-Caveat Lector-
>From www.wsws.org
WSWS : News
& Analysis : North America
CEO pay soars as US stocks plummet
By Kate Randall
24 September 2001
Back to screen version| Send this link by email | Email the author
In early 2001, WorldCom CEO Bernard Ebbers received a $10 million
bonus in return for his pledge to stay on with the telecommunications
giant for at least two more years. On top of that, the company
granted him a $61.5 million loan and a guarantee for $100 million
more in additional loans. In 2000, Ebbers received more than $34
million in salary, bonuses and long-term compensation, including
stock options.
One might expect that a company doling out such high levels of cash
and other perks to its top executive was doing extremely well. But in
fact the long-distance telephone company has been struggling to
recover from a failed merger with Sprint Corp., and is in the midst
of a restructuring plan to stave off losses. For the second quarter
of 2001, WorldCom group, which comprises the corporation’s
communications, Internet and telephone services, posted a net income
of $574 million, down $197 million from the same period last year.
The company’s separate MCI group lost $29 million, dropping
dramatically from its $541 million in profits in the second quarter
of 2000.
This past February, around the same time CEO Ebbers was raking in his
multimillion-dollar compensation package, WorldCom laid off 6,000 of
its 77,000 employees, mainly in its sales and marketing operations. A
study released last month by the Institute for Policy Studies and
United for a Fair Economy—“Executive Excess 2001: Layoffs, Tax
Rebates, The Gender Gap”—shows that Ebbers’ situation is not unique
among chief executives at US corporations today.
The report examines 52 US firms that announced layoffs of 1,000 or
more workers between January 1 and August 1, 2001, a period when more
than 777,000 US workers lost their jobs. The study shows that as the
economic boom of the 1990s began to falter in 2000, and profits and
share values plunged, CEOs at financially distressed companies
continued to pull in mammoth salaries. Moreover, the report reveals
how CEOs at those companies that eliminated the most jobs earned
substantially more than other executives.
As in the case of WorldCom CEO Bernard Ebbers, some of the top-
earning CEOs were at the helm of corporations that have carried out
thousands of job cuts. Dell Computer Corp. has eliminated 5,700 jobs
so far in 2001, and its chief executive Michael Dell received $201.3
million in total compensation. JDS Uniphase CEO Kevin Kalkhoven took
in $106.9 million in 2000; the fiber-optic components maker has cut
12,000 jobs so far this year. The report cites many more examples.
But even more significantly, many of these “layoff leaders” received
hefty compensation packages while their companies were losing
millions of dollars in profits and share values plummeted. Merrill
Lynch & Company, the nation’s biggest brokerage firm, for example,
reported a 21 percent drop in net income for the quarter ended July
30, with earnings of $874 million compared to $1.1 billion for the
same period last year. The company has eliminated 1,700 jobs this
year. But Merrill Lynch chief executive David Komansky made $39.1
million in 2000, up 82 percent from 1999.
Minneapolis-based telecommunications equipment maker ADC Telecom
announced August 23 a $40 million loss in the quarter ended July 31,
compared to a $121 million profit in the same period last year. The
company announced March 27 that it was eliminating 4,000 jobs. ADC
Telecom CEO W.J. Cadogan, however, received a 150 percent increase in
salary and bonus over his 1999 earnings, and took home a total
compensation package of more than $45 million.
Even when the stock market bubble began to burst in 2000—and
trillions of dollars in paper wealth, particularly in the high-tech
sector, were lost—CEO pay continued to rise. According to Business
Week’s annual survey of 365 of the biggest US companies, executive
pay rose to an average of $13.1 million a year in 2000. The magazine
also reports that four of the top-earning CEOs for the last five
years have come from companies which they describe as “marginal to
horrible performers” in the market—Walt Disney, Cendant, Computer
Associates and Apple Computer.
“Executive Excess 2001” argues that these figures debunk the claims
of those who contend that “the market” determines CEO pay. The
authors of the study describe a situation inside corporations where
committees that determine CEO compensation are generally controlled
by the CEOs themselves. The report cites a Fortune magazine
investigation: “Directors who won’t play along [with the increases]
are rotated out to other committees. One chairman of a compensation
committee agreed with another director that ‘this stuff is wrong,’
but went on to say, ‘we’ve got to do it.’”
