CEO pay raises jump a median of 27% in 2010, report finds

American CEOs raked in fat paychecks last year, as head honchos netted a median 27% increase in compensation in fiscal year 2010.

Top executives from the S&P 500 scored a median 36.5% bump in realized compensation after two years of pay declines in 2008 and 2009, according to the ninth annual report from research group GMI.

It’s sure to irk Occupy protesters, who have railed against the high-flying lifestyles of the 1% while the average American works more for less money and cuts back on spending.

The total chief executive earnings, calculated from more than 3,200 proxy statements, include base salary, pension and retirement plan payments, exercised options and more.

Among the list of the top 10 highest-paid executives -– all men -– three came from healthcare companies and four were collecting exit packages from retirement or termination. Of the top five, three landed single-year pension and deferred compensation boosts of $14 million.

More than 70% of all chief executives were given restricted stock awards while 53% ended up with stock options, whose median profits soared to $1.3 million last year from $950,400 in 2009. Among the S&P 500, bosses saw perks jump 11%.

John H. Hammergren, chief executive of healthcare company McKesson Corp., led the list with nearly $145.3 million in compensation, including a base salary of $1.6 million and more than 3.3 million exercised stock options that scored him a profit of $112 million.

Other chief executives in the top 10 included Thomas M. Ryan of CVS Caremark Corp. and Ralph Lauren of Polo Ralph Lauren Corp.

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-- Tiffany Hsu

Photo: John Hammergren of McKesson is the highest-paid chief executive according to research group GMI. Credit: George Nikitin / Associated Press

American CEOs raked in fat paychecks last year, as head honchos netted a median 27% increase in compensation in fiscal year 2010.

Top executives from the S&P 500 scored a median 36.5% bump in realized compensation after two years of pay declines in 2008 and 2009, according to the ninth annual report from research group GMI.

It’s sure to irk Occupy protestors, who have railed against the high-flying lifestyles of the 1% while the average American works more for less money and cuts back on spending.

The total chief executive earnings, calculated from more than 3,200 proxy statements, include base salary, pension and retirement plan payments, exercised options and more.

Among the list of the top ten highest-paid executives – all men – three came from health care companies and four were collecting exit packages from retirment or termination. Of the top five, three landed single-year pension and deferred compensation boosts of $14 million.

More than 70% of all chief executives were given restricted stock awards while 53% ended up with stock options, whose median profits soared to $1.3 million last year from $950,400 in 2009. Among the S&P 500, bosses saw perks jump 11%.

John H. Hammergren, chief executive of health care company McKesson Corp., led the list with nearly $145.3 million in compensation, including a base salary of $1.6 million and more than 3.3 million exercised stock options that scored him a profit of $112 million.

Other chief executives in the top ten included Thomas M. Ryan of CVS Caremark Corp. and Ralph Lauren of Polo Ralph Lauren Corp.

Lawmakers slam Fannie Mae, Freddie Mac CEOs over pay and bonuses

 

The chief executives of Fannie Mae and Freddie Mac faced bipartisan outrage Wednesday over multimillion-dollar salaries and large bonuses at the seized housing finance giants, which still owe the government a combined $150 billion in the largest financial crisis bailout.

"Should you profit while the taxpayer is paying the bill?" asked Rep. Darrell Issa (R-Vista), chairman of the House Oversight and Government Reform Committee.

He summoned Fannie Mae CEO Michael Williams and Freddie Mac CEO Charles "Ed" Haldeman Jr. to testify before his committee. The hearing came a day after another House panel voted overwhelmingly to suspend large executive compensation packages at the two companies and align their salaries with that of government employees.

The total compensation for the top six executives at Fannie and Freddie for 2009 and 2010 was $35.4 million, with Williams and Haldeman receiving about half of that. Each of them could take home as much as $6 million apiece in salary and bonuses in 2011.

Rep. Carolyn Maloney (D-N.Y.) said taxpayers were upset because Fannie and Freddie continue to lose money and require additional bailout money.

"It’s hard for them to understand how executives get $6 million in pay for a failing entity," she said.

The salary and compensation were defended by Williams, Haldeman and Edward DeMarco, the latter of whom is the acting director of the Federal Housing Finance Agency, which has overseen Fannie and Freddie since they were put in a government conservatorship in 2008 because they were on the brink of failure.

The three said executive compensation has been dramatically reduced since the companies were seized but that it remained important to attract and keep skilled people to manage the firms' combined $5 trillion in mortgage-backed securities to prevent further taxpayer losses and additional damage to the housing market.

