Advertisement

Opinion

Opinion

CEO salaries are moral issue

April 6, 2011

Advertisement

During the 2008 presidential campaign when candidate Barack Obama told “Joe the Plumber” that he wanted to “spread the wealth around,” it sounded to a lot of conservatives like socialism: “From each according to his ability, to each according to his need,” in the words of Karl Marx.

There is a kind of wealth spreading, however, that ought to meet the political litmus test of conservative Republicans, liberal Democrats and radical Independents. At a time of high unemployment, too many layoffs and too few new jobs in the private sector (230,000 jobs were created last month, according to the Labor Department, but unemployment continues to officially hover at just under 9 percent and Gallup calculates it, without seasonal adjustment, at 10.0 percent), it is disheartening to see so many CEOs having recovered enough from their personal recession to pay themselves salaries and benefits that would have shamed the super-rich in America’s Gilded Age.

USA Today reported last week in a story on CEO compensation that “three-quarters of CEOs got raises — and, in many cases, the increases were substantial.” Employee pay, on the other hand, effectively stalled. Median CEO pay, reported the newspaper, increased 27 percent last year, meaning the average CEO received $9 million in 2010. Even in a struggling economy, I wager most people could get by on $9 million a year. In a strange twist, General Electric, whose chairman Jeffrey Immelt now advises President Obama on job creation, paid no taxes last year, despite earning $14 billion. But that’s another column.

Unlike my liberal friends, I don’t obsess about how much money other people make. Whatever compensation someone can negotiate is fine with me. Whether a person is “worth” their pay is a subjective matter and open to debate.

The moral issue in executive pay is whether management deserves these high salaries while employees are laid off, or denied pay increases.

Last April, the Baltimore Sun reported that Stanley-Black and Decker in Towson, Md., announced plans to lay off 4,000 of its 38,000 employees. Yet, according to USA Today, Stanley-Black and Decker CEO John Lundgren made more than $32 million in 2010, up 253.1 percent from the previous year.

U.S. Bancorp Chairman Richard Davis was paid $16.1 million in 2010, a 143.0 percent compensation boost. In January, U.S. Bancorp announced that 64 workers in its Milwaukee office would be cut.

If I were a CEO being paid such astronomical amounts and people were being laid off, or struggling in a recession, at least in part due to the lack of pay increases, I would feel morally obligated to take less money. I would ask the chief financial officer of my company to share some of my wealth with loyal employees so that they could continue caring for their families.

One doesn’t have to be a liberal who believes in income redistribution to see the unfairness in disproportionate pay. Think of the kudos and favorable press coverage that would come to a corporate chief who shared his wealth, rather than lay off employees. It could change not only the media coverage of big business, but also the way the public perceives the super rich. Heck, some of them might even start voting Republican!

Five CEOs saw a slight decline in compensation, according to the USA Today/GovernanceMetrics international data, but they still earned more than most lottery winners receive.

President Obama has spoken of some of these CEOs as not “needing” the money they get. Again, that is a subjective judgment. What he should be doing is shaming those companies that lay off workers while paying their top management such exorbitant salaries and benefits. Stockholders ought to demand that no competent worker should be laid off if a CEO earns above a certain amount of money. Stockholders also have a moral responsibility beyond the dividends they receive.

Making money is a noble American objective, making a living is a nobler one. Corporations ought to have enough decency and compassion to make sure no worker is let go solely to increase the bottom line or pad the boss’s pockets with more money than he (or she) can ever hope to spend in a lifetime.

— Cal Thomas is a columnist for Tribune Media Services. His email is tmseditors@tribune.com.

Comments

Gandalf 3 years, 10 months ago

I better go back to bed, I,m agreeing with Cal??

Grundoon Luna 3 years, 10 months ago

I know. Hell must be freezing over becuse I think he's pretty much correct.

