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Archive for Thursday, February 1, 2007

Bush takes aim at lavish executive pay

February 1, 2007

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— President Bush challenged the corporate world Wednesday on the lavish salaries and bonuses paid to chief executives, saying their pay should be tied to how much they help their companies' shareholders.

"America's corporate boardrooms must step up to their responsibilities," Bush said in a speech on Wall Street addressing the state of the U.S. economy. A few executives' extravagant pay packages, recently in the news, have disgusted millions of U.S. workers who will never come near such deals.

"You need to pay attention to the executive compensation packages that you approve," he said. "You need to show the world that American businesses are a model of transparency and good corporate governance."

Bush's comments came during a White House push to get people focused on the economy at a time when other issues command attention - including the Iraq war and all the candidates running for his job.

He spoke at Federal Hall, a venerable site just blocks from where terrorists destroyed the World Trade Center. Bush caused a frenzy with an unannounced stop on the floor of the New York Stock Exchange, joining Ronald Reagan as the only presidents to do so during trading hours.

On executive pay, Bush was prodding the business community to act on its own. He offered no promise of federal intervention. In fact, he said government should stay out of it.

But the president clearly hoped to send a message that would resonate with the public.

His immediate listeners, a dark-suited New York business audience, reacted with silence. But the invited crowd offered applause when Bush talked about cutting taxes and improving education.

Attention to corporate pay has been fueled by some notable cases. Recently, Home Depot CEO Bob Nardelli was earning an average of $25.7 million a year - excluding stock options - before he was forced out in a furor over his compensation. He left with a severance package worth about $210 million.

President Bush makes an unannounced visit Wednesday to the New York Stock Exchange and meets trading assistant Jennifer Fagenson at the post that trades the Walt Disney Co. Bush became the second president to visit during trading hours.

President Bush makes an unannounced visit Wednesday to the New York Stock Exchange and meets trading assistant Jennifer Fagenson at the post that trades the Walt Disney Co. Bush became the second president to visit during trading hours.

The New York Stock Exchange faced an uproar over former CEO Richard Grasso's $187.5 million severance package. Former New York Attorney General Eliot Spitzer, now governor, sued NYSE board members over the package Grasso got when he quit as chairman in 2003.

Beyond targeting golden pay packages, Bush reiterated the themes of his economic message these days - trade, health care, energy and education. All require help from a Democratic Congress, which is fashioning its own plans for a mainstream domestic agenda.

"Criticizing CEO pay won't do anything to raise the wages of average Americans," said Sen. Charles Schumer, D-N.Y., the new chairman of the Joint Economic Committee. "Middle-class families would be best served if the president joined us in crafting bold policy solutions that address the real insecurity they feel in our changing economy."

Bush touted new federal rules that give investors access to clearer and more detailed information from public companies on their top executives' pay packages and perks.

Yet in a nod to the business community, Bush said his administration was working to improve how those rules are being enforced so the burden is not oppressive on industry.

He pushed for an extension of his fast-track trade authority, which lets him send complex trade deals to Congress for an up-or-down vote, a health care plan intended to extend insurance coverage through a change in the tax code, a reduction in gas consumption by raising economy standards for cars and investing in alternative fuels, and extending a federal education law that requires schools to show progress each year or face penalties.

The president got a boost from a new government report the economy expanded at a faster-than-expected 3.5 percent annual rate in the final quarter of last year.

Democrats bemoan the nation's factory-job losses and huge trade deficits under Bush's tenure, creating wildly different pictures of the economy.

It is a tale of the suburbs and the cities, said Clyde Prestowitz, president of the Economic Strategy Institute and a Commerce official during the Reagan administration.

The suburbs reflect the story that Bush describes, with good living built on low interest rates, rising household income and a rising stock market, he said. But in the city centers, consumption is heavily based on debt, the infrastructure is aging, schools are underperforming and many new jobs are low-wage. So the gap between rich and poor is growing.

"On the surface, everything looks good and we're having a great party," Prestowitz said. "But the chances are good that we'll have to face a reckoning somewhere down the road."

Bush, who is paid $400,000 a year as president, acknowledged that some workers are being left behind in the booming economy.

"The fact is that income inequality is real. It has been rising for more than 25 years," the president said, adding that more education and training can lift people's salaries.

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