Workers Struggle for Payday Cash While CEOs Reap Benefits

Friday, February 12th, 2010 By

The American worker

Employees all over the country are struggling with maximizing their payday cash. It was a rough year for the American worker. Hefty job cuts and lay-offs combined shot the unemployment rate up to 10%. The recession had a detrimental effect on the job force, but one sector of that force has come out better than the rest. CEOs nationwide have maintained their high-paying salaries and seen few downsides to the economic recession.

The CEO compensation

Some recent studies showed that not all CEOs were impervious to the market’s changes. In total, compensation for CEOs at S&P 500 companies declined by 5.7%, or $700,000. Some CEOs took pains to manage their own salaries and bonuses. Jeffrey R. Immelt, CEO for General Electric, declined to accept his bonus last year. Vikram Pandit, CEO of CitiGroup, set a cap on his bonus at $1 million per year until the bank experiences a full turnaround. CEOs are aware of the delicate market situation and know how it looks when the employment rate is in the double-digits, but they are still accepting millions of dollars. In particular, banking CEOs are feeling the critical eye of the public. They are the ones after all who benefited most from the bailout.

Some CEOs take the raise

There are some exceptions in the world of executives. For example, Michael Jeffries, CEO for Abercrombie and Fitch, took a pay increase of 39% despite the fact that company stock fell 72%. Many staff members of the company were let go or laid-off. Though it looks bad, some analysts maintain that it may be necessary to keep on compensating executives. They believe that retaining them in the high positions is what is going to save the company and reduce its bottom line. Though that normally means more job cuts and labor concessions, it still is better than the company closing altogether.

Perception is everything

Despite the desire to retain top-notch CEOs, companies need to remember that perception is everything. When company leaders seem to be getting preferential treatment through compensation and bonuses while lower level staff struggle with payday cash, it isn’t good for public perception. Normally, the public wants to see sacrifices from top-management down, and not the other way around. Add to that the employees of companies want to be sure that their directors are worthy to be followed, and accepting bonuses in a struggling company can make it difficult to rally support. In particular when the market is down, employees need to be supportive and motivated to do their best. If CEOs are not giving the right message to their downline, it can cause more problems in the future.

Finding a balance

Many recent news stories have focused on CEO compensation for companies that accepted bailout money. AIG and Merrill Lynch are two companies that used the funds, but then turned around and increased CEO pay. In another example, Hewlett Packard CEO Mark V. Hurd’s compensation increased to $42.5 million last year due to a three-year compensation package. Though CEOs need to be adequately compensated to fuel companies into true turnarounds, there has to be a limit. With so many Americans struggling to find payday cash, it’s hard to justify the millions of dollars going to select individuals.

(Photo Credit: http://www.flickr.com/photos/labor2008/ / CC BY 2.0)

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  • czander

    In November, 2008 La-Z-Boy terminated 240 employees, CEO Kurt Darrow received a $202,000 bonus for fiscal year 2008, in 2007 he received a $150,000 bonus.
    In 2003 employees at American Airlines took pay cuts of up to 50% in an effort to save the carrier from bankruptcy while its CEO Gerard J. Arpey, of American’s parent company, AMR, has seen his base salary rise every year since 2005, except 2009. Meanwhile the airlines pilot’s wages have been stuck in a wage-adjusted base which means they are being compensated for the same amount they were paid in 1992. At the same time the airline’s executives have received $330 million in stock grants and option awards since 2005. At the end of 2009, the airline will have terminated as many as 1,600 workers while giving over 1,000 executive’s bonuses. The union is upset at the bonuses they still have not recovered from their pay cuts in 2003.
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    DuPont CEO Ellen Kullman got a salary increase and bonus in 2009 after she terminated 2,000 employees. She was also awarded a bonus of $1.5 million for 2009 and was given a target bonus of about $2 million for 2010. They did not say how many employees she had to terminate to obtain that bonus. These were called “short term bonuses” she also was granted a long-term incentive award (bonus) valued at $6.5 million. In 2008 she terminated 2,500 fulltime employees and 4,000 contractors.
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