When the economy was expanding the huge salaries and bonuses were
justified with claims that the CEOs were generating huge profits,
improving a company’s position and creating jobs. This of course
ignored the fact that the ultimate source of profit is not the
business acumen of top executives, but the physical and mental labors
of working people. Nevertheless today it cannot even be claimed that
multimillion-dollar packages are a reward for business success.
Companies are continuing to pay these salaries and bonuses to
America’s top CEOs even as they face falling profits, financial
instability and are cutting their workforces. This demonstrates the
essentially anti-social and parasitic tendencies inherent within the
profit system. It is a particularly glaring example of how, under
capitalism, the interests of the working population and society as a
whole are subordinated to the drive for profit and the enrichment of
a tiny elite.
Under conditions of an economic downturn, the acquiescence of boards
of directors to the seemingly insatiable greed on the part of company
CEOs also represents a colossal mismanagement on the part of these
capitalist enterprises, in many cases threatening the viability of
the corporations themselves. As CEO compensation continues to rise,
resources needed for research and development, upgrading machinery,
not to mention improvements in working conditions and the living
standards of employees, are squandered, placing these companies on
even shakier ground.
“Executive Excess 2001” documents a virtual explosion in executive
pay over the past decade, which jumped a phenomenal 571 percent
between 1990 and 2000. This dramatic increase in CEO compensation
dwarfed the increase in workers’ pay during the same period, which
grew by only 37 percent, barely surpassing the 32 percent rise in the
cost of living due to inflation. CEO pay now stands at 531 times the
pay of the average US worker. According to the study, if the average
pay for production workers had grown at the same rate since 1990 as
it has for CEOs, workers’ 2000 annual average earnings would have
been $120,491, instead of the present $24,668 average.
As executive salaries soared during the economic boom of the 1990s,
millions of workers and their families saw their standard of living
deteriorate. Over the past decade, social programs have been gutted
and millions of poor people have been thrown off the welfare rolls.
According to the Economic Policy Institute, 29 percent of working
families do not earn a living wage. Of these families, 70 percent
experience real hardships, such as skipping meals or forgoing needed
medical care.
The bloated compensation packages of corporate CEOs represent a
considerable percentage of the resources of society, which could go
towards funding urgent social needs—such as growing poverty,
homelessness, a collapsing educational system, urban blight, a
crumbling infrastructure. The squandering of billions of dollars on
individuals—who in fact produce little wealth—while the needs of
increasing numbers of the population go unmet is an indictment of a
system based on private ownership of the means of production. How can
such a misuse and misallocation of resources be justified?
Furthermore, the unchecked greed of these top executives endangers
the livelihoods of hundreds of thousands of workers employed by these
corporations. These workers and their families depend on company
paychecks, retirement packages, medical and other benefits, which are
jeopardized by a reckless policy on the part of management that
subordinates their economic security to the self-aggrandizement of
these CEOs. From every standpoint—moral, social and economic—this
practice is criminal. It represents a level of corruption and
plundering of resources unparalleled in the history of corporate
America.
The study also shows how corporations resort to outright fraud to pad
the bank accounts of their top executives. One particularly lucrative
method is tax evasion: “Many taxpayers probably don’t realize that
hundreds of millions of dollars in corporate tax rebates routinely
flow into the coffers of some of America’s richest corporations,
sometimes reducing their total tax bill to less than zero. Less than
zero? How is that possible?” The study’s authors explain how
companies use a wide variety of special tax breaks to reduce their
liability.
Some corporations write off the depreciation of factories, buildings
and equipment faster than they actually wear out. They also receive
tax breaks for research and development, Puerto Rican operations, oil
drilling, and other company practices. They hire the expertise of
high-priced corporate lawyers to design individualized tax shelters.
The end result is that while the statutory tax rate of corporate
profits is 35 percent, many companies pay as little at 20 percent and
some pay none at all.
The Bush administration continues to insist that the $39 million in
tax rebate checks sent out this summer to individual taxpayers—a
maximum of $300 for an individual, $500 for a single parent, and $600
for a couple—will jump-start the economy. But between 1996 and 1998
the government gave more than 82 times this amount—$3.2 billion—in
tax rebates to 41 large, profitable corporations.
