In a rational economic system (and yes I know some consider “rational economics” to be an oxymoron”), one would assume that a company that is pissing money down a storm drain in public would cut expenses and also fire its senior management or at the very least downsize their salaries and bonuses until said company was in the black. Well, as we all know American capitalism is not governed by rational considerations when it comes to what happens to people on the low end of the pay scale (who are fired, laid off or forced to accept draconian wage and benefit cuts at best) versus those lucky duckies on the high end.
Case in point, American Airlines. Last year American Airlines was the only major US air carrier to lose money. The only one. I bet you can already guess what happened to the Chief Executive Officer, Gerard Arpey, but what the heck, I’ll let Ft. Worth Star-Telegram tell you anyway:
AMR Corp. Chief Executive Gerard Arpey received $5.2 million in total compensation last year, even though the parent company of American Airlines was the only major U.S. carrier to lose money in 2010.
Arpey’s compensation grew 11 percent over 2009, boosted by an increase in stock awards and options that were granted in May.
Last year, AMR posted a $471 million loss while other major carriers reported profits. And with rising fuel costs, the Fort Worth-based company reported a $436 million loss for the first quarter.
I must admit, If I managed to lose nearly $1 BILLION in the last 15 months on my watch, I’d probably resign in shame. But our American executives (the company and the country both) are made of sterner stuff than you or I. They know how to handle adversity and tough times. They demand a raise! Now that’s what I call initiative (you may have another word for it, though, and I wouldn’t blame you).
One would think this would be an anomaly in our highly efficient, market driven capitalist system. After all, don’t conservatives, and the economists at well funded “think tanks” who they rely upon (cough – The Heritage Foundation – cough), always tell us that the “invisible hand” of market always rewards success and punishes failure. Don’t they always claim that the market is “self-correcting” and is best left to its own devices. Well, the answer as you might have guessed is a big fat “No!” In 21st Century America, the success or failure of your larger multinational companies (and by success I mean profits and by failure I mean losses) has little correlation with senior executive pay, even before the Great Recession brought to you by George W. Bush and friends. From a 2005 Center from American Progress report completed in 2005:
In 2004, the average CEO compensation was over $9 million, as reported in The Wall Street Journal’s annual analysis of the 350 largest public companies (WSJ, 2005). This is a whopping 14.5 percent increase over average CEO compensation in 2003. The big gains in 2004 were not the exception to the rule. Adjusted for inflation, CEO pay skyrocketed 480 percent between 1980 and 2003. Between 1989 and 2004, CEO compensation grew by 276 percent in inflation-adjusted terms (EPI, 2005; WSJ, 2005). […]
“If CEO and worker pay had increased at the pace of worker productivity, CEOs would have made [only] $2.3 million in 2003 and workers $51,148,” according to one estimate. (Sklar, 2004) But this is not what happened. Median income declined by about $600 in inflation-adjusted dollars, or 1.2 percent between 2001 and 2003, according to Census data. In fact, from the end of 2003 through March 2005, inflation-adjusted weekly earnings for the “production non-supervisory worker” (this includes 80 percent of the American workforce) actually declined by 0.9 percent (Bureau of Labor Statistics, 2005).
Now remember, that was during the height of the Bush Boom, his so-called “ownership society” when companies were flush with profits from the Bush tax cuts and speculating at the unregulated derivative driven Wall Street casino. Worker productivity was up, but the only workers benefiting from that fact were those at the top. The typical “non-supervisory production” workers actually saw a loss of income over those years.
But what about now you ask? Hasn’t the market self corrected? Isn’t CEO pay on a precipitous decline as millions of American worker bees either lost their jobs or took severe cuts in pay or benefits? Well, not exactly. Of course, we are all aware how the bailout of the Wall Street Mega-Banks only resulted in even higher executive bonuses and pay, despite the fact that the financial industry was the principal cause of the collapse of the world’s economy. Just look at the recent pay developments for the top level managers for the Banksters in 2010, only 2 years removed from nearly spirally the world’s economy into a second Great Depression:
In 2010, total compensation and benefits at publicly traded Wall Street banks and securities firms hit a record of $135 billion, according to an analysis by The Wall Street Journal. The total is up 5.7% from $128 billion in combined compensation and benefits by the same companies in 2009.