"I understand the outrage," Haldeman said. "We have significantly reduced executive compensation and overall spending at Freddie Mac, but we have tried to do it in a way that does not risk disrupting the functioning of the company."

DeMarco, who earns $239,555 a year as the independent government regulator of Fannie and Freddie, said that the top executives who caused the problems at Fannie and Freddie before 2008 are no longer there and  that it was difficult to find qualified people to help run the companies.

"Others may believe that this sort of talent is easily and quickly hired at compensation far below that of  competing private firms, but I do not," DeMarco said.

But that didn't satisfy some lawmakers, who said Fannie and Freddie should be able to find people who do not need to make six-figure salaries.

Rep. Trey Gowdy (R-S.C.) said that there have been complaints for years about the pay of federal judges compared with that in the private sector and that those jobs are still coveted by lawyers.

"I find it bitterly ironic that the total compensation for the United States Supreme Court justices is less than [what] either of these two men made," Gowdy said.

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-- Jim Puzzanghera in Washington

Photo: Fannie Mae Chief Executive Michael Williams and Freddie Mac Chief Executive Charles "Ed" Haldeman Jr. take the oath before testifying before the House Oversight and Government Reform Committee on  Wednesday. Credit: Getty Images

Banker bonuses falling amid new calls to ban them all together

For a Wall Street trader looking forward to her or his end-of-year bonus, this is not a good morning.

In the near term, it looks as though bonuses this year will be down as much as 20% to 30% from last year, according to a survey out today from a leading industry compensation consultant.

In the longer term, Nassim Taleb, author of "The Black Swan" and one of the most respected prognosticators in the financial world, wrote in the New York Times that bonuses should disappear altogether, at least for firms that could be bailed out by the government. 

Taleb repeated the somewhat familiar argument that bonuses create incentives for bankers to take big risks while not punishing them when those risks go bad. He throws in a comparison to the pay arrangements in other risky fields:

Consider that we trust military and homeland security personnel with our lives, yet we don’t give them lavish bonuses. They get promotions and the honor of a job well done if they succeed, and the severe disincentive of shame if they fail. For bankers, it is the opposite: a bonus if they make short-term profits and a bailout if they go bust. The question of talent is a red herring: Having worked with both groups, I can tell you that military and security people are not only more careful about safety, but also have far greater technical skill, than bankers.

Bankers are certainly grumbling over their granola this morning. But the most immediate public response came from the economics blogger at the Atlantic magazine, Daniel Indiviglio, who said that following Taleb's prescription might actually increase risk-taking. According to Indiviglio, if bonuses were banned, bankers would simply receive all of their compensation in a fixed salary that could not be clawed back. At least under the current system, Indiviglio said, bankers get some of their bonus in stock, which goes down in value if the bank does poorly.

Think about it: if trades go bad, then shareholders will suffer by seeing dividends cut or shares diluted when more capital must be acquired. But every time banks have a good year, bankers will get a nice salary bump -- and that amount will be guaranteed even in bad years. Remember those guaranteed bonuses everybody was angry about a few years ago? If you were to pay a guaranteed bonus out over the course of a year in semimonthly installments, you could call it something else: a "salary."

Whatever the result of this debate, bankers are already looking at shrinking bonuses. The compensation consultancy Johnson Associates said in its survey that new regulations and slow economic growth will lead to smaller bonuses, especially in the traditionally lucrative bond- and stock-trading operations. 

Even with all the gloom, at least one group is getting higher bonuses than might be expected. The Daily Telegraph reported today that MF Global, the trading firm that went bankrupt last week, gave bonuses to its employees in London just hours before the company declared bankruptcy.

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-- Nathaniel Popper in New York
Twitter.com/nathanielpopper

Photo: Getty Images

Wealthy can declare support for Occupy Wall Street on new website

While members of the so-called 99% take part in Occupy Wall Street protests, a new website lets some of the wealthy 1% declare their support for the movement.

The site, called "We are the 1 percent, We stand with the 99 percent," lets people post photos of themselves pronouncing their solidarity with the Occupy protesters in New York, Los Angeles and elsewhere.

"When I was 18 my father won $9 million in the California lottery," one person posted on the site, along with a photo of him holding his message written on two pieces of white paper. "With that money I now have no college debt. When my father dies I will inherit a 3rd of his money. I am committed to using it to help those less fortunate. Due to sheer luck, I am the 1%. I stand with the 99%."

The posts contain no names, but similarly show people holding up handwritten notes on pieces of paper, index cards or cardboard explaining why they back the movement. (Although there is a link to a YouTube video of singer Willie Nelson publicly backing the protests).

