The Pessimist

I quote most of an article I tripped across while I was browsing grotesque salaries.

Severance packages By Eve Ggem

I read in The Union that Mr. Nardelli, CEO of Home Depot, resigned. However, he gets a $210 million severance package.

Yesterday, after seven years, my son was fired from his landscaper job with a big Grass Valley subdivision due to cutbacks. Severance package - zero.

For seven years he did backbreaking work, often in miserable weather with no paid holidays, vacation or benefits. In wet, winter months, his young family got by on a smaller paycheck.

Two years ago, after eight years working since age 15 for a local inn/motel in housekeeping then front desk clerk, his wife was fired because of "slow season." Severance package - zero.

...

Life isn't fair, heartbreakingly so - Wanna share your secret and your $210 million, Mr. Nardelli?

Eve Ggem, Nevada City

(I've copied most of the article here because TheUnion, a Nevada newspaper, may require you to register to read it.)

I thought the above was a fairly reasoned argument -- the rich play by different rules than everybody else. You'd think that that argument would receive fairly wide tacit support. But you'd be wrong.

There were 17 comments attached to the article. Here is a sampling of the first few:

• Don't forget, the government will take maybe $60 million of Nardeli's nest egg in taxes. With their cut, the Gov can pay some aerospace company to build one cruise missile to shoot at some rocks in the desert somewhere near some oil reserves.
• Ms. Ggem, severance pay is not the issue, and focusing on it in this case is a distraction from the real problem. Both your son and daughter-in-law need to develop more valuable skills so they can get better paying jobs
• Sometimes people have to make the tough choices and relocate to improve their personal finances.

Can you see the problem? I tried to post my own comment, even registering for the site, but the moderators would not post it. They wouldn't tell me why, but I'm guessing that you can't use the words "damn" and "Americans" in the same post. So, I'll post it here:

I wanted to comment and offer my sympathy and best wishes for your family. But in reading the comments that follow, I can clearly see the root of the problem: American hobbsian capitalism.
No American would restrict the avarice of their ruling class, because they all aspire to that same American dream. Fabulous wealth: the law, morality and the common good of "other" be damned.
ThePessimist

I did manage to post a reply to the first commentor; I repeat it here for completeness:

This is a unrelated right-wing argument.
If the CEO hadn't stolen the "severance" money, the corporations income would have been 210 million higher and the corporation would have paid the tax, or it would be paid out in dividends and the shareholders would have paid the tax. Or the company would have been worth $210M more, so the share price would be higher, and capital gains tax paid there on.
What the "government" does with the tax money isn't related to the issue at hand. Corporate CEO robber-barons and their Board member friends are stealing money in unearned severance and unjustifiable salaries; while common people, like Ms. Ggem's children get the shaft.

Americans won't control corporate greed, because they think it will limit their potential to achieve similar wealth. The CEO got the money because he "earned it" and the government should keep their corrupt noses out of it. Let capitalism take its natural course unfettered. But this dream is as unrealistic as the dream of all those black youths who avoid education, jobs or other responsibilities to play hoops. They think they're on their way to a multi-million dollar NBA contract. Well, their odds of making it to the NBA (or their white confreres becoming CEO of a Fortune 500 company) are less than the chance of being struck by lightning.

Anybody can grow up to be president (as George W has proven). But it helps if you come from money, get an ivy league education, and know the right people. No amount of education available to Ms Ggem's children would track them to the top. But that doesn't reduce the argument that severance from any job should be a requirement, not just for the Executive class.

My last posting was on the ridiculous ratio of CEO to average salary in Canada. The rant was inspired by a Jan 2 article by the Canadian Centre for Policy Alternatives. But I've been fuming about this issue for quite some time and I have a collection of quotes to prove it.
The following are from an article in a 2006 issue of CA Magazine by Gerard Berube entitled Grotesque Salaries:

• In 1982, US business leaders earned on average 42 times an employee's salary. This multiple shot up to 107 in 1990 and by 2000, it hit 525. The market correction narrowed the gap to 281 in 2002, but by 2004 it was back to 421. Are these gaps too wide?
• In 2004 the average salary of CEOs was $729,000, with an average bonus of $814,000, for a total base salary of $1.5 million. But, with stock options included, the average reached $5.5 million.
• A survey of large US institutional investors showed 90% believe executives are overpaid and that a company's success has little to do with the management team.
  A July 2003 survey by The Economist showed that only 23% had confidence in business leaders.
• John Hunkin, CEO of CIBC, was paid $50 million just before he resigned in June 2005, even though it was a deficit year when out-of-court settlements proliferated and the bank had to set aside a $2.83 billion Enron-related provision.
• John Roth, head of Nortel, received $125 million the year before the company's market meltdown.
• Michael Eisner, earned $800 million in the 13 years he ran Disney, a company whose shares yielded less than US Treasury bills during that time.
• Steve Jobs, Apple president, was paid $775 million when he was boasting of his $1 token salary.