But it's more than that. There is open hostility expressed by Corporate America toward America workers. Now even the goverment is now attacking the middle class and poor -see the House controlled by the GOP, Wisconsin, Indiana, Ohio, New Hampshire etc. . . . . I guess some folks took them at their word about what they wanted to accomplish, big mistake. But back to corporate America, you aren't a person, an individual. The department used to be called Personnel, then Human Resources, but now? Human Capital. Do the mf'ers think they own us? It's time for revolution people!!!! Liberté, égalité, fraternité!!!

Grundoon Luna 3 years, 10 months ago

In your dreams. Jobs are eliminated here and shipped over seas or the workload is passed on to the remaining workers, who are already stretched to the max.

notajayhawk 3 years, 10 months ago

"Jobs are eliminated here and shipped over seas or the workload is passed on to the remaining workers"

In what kind of Bizarro alternate universe does that make sense? The "job" went overseas but the "workload" stayed here? So, what - they spent millions to build a factory in Malaysia and hired a thousand or so employees to produce nothing? Mmmmmmmm OK.

xclusive85 3 years, 10 months ago

Did you miss the word "or"? I know it is small, but for context here, very important.

Grundoon Luna 3 years, 10 months ago

A bizzaro universe where one can read and comprehend. I don't think you've been there. :-P

Grundoon Luna 3 years, 10 months ago

Free to produce other goods and services. Really? With what? Nice theories. Do you teach that? It seems it's not playing out in reality. Theories often work out that way. The only people with anything are the wealthiest, who are sitting on more assets than they ever have before. They're the only people that saw any gains while the rest have stagnated over the last 20-30 years the while the middle class declining all the while. The rich get tax breaks and the middle class and the poor are the ones made to suffer. They should be ashamed.

Liberty275 3 years, 10 months ago

Another idea is cut the CEO's salary, fire the useless workers and then maybe they can afford to put envelope thingies in the slot for Mr Shewman.

Or... maybe we can ship all our drive-thru banks overseas (as azure-attitude suggests) so we can use slave labor to make the envelope thingies and hand them out in person so when Mr Shewman drives to India to make a withdraw, he will get an envelope thingy with a personal touch. Maybe the slave laborer can make them for each individual using some fancy dance moves.

Since we are outsourcing the labor to virtual Indian slaves, but keeping the workload here, everyone gets a job, smiles all the time and finally nirvana is reached.

cato_the_elder 3 years, 10 months ago

U.S. Bank has made a phenomenal recovery since the bubble burst. This has been due in no small part to the fact that under Davis its real estate loan portfolio was nowhere nearly as toxic as was the case, for example, with Wells Fargo, Bank of America, and Citibank. People who criticize the compensation of CEOs often have a point and I agree with Thomas that a moral component is present during these times, but specific criticism of Davis in this context is misplaced. U.S. Bank's shareholders are generally very pleased with the outstanding job he has done in an extraordinarily difficult situation, and that's reflected in his compensation package.

SinoHawk 3 years, 10 months ago

Not to mention that US Bank is hiring 1,000 new employees in Overland Park. Firing 64 in Wisconsin and then hiring 1,000 in Kansas is a net gain, Cal.

jafs 3 years, 10 months ago

How much money did they get in the bailouts?

monkeyhawk 3 years, 10 months ago

How much did they pay back? Were they forced to take the money?

"Obama Wants to Control the Banks There's a reason he refuses to accept repayment of TARP money.

I must be naive. I really thought the administration would welcome the return of bank bailout money. Some $340 million in TARP cash flowed back this week from four small banks in Louisiana, New York, Indiana and California. This isn't much when we routinely talk in trillions, but clearly that money has not been wasted or otherwise sunk down Wall Street's black hole. So why no cheering as the cash comes back?

My answer: The government wants to control the banks, just as it now controls GM and Chrysler, and will surely control the health industry in the not-too-distant future. Keeping them TARP-stuffed is the key to control. And for this intensely political president, mere influence is not enough. The White House wants to tell 'em what to do. Control. Direct. Command." http://online.wsj.com/article/SB123879833094588163.html

Grundoon Luna 3 years, 10 months ago

Paranoid much? If AIG would pay back theirs the vast majority of TARP will have been returned and at a profit for the American people.

canyon_wren 3 years, 10 months ago

What a heartless--and unrealistic attitude!

jafs 3 years, 10 months ago

Wow - I can't wait to see the folks who always criticize the "lefties" for this kind of thinking weigh in on this one!

