AFL-CIO's 2009 - 10 Worst CEO Pay Practices

For Immediate Release      
Contact: Amaya Smith 202-637-5018

AFL-CIO’s 2009 Executive PayWatch Highlights 10 of the Worst CEO Pay
Practices
Popular Website Includes Latest CEO Pay Data; Bailout Bonuses www.paywatch.org
 
(Washington, April 14)- Retention bonuses.  Golden coffins.  Turbo-
charged pension plans.   Hefty severance packages.  Lavish “executive
physicals.”  These are some of the outrageous CEO pay practices
highlighted in the AFL-CIO’s 2009 Executive PayWatch website launched
today at www.paywatch.org ( http://www.paywatch.org/ ).  Despite the
worst economic slump in decades, companies continue to heap millions of
dollars in pay, bonuses and perquisites on CEO for poor performance,
according to the latest data for 2008. The 2009 PayWatch site
highlights 10 of these worst CEO pay practices through case studies and
includes a comprehensive database of new CEO pay figures.
 
“Americans are rightly angered by CEOs who haven’t learned their
lesson,” said AFL-CIO Secretary-Treasurer Richard Trumka.  “After
driving the economy into the ground and gambling with the nation’s
retirement savings, these same corporations are giving out huge bonuses
for bad behavior.”  
 
The 2009 PayWatch includes a new section on pay practices at companies
which received taxpayer assistance under the Troubled Asset Relief
Program (TARP). The new PayWatch also includes companies which are
actively lobbying against workers’ ability to form unions and bargain
collectively for fair pay and benefits.
            
Corporations and pay practices featured in the 2009 Executive PayWatch
are:
 
‘Super-Sized’ Stock Options:  SunTrust (STI) received $4.9 billion from  the TARP bailout fund and wants shareholders to approve a mega-grant of  $7.7 million in stock options for James Wells, its chairman and chief  executive officer, even as investors have lost billions of dollars.
 
Pay for Failure: Bank of America Corp’s (BAC) board of directors
subscribes to a philosophy that rewards executives regardless of
performance.  Experts say this practice encouraged CEO Ken Lewis to
make risky acquisitions of troubled financial companies such as Merrill
Lynch and Countrywide Financial.             
 
Retention Bonuses: American International Group A.I.G. (AIG) has been
kept afloat by more than $170 billion in federal assistance since
September 2008 - about $1,500 for every household in the nation.  But
the New York-based giant insurer that nearly brought down the global
financial system paid out more than $500 million in salaries and
bonuses to hundreds of senior employees even as it was being bailed out
by the government.
 
Executive Physicals:  Employees of Wal-Mart (WMT), the world’s largest  retailer, have a strong incentive to stay healthy.  Only 48% are  enrolled in Wal-Mart’s health care plan for its employees, according to  an internal company memo, and 46% of Wal-Mart employees’ children are  either on Medicaid or uninsured.  To put that in perspective, 11% of  children in America were uninsured in the U.S in 2007, according to the  U.S. Census Bureau.  Meanwhile, the CEO and top executives receive an  annual “senior executive physical”
examination paid for by the company.   While Wal-Mart doesn’t list the
exact cost of the executive physical  it is listed as part of the $431,446 received by former CEO H. Lee  Scott Jr. under the category of “all other compensation.”
 
Moving the Performance Goalposts: Toll Brothers (TOL), the nation’s
largest luxury home-builder, benefited from the housing bubble. As the
housing market cratered in 2007 and it became clear that Robert Toll,
the founding chairman and chief executive officer, would not qualify
for a bonus under the existing plan, the company decided to move the
performance goalposts.  Instead of linking Toll’s bonus to the
company’s net income, the new plan is tied to a percenta
ge of the
company’s income before taxes and bonus, revenues of at least $1.5
billion, and several squishy factors such as “management enhancement
and efficiencies, and financial market visibility and access.”
 
Job Security for the CEO, insecurity for workers: FedEx Corp.’s (FDX)  Frederick Smith, the chairman, president and chief executive officer,
receives a generous salary, assurance of a severance if the company
gets bought, perks and a traditional pension. Yet FedEx has a double
standard for its workers. FedEx Ground classifies drivers as
independent contractors so it doesn’t have to provide them with basic
benefits, such as overtime pay or expense reimbursements. FedEx Ground
drivers also are required to pay for their own delivery trucks, as well
as for the insurance, repairs, gas and tires they need to do their
jobs. By arguing that the drivers are independent contractors, not
employees, FedEx maintains they can’t unionize. FedEx even opposes the  Employee Free Choice Act, legislation that would ensure all workers can  have the freedom to form unions to bargain for fair pay and better
benefits.  
 
Lavish Perquisites: While most working Americans struggle to file their  federal tax returns by April 15, that’s one thing Ray Irani, chief of  Occidental Petroleum (OXY), doesn’t need to worry about. In 2008, the  company provided Irani with more than $400,000 in tax preparation and
financial planning services.  That’s nearly eight times the $50,233
median U.S. household income in 2007, and more than the $400,000 salary
of the President of the United States.
 
‘Golden Coffin’ Death Benefits: Americans have lost nearly one-fifth of  their household wealth in the past year, leaving many wondering about  the legacy they will leave their children.  But James Bernhard’s heirs  are well taken care of.  When the founding chairman, president and  chief executive officer of the Shaw Group (SGR)dies, the Baton Rouge,  La. construction giant will pay more than $40 million to his heirs  through “golden coffin” benefits, including pay, stock awards, life  insurance and health benefits.
 
‘Golden Parachute’ Severance Benefits: Workers laid off by companies in  these tough economic times are lucky if they receive more than their  last paycheck and their legal right to extend healthcare benefits, but  chief executive officers at many of America’s largest companies often  receive a “golden parachute,” or a generous severance package, when  they depart.  Richard L. Bond, president and top executive of Tyson  Foods Inc. (TSN) until January 5, stood to collect more than $14  million in severance.
 
Turbo-charged Pension Plan:  Deere & Co. (DE) workers and pensioners
have good reason to fret over their retirement.  Deere expects to earn
8.3% on its pension plan investments in fiscal 2009, but the stock
market decline makes that highly unlikely, jeopardizing the company’s
$683 million pension surplus.Overall, the nation’s pension funds lost
roughly $1 trillion in assets by last summer alone.  But CEO Robert
Lane’s retirement income is secure: the value of his total pension
benefits increased $5.5 million in fiscal 2008 to $22.5 million - or
about $1.6 million annually. Lane and other senior executives
participate in not one, but three different pension plans.
 
The AFL-CIO launched Executive PayWatch in 1997 to draw attention to
runaway CEO pay packages and the widening gap between the compensation
of corporate chieftains and workers.  In 1980, CEOs of large U.S.
companies made 42 times the wages of the average worker; by 2006 the
gap had widened to more than 364 times.  
 
The AFL-CIO represents 11 million workers in 56 unions nationwide and
works to advance the interests of America’s working families.  
 
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