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WASHINGTON -- The chief executives of major U.S. corporations enjoyed double-digit
pay raises last year, adding to a record of ''jaw-dropping'' compensation largely
undisturbed by recent years' falling profits and share prices and a wave of scandals
involving management chicanery, the country's leading labor federation said in
a new survey.
Chief executive officers (CEOs) were being enriched at the expense of working
families' retirement savings, the AFL-CIO said in its Executive Pay Watch study,
released Monday as a Web site. The latest annual update aimed to rally support
for labor and other investors who plan to force some 140 companies to confront
pay issues at annual shareholders' meetings in coming months.
''We have seen a tremendous amount of interest among workers in holding CEOs
and their boards accountable,'' said Richard Trumka, secretary-treasurer of
the 13-million-member labor federation. ''They are rightfully outraged when
they learn about jaw-dropping executive compensation packages. It's time to
put the brakes on runaway CEO pay.''
An analysis of securities filings showed that CEO salaries rose 12 percent
in 2004 compared with average raises of 3.6 percent for rank-and-file workers,
further widening the world's largest gaps between executive and labor pay.
The average CEO of a major corporation received $9.84 million in total compensation
in 2004, the AFL-CIO said.
Business Week magazine arrived at similar numbers last week, when it released
its 55th annual executive pay scorecard. It pegged the average CEO pay raise
at 11.3 percent and described this as ''not far off the rise in shareholder
gains'' last year.
''Increases were moderated in 2004 by the continued impact of corporate reform,
an ongoing shareholder revolt over astronomical pay levels, and pending accounting
changes that are reining in the use of stock options,'' said the magazine's
survey of 367 CEO pay packages.
But it also found that CEO raises once again dwarfed those of the average worker,
who saw pay rise 2.9 percent, to $33,176 per year, and concluded: ''Nearly 40
of the nation's chief executives walked away with more than $20 million, excluding
windfalls from option exercises. There have been improvements, but pay for performance
is still not the standard practice everywhere. Some [corporate] boards, at least,
are still lavishly rewarding CEOs who deserve far less.''
With more than $400 billion in assets invested in the capital markets through
pension funds, unions have emerged as increasingly vociferous and influential
investor activists, especially on pay-related issues.
Last year, union-sponsored pension plans won majority shareholder support for
an unprecedented 34 proposals on CEO pay. Although shareholder resolutions usually
are non-binding, those that win majority backing have been virtually impossible
for companies to disregard.
Activists and analysts alike have credited investor pressure as a major reason
why firms have begun to wean themselves off stock options, which give executives
the right to buy shares at a fixed price over a specified period, essentially
gambling that the price will have risen by the time they convert the options
into actual shares. They then keep or sell the shares as they prefer.
Stock options made up 69 percent of a typical CEO's compensation in 2001 but
last year the figure was down to 31 percent, the AFL-CIO said, citing news reports.
This year, unions have submitted more than 140 shareholder resolutions demanding
that firms tie CEO pay to corporate performance, limit ''golden parachute''
severance packages, and seek shareholder approval of preferential executive
pensions.
Executive Pay Watch highlighted six companies it described as emblematic of
the issues confronting firms at this year's annual shareholders' meetings.
The AFL-CIO said it would ask biotechnology firm Amgen to boost the amount
of company stock that executives are required to hold. This, it added, was because
CEO Kevin W. Sharer had cashed in millions of dollars in stock options in recent
years without actually owning any of the biotech firm's shares outright. Amgen
in 2002 began requiring company executives and directors to own more of its
stock but they were given five years to comply.
Unions said they would demand that Sempra Energy clearly state the costs of
issuing stock options when it prepares its income statements. U.S. accounting
rule makers have ordered large companies to do so beginning with financial statements
issued after Jun. 15 and Sempra has said it would comply.
In addition, they would ask Wal-Mart Stores, the world's largest retail chain,
to switch from stock options to actual shares when compensating top executives,
and to grant shares based on corporate performance.
Other proposals will target CEO pay and severance levels at Coca-Cola, energy
supplier Dynegy, and communications company Sprint.
The United States long has had the industrialized world's largest gap in pay
between chief executives and blue-collar workers. CEO compensation swelled from
85 times what workers earned in 1990, to 209 times in 1996, and 326 times the
following year. In 1999, CEO pay surged to a record 419 times the average worker's
wage, according to the U.S. Bureau of Labor Statistics.
The gap then declined, to 282-to-1 in 2002, before surpassing 300-to-1 the
following year, according to the research and advocacy group United for a Fair
Economy (UFE).
Comparable figures for other wealthy nations generally do not exceed the double
digits.
U.S. CEOs' pay rose 313 percent from 1990 to 2003, UFE said. By contrast, the
Standard & Poor's 500 stock index rose 242 percent and corporate profits
gained 128 percent.
During the same period, average worker pay rose 49 percent while inflation
climbed 41 percent.
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