That does not even touch on the fact, public corporate CEO compensation is now 'heads you win, tails you still win' - performance means little. [Sep 27, 2008: Heads We Win, Tails We Win] [Oct 30, 2007: You're Fired! Now Here is $160M to Help Ease the Pain] [Jan 22, 2009: Merrill Lynch's John Thain Can Only Work on $87,000 Rugs] [Sep 17, 2008: Thain's Aides May Get $200M for Weeks of Work] [Apr 9, 2009: Chesapeake Energy CEO Aubrey McClendon With New Shady Compensation Deal] But I won't digress.
This issue is parallel to the short term-ism thinking in almost all aspects of American life, whether in our political system, educational system, or (fill in the blank) policy. [Sep 9, 2009: WSJ - Vanguard's John Bogle, Warren Buffet Speak Out Against Short Term Nature of Mar It's all about the tree in front of you, forget the forest since the decision makers will get their rewards and leave the problems behind to the next group. "Kick the can" policies nationwide.
Proponents will argue the current compensation system rewards productivity and efficiency - I'd argue those things would happen anyhow in a market based system... if a CEO was paid 30x the median company wage or 300x.* [Oct 4, 2008: Credit Crisis Sharpens Anger Over CEO Pay] Don't you think a public corporation CEO who had to actually stick around a company at that position for 15-20 years to build 'generational' wealth would be more focused on the long term health rather than taking actions that will (in many cases) create a facade of health in the near term. Anyhow, it won't change... you cannot discuss it without being called a (brace for it) "European"!
*I have a totally different view of "founder CEOs" who have an ingrained drive to see their companies succeed, rather than the "babysitter CEOs".
Either way, why would any CEO announce hiring 8,000 workers when cutting 8,000 means an instant +6% print to the stock price in premarket? Mass hiring would be suicide to a portion of their stock based compensation packages.
- As U.S. companies shed millions of workers during the recession, the CEOs who laid off the most people brought home pay that was significantly higher than that of their peers, a study released on Thursday found.
- The CEOs of the 50 U.S. companies that laid off the most workers between November 2008 and April 2010 were paid $12 million on average in 2009, or 42 percent more than the average ($8.5 million) across the Standard & Poor's 500 .according to a study by the Institute for Policy Studies, a Washington think tank.
- Each of the 50 companies examined in the report laid off at least 3,000 workers between November 2008 and April 2010.
- The cuts also came at a time when the companies were increasing profit -- 72 percent of companies announced planned layoffs even while earnings were rising, the study found.
- "There is still this general notion that when CEOs slash a lot of jobs they are being the tough guy, making the hard decisions necessarily to make their company lean and mean and that it's going to be a good thing for the bottom line," said Sarah Anderson, global economy project director at IPS and the study's primary author.
- "We are trying to encourage people to think long-term, that there are all kinds of costs to mass layoffs, in terms of morale problems with remaining workers, in terms of when you may have to rehire and train workers if conditions improve ... It was more a way to boost their profits in the short terms and line the pockets of their CEOs," she said." (Sarah sounds very "European" with talk like that!)
- Five of the 50 top layoff leaders received taxpayer-funded bailouts. (that's ok, America is all about
corporate socialismcapitalism, and that's just the luck of the draw - wink wink)
- Many companies rewarded executives with stock options, which had little downside risk and gave corporate leaders a clear incentive to drive up a company’s stock price.
Ironic random statistic from the study:
- Overall, the Institute for Policy Studies calculates that the $598 million total compensation awarded to the top 50 CEO layoff leaders was enough to provide average unemployment benefits to 37,759 workers for an entire year, or nearly one month of benefits for each of the 531,363 workers their companies laid off.
How symmetric. ;)
[Feb 15, 2010: Newsweek - Layoff the Layoffs: Our Overreliance on Downsizing is Killing Workers & the Economy]
Video below with appearance by the "socialist" Sarah.