Executive Pay Soars In 2010, While Millions Lose Their Jobs and Homes

By Daniel Costello
New York Times

UNLIKE some previous years, 2010 registered broad gains in executive pay, benefiting C.E.O.’s from nearly all parts of the economy.

HAPPY days are back — in the corner office, at least.

After shrinking during the 2008-9 recession, paychecks for top American executives are growing again — in many cases, significantly so.

Rarely has the view from the corner office seemed so at odds with the view from the street corner. At a time when millions of Americans are trying to hang on to homes and millions more are trying to hang on to jobs, the chief executives of major corporations like 3M, General Electric and Cisco Systems are making as much today as they were before the recession hit. Indeed, some are making even more.

The disparity is especially stark as companies are swimming in cash. In the fourth quarter, profits at American businesses were up an astounding 29.2 percent, the fastest growth in more than 60 years. Collectively, American corporations logged profits at an annual rate of $1.678 trillion.

So far, this recovery has not trickled down. After two relatively lean years, C.E.O.’s in finance, technology, energy and beyond are pulling down multimillion-dollar paychecks. What many of these executives aren’t doing, however, is hiring. Unemployment, although down from its peak, stood at 8.8 percent in March. And few economists predict the jobless rate will drop substantially anytime soon.

For the average C.E.O., however, the good times have returned. The median pay for top executives at 200 major companies was $9.6 million last year. That was a 12 percent increase over 2009, according to a study conducted for The New York Times by Equilar, a compensation consulting firm based in Redwood City, Calif.

Many if not most of the corporations run by these executives are doing better than they were in the downturn. Many businesses were hit so hard by the recession that even small improvements in sales and profits look good by comparison. But C.E.O. pay is also on the rise again at companies like Capital One and Goldman Sachs, which survived the economic storm with the help of all those taxpayer-financed bailouts.

Against such a backdrop, it’s noteworthy that recent moves to empower shareholders seem to have done little to tamp down corporate enthusiasm for paying top dollar to top executives. This is generally the season when companies hold annual meetings for their shareholders.

Under new rules included in the Dodd-Frank financial regulations, nearly all public companies must now give shareholders a say on executive pay. Analysts and corporate governance experts are wondering how these votes will play out, even though companies are under no obligation to heed their shareholders’ advice.

“What’s funny about pay is that when the market is going up, it covers a lot of sins,” said David F. Larcker, director of the corporate governance research program at the Stanford Business School. It is when the market “is going sideways or down that funny things happen,” he said: “Considering some of the current pay packages, shareholders want to see strong results.”

On this year’s list, the highest-paid C.E.O. was Philippe P. Dauman of Viacom, who made $84.5 million in just nine months. (Viacom changed its fiscal year-end to September from December.)

Viacom has said that the compensation was inflated by one-time stock awards linked to a long-term contract signed last year.

Also at the top was Ray R. Irani, the C.E.O. of Occidental Petroleum, who took home $76.1 million last year, up 142 percent from the previous one. Last year, the board awarded Mr. Irani a $33 million cash bonus plus $40.3 million in stock awards, more than double what he received in 2009.

Mr. Irani is retiring this year, and Occidental has said that it has set higher hurdles that will significantly reduce executive pay packages.

Lawrence J. Ellison of Oracle, the software giant, followed close behind, with a $70.1 million payout, though that is down 17 percent from 2009. Still, Mr. Ellison’s fortunes are just fine: he had more than $26.3 billion in stock and other holdings in Oracle in 2010.

UNLIKE some previous years, 2010 registered broad gains in executive pay, benefiting C.E.O.’s from nearly all parts of the economy.

Many consumer products companies also offered rich pay packages, including one for John F. Lundgren, chief executive of Stanley Black & Decker, whose pay rose 253 percent, to $32.57 million, after a huge stock award. His counterpart at Emerson Electric, David N. Farr, saw his pay rise 233 percent, to $22.9 million, also because he was granted millions in stock.

