Delta’s plans to lay off 12,000-15,000 workers was bad news for employees. However, new figures on CEO salaries at other top job-cutting firms suggest that Delta CEO Ronald Allen can expect a nice bonus.
MAJOR FINDINGS:
1. A Business Week survey of executive pay shows that of 27 U.S. companies announcing layoffs of more than 10,000 workers since March 1991, most of these companies’ leaders were loosening, rather than tightening, their own belts during this period of austerity.
Compensation data are available for CEOs of 23 of the 27 biggest job-destroying companies. On average, their annual compensation (not including stock options) rose 30 percent in 1993 to about $1.9 million. All of the men (and they are all men) made more than $1 million in salary and bonuses in 1993; most have an extra million or two in stock options.
2. A new tax law passed last year gives executives an extra incentive to slash jobs. The law imposes a $1 million cap on the amount of executive pay that is deductible, unless the pay raise is linked to performance. When Sears announced mass layoffs in January 1993, CEO Edward Brennan quietly accepted a 200 percent pay hike, raising his 993 compensation to more than $3 million, while 50,000 workers slated to lose their jobs.
3. A CEO’s willingness to ax tens of thousands of workers does not necessarily make him a good value to the company’s shareholders. Of the 21 top job-cutting CEOs for which data are available, nine fell in the bottom 30% of CEOs surveyed in terms of shareholder returns.