Organizers of the site identified two of the people with posts on the site, including Carl Schweser, who created a study program that now is part of Kaplan Schweser, a company that helps people prepare for financial exams.

"I made millions studying the math of mortgages and bonds and helping bankers pass the Chartered Financial Analyst Exam," Schweser wrote on the site. "It isn’t fair that I have retired in comfort after a career working with financial instruments while people who worked as nurses, teachers, soldiers, etc. are worried about paying for their future, their healthcare, and their children’s educations."

"They are the backbone of this country that allowed me to succeed," he continued. "I am willing to pay more taxes so that everyone can look forward to a secure future like I do. I am the 1%. I stand with the 99%. (Which equals 100% of America.) Tax me.”

Many of the posts are from children of wealthy parents or people who have inherited money.

"Being born to the right family at the right time made me a millionaire," one man writes. "Giving most of the money away made me happy."

A woman posted that, "I can afford to work my dream job at an arts non-profit because my husband works for Google. We should all be able to afford following our dreams."

The site was created by two organizations: Resource Generation, which organizes wealthy young people to work for social change, and Wealth for Common Good, a group of wealthy people and business executives that advocate for what they call fair taxation, such as higher tax rates on millionaires.

The groups said they were inspired by the “We are the 99 percent” blog, which posts similar declarations from people participating in the Occupy protests.

“Those of us with more than we need and who believe in a more just distribution of resources can stand up and tell the truth about how the deck has been stacked in our favor," said Elspeth Gilmore, co-director of Resource Generation. "We need to say that we think it’s wrong too.”

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-- Jim Puzzanghera

Photo: A wealthy supporter of the Occupy Wall Street protests. Credit: Westandwiththe99percent.tumblr.com

Income for the top 1% has soared over last three decades

The rich have gotten richer over the last three decades -- and the very rich have gotten very richer -- far outpacing the middle class, according to a new government study.

The huge disparity in income growth significantly has widened the gap between the rich and the middle class, a key focus of protesters on Wall Street, in Los Angeles and elsewhere.

The top 1% of households saw their after-tax household income grow by 275% from 1979 to 2007, more than quadruple the growth of the rest of the top 20% of the population during that period, according to the study by nonpartisan Congressional Budget Office.

Meanwhile, income for the 60% of households that make up the middle of the income scale increased by slightly less than 40%, the study found. The poor -- the 20% of the population with the lowest income -- saw just an 18% increase.

"As a result of that uneven income growth, the distribution of after-tax household income in the United States was substantially more unequal in 2007 than in 1979," the report said.

The findings come as protesters have occupied parks near Wall Street, Los Angeles City Hall and around the country, decrying the growing pocketbooks and influence of what they have called "the 1%." The protesters have declared themselves to be "the 99%."

Overall, inflation-adjusted, after-tax income for the entire population rose 62% from 1979 to 2007.

The report said the exact cause of the rapid income growth for the richest Americans are not clear, but  researchers have speculated on some reasons: soaring salaries of superstar actors, athletes and musicians, more liberal executive compensation, and the growth of the financial sector.

At the same time, "the equalizing effect of federal taxes was smaller," the report said. The overall average federal tax rate fell slightly during the period because of income tax cuts, and the tax system became less progressive as more money was raised through payroll taxes.

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-- Jim Puzzanghera

Consumer Confidential: Blockbuster, man caves, zodiac salaries

Here's your feelin'-groovy Friday roundup of consumer news from around the Web:

--Heads up, Netflix. Dish Network is announcing an Internet video service that will try to woo away subscribers. The service will be offered through Blockbuster, the video-store chain that Dish Network bought out of bankruptcy court for $321 million five months ago. Netflix's success as a subscription service that mails rented DVDs and streams video over high-speed Internet connections played a pivotal role in Blockbuster's downfall. Now Dish and Blockbuster are apparently hoping for a little payback as Netflix faces a customer backlash triggered by changes to its prices and format. Dish says its Blockbuster service will be "a stream come true." We'll see.

--Good news, guys: A man cave in the basement won't detract from the resale value of your home. "As long as you don't make it too specific, there tends to be a resale market for man caves," said Stephanie Rauterkus, a professor of accounting and finance at the University of Alabama-Birmingham. "No matter how crazy you get, there tends to be at least one or two other people in the world who have that same kind of craziness." Still, she says there are some rules to follow if you want your man cave to be a true real-estate asset: First, stay sane with the cost. Only spend what you can afford. Second, stay sane with the decor -- in case you move or your team preferences change. Finally, stay sane with the decision. Sleep on it as you would for all major purchases.