Most executive compensation plans consist of stock options that ballooned as markets recovered after the financial crisis. Although executives typically have to wait several years before cashing in new options, the booming stock market still meant that those options were a bonanza for many chiefs, said Bruce H. Goldfarb, a compensation consultant based in New York.

The chief executive of Ford Motor, Alan R. Mulally, made $26.5 million in total pay, up 48 percent over the previous year as a result of big stock option awards. Ford was the only one of Detroit’s Big Three automakers that did not receive a government bailout, and its stock value rose 68 percent last year.

New government regulations put in place after the financial crisis have emboldened some activist shareholders to try again to rein in compensation they deem excessive and undeserved. Although companies will not be bound by such votes, they will have to disclose the results in reports filed with the Securities and Exchange Commission, as well as how they considered the voting in setting subsequent executive pay.

Still, it remains to be seen whether these changes have any teeth. For “say on pay” votes, there is no standard for what percentage of shareholder votes constitutes an endorsement or a rebuttal of policies. Even the prospect of the public votes, though, appears to have altered the relationship between investors and corporate executives on many discussions in recent months.

“I’ve been in two client meetings a week for the past four months to help determine this year’s compensation plans,” said Ira T. Kay, a managing partner at Pay Governance, a compensation consulting firm in New York. “While companies are making many tactical decisions about what to pay executives, it’s all being done in the context of trying to make sure they get a favorable vote on say on pay.”

There are some early signs that shareholders are pushing back and demanding to be heard on what they deem as excessive pay packages.

Just weeks into this proxy season, a majority of voting shareholders at four companies have handed rebukes to management over pay plans: Hewlett-Packard, Beazer Homes USA, the Jacobs Engineering Group and Shuffle Master, a maker of casino equipment.

By comparison, in the entire proxy season last year, just three companies — KeyCorp, Occidental Petroleum and the former Motorola (now split into two companies) — received majority negative votes on corporate pay packages.

Shareholder frustration was probably most evident in recent weeks in the unusually bitter public spat at Hewlett-Packard. H.P.’s board has already been heavily criticized for its handling of the ouster last year of its former chief, Mark V. Hurd, after an H.P. investigation uncovered business conduct violations related to a personal relationship with a contractor.

Two of the most powerful shareholder advisory groups issued highly critical public reports recommending that investors this year vote against H.P.’s executive pay plans and current board members, saying that the company highly overpaid its executives.

In a report in early March, one advisory firm, Glass, Lewis & Company, gave H.P. a grade of D on a scale of A to F. It said H.P. paid its executives more than the median of 33 other similar-size companies and faulted the board for the $35 million severance payout to Mr. Hurd, now a president of Oracle.

In a second report, the proxy advisory firm Institutional Shareholder Services criticized H.P. for what it called its generous executive compensation that “rewards executives even if the company performs poorly.”

H.P. rejected the criticism in a letter to shareholders in March, saying the recommendations were flawed. But at a packed annual meeting in an Arlington, Va., hotel late last month, a majority of shareholders voted against approving the robust executive pay packages.

The company said the compensation plans were under review.

“While we are disappointed with the outcome of the advisory shareholder vote, H.P. intends to carefully consider our shareholders’ perspectives regarding executive compensation matters and will take those views under advisement when making future decisions relating to executive compensation,” the company said in a statement.

True power for shareholders may come when executives who perform badly or whose companies are accused of fraud are required to forfeit their multimillion-dollar payouts.

Regulators forced just such a concession with the chief executive of Beazer Homes, Ian J. McCarthy. Though he was not charged personally, in a settlement with the S.E.C. last month, Mr. McCarthy agreed to return $6.5 million in compensation that he had received while the company was accused of filing inaccurate financial statements in 2006. Beazer restated its results for that year and resolved the S.E.C.’s claims in 2008 without paying penalties or admitting any wrongdoing.

