Tuesday, May 19, 2015
Polarizing Paragons of Pay
From university presidents and major college sports coaches – even at public institutions – to athletes and those at the top of huge corporations, the levels of compensation – fully adjusted for inflation – are vast multiples of practices just a couple of decades ago. This growing disparity of compensation leads to other anomalies across the board. Like the cost of entertainment, from professional sporting events, to high profile Broadway shows, to housing in and around key cities and the price of a solid education.
Things we used to take for granted, like the ability to retire, are also eroding both because to increase profitability corporate America has increasingly elected to downsize benefits and by reason of the soaring cost of just about everything. “Lots of companies have been phasing out pension plans. Social Security and Medicare are proving extremely expensive to maintain as people live longer and health costs rise. And retirement accounts, like 401Ks, which are the supposed alternative, are only helping some people: 45% of working-age households don't have them. Across the U.S., near-retirement households have an average of $12,000 in retirement savings, while working-age households have just $3,000, according to the National Institute on Retirement Security. Which isn't much for 20 years of vacations with the grandkids, even with Social Security thrown in.
Increasing numbers of people aren't sure they'll be able to retire. Last year, 43% of Americans were "not too" or "not at all" confident of having enough money, according to the Employee Benefit Research Institute, up from 27% in 1995. And the young are particularly skeptical. Only one in five millennials think they'll be able to claim Social Security when the time comes, a Gallup poll found. One quarter think they'll have to work in their senior years—and it's very likely that they're right.” FastCompany.com, May 18th. Save money! In this economy? With student loans, high housing costs and soaring food prices?s
That the average 800 square foot home in San Francisco these days costs $1 million (try New York City, Washington, D.C., Seattle, Los Angeles, etc. to see where rents and home prices have settled) or NBA, NHL, NFL, MLB seats anywhere near the action are in the hundred plus dollar range tells you what is really going on in this country. The rising cost of getting a “life-preparing” education has crushed the economics of too many young graduates stepping into the work world, while the scions of the mega-rich have access to full and proper educational opportunities at the best universities with no comparable burdens.
The general trend in this country is a deep and steady decline in the standard of living for average Americans, a decimation of upward social mobility and a clear destruction of hope for a better future for most of us. Pay at the top is simply out-of-control, much higher in this country than in the rest of the developed world. Tens of millions to hundreds of millions each to CEOs all over this nation.
“From 1978 to 2013, CEO compensation, inflation-adjusted, increased 937 percent, a rise more than double stock market growth and substantially greater than the painfully slow 10.2 percent growth in a typical worker’s compensation over the same period… The CEO-to-worker compensation ratio was 20-to-1 in 1965 and 29.9-to-1 in 1978, grew to 122.6-to-1 in 1995, peaked at 383.4-to-1 in 2000, and was 295.9-to-1 in 2013, far higher than it was in the 1960s, 1970s, 1980s, or 1990s.” Economic Policy Institute, June 12, 2014.
You would have thought that financial restraint laws passed as a result of the recent Great Recession would have stemmed this unsustainable and polarizing trend. Not really, and if anything, the situation has worsened. “It’s been five years since the Dodd-Frank law required that companies let investors vote on their executive pay practices. The idea, lawmakers said, was to give shareholders a chance to sound off when compensation plans are not in their best interests.
“But has putting these matters to a vote done anything to rein in executive pay? Not a chance. Since these votes started being tallied, [already outrageously high] C.E.O. pay has risen on average 12 percent annually… There are several reasons ‘say on pay,’ as it is known, has had little impact on executive compensation. One may be that the votes are not binding…
“[Yet the majority of shareholders just let it happen. The] median shareholder support for pay practices at the 500 largest companies was 95 percent of the shares voted, according to a ranking compiled by the Shareholder Forum, an independent creator of programs to help investors make sound decisions. The vote ranking, based on data from Equilar, a compensation analysis company in Redwood City, Calif., shows that overall support has risen from 93.8 percent in 2011.
“This apparent satisfaction with pay may be a result of the rising stock market. Shareholder dissent, when it does crop up, typically occurs at companies that have awarded lush compensation even as their performance has lagged. Investors watching their shares go up are less likely to be outraged by a sizable bonus or stock grant.
“Still, among the most generous companies, shareholders’ discontent is percolating. Last year, 15.9 percent of the shares voted at the 100 top-paying companies were nays, compared with 15.4 percent in 2013. And among the companies whose votes have occurred so far in 2015, the dissent figure has increased to 18.4 percent…
“The company receiving the largest dissent — 54 percent — was Oracle. Its shareholders have long complained about how much the board pays Lawrence J. Ellison, its founder. Second on the dissent list was David M. Zaslav [pictured above], chief executive at Discovery Communications and the highest-paid C.E.O. in the nation. He received compensation worth $156 million last year, a 368 percent increase over 2013… At last year’s annual meeting, when investors had information on Mr. Zaslav’s compensation for 2013, 41 percent of the voted shares rejected Discovery’s pay practices.
“Another case in point: David T. Hamamoto, chief executive of Northstar Realty Finance, a real estate investment company. Some 39 percent of the votes cast at the company’s 2014 annual meeting were against its executive pay, but Mr. Hamamoto’s $60 million package for last year was an increase of 227 percent over 2013.
“Then there’s Leonard Schleifer, the chief executive of Regeneron Pharmaceuticals, a biopharmaceutical company…He received $42 million in compensation last year, a 15 percent increase; 38 percent of the votes cast at the 2014 shareholders’ meeting disapproved of the company’s pay practices.” New York Times, May 16th. The list goes on and on and on and on. Les Mooves (CBS), $58 million, Marrisa Mayer (Yahoo), $42 million, Steven Mollenkopf (Qualcomm), $61 million, Philippe Dauman (Viacom), $44 million, etc., etc., etc.
Since 90% of stocks are owned by 10% of the American population, we seem to have an insider’s club where those at the top take care of their own. The fact that these staggering rates of pay ripple through every aspect of the economy, making life and affordability that much more difficult for everyone else – folks who don’t get to vote on executive pay are left out with no power to change anything – doesn’t seem to matter… to anyone who could make a difference. While Europe has nothing like the extent and levels of pay we have here in the U.S., the European Union (with separate rules in the UK) is considering serious requirements on what executives can be paid in public companies. Nothing like that could ever pass the existing Congress, and there is no one seriously talking about such laws.
But as both parties speak about “income inequality,” what exactly are they proposing to fix it? Precious little is being discussed about the anomalies at the top. Instead, each party is promising false hope to the masses that they will make more money. Each party seems to acknowledge that the bulk of the new jobs that have dropped the unemployment rates are really low-pay, low-advancement opportunities. All we really have is abstract promises of “better” without the remotest viable path to that goal on either party’s platform.
I’m Peter Dekom, and until enough Americans get angry at these absurd practices, nothing will change!