Despite the worst economic crisis since the Great Depression, top corporate executives are still taking home staggeringly more than their counterparts a generation ago.
Millions of Americans last year lost their jobs, their homes, and their retirement security. American CEOs last year lost some pocket change — and some of them didn’t even lose that. In 2008, the Wall Street Journal reported this past Friday, pay for typical big-time U.S. CEOs dropped a mere 3.4 percent, to a $7.6 million median. Two days later, the New York Times pronounced a 9.4 percent CEO pay falloff last year. But the Times put median CEO pay at $8.4 million, a higher total.
The Journal figures cover the first 200 U.S. corporations with over $5 billion in revenue to file executive pay figures for 2008. The Times tally spotlights 200 CEOs at companies that last year took in at least $6.3 billion in revenue.
Several major U.S. corporations haven’t yet disclosed their 2008 pay numbers. CEO pay specifics for last year, consequently, will likely change somewhat over the coming weeks as other national news outlets — USA Today and Forbes, among them — hit the streets with their annual CEO pay surveys.
But any new specifics that may emerge won’t alter the larger CEO pay picture. In 2008, despite the worst economic meltdown in over 75 years, U.S. chief executives continued to take home over 300 times more pay than their workers. That’s a gap ten times wider than the gap between top execs and workers that existed just a generation ago.
Corporate boards of directors seem determined to keep this massive gap intact. Most corporations are refusing to make even symbolic gestures toward more common-sense executive compensation.
Remember last fall’s firestorm over executive jets? In 2008, over half America’s big corporations — 104 of the 200 the Wall Street Journal tracked — continued to foot the bill for the personal air travel of their top executives, only three fewer than the year before.
CEOs have to report the personal air travel subsidies they get, along with whatever other perks they receive, as taxable income. Over a third of America’s biggest corporations last year actually gave their executives extra money to pay the taxes on all this perk income.
The dollars devoted to this tax reimbursing — or “grossing up,” as power suits refer to the process — averaged $16,400 last year. That sum might not sound like much, given the millions CEOs take home overall, but, in 2008, average American workers had to labor five months to make $16,400.
The Wall Street Journal doesn’t include perks like free air travel and tax gross-ups in its $7.6 million figure for 2008 CEO “direct compensation.” The New York Times $8.4 million total does.
Neither paper’s pay totals for 2008 include the gains CEOs registered last year cashing out the stock options they collected in previous years. These cashouts generated some staggering personal paydays.
Occidental Petroleum’s Ray Irani, for instance, took home $49.9 million in “total direct compensation,” according to the Wall Street Journal figures. But he gained another $215.9 million in 2008 from options and other long-term “incentives” that Occidental had stuffed in his personal portfolio before last year.
Corporate boards have essentially created what amounts to a perpetual motion pay machine that year in and year out gins up millions in executive compensation, no matter what may be happening economically in the real world.
In “good” times, with revenues and profits up, boards hand executives stock awards and cash bonuses as rewards for their fine “performance.” In hard times, boards keep the stock awards coming — as an incentive to stick around and perform better in the future.
Congress, in the months since the Great Meltdown began a year ago, has at times appeared ready to toss a monkey wrench or two into Corporate America’s perpetual motion executive windfall machine. The stimulus bill that lawmakers passed in February includes provisions that will, if applied seriously, dampen executive pay at companies that get federal bailout dollars.
But top Treasury Department officials, the Washington Post revealed Saturday, are now setting up special “middlemen” conduits that let banks and other bailout-related companies benefit from taxpayer dollars without having to face any meaningfulexecutive pay restrictions.
Treasury Secretary Timothy Geithner believes, the Post reports, that major firms won’t participate in bailout recovery efforts if their top execs face limits on their pay.
On that score, Geithner may be right. The sense of entitlement in executive suites has become so entrenched that America’s biggest banks and corporations now consider the maintenance of outrageously high levels of executive pay a matter of “principle.”
Unfortunately, Geithner’s response to this executive blackmail — “we get to keep our windfalls or else” — couldn’t be more wrong-headed. Instead of giving bailout-related companies a free pass on executive pay, Geithner should be asking Congress to extend executive pay limits beyond the bailout.
Lawmakers could, for instance, deny companies federal contracts if they pay their executives over 25 times what they pay their workers. Or Congress, to discourage the chase after windfalls that has so disastrously driven the U.S. economy off the straight and narrow, could up tax rates on companies that pay their execs excessively.
American public opinion appears already headed in this direction, toward more sweeping executive pay limits. For the sake of a successful economic recovery, the Obama White House now needs to run faster and catch up.
Sam Pizzigati edits Too Much, the online weekly on excess and inequality.