Such clawbacks have rarely been used, but were a main feature of the Sarbanes-Oxley Act of 2002, which was passed after extensive frauds at Enron and WorldCom. In late March, investors in Beazer Homes also filed a lawsuit against directors of the company, accusing the board of improperly increasing pay for executives in 2010 despite the company’s $34 million net loss that year. The losses were blamed on poor sales of existing homes and little demand for new ones. Beazer said it would not comment on pending litigation.

CAROL BOWIE, director of research at Institutional Shareholder Services, said that while executive compensation would probably keep rising and outstrip wage increases in the economy, pay packages could be entering a new era of investor scrutiny.

With “say on pay” voting, investors are “in a moment when the rubber meets the road,” Ms. Bowie said. “They have a tool — maybe it’s a blunt one — but it can help them express their frustration and ensure the buck stops with them.”

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One Response to Executive Pay Soars In 2010, While Millions Lose Their Jobs and Homes

  1. Paul Felix Schott says:

    When this Old World starts getting you down. From Pollution the cost of OIL,
    Heating Fuel,The Fuel you put in your Vehicles, You Electric Bills from
    cooling air conditioners and lights not to speak of the Evil. The TAX that all
    Governments Federal, State, County and City put on everything they can thing of.
    They are supposed to serve us. Not put a burden on its people. That they are
    elected to serve all the people you, not their own Pocket Books.

    The Wicked keep putting higher taxes on everything. Making it a Heavy
    Burden on many that are already struggling just to put food on the table.
    Too many Americans have lost their home to the tax collector or to foreclosures
    from the unjust bankers greed. More are out of work and lost their homes then
    in the GREAT DEPRESSION,in the last ten years. All Americans and many Nations
    need good jobs and more of them. Not more TAXES.

    There is a Industry that will employ workers and is growing by more then 50%
    every year. There is a clear way for all up on the roof the Sun Light is free
    fuel from GOD. Some wicked in Government have been backing Coal, Oil, Gas and
    the Nuclear industries for too many years. These kickbacks to them were called
    Subsidizing Industry Technology. Most all Wise Men and smart Economist and
    Environmentalists call this padding their pockets and subsidizing back to the
    Stone Age.

    This might even been funny in the 1960?s. If it were a Fred Flintstones and
    Barny Rubble Movie. About How to aggressively systematically work with the rich
    to Pollute Ground Water quality to the point it is unsafe to drink or use.
    So to they make a law you can only buy water from their pipe line. And to make
    the air we breath full of Toxic Gases, Sulfur Dioxide and more Radioactive
    and Acid Rain. Injuring all living things on Earth.

    With Fred Flintstones to the Rescue. To help create a Healthier Environment.
    For all Future Generations. By spotlighting Renewable Energy and Free Energy
    like Wind and Solar. On his and his neighbor Barny Rubble’s roof. Even though
    the greedy wicked would do everything to stop or slow them down.

    Just imagine a dream that a 100 years ago one of the smartest man to ever
    live had. A dream after working with Sun Light. That all on Earth would use
    Free Energy Solar Energy.

    That Dream also shared by a man that dreamed this over 2,250 years ago.
    Both These men showed the world in their days. That this dream of Free Energy
    Solar Energy World wide was very possible. Both of these two wise men had
    first hand worked and researched their experiments for not just days, weeks
    put for many years.

    One of these men used chalk on Black Board the others board was a black
    stone table or floor covered with white sand and used a stick. One of these
    two Brilliant men had Kings from all most every Kingdom on Earth come to him
    for advice.

    The other went to almost every nation on Earth. Freely on his own dime
    Teaching All that had ears to hear. He would win the Nobel Prize for doing so.
    For his work on Solar Energy. Only after years of doing research and when most
    Scientist on Earth would not take the nomination for the Nobel Prize in 1921
    this Brilliant scientist was awarded it in 1922 for the 1921 year.

    Now if this was just a Pretend TV Show or a Movie from a dream. This would
    be a great Sci Fi Story Line. In the 1960?s or even better to day. Sci Fi story
    Movie or dream No.