This seems eerily similar to an idea I posted on another thread just the other day.

The fact that businesses can squeeze more and more out of employees is not a justification for doing so, or an indication that the folks laid off weren't doing anything productive.

In fact, you can get folks to do almost anything if they're scared of losing their jobs, or desperate to get them. So this atmosphere of fear and stress is good for employers, but very bad for employees.

It's a dark side of our system - lay some folks off, then the ones you keep will accept working harder for less money, and the ones laid off will be desperate for a job, and willing to accept wages and working conditions they might not otherwise accept.

And, of course, this only gets worse if you reduce/eliminate unemployment, as those on the right often suggest.

jafs 3 years, 10 months ago

"unemployment benefits", of course.

Liberty275 3 years, 10 months ago

"And, of course, this only gets worse if you reduce/eliminate unemployment, as those on the right often suggest."

Where? Unemployment is a form of insurance. I've not seen the right argue against any form of insurance. I think the view it as a form of financial responsibility required for doing business, on the same level as being licensed or bonded or having liability insurance.

jafs 3 years, 10 months ago

You haven't seen the many comments outraged about how long people can get unemployment benefits from those on the right on this forum?

Kontum1972 3 years, 10 months ago

This comment was removed by the site staff for violation of the usage agreement.

jayhawklawrence 3 years, 10 months ago

Well, first the logic is flawed and then the moral indignation is out of character.

I too found my jaw dropping a little when I read this.

My take on the economic point being made is that as long as it is easy to offshore the production and get a "short term" reduction in costs there is not enough incentive to improve the operations and the product line to make the US based operation more competitive. Off shoring becomes the easier road.

The CEOs that do this are hurting the company, the country and the employees. Then they are being over compensated because of a moral and ethical problem in the United States which Cal Powers is identifying.

The offshoring issue, unfortunately, has reached critical mass because too many know-it-alls in the United States think we cannot compete with China so they just raise the white flag and surrender. Then they fail to blame themselves for being inadequate when it is easier to blame the "working class" for not working cheap enough. The ultimate insult.

My second point would be that I think Cal is going to get harassed by his core constituents for showing too much empathy and straying into an area where "Conservatives" don't like to go.

I expect to see an Obama hate piece in the near future to make up for this.

notajayhawk 3 years, 10 months ago

"The CEOs that do this are hurting the company, the country and the employees."

The CEO doesn't work for the country or the employees, he works for the owners (i.e., the shareholders). As far as hurting the company, since a significant factor in their compensation is stock options, if their compensation goes up it's because they made money for the company and its shareholders.

jayhawklawrence 3 years, 10 months ago

We have to start competing in the world economy and we cannot continue down the road we have been on.

Whatever you learned about competing in the global economy, we need to delete and reboot and start over.

Kind of reminds me of when the world believed the earth was flat and nobody could tell them anything different.

notajayhawk 3 years, 10 months ago

"We have to start competing in the world economy"

Why, I completely agree. So can we cut the corporate tax rates to what they are in other countries for a start?

Corey Williams 3 years, 10 months ago

Sure. As long as the corporations actually pay their taxes.

notajayhawk 3 years, 10 months ago

Well, it's nice to see how some of these urban myths have been so heavily propagandized by the left that they're even infecting some on the right.

"In a strange twist, General Electric, whose chairman Jeffrey Immelt now advises President Obama on job creation, paid no taxes last year, despite earning $14 billion."

First of all, yes, GE earned about $14 billion - before a billion dollar loss from selling off some unprofitable divisions, but that's academic. What none of the press is mentioning is that only a little over 5 billion of those earnings were from United States operations. Somewhat of a difference.

