shih.). “CEOs are squeezing workers to boost short-term profits and fatten their own paychecks.”
The report finds a correlation between layoffs and excess CEO pay, but not a causal relationship, as multiple factors contribute to the perfect storm of economic meltdown: Wall Street pressures to cut costs; a short-term investment mentality that measures productivity in quarterly units; an acute risk-averse climate that skews decisions in favor of a few. Recent Dodd-Frank financial reforms approved by Congress include provisions for shareholder Say-on-Pay and disclosure of pay gaps between CEOs and employees. However, corporate lawyers predict a “logistical nightmare” to implement the law, according to the Financial Times. Ultimately, corporate boards decide on executive compensation. Now that the SEC’s proxy access rulemaking gives shareholders a foot in the door to nominate candidates for board elections, the outlook for better boards looks brighter.
But tell that to millions of Americans who’ve been jobless for weeks, months, and years—including the so-called 99ers who’ve been unemployed for 99 weeks or more, and continue to press Congress for yet another extension of unemployment benefits. The gap between those with little and those with a lot is widening. CEO salaries serve as a lightning rod, focusing energy on a dilemma in search of a solution. But fixing the problem requires far more than any given board or shareholder activist can provide. Escaping this quandary calls for systemic action.
“We bail them out — they lay us off,” commented longtime labor activist Joe Uehlein, Executive Director of the Labor Network for Sustainability, on the report findings. “Working people worked hard to build these companies. Squeezing workers to boost profit and CEO pay reflects a perverse and unsustainable culture that honors a piece of pavement called Wall Street at the expense of humanity. We have to turn this around if we’re going to build a sustainable future for everyone.”