Why Are American Executives Paid So Much?
by Nancy Scola, Sat May 12, 2007 at 02:37:53 PM EDT
My old boss Henry Waxman has just launched an intriguing new investigation: why, exactly, are American executives pulling in such stratospheric paychecks? CEOs and CFOs in the U.S. make 400 times what the average worker earns. In 1965, it was more like a factor of 20. One part of the puzzle: "independent" compensation consultants who might not be so independent. The SEC doesn't require companies to report on whether their compensation consultants also provide them with other services, so Waxman is asking six big consulting firms to self-report exactly what work they do for the top 250 Fortune 500 companies.
Why might the independent compensation consultants be not so independent? Well, not only did consultants from Hewitt Associates, for example, reportedly advise the compensation committee from Verizon's board of directors on just how and what to pay CEO Ivan Seidenberg, Verizon is one of Hewitt's biggest clients. In addition to the compensation work, Hewitt runs Verizon's employee benefits plans and advises the company on human resources. The argument goes that Hewitt's business relationship with Verizon is managed by the same executives whose pay it gets to decide on. (In 2005, Seidenberg earned $19.4 million in salary, bonus, stock and other compensation. In that same year, Verizon stock fell more than 25% and some managers' pensions were frozen.)
No doubt that people are starting to get a bit ticked off when executives earn such immense paychecks, especially when a lot of Americans are struggling to make ends meet. This is, I think, an issue with real momentum for Dems in 2008. Clinton and Edwards (in spirit, at least) have gotten behind Obama's bill that would allow the shareholders of public companies to hold a non-binding vote every year on executive pay, the way they do it over in England.
Waxman has asked the consultants to turn over the information to the House Oversight and Government Reform Committee by May 29th.