And the part about not paying any taxes has been thoroughly debunked, but that doesn't keep it from spreading like wildfire. Seems that story originated from the NYT (go figure), and it was based on the fact that their reporter doesn't know the difference between a tax benefit and a 'credit' or 'rebate'.

http://www.propublica.org/article/setting-the-record-straight-on-ges-taxes

GE's financial statements are available on their website. While the final amount they end up paying for the 2010 tax year won't be known until the actual filing, it appears from their statements that their tax liability increased by about $800,000,000 last year.

[continued]

notajayhawk 3 years, 10 months ago

[continued]

And the other myth that's been making the rounds - CEO compensation - that's a good one, too. The "average CEO" does not make anything close to $9M. Even the AFL-CIO is a little more accurate on that one, noting that figure applies to "the nation’s largest corporations", the S&P 500 (reporting 2009 figures). Saying that "the average CEO received $9 million" is about as accurate as saying that the average restaurant owner makes as much as the CEO's of Applebee's, McDonald's, and Yum! Brands (KFC, PizzaHut, Taco Bell, Long John Silvers, etc.).

http://www.aflcio.org/corporatewatch/paywatch/pay/

And, Cal (and the rest of you), USA Today also reported that a big boost in CEO compensation came from the stock market.

http://www.usatoday.com/money/companies/management/2011-04-04-1Aoptions04_ST_N.htm

And what, pray tell, is wrong with that? If the CEO is making money for the shareholders by increasing the value of the stock, he gets paid more. That happens to be what they're paying him to do. And it works both ways - if the value of the stock tanks, they can lose more money than all of you put together will see in your lifetimes:

"But McClendon gambled on the success of his company and bought Chesapeake stock on margin; when his stock tanked, he was forced to sell almost all his shares for $595 million in October to cover a margin call. That left him about $2 billion poorer."

http://www.usatoday.com/money/companies/management/2009-05-01-ceo-pay-for-2008-falls_N.htm

I'm not saying anyone should feel sorry for a guy whose net worth dropped down to under a billion dollars. Just pointing out that the numbers people throw around about CEO compensation are meaningless. And, as the USA Today story from 2009 points out, they're often out of date, since the stock options that are included in those 'total compensation figures' are valued at the stock price when issued.

Oh, and BTW, while some of those CEO's compensation increased last year, CEO compensation overall is still waaaaaay down from a couple of years ago - gee, seems like, despite the appeals to class jealousy, they were affected by the downturn in the economy just like everyone else (if you can even compare losing millions - or billions - of dollars to be 'just like everyone else).

Okay, sorry to interrupt with facts. Please continue with your ranting and righteous indignation.

jayhawklawrence 3 years, 10 months ago

This is always an amusing road to go down when people start picking and choosing stories to match their bias.

I believe it is formally known as "selection bias".

Here are some enlightening quotes from Warren Buffet, a man who knows something about managing money.

"I just think that - when a country needs more income and we do, we're only taking in 15 percent of GDP, I mean, that - that - when a country needs more income, they should get it from the people that have it. " Buffet

"The rich are always going to say that, you know, just give us more money and we'll go out and spend more and then it will all trickle down to the rest of you. But that has not worked the last 10 years, and I hope the American public is catching on." Buffet

He told Brokaw: "I'll bet a million dollars against any member of the Forbes 400 who challenges me that the average (federal tax rate including income and payroll taxes) for the Forbes 400 will be less than the average of their receptionists." Buffet

We can go on listening to the loud mouths in the media or the politicians where the deck is always stacked against the American people, or we can simply admit to ourselves that we have been brainwashed to ignore the obvious.

notajayhawk 3 years, 10 months ago

Quick question, jhl: When the top marginal tax rates were much, much higher, what percentage of GDP were we taking in in taxes?

tomatogrower 3 years, 10 months ago

Oh my god, Cal. You are going to be accused of class envy. People will tell you to go back to school and get a real job, so you too can earn millions of dollars and rip off the workers, just like these CEO's. You are suppose to worship these gods who obviously are sent here on earth by god to rip o, I mean rule. Time to kowtow, Cal.

tomatogrower 3 years, 10 months ago

So has anyone figured out the mathematics of the new comment counting? Is it 50 for every post, or does it just shoot out random numbers?

gccs14r 3 years, 10 months ago

I've worked for companies where, at least at the lower levels, each step up in the hierarchy received 10% more compensation than the highest-paid subordinate. If that were carried out universally, that would go a long way toward trimming excess compensation in the executive ranks. If CEOs don't like the pay they receive, they're welcome to raise the wages of the people who do the actual work of the company so that their own compensation can go up.

