The Real Moochers: America’s Bailed Out and Subsidized CEOsPosted: August 28, 2013
Any one that has spent much time in private sector job can probably discuss how demoralizing the place can be even when you’re doing something you love. The guy above you always takes credit for what you do right and blames you for what goes wrong. You get shoved into a salaried position so they can avoid paying you more and better and overtime. The expectations are always for more than a 40 hour work week even you when you have little to do for a time period. The benefits are bad and getting worse. Then they were you out physically, emotionally, and every which way possible which explains a lot of the graph and the rise in disability. American Management and corporations treat workers about that same way they treat machines. They wear them out and throw them away when they are no longer functional. No amount of consumerable junk eventually replaces having to go to a job that destroys both your physical and mental health. So, part of the weirdness of the labor markets these days is that people are just dropping out of the labor force.
If the decline stemmed largely from an aging work force, it would be much less worrisome. But the initial wave of baby-boomer retirements plays only a small role in the drop; the labor force participation rate has fallen almost as sharply for people aged 25 to 54 as it has for the overall adult population.
As the report notes, economists are not entirely sure what has caused the shift. One factor seems to be the so-called skills gap — the slow growth in educational attainment in recent decades, even as the economy has become more technologically advanced.
A second factor is most likely the weak economic growth of the past 13 years: the 2000-1 dot-com bust, the mediocre expansion that followed, the financial crisis that began in 2007 and the disappointing recovery of the last few years.
Another cause may be the rise in the number of workers on disability. The report cites a study by the Federal Reserve Bank of San Francisco to argue that disability is helping cause the decline in work. That’s probably right, although it is worth remembering that the growth of the ranks of the disabled may be more of an effect of the jobs slump than a cause.
Either way, the decline in labor force participation almost certainly receives too little attention. Each month, small changes in the unemployment rate receive great scrutiny. We often overlook just how flawed a measure of the job market that rate has become over the last 13 years.
So, the news continues to be pretty glum for American workers even though there are more unemployed going back to work. Their wages will not keep them in a middle class standard of living. Changes are some health problem will devastate their finances. Extremely rich people are pouring tons of money into creating untrue memes about social security, medicare, and the size of the government debt. Let’s not even discuss the fact that we have direct evidence that Keynesian stimulus works and government spending has been coming down rapidly under the Obama administration. Truth and data must be for suckers like us.
Meanwhile, here’s a disturbing set of studies that really should grab some attention. “Nearly 40 percent of the CEOs on the highest-paid lists from the past 20 years were eventually “bailed out, booted, or busted.” These are the folks grabbing huge salaries for supposedly stellar performance.
But our analysis reveals widespread poor performance within America’s elite CEO circles. Chief executives performing poorly — and blatantly so — have consistently populated the ranks of our nation’s top-paid CEOs over the last two decades.
The report’s key finding: nearly 40 percent of the CEOs on these highest-paid lists were eventually “bailed out, booted, or busted.”
- The Bailed Out: CEOs whose firms either ceased to exist or received taxpayer bailouts after the 2008 financial crash held 22 percent of the slots in our sample. Richard Fuld of Lehman Brothers enjoyed one of Corporate America’s largest 25 paychecks for eight consecutive years — until his firm went belly up in 2008.
- The Booted: Not counting those on the bailed out list, another 8 percent of our sample was made up of CEOs who wound up losing their jobs involuntarily. Despite their poor performance, the “booted” CEOs jumped out the escape hatch with golden parachutes valued at $48 million on average.
- The Busted: CEOs who led corporations that ended up paying significant fraud-related fines or settlements comprised an additional 8 percent of the sample. One CEO had to pay a penalty out of his own pocket for stock option back-dating. The other companies shelled out payments that totaled over $100 million per firm.
The ink has dryed on Dodd-Frank. Yet, we have not had the most basic requirements to rein in out-of-control CEO pay implemented.
CEO-worker pay ratio disclosure: Three years after President Barack Obama signed the Dodd-Frank legislation, the SEC has still not implemented this commonsense transparency measure. The reform would discourage both large pay disparities that can harm employee morale and productivity and excessive executive pay levels that can encourage excessively risky behavior.