How comforting for the roughly 15% unemployed and underemployed Americans that must be, to know that the Masters of The Universe, two years after their Financial Death Star nearly destroyed economic life as we know it, are back riding high, no doubt partying like its 1999. And what is good for Wall Street, is just as good at other companies, regardless of their profit or loss statements (from 2009):
Amid the deepest economic collapse in generations, corporate America is coming up with a novel way to justify extravagant executive pay: Ignore the bad news.
Companies that sank into the red last year are looking past a host of business expenses, ranging from asset write-downs to higher-than-expected operating costs, to rationalize paying brass even more than they got in flush times. Others appear to be reducing pay but continue to bestow extraordinary perks, such as “golden coffins.” […]
Loews, whose holdings include hotels, insurers and oil exploration outfits, lost $182 million from continuing operations last year, and its stock price sank 44%. Yet the board paid Mr. Tisch $7 million—8% more than in 2007, when Loews generated $1.6 billion of net income from continuing operations. […]
But even companies that have better aligned their pay policies with the times still seem to have a tin ear when it comes to what critics call over-the-top perks.
For example, the total pay of Verizon Communications Inc. CEO Ivan Seidenberg fell 30% last year, to $18.6 million. But some shareholders are peeved that his heirs stand to collect up to $35 million payable upon Mr. Seidenberg’s death—an unusual benefit known as a “golden coffin.”
Arguing that shareholders shouldn’t be saddled with a payment for which no service can be rendered, the Philadelphia city employees’ pension fund and another public pension fund have filed a shareholder resolution for Verizon investors to vote on the perk.
Verizon insists that golden coffins are necessary to retain key employees.
Yes, must be nice to have your pay unrelated to your companies’ performance. Your family makes out like bandits even if you die, regardless of how good or bad an economic manager you proved to be. I guess they measure “merit” by a different standard in the board room than they do on the factory floor or the cubicle maze.
…CEO pay in 2009 more than doubled the CEO pay average for the decade of the 1990s, more than quadrupled the CEO pay average for the 1980s, and ran approximately eight times the CEO average for all the decades of the mid-20th century.
American workers, by contrast, are taking home less in real weekly wages than they took home in the 1970s. Back in those years, precious few top executives made over 30 times what their workers made. In 2009, we calculate in the 17th annual Executive Excess, CEOs of major U.S. corporations averaged 263 times the average compensation of American workers. CEOs are clearly not hurting.
But they are, as we detail in these pages, causing others to needlessly hurt — by cutting jobs to feather their own already comfortable executive nests. In 2009, the CEOs who slashed their payrolls the deepest took home 42 percent more compensation than the year’s chief executive pay average for S&P 500 companies.
What a wonderful world! Play Mr. Grinch and put more people out on the street without a job, and not only are you not considered a merciless bastard, but your company rewards you with even more money than if you actually tried to save jobs! Meanwhile your former employees struggle to find new jobs, pay for rising health care costs, feed their families and avoid losing their homes to foreclosure.
Which brings us back to the little people, the ones Fox News calls thugs and the real villains for crashing our country’s good fortunes over the last thirty years, despite ever declining member ship rolls. I speak of course about those heaving handed criminal enterprises known as UNIONS. Why just look what they are doing to poor American Airlines at the shareholder meeting where these senior executive compensation increases were announced:
American Airlines’ unions had picketed outside the meeting, protesting “corporate greed” and the stock-based bonuses awarded to AMR managers each year.
On Wednesday, the Association of Professional Flight Attendants picketed at several airports, including Dallas/Fort Worth, handing out leaflets to passengers saying AMR executives had received over $100 million in compensation and bonuses since 2005.
Union representatives were not immediately available for comment late Thursday. American has been in contract negotiations with its three unions for several years as they seek to increase wages. But the carrier’s officials say American’s labor costs are the highest in the industry.
I’ve seen some of those flight attendants and despite their generally modest size and stature I’m sure they are all viscous goons willing to do anything — anything — to destroy our country out of pure greed and malice for their betters. Unlike those poor beleaguered executives such as CEO Arpey at American Airlines. Why those nasty Union members begrudge American Airlines’ poor senior executives $100 MILLION in compensation since 2005 is beyond me. Just who do they think they are?