The CEO recovery

Posted: 1 September 2010 in Uncategorized
Tags: , , , ,

Not only are CEOs getting a huge cut of the huge profits appropriated by capitalist firms. The CEOs of the firms that laid off the most workers have gotten much more than other CEOs.

According to a new study [pdf] by the Institute for Policy Studies,

The 50 top CEO layoff leaders received $12 million on average in 2009, compared to the S&P 500 average of $8.5 million. Each of the corporations surveyed laid off at least 3,000 workers between November 2008 and April 2010. Seventy-two percent of the firms announced mass layoffs at a time of positive earnings reports.

The outrageous compensation awarded to CEOs is matched by their outrageous behavior: before the recession, in taking the kinds of risks that sent the global economy to the brink of disaster; and during the recession, in laying off millions of workers and in keeping wages and salaries constant for those workers who have managed to retain their jobs.

In the end, that’s what CEOs are getting paid for. And the more ruthless they are in laying off workers, the more their own cut of the profits recovers.

  1. Tomboktu says:

    The issue of CEO (and other senior officer) ‘compensation’* interests me a lot.

    I have been poking through the literature (with a view to going back to to a PhD on it). I could find little literature that criticises the levels of CEO pay, and that which I did find (mostly by Lucian Bebchuck) is concerned with redistributing some of that cash to shareholders, rather than across the firm.

    One idea I am mulling wading into is whether there are lessons we could learn from competition law (or anti-trust law, as I understand is the usual term in the USA). There must have been a time when the introduction of those restraints on companies was novel, and I presume it might have met resistance. Is there anything we could learn from that area in bringing forward proposals for regulating CEO pay? A second possibility I am mulling is whether there is any potential in expanding the remit of Worker Councils that are required by EU law. Possible areas for considering could include expanding the range of companies that are required to have them, expanding the role they have in companies (e.g., giving them a right to elect directors; to acquire shares as companies grow).

    I did opine on the broader issue a little under a year ago. As I said at the time, once I started poking around the literature, I was quite surprised to see how little it had to say. There is the dollop of work on mining tax data from a range of countires (building on Pikety and Saez’s work), and some claiming the growth in the CEO pay can be accounted for by the increased size of firms (funny that, as Lane Kenwothy notes, the graph for workers’ pay hasn’t also climbed as CEOs’ pay has). I’m keen not to do research that merely adds new data or adapts or applies a new or existing methodology to data gathering or analysis, but that offers feasible ways of changing the situation.

    *I think that using the word ‘compensation’ in that context is weird. I associate that term with a attempting t balance for a harm done to a person. I don’t perceive the labour CEOs are required to put in, even if it does genuinely require long hours and stress for their tenure, as a “harm” that merits payments that, in the Irish Courts, a child who was injured by medical malpractice could expect.

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