The poor rich millionaire bosses

When I read “America’s CEOs enjoyed pay hikes of up to 40% last year [2010]” [1], I thought this was one of those sensationalist strap lines, even if it is from The Guardian. I figured that “up to 40%” might be hiding “as low as 0%” at the other end. But, the second line in the article disabused me of that notion, saying, “… top bosses enjoyed pay hikes of between 27 and 40% last year.” I too would enjoy even a 27% pay hike, year on year!

In 2010 stock prices in the US “recovered across the board.” And, as CEOs’ remunerations are so tightly tied to stock options, the bosses simply cannot help but take home healthy bundles of joy, at or near retirement age! Don't begrudge their compulsions, please.

Poor bosses. They sat through wretched 2008 and 2009, the global crisis and all that. In 2009, the median base salary increased by 2%, cash payments by 1.5%. But, stocks tumbled and profits on options took a dive. The overall effect was to the tune of -0.3%. Oh, my! Yet, we must remember what they must have gone through in 2007 and 2008. As much as the CEOs must have “suffered”, the decline in the wider economy, that means people like me living in the US, was much too severe. Here is my small drop of crocodile tears for my fellow middle class travelers, but across the ocean.

I kind of browsed a gallery of photographs – with snippets of how they came upon their bundles – of the big winners on offer on the website of the newspaper [2]. And, that was revealing. Some interesting tidbits on mostly dour looking CEOs.

a. John Hammergren of McKesson, world’s largest healthcare firm, got paid $ 145 million out of which, $ 143 million from stock options and perks. But that is not interesting. “If the company changes hands he stands to make even more money – $469m to be exact”. And, that is interesting. Do you think he is working hard to avoid that fate?

b. Joel F Gemunder, CEO, Omnicare made do with $ 98.28 million, which included $ 16 million as cash severance as a part of final-year package. Perhaps this is one of the reasons the article says, “2010 was a great year to lose your job as a CEO.”

c. John Plant of TRW Automobile Holdings got two bonuses, $ 2.5 million as “retention bonus for staying put” and $ 4.5 million for “unspecified ‘additional factors’”. Hmm …

d. $ 65 million of $ 69 million that the poor Frank Coyne of Verisk Analytics (I read the name of the company as Very Sick and wondered how could anyone have invested in it!) came from stock options.

e. Under Thomas M Ryan’s watch over 13 years CVS Caremark Corporation shed 50% of its share value and the CEO was punished with only $ 50 million, out of a total package of $ 68 million. Poor old Tom …

On down the list you have Adam Metz getting $ 46 million just as his company was coming out of bankruptcy. “Go bankrupt and thou shalt receive,” the Bible commands.

Ralph Lauren pocketing $ 19 million, just as he had done the year before and the maximum the company allows. While fashion changes from season to season, “Some things never go out of style.”

From the photograph I can, probably correctly, identify Ronald Williams of Aetna as a non-White. And, he ain’t doing no good by his tribe (a deliberate racist usage just to mark how awful it truly is), pocketing $ 50.4 million as the company shed 70% of its value!

You also got Mario Gabelli, an investor who had no stock options but all his pay came for his “services” – as handsome as he is, I hope the “services” can be talked about in polite company!

Well, that is the story, interesting parts of it. I would mention some blood-boiling aspects too. Our so-called meritocratic system and its star performers have a negative index of performance – shares shedding, companies folding and pay packets bulging. Their performance is assessed in the short-term whereas its effects show up after they have vamoosed from the scene of the crime. No wonder the corporates want no oversights.

“Three of this year’s top 10 earners come from the healthcare industry.” If you think this may have much to do with the failure in providing public health insurance, I will excuse you. If there are no bankers in this list, you may have to just wait for the next. The outfit who did the “CEO pay survey” says, “[T]here will be more to come … a rash of massive stock option bonuses as many firms awarded their top executives big option deals when the stock markets hit their lows in 2007-2008.”

Loud noises were made that the short-termism that was fingered as the main culprit for the financial crisis that metamorphosed into an economic crisis should be a thing of the past. But, now it looks like it is a thing of the present, and more ominously, as of the future too!

The rich have got as poor as they are ever going to get. And, the poor have got as rich as they are ever going to get.

Go figure.

Raghuram Ekambaram

References

1. http://www.guardian.co.uk/business/2011/dec/14/executive-pay-increase-america-ceos/print

2. http://www.guardian.co.uk/business/gallery/2011/dec/14/americas-top-10-highest-paid-ceos-2011#/?picture=383291403&index=9