Well hard times come no more. According to the GuardianUK CEO pay survey it just got a little shinier for some in that city on the hill. While austerity and stagnation is the order of the day for the majority of Americans some of the country’s top bosses got pay increases of between 27 and 40% last year.
America's highest paid executive took home more than $145.2m, and as stock prices recovered across the board, the median value of bosses' profits on stock options rose 70% in 2010, from $950,400 to $1.3m
The top of the top came from the health care industry. The head of the world’s largest healthcare firm McKesson’s, John Hammergren, made over $145million in 2010, the majority from stock options.
Just for laughs here is some local perspective on how much money Hammergren’s $145 million is in a human scale. In Vermont, Federal spending cuts to LIHEAP (Low Income Home Energy Assistance Program funding to low-income households) might ultimately result in funding to the state going from $27.5 million in 2011 to approximately $11.6 Million for 2012.
One counter-intuitive, gravity defying feature of high-end pay packages is that stock prices may go down, yet compensation continues to head up for some departing and retiring executives. Notice three out of these four highest paid departing or retiring CEOs were leaving companies where shareholder stock prices had declined during their tenure.
Ronald Williams, former head of Aetna, a health insurer, exercised 2.4m options for a profit of $50.4m. Aetna's stock price declined by 70% from when Williams assumed the role of CEO in February 2006 until his retirement. At pharmacy chain CVS, Thomas Ryan made a $28m profit on his options. During Ryan's 13-year tenure as CEO, CVS Caremark's stock price decreased almost 54%.
Omnicare's Joel Gemunder retired last August and received cash severance of $16m, part of a final-year pay package worth $98.28m. Adam Metz, the former boss of General Growth Properties, a real estate company that specialises in shopping malls, walked away with a $46m cash bonus in 2010. GGP executives received nearly $115m in bonuses from the firm as it emerged from bankruptcy.
It may always to be good at the top. However for many Americans maybe “all they can do is stare from a distance at that city's glimmering towers” (to lift a line from part of a well known speech).
That’s one of my favorite songs! Excellent.
This is the exposed part of the Wall st iceberg. Corporate execs siphoning money from investors and workers. Not much different than Wall st siphoning money from 401 contributions. Either case, performance doesn’t matter. The system lets these people make money on both the upside and downside. For 401k’s, the carrot is a tax incentive and employer matches. The reality is Wall st skims this off the top. It’s the ultimate scam. Market volatility designed to move money from those who think they are investing in retirement to those running the system.
Likelihood of change: 0.00001%.
Re. McKesson’s John Hammergren’s $145 million compensation in 2010.
Health care right?
Here’s a comparison. If we do the math, that shitbag earned as much as 5,183 of our neighbors who work in nursing & residential care facilities. That’s right. The ones who do the hard (and often thankless) work of caring for elderly and disabled Vermonters.
We’ve always had inequities but we are so far past crazy that it sometimes makes me physically ill.
2 simple rules would move this issue from a festering pus-hole to the level of “disgusting but not the worst problem”:
1. Shareholder votes every year on the compensation (including deferred compensation and perks) of the top 20 highest paid employees in any public company. No bonuses granted to the top 20 until after a full vote of shareholders.
2. Any penalties or fines assessed to a corporation for illegal acts, whether admitted or not, are paid out of the compensation of the top 20 highest paid employees at the time of the crime, even if those people no longer work for the corporation (Clawback). No public corporation would be allowed to purchase liability insurance or waive liability for any of the top 20 paid employees.
The result? If a company had a bad year, they would not propose bonuses or deferred stock/option plans. And, an awful lot of people would want to be the 21st highest paid…and we’d have a “race to the middle”.