Pay restrictions on executives of large financial institutions: Within nine months of the enactment of the 2010 Dodd-Frank law, regulators were supposed to have issued guidelines that prohibit large financial institutions from granting incentive-based compensation that “encourages inappropriate risks.” Regulators are still dragging their feet on this modest reform.
Limiting the deductibility of executive compensation: At a time when Congress is debating sharp cuts to essential public services, corporations are able to avoid paying their fair share of taxes by deducting unlimited amounts from their IRS bill for the cost of executive compensation. Two bills, the Stop Subsidizing Multimillion Dollar Corporate Bonuses Act (S.1746) and the Income Equity Act (H.R. 199) would fix this outrageous loophole and significantly reduce taxpayer subsidies for excessive CEO pay.
Couple these concepts with this item. “Taxpayer Dollars Paid A Third Of Richest Corporate CEOs”. Cleary, there is something wrong with this picture.
“Financial bailouts offer just one example of how a significant number of America’s CEO pay leaders owe much of their good fortune to America’s taxpayers,” reads the report. “Government contracts offer another.”
IPS has been publishing annual reports on executive compensation since 1993, tracking the 25 highest-paid CEOs each year and analyzing trends in payouts. Of the 500 total company listings, 103 were banks that received government bailouts under the Troubled Asset Relief Program, while another 62 were among the nation’s most prolific government contractors.
Many of the companies appeared multiple times on the annual top 25 list, with Bank of America appearing 18 times, Citigroup appearing 15 times, while Morgan Stanley and American Express each secured 12 slots. JPMorgan Chase CEO Jamie Dimon has landed on the list twice since the bank received $10 billion under TARP, and American Express CEO Kenneth Chenault has appeared three times since his company accepted $3.4 billion in bailout money. Goldman Sachs received $10 billion under TARP, and made the list seven times in the past two decades, once after receiving its bailout. Washington Mutual and Lehman Brothers, both of which failed in 2008, also appeared on the list, with Leman making eight appearances before filing for bankruptcy.
Aren’t you glad that Looter Larry is on his way to Fed Chair now?
About 12 percent of the 500 CEOs listed comprised executives who ran firms that did extensive business with the federal government. IBM landed on the top CEO pay list 11 times, securing about $11 billion in total government contracts during those years, while General Electric appeared on the annual list eight times, with $16.5 billion in contracts. GE also has a large banking wing, which issued more than $70 billion in debt guaranteed by the federal government at the height of the financial crisis, making it one of the biggest beneficiaries of the bank rescue.
“Approximately 4 percent of GE’s annual revenues come from sales to the U.S. government, primarily work to support the U.S. military,” GE spokesman Seth Martin told HuffPost. Martin emphasized that none of its government-backed debt defaulted, and that the company paid taxpayers $2.3 billion in guarantee fees as part of the program.
Major government contractor United Technologies has appeared on the annual highest-paid CEO list six times, bringing in $32.8 billion in government business, while Lockheed Martin has scored five appearances, generating a total of $125 billion from government contracts from those years.
All these companies argue that they have to pay these sums to CEOS to attract and retain their services. However, look at the performances of CEOS when the economy isn’t going swimmingly. They fail and bring enormous harm to taxpayers, the labor market, and our economy. It’s easy to manage a company in a recovering economy when all you are doing is sitting on cheap money and letting some customers come in to an under-stocked, under-employed, and low service providing company while working your remaining employees to death and disability.
Executive pay has steadily increased relative to average worker pay for several decades, but has exploded since 1993. That year, CEOs of companies in the S&P 500 Index made an average of 195 times as much their average worker. By 2012, that ratio had ballooned to 354 to 1.
Even corporations that do not do business with the government or receive bailouts receive subsidies for CEO pay. All companies are currently able to deduct unlimited amounts in CEO pay from their federal tax bills, so long as the pay takes the form of “performance-based” compensation such as bonuses or stock payments.
It’s just hard for me to continue to blog about these issues because they are so pervasive and not even the smallest of remedies are implemented.