The new batch of executive compensation reports are some of the most embarrassing ever. Pay for big company bosses overall was $11.7 million on average last year, according to the New York Times. But the real scandals are in the individual stories.
Perhaps most appalling are the “subprime CEOs,” those guys who cashed in as their companies (including Citigroup, Merrill Lynch and Countrywide) suffered greatly for their involvement in the mortgage mess. Charles Prince, for example, pocketed a $10.4 million performance bonus from Citigroup, despite a 48 percent drop in his company’s stock.
Then there are the defense contractors, the prime beneficiaries of the post-9/11 military spending boom. Last year Lockheed Martin chief Robert Stevens pocketed nearly $20 million in stock options — even while government auditors were accusing the aerospace firm of more than $8 billion in cost overruns.
Or how about Sprint CEO Gary Forsee, who got a payout valued at $21.8 million while 4,000 of his workers were about to get pink slips?
Unfortunately, despite some laudable efforts, the problem of excessive pay is not being fixed.
Yes, Democrats in Congress have held some blockbuster hearings and Sens. Barack Obama and Hillary Clinton have both blasted the CEO/worker pay gap on the campaign trail. And, yes, there are even some promising bills floating around.
One that passed the House last year would give shareholders the right to vote on pay packages. The votes would be nonbinding, but the prospect of a large quantity of “no” votes could put a damper on corporate boards’ willingness to approve lush golden parachutes.
A couple of other bills would eliminate tax loopholes that encourage runaway pay.
Did you know, for example, that gazillionaire private equity and hedge fund managers now pay a lower tax rate than most of us? That’s because a big chunk of their pay is in the form of a percent of their fund’s profits, which is treated as “capital gains” and taxed at less than half the rate of ordinary income.
Fixing that should be a no-brainer. But Congress hasn’t even managed to plug the hedge fund loophole yet.
Instead, we’re still stuck with a system that hands out eight-figure paychecks like candy at a parade.