A climate of anxiety has enveloped the country over the past year. Workers are increasingly anxious about their job security and the rising cost of basics like health insurance, housing, college, and gasoline. Many military families are facing particularly difficult financial strains at home as they grapple with the dire risks to their loved ones far away. And through it all, too many corporate executives remain removed from such cares and worries. As they demand costcutting on the factory floor and in the back offices, costs in their own executive suites continue to soar. And as the Iraq conflict rages on, many corporate leaders are personally profiting from the suffering through war-related contracts.
We are also struck in this Presidential election year by the continued heavy corporate involvement in funding campaigns and the apparent inability of the political system to address issues like job outsourcing and the non-expensing of stock options. For many companies, “political profits” play as important a role in business success as investments in new products or enhanced customer service. Profits enhanced by investments in the political process seem to have a greater chance of finding their way into the pockets of CEOs.
At the same time, we have seen some positive signs over the past year that corporate leaders are not untouchable. Deepening public anger over excessive executive pay has prompted shareholders, workers, and even some corporate and Wall Street leaders to demand change. For example:
• New York Stock Exchange CEO Richard Grasso was forced to resign following disclosure of his $140 million pay package. The Exchange has filed suit against Grasso, seeking a return of some of his excessive pay.
• Long-time pay giant Michael Eisner, CEO of the Walt Disney Company, received a vote of “no confidence” from 45 percent of Disney shareholders. The rebuke forced Eisner to give up his role as Disney’s chairman, although he remains CEO.
• For the second year in a row, shareholder proposals on executive compensation dominated corporate annual meetings, with more than 300 resolutions filed by concerned shareholders.
• Whole Foods Market set a positive example by limiting CEO John Mackey’s salary to no more than 14 times the pay of the average frontline employee. In addition, all employees can qualify for stock options, and the company says that 94 percent of options go to nonexecutive staff.
Despite these developments, however, it is clear that executive pay is still out of control. Even in the post-Enron world, corporate boards are far too clubby and corporate lobbyists continue to hold far too much influence over our political system. Greater public pressure and political action will be needed to narrow the gap between executives and the legions of employees who also play an important role in creating shareholder value.