Layoffs lead to more lucre for U.S. CEOs

Social justice news
September 2001

U.S. remains global master of war
Bush stem cell decision condemned
Drought adds to woes in hard-hit Central America
From welfare poor to working poor?
Layoffs lead to more lucre for U.S. CEOs
New report says "three strikes" strikes out
Report warns of slowing progress on child hunger

Other news this month

Layoffs lead to more lucre for U.S. CEOs
As the stock market slides and U.S. workers face the biggest wave of job cuts in a decade, top executives continue to enjoy exorbitant pay hikes, according to a new report, “Executive Excess 2001: Layoffs, Tax Rebates and the Gender Gap.”

A "decade of greed'' in the 1990s was followed last year by a particularly "blatant pattern of CEOs benefitting at the expense of their workers,'' the Institute for Policy Studies and United for a Fair Economy said in their annual pay survey released August 28. The report is the eighth annual study on the CEO-worker pay gap by the institute and United for a Fair Economy.

The study reports that executive pay jumped 571 percent between 1990 and 2000. CEO pay rose even in 2000, a year in which the S&P 500 suffered a 10 percent loss. The explosion in CEO pay over the decade dwarfed the 37 percent growth in worker pay.

According to the report, if the average annual pay for production workers had grown at the same rate since 1990 as it has for CEOs, their 2000 annual earnings would have been $120,491 instead of $24,668. Likewise, if the minimum wage, which stood at $3.80 an hour in 1990, had grown at the same rate as CEO pay over the decade, it would now be $25.50 an hour, rather than the current $5.15 an hour.

CEOs of firms that announced layoffs of 1,000 or more workers this year earned about 80 percent more, on average, than executives at 365 top firms surveyed by Business Week. The layoff leaders earned an average of $23.7 million in total compensation in 2000, compared with a $13.1 million average for executives as a whole. The top job-cutters received an increase in salary and bonus of nearly 20 percent in 2000, compared to average raises in that year for U.S. wage workers of about 3 percent and for salaried employees of 4 percent.

The yearlong economic slump is taking a toll on the nation's labor markets. Last August 23, the government reported that the number of laid-off workers drawing unemployment benefits had hit a nine-year peak. The Labor Department said the number of Americans collecting jobless benefits rose to 3.18 million in the week ending Aug. 11, the highest level since September 1992, when the country was struggling to emerge from the last recession.

The study also looked at the performance of U.S. corporations that had avoided paying federal taxes or even managed to earn tax refunds or rebates. It found that between 1996 and 1998, 41 large, profitable corporations used special tax breaks and credits to reduce their corporate tax bill to less than zero. Instead of paying taxes, they received outright tax rebate checks from the U.S. Treasury. As a group, the CEOs of these tax rebate firms averaged pay hikes of 69 percent, far above the typical CEO raise of 38 percent. Those pay hikes, made possible in part by tax rebates, totaled $194 million. In six cases, the CEO's raise entirely consumed his company's tax rebate for the year.

CEOs at the tax rebate companies earned 12 percent more on average than executives in the Business Week surveys for the years 1996-98. Executive pay at the tax rebate companies totaled $495 million during those years, equivalent to 15 percent of the $3.2 billion in total tax refunds paid to those companies over the period.

The study also looked at an emerging gender gap in upper management salaries. Heather Killen, a senior vice president of Yahoo, was the highest-paid woman in America in 2000, with a total compensation package of $32.7 million, a mere 11 percent of the highest-paid male (John Reed of Citigroup: $293 million). The 30 highest-paid women in the corporate world earned average total compensation of $8.7 million, as compared with $112.9 million for the 30 highest-paid men, a ratio of 1 to 13.

The Institute for Policy Studies is an independent center for progressive research and education in Washington, DC. United for a Fair Economy is a national organization based in Boston that spotlights growing economic inequality.

For more information:
United for a Fair Economy
"Executive Excess"
Electronic Policy Network

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