    All that i Have told you did actually really happen. Albert Einstein won the
    Nobel Prize for what? When Government leaders asked him to go on stage. To
    address the Scientific Community and the World. About what he was given the
    Nobel Prize for. When Albert Einstein Had done so. He addressed them with his
    other accomplishments. For years most Governments did not have a ear for
    Einstein’s Dream.

    Archimedes around 250 B.C. was know most of the World over as a great
    Mathematician. One of the first Scientist and Inventor of many things. Even
    the first Laser Ray from the Sun’s Energy. Science Fiction is what you would
    have though you were seeing if you could go back in time, it was real.To day
    we call it The LASER, Light Amplification by Stimulated Emission. Back then it
    was just called Amplification of the SUN Archimedes Death Ray.

    Thousand of years later it would be a Laser. That Albert Einstein help
    make possible. That would unlock one of the first books on Earth.
    The METHOD written by Archimedes. Then over more then 250 years later. When
    well Faded was cut from a scroll and put into a book form, to be easier to
    hide from the Romans by St. Paul. This book sold for over 2 million dollars.
    In New york at Christie’s Auction House.

    These two are at the top of the list of the World’s Greatest Scientists,
    Viewed by Scientist around the World.

    Sad that for the last 25 years or so of every teacher asked no matter what
    Grade k through 16. 80% of them did not know Archimedes. Even sadder 90%
    of them could not tell you what one of the most Brilliant Scientist to ever
    live on Earth. Won the Nobel Prize for.

    It was for the work Albert Einstein did to show the World it could get
    Free Energy, Electric from the SUN. PHOTOVOLTAICS

    You ask this question to any Military general 95% of them will get it right.
    Even more surprising 99% of them will know more about Archimedes then most
    Teachers on Earth. Generals know Energy is the key to Winning.

    At almost one thousand to one Archimedes always won against what all knew was
    impossible odds. Archimedes home town city of Syracuse was victorious against the
    greatest Kingdoms Armies on earth many times. Syracuse once was one of the most
    powerful cities in the World.

    I can only ask you to please look into Solar Energy, Solar Power, Solar Panels
    and Solar array on the internet under Images. To see and explore for your self
    then you be the JURY.

    More then 10 years ago the Internet became most of the World’s Universities
    Learning Platform. A Modern Day Archimedes Resource Center.

    The Solar Energy Industry in the year 2010 has leaped ahead farther and
    faster then any other industry on Earth. The Solar Industry in the
    United States of America alone, has grown by more then 50% in 2010 and it looks
    like that number will go up even higher this year 2011.

    The strong benefits of Solar Energy is Clear Clean Air viewed in major cities
    as improving air quality. Clean Cities. By all that use there brain for good .
    View it as protecting the environment and Freedom from OIL.

    While the Federal Government has eased the Tax on Renewable Energy till the end
    of this year 2011. Some cities in the states that these Legislators come from have
    worked against these tax credits.

    By doing so they are showing their true objectives. That they have
    stock in some power plants and do not want to lose all that Money they
    have been taking out of your pocket books for too many years. By taxing
    you on your Energy Bills. They want to Control Power and Tax Everything
    they can. Not let People be free to get their own power from the top of
    their own roofs.

    By adding their own taxes to them. These wicked leaders think that
    this will take away the incentives to harvest the Free Energy from the

    The Public ability and awareness for all on Earth to use the Natural
    Solar Energy, is Contributing to Production of Solar Energy Products.
    Making the Solar Energy Industry the fastest growing on Earth. A Wealth
    of Free Energy From The SUN.

    The more the wicked try to slow the Solar Energy Industry down, it only Enhances
    involvement and the efforts of the Good at Heart.

    GOD Bless you for reading this.

    The Lord’s little Helper
    Paul Felix Schott

    through out History Many have tried to wipe the good from our history books.
    Read the Bible Jesus will Bless you more then i can.

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