Executive Compensation…uh, Overcompensation

I’ve been reading economics blogs lately to see how we will soon become just another third world country. Just came across this tidbit from The Automatic Earth:

What’s wrong with Wall Street? …:
* Rewards employees, not shareholders – It pays as much as 76% of its revenues to the people who work there (e.g., in 2006 Merrill paid $17 billion in compensation and its revenue totaled $22.4 billion). That pay is linked to revenue, not how much money their deals make for customers.

That money is not going to the real employees (the ones who do all the actual work). It is going to the leeches, those CEOs and top execs who get paid many millions, with multimillion golden parachutes beyond that) to take the companies for every dime as they ride its stock down into oblivion.

Decades ago one of my bosses said to me, “Well, a company can make money by selling things or by cutting expenses. And we are in the phone business and everyone has a phone, so our only choice is to cut expenses. And thirty percent of any company’s expenses are employee pay. So if the executives want to get paid more they have to cut rank and file employees. And that is what we are doing.” And the company laid off a quarter of a million employees while I was there, from 355,000 employees down to 120,000 (and many more since).

But right now, look at that thirty percent going to employee wages. That is management and non-management. But that was back in the 1980s, just as the era of downsizing was beginning. Since then per-employee productivity has been rising drastically, as huge numbers of employees have been cut and the remainder forced to do the jobs of those who left…or suffer the same fate themselves. And at the same time CEO pay has skyrocketed from about 30 times the average wage in 1980 to over 350 times now.

Now it appears that not only are CEOs and high level execs getting a much greater cut of employee pay, but now many execs are taking money that would have gone to stockholders or better or cheaper products and keeping it for themselves.

And you and I are paying for it…

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One Response to Executive Compensation…uh, Overcompensation

  1. travis reems says:

    One golden parachute all St. Louisan’s are paying for directly is former Police Chief Joe Mokwa’s severance package of $100,000.

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