How about the Wall Street Journal:

• Pfizer's "compensation committee" defended Pfizer CEO Hank McKinnell's windfall compensation of $168 million on grounds of market forces in executive pay -- which in this context appears to mean, "CEOs at other companies are picking shareholders' pockets, too." - Carol Hymowitz

Or how about from the pages of the paper this month:

• Bob Nardelli, former CEO of Home Depot, after 6 years on the job was fired and received a severance package of $210 million (US$). He basically achieved none of the objectives set out for him, the share price went down, yet he was given a diamond encrusted pink slip.

So, Ontario crown corporations pay their CEOs $1 to $2M. Corporate Canada CEOs earn $9M on average, and some a lot more. But American Fortune 500 companies pay their CEOs 10 times more than their Canadian counterparts. And none of them, it would seem, actually have to link their performance to their compensation. Even when they fail spectacularly, or are fired in disgrace, they typically walk away with more money than any of us mere mortals can even imagine.

Something has to be done about this.

The "honour system" isn't going to work. CEO compensation is determined by the board of directors. The Board is typically made up of CEOs of other companies. The more they pay the CEO -- the higher they can raise the bar -- the more they can demand from their day job.

As Dilbert's CEO says:

• How can the board justify my exhorbitant salary? Simple: They're all friends of mine, and it's not their money.

I'm afraid the goverment is going to have to step in. Some say our members of parliament are overpaid. But they make between $100 and $200 thousand dollars. Certainly they could earn their salary by passing laws to crack down on executive theft from shareholders.

Will they do it? I'm pessimistic.

Next

You can't look at a newspaper without being inundated by tales of corporate greed. And the problem bears little resemblance to the fears expressed about globalization, corporate malfeasance or psychotic behaviour towards all stakeholders except shareholders.

The problem is much more personal. The biggest theives are CEOs, and the people they are stealing from are their shareholders.

Let's take a couple of recent examples.

The Canadian Centre for Policy Alternatives issued a press release that ran in the papers January 2nd: No New Year’s hangover for top CEOs
Seems the average annual compensation of the CEOs of the 100 largest Canadian companies is $10million. That sounds like a lot, right? But how much is it? Most of us don't have a real perspective on numbers that large, as they usually only appear in our lottery fantasies. So, the CCPA stated it in another way that makes the number a little easier to grasp: The average CEO had already made more by January 2nd then the average Canadian employee is going to make in the whole year.

Hydro One
Then there was Tom Parkinson, CEO of Hydro One, who last month got caught by the Auditor General with his hand in the cookie jar -- he was using his secretary's expense account to put through his own unauthorized personal expenses to the tune of $45,000. Now, the guy made $1.5million a year, so it is hard to understand why he needed to steal chump change like $45k. And he wouldn't be so dumb anyway, as his immediate predecessor Eleanor Clitheroe was fired for padding her expense account. So, the guy gets fired, right? No! He resigns; and he is immediately paid his full 3-year contract - another $3million !!

Where can I get a contract like that? He resigns because he faces embarassing accusations and he gets paid anyway? He'd be crazy not to steal the lunch money, or fuck the secretary, or use the company helicopter to fly him to his cottage -- anything to be relieved of the obligation to show up at the office everyday. How tiresome -- so much better to get two years pay and only sit around at the cottage all day doing no work at all. Unfortunately, ThePessimist believes Parkinson is probably only days away from landing another cushy multi-million dollar job so he can start the process all over again. Why do these people keep getting jobs at all?

The inner-communist in me is running his tin cup along my rib cage. What makes these people worth 150, 250, 500 times the worth of their average employee? Does he do hundreds of times more work than I do? Is his work worth hundreds of times mine? Sure the CEO's worth more than the average employee, maybe he even does more, and he should be paid more. But not hundreds of times more. Prior to the 1980's, the average multiplier was 40 times (and some people then thought that that was high). But with executive salaries, stock options and bonuses going through the roof in the last 15 years, 40 times looks parsimonious.

It is time to start bringing these salaries back down into reasonable ranges, or a revolution of some sort is going to have to follow.

Next

I tripped across this quite by accident. I don't know if it is real or faked. Given the shit on the internet, it obviously could go either way.

But it looks real enough.

See Saddam being hanged, as recorded by a video phone: Bye bye

Like everybody else, I'm not sorry to see him go. One less despot has to be a good thing (Slobo, Pinochet, Saddam, my Christmas wish list is almost complete).

There's no doubting that Saddam deserved to die. It is just too bad that it had to be at the hands of such a kangaroo court. But you can't argue with the results.

Will it bring peace to Iraq? Kinda hard to see how. The Shiites and Sunnis will continue their bloody civil war. Perhaps they will get tired of killing each other first, or maybe they'll just keep killing each other until one or the other or both are gone. Either result would suit me fine, but it will likely take longer than we would like. We'll watch and see. ThePessimist expects that the more likely outcome will be the rise of a new strong-man (theocrat, thug or puppet) to restore order.