by Deb Cupples | The Bureau of Labor Statistics reports that our nation lost 663,000 jobs in March alone, followed by 651,000 jobs lost in February.
This brings the total jobs lost since December 2007 up to 5.1 million. Our nation's unemployment rate has risen from 8.1% to 8.5% -- reportedly the largest unemployment rate in 25 years (or so).
December 2007 is thought to be when our nation's recession began; at that time, however, Bush Administration downright refused to admit that we were in a recession.
While masses of ordinary Americans lose their jobs -- and their ability to spend money supporting American businesses by buying cars, computers, appliances, etc -- many U.S. companies haven't severely cut the pay of executives and managers.
Economist Brad Delong says that we need a bigger economic-stimulus package. He's likley right. Perhaps we need to couple such efforts with limits on the looting of public companies by executives and managers.
Every
company dollar funneled into an executive's personal bank account is
one less dollar to spend on paying off its debts,
offsetting losses, or saving jobs.
Over the past few months, we've been seeing some results from what amounts to company looting by executives -- all with the approval of the Board of Directors (which sets executive compensation packages).
Make no mistake: overpaying executives amounts to a massive redistribution of shareholder wealth -- that and it indirectly contributes to our nation's job losses, which is bad for our nation's economy.
As an illustration of how many jobs could be saved by cutting executive pay, consider the 2007 compensation of just the CEOs at a few big, public companies:
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| Company | CEO |
2007 Salary, Bonus, Incentives, Perks, & Stock Grants* |
| Alcoa | Alain Belda | .....$12 million |
| Bank of America | Kenneth Lewis | ........$17 million |
| Coca-Cola | Neville Isdell | .....$18.5 million |
| General Electric | Jeffrey Immelt | .....$19.3 million |
| Goldman Sachs | Lloyd Blankfein | .....$53.5 million |
| Merck | Richard Clark | .......$12 million |
| Xerox | Anne Mulcahy | .....$11.5 million |
* Total does not include stock options, because 1) execs pay something for them, and 2) stock option values are hard to calculate. The total also does not include deferred compensation or pension growth. In short, the executives' compensation packages for 2007 likely exceed the totals listed in Table 1. The total includes stock grants, because they represent a transfer of company wealth to an executive (i.e., the company could sell those stocks and keep the proceeds).
Let's assume that the average non-managerial employee costs each company $100,000 a year (likely a high estimate).
Let's assume that each CEO actually deserves 25 times more money than the average employee: i.e., that execs are worth $2.5 million a year.
How many non-managerial jobs could have been saved in 2007 if the companies listed in Table 1 had simply cut their CEO's pay to $2.5 million a year? See Table 2 (below).
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| Company | $ Saved by CEO Pay Cut | # Jobs Saved |
| Alcoa | $9.5 million | 95 jobs |
| Bank of America | $14.5 million | 145 jobs |
| Coca-Cola | $16 million | 160 jobs |
| General Electric | $16.8 million | 168 jobs |
| Goldman Sachs | $51 million | 510 jobs |
| Merck | $9.5 million | 95 jobs |
| Xerox | $9 million | 110 jobs |
Yes, just by cutting CEO pay to $2.5 million a year, those seven companies could have collectively saved more than 1,200 jobs for a year.
The news gets better, because CEOs are not the only managers diverting company dollars away from the task of saving (or creating) jobs -- meaning that there are more managerial pay packages that could be cut in order to fund non-managerial jobs.
In 2007, for example, Goldman Sachs paid just its top-5 execs $324 billion (most of which was in the form of bonuses). That's just one year and a small fraction of the number of execs and managers that likely got compensation packages.
In 2006, Merrill Lynch funneled $5 to $6 billion to 2,000 employees just in the form of bonuses.
I could go on and on with examples, but my point is that executives should be prohibited from looting their shareholders' money pots -- especially during times when so many Americans are losing their jobs.
Remember that masses of job losses means masses of people who don't have money to spend on extras -- which means less money spent supporting American businesses, which can lead to even more job cuts, which means even less money to support American business, and so on.
Note that executives did not always take such huge compensation packages. As an indicator of the growth of that redistribution of shareholder wealth, consider the massive increases in CEOs' pay compared to average non-managerial workers' pay:
- In 1970, CEOs averaged 25 times more than average workers.
- In 1990, CEOs averaged 90 times more than average workers.
- In 2002, CEOs averaged 143 times more than average workers.
- In 2006, CEOs averaged 364 times more than average workers.
Executives and managers make companies less valuable to shareholders by helping themselves to bigger and bigger pay packages -- even when the companies weren't doing so well. Merrill Lynch, Fannie Mae, AIG, and Enron are just five of many examples.
It would be fair and fitting if all executives at our nation's public companies were forced to tighten their belts as much as millions of American families have been forced to do.
Memeorandum has commentary.
Other Buck Naked Politics Posts:
* Real Executive Bonuses Based on Fake Profits
* More Right Wing False Analogies: this Time re: Executive Pay Caps
* PBGC Recklessly Invested in Pension Insurance Funds in Stocks
* Bank Execs Might Give Back TARP $ if They Can't Keep Bonuses
* Wall Street Execs Got Billions While Driving Economy Toward Cliff
* Executives Skate out of Economic Disaster with Millions
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