In a particularly creative method of reducing their taxes,
corporations take a tax deduction in the same year that employees
exercise their stock options. This deduction is equal to the
difference between what the employees pay for the stock and what it’s
worth. As a result, when an executive cashes in his stock options,
his bank account grows and the company’s tax bill is reduced.
Not surprisingly, corporate CEOs are often first in line to collect
their share of swindled tax revenue. According to “Corporate Income
Taxes in the 1990s,” a study of 41 large companies issued in October
2000 by the Institute on Taxation and Economic Policy, in 1996-98
CEOs of companies receiving tax rebates saw their pay rise by a total
of $194 million. At six companies—Black & Decker, Praxair, Coca-Cola,
Colgate-Palmolive, Enron and McKesson—pay raises for the companies’
top executives devoured the entire tax rebate for that year.
Copyright 1998-2001
World Socialist Web Site
All rights reserved
~~~~~~~~~~~~~~~
Forwarded as information only; no endorsement to be presumed
+ + + + + + + + + + + + + + + + + + + + + + + + + + + +
In accordance with Title 17 U.S.C. section 107, this material
is distributed without charge or profit to those who have
expressed a prior interest in receiving this type of information
for non-profit research and educational purposes only.
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + +
The only real voyage of discovery consists not in seeking
new landscapes but in having new eyes. -Marcel Proust
+ + + + + + + + + + + + + + + + + + + + + + + + + + + +
"Do not believe in anything simply because you have heard it. Do not believe
simply because it has been handed down for many generations. Do not
believe in anything simply because it is spoken and rumored by many. Do
not believe in anything simply because it is written in Holy Scriptures. Do not
believe in anything merely on the authority of Teachers, elders or wise men.
Believe only after careful observation and analysis, when you find that it
agrees with reason and is conducive to the good and benefit of one and all.
Then accept it and live up to it."
The Buddha on Belief, from the Kalama Sutta
+ + + + + + + + + + + + + + + + + + + + + + + + + + + +
A merely fallen enemy may rise again, but the reconciled
one is truly vanquished. -Johann Christoph Schiller,
German Writer (1759-1805)
+ + + + + + + + + + + + + + + + + + + + + + + + + + + +
It is preoccupation with possessions, more than anything else, that
prevents us from living freely and nobly. -Bertrand Russell
+ + + + + + + + + + + + + + + + + + + + + + + + + + + +
"Everyone has the right...to seek, receive and impart
information and ideas through any media and regardless
of frontiers."
Universal Declaration of Human Rights
+ + + + + + + + + + + + + + + + + + + + + + + + + + + +
"Always do sober what you said you'd do drunk. That will
teach you to keep your mouth shut."
--- Ernest Hemingway
<A HREF="http://www.ctrl.org/";>www.ctrl.org</A>
DECLARATION & DISCLAIMER
==========
CTRL is a discussion & informational exchange list. Proselytizing propagandic
screeds are unwelcomed. Substance—not soap-boxing—please! These are
sordid matters and 'conspiracy theory'—with its many half-truths, mis-
directions and outright frauds—is used politically by different groups with
major and minor effects spread throughout the spectrum of time and thought.
That being said, CTRLgives no endorsement to the validity of posts, and
always suggests to readers; be wary of what you read. CTRL gives no
credence to Holocaust denial and nazi's need not apply.
Let us please be civil and as always, Caveat Lector.
========================================================================
Archives Available at:
http://peach.ease.lsoft.com/archives/ctrl.html
<A HREF="http://peach.ease.lsoft.com/archives/ctrl.html";>Archives of
[EMAIL PROTECTED]</A>
http:[EMAIL PROTECTED]/
<A HREF="http:[EMAIL PROTECTED]/";>ctrl</A>
========================================================================
To subscribe to Conspiracy Theory Research List[CTRL] send email:
SUBSCRIBE CTRL [to:] [EMAIL PROTECTED]
To UNsubscribe to Conspiracy Theory Research List[CTRL] send email:
SIGNOFF CTRL [to:] [EMAIL PROTECTED]
Om