There has long been a disconnect between company profitability, stock price, and executive compensation. It used to be that one bought stock in a company for security and dividend income, both of which came about from a healthy investment in R&D and new manufacturing. Now people buy stock like they buy lottery tickets, hoping to score quick riches on little investment of money, time, or thought. All they're interested in is the short-term stock price, not the sustainability of the enterprise, so they love CEOs who can pump up the stock price by slashing spending, selling off assets, and moving manufacturing off to slave-labor countries--just as long as they're the ones who get to sell right before the inevitable collapse.

SinoHawk 3 years, 10 months ago

gccs14r:

My last company had a very extensive pay-grading system, and the gap from "midpoint to midpoint" (the median compensation gap between two grades) was significantly larger than 10%. An employee moving up from Associate Accountant to Accountant could expect about a 10% pay raise in the first year (up to 15%), but the positional gap was closer to 20 or 25% (this typically got higher as the grades went up).

For instance (using hypothetical 25% pay raise per grade w/ actual number of observed pay grades): Associate Professional-50k Professional-62.5k Sr. Professional-78k Advisor-97k Manager (non-operations)-122k Sr. Manager-152k Managing Director-191k Vice President-238k SVP-300k EVP-372k Divisonal President-465k Executive VP (of the corporation)-582k CEO-727k

These numbers actually closely model the "base pay" for my former company. The difference is that a lot of corporations start giving equity to higher-ups based on performance. This is supposed to incentivize good performance while reducing the ability of other corporations to "poach" talent. For instance, the CEO of Walmart had a base pay of $1.2M in 2010, but had options and other compensation of about $18M.

jafs 3 years, 10 months ago

Yep.

And those CEO's have guaranteed severance packages, so when things go bad, they still walk away with loads of money.

JHOK32 3 years, 10 months ago

Wow! Cal Thomas actually said something that made perfect sense for once. There may be hope for him yet! Check out the new flick "Inside Job" if you really want to get your blood boiling about who the greedy A holes were that really destroyed our entire economy.

Kookamooka 3 years, 10 months ago

If this practice of paying stupid CEO's and executives who destroy companies ridiculous raises and multi-million dollar compensation packages doesn't stop....there will be a revolution. How do I know? I'm going to start it. Grab your pitchforks friends! There's a heap of manure to clean up!

notajayhawk 3 years, 10 months ago

I see we all like playing with numbers. How about these:

Do any of you fine folks think it would be unreasonable for the CEO of a company that had 100 employees making an average of $30K to be making $150K themselves? That's only 5 times what the employees make, is that objectionable to any of you?

So now we take a company with one hundred thousand employees averaging $30K, and the CEO is making 500 times as much, that's $15 million. And from what you're saying, that's bad, right?

So we have a guy who's managing a company that's 1000 times the size, and he's only making 100 times as much as his counterpart in the smaller company.

And that's too much?

Are any of you starting to see the problem here? The entire concept you're all b*#@%ing and moaning about is based on an illusion. The larger the company, the more employees you have making that same average pay, but the average doesn't go up. Whether you have ten employees making $30K, a hundred employees making $30K, a thousand employees making $30K, ten thousand employees making $30K, a hundred thousand employees making $30K, or a million employees making $30K, the average is still $30K. On the other hand, the CEO's responsibilities, I hope you'd agree, increase rather dramatically from a company with ten employees to a company with a million employees. And you want to put some kind of arbitrary limit on his salary based on some multiple of an average employee wage that never changes regardless of how big the company gets, no matter how many facilities they have or how many countries they operate in or how big the responsibilities that come with the job are?

Brilliant.

Commenting has been disabled for this item.