April 15—As the nation’s workers face today’s federal tax filing deadline, the new AFL-CIO Executive PayWatch report reveals how the average corporate chief executive officer’s pay package—now 301 times bigger than the average workers’ paycheck—too often results from cozy insider relationships instead of realistic contributions to the company.
CEOs seeking a pay raise turn to their friends in high places—in most instances, compensation committee directors on their companies’ boards of directors, many of whom have long-standing business and personal relationships with the CEOs.
The 2004 AFL-CIO Executive PayWatch profiles 10 of these cozy CEO-compensation director relationships and tells how to take action to reform these boardroom financial love affairs.
Each company’s board of directors is responsible for approving a CEO pay packages, and the board’s compensation committee director plays the most significant role in designing CEO pay, stock options, bonuses and other perks.
But every dollar of these multi-million pay packages—sometimes more than $100 million with stock options—takes earnings away from company shareholders. Hundreds of millions of those shareholder dollars are invested in the retirement savings of America’s working families.
In 2003, the average CEO of a major company received $9.2 million in total compensation, according to a study by compensation consultant Pearl Meyer & Partners for The New York Times. While total CEO pay fell just 8 percent between 2002 and 2003, this study found the estimated value of stock option grants to CEOs fell nearly 40 percent in 2003.
Safeway’s CEO Steven Burd Cashes Out While Company Profits Sink
Too often, the CEO pay system enriches executives without regard to company performance and profit or to the CEOs' contribution to their companies. In one such example, PayWatch profiles Safeway CEO Steven Burd, who cashed out $13 million in stock options in 2003 even as Safeway lost $169.8 million in net income.
Over the past five years, Safeway’s total market value has dropped by $20 billion, and The Wall Street Journal named Safeway among the 50 Worst Performers over the past one, three and five years. Several of the largest U.S. public employee pension funds have announced they will vote against Burd and other directors because of Safeway’s poor shareholder performance.
Making Shareholders Votes Count
Each one of the 10 directors profiled in the AFL-CIO Executive Paywatch is responsible for astronomical CEO pay packages. By voting “No” on their election, shareholders can send a message that excessive executive pay must be stopped. Activist shareholders at Safeway have begun “Vote No” campaigns for the company’s May shareholders’ meetings.
More
Make CEO pay count on the books.
Learn about the relationship between CEOs and their compensation committee directors at these 10 companies.
