CEO Pay and the Great Recession
September 1, 2010 · By Kevin Shih
At a time when we're experiencing the worst economic crisis in the past 80 years, CEOs who slash jobs should have to tighten their own belts.
Over 15 million workers were fired from their jobs from January 2007 through December 2009, according to the Bureau of Labor Statistics.
Keep that in mind while looking at these numbers from IPS’s just-released 17th annual Executive Excess Report, CEO Pay and the Great Recession:
- Fred Hassan, the ex-CEO of Schering-Plough, received a $33 million golden parachute when his firm merged with Merck in late 2009. The merger led to 16,000 workers being fired.
- William Weldon of Johnson & Johnson took home $25.6 million, more than three times as much as the S&P 500 CEO average, at a time when his firm slashed 9,000 jobs and while the company was facing a massive drug recall scandal.
- Mark Hurd of Hewlett-Packard, currently famous for failing to cover up a relationship with a contractor/erotic film star, has been awarded $24.2 million for laying off 6,400 workers. On top of that, he received an additional $28 million in severance.
These two sets of data illustrate a pretty dire picture, especially at a time when we are experiencing record unemployment. Both the government and the private sector are unwilling to take sufficient measures to put Americans back to work. The federal government is moving away from job-creating stimulus to supposedly austere measures, like cutting much needed social safety net programs (see here for an obvious example). The private sector, on the other hand, is making record short-term profits by eliminating jobs—furthering the income gap between the rich and the poor, while also significantly decreasing the consumption and taxpaying power of regular workers.
CEO Pay and the Great Recession is a report we released today that illustrates this irresponsible behavior in the corporate sector. According to the report, the 50 top CEOs that have laid off the most workers in 2009 received $12 million on average, while the S&P 500 companies have earned around $8.5 million on average.
Some additional key findings:
- Five of the 50 top layoff leaders were recipients of major financial bailouts. Of these, American Express CEO Kenneth Chenault took home the highest 2009 pay, $16.8 million, including a $5 million cash bonus. American Express has laid off 4,000 employees since receiving $3.4 billion in taxpayer bailout funds.
- The $598 million combined compensation of the top 50 CEO layoff leaders could provide average unemployment benefits to 37,759 workers for an entire year — or nearly a month of benefits for each of the 531,363 workers their companies laid off.
At a time when we're experiencing the worst economic crisis in the past 80 years, CEOs who slash jobs should have to tighten their own belts, not just so they’re in line with today’s S&P norm, but moving towards CEO pay levels in previous decades when the U.S. economy was more stable. This is a move that is necessary to establish robust sustainable economic growth. It would also help prevent future economic crises like the one we are experiencing today.
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