--Which zodiac signs rake in the biggest bucks? A new survey by CareerBuilder finds that Virgos, Aries and Scorpios tend to score six-figure salaries, while Capricorns and Leos are often vice presidents or higher (although at the highest levels, Capricorns edge them out). Middle management is filled with Aries, while those who fall into the Aquarius category tend to swim at the bottom in entry-level positions. Libras and those born under Taurus are more satisfied on the job than others. Also, first-borns and only children tend to pull in bigger paychecks, and middle children are more likely to hold low-level jobs. Is there anything to this? Post your comments.

-- David Lazarus

Photo: Will Blockbuster get a little payback from Netflix? Credit: Rick Wilking / Reuters

Consumer Confidential: Mean money, Google phones, wiener war

Here's your maybe-baby Monday roundup of consumer news from around the Web:

-- It pays to be mean. According to a new study, "agreeable" workers make significantly less money than their nastier counterparts, with the gap wider among men. The study, titled "Do Nice Guys -- and Gals -- Really Finish Last?", uses survey data to examine "agreeableness" and finds that men who disagree with others often make 18%, or $9,772 annually, more in salary than those who agree with colleagues. The salary disparity is far less among women, with disagreeable females making 5%, or $1,828, more than nicer women. As Cornell professor Beth Livingston, who co-authored the study with Timothy Judge of the University of Notre Dame and Charlice Hurst of the University of Western Ontario, told the Wall Street Journal: "Nice guys are getting the shaft."

-- Google is diving deeper into the smartphone business by purchasing Motorola Mobility Holdings for $12.5 billion. The deal gives Google its own in-house hardware operation, potentially enabling it to challenge rival Apple on better terms but also raising questions for partners like Samsung Electronics that license Google's Android operating system. It also gives Google ownership of a huge trove of patents that it will be able to use to defend itself amid an increasing fierce war over intellectual property among technology companies. Google expects to complete the transaction by early 2012, and it's been approved by the boards of both companies.

--The wiener war is underway in federal court. The nation's two largest hot dog makers have taken their legal beefs to a judge, who opened a trial Monday on whether the rivals behind Oscar Mayer and Ball Park franks broke false-advertising laws in their efforts to become top dog. The dispute pits Chicago-area companies Sara Lee, which makes Ball Park franks, against Kraft Foods, which makes Oscar Mayer. Sara Lee fired the first volley in a 2009 lawsuit singling out Oscar Mayer ads that brag its dogs beat out Ball Park franks in a national taste test. Those tests, Sara Lee argues, stacked the deck against Ball Park in part by altering the way the hot dogs were cooked and served. Kraft filed its own lawsuit in 2009, alleging that Sara Lee ran false and deceptive ads including a campaign in which Ball Parks are heralded as "America's Best Franks."

-- David Lazarus

Photo: Mean people make more green stuff, a study says. Credit: Universal Studios

 

Wall Street Roundup: Double-dip catalysts. Screwflation.

Gold: Trading now at $1,527 per ounce, down 0.1% from Friday. Dow Jones industrial average: Trading now at 11,981.28, up 0.3% from Friday.

Today's OK, but tomorrow? Stocks are rising Monday morning, but economists are not hopeful about the economic data that are going to be delivered this week.

Double-dip catalysts. After six weeks of a declining stock market, all the analysts are asking what it would take to turn the current slow patch into a double-dip recession. Could a Greek default do it -- or will it take a perfect storm of factors?

Screwflation. Investor Doug Kass has coined a new term, screwflation, to describe the combination of inflation and stagnating middle-class wages linked to the current malaise.

Winning back Wall Street. President Obama is putting on a charm offensive to try to win back the Wall Street donors who played such an important role in his 2008 campaign.

Shrinking bonuses. With Wall Street banks struggling in the current economic environment, compensation for the bankers may be pushed down.

-- Nathaniel Popper in New York

Credit: Stan Honda / Getty Images

 

New rule tries to rein in the pay of corporate executives

A rule passed Tuesday lets investors vote on executive pay as often as once a year.

Problem is, companies don’t have to abide by the votes.

The Securities and Exchange Commission ruled that companies must hold shareholder votes on their executives’ pay at least once every three years, and as frequently as every year if shareholders want it. Congress required such “say-on-pay” votes in last year’s financial overhaul package but left it to the SEC to work out the timing and other details.

The rule also gives shareholders the right to vote on so-called “golden parachutes” given to executives when they leave companies.

Say-on-pay is a victory for investor advocates who hope it will make a dent in what they say is runaway executive compensation. But all votes are nonbinding, meaning corporate boards remain free to pay executives whatever they like.

Still, proponents say companies will listen to shareholders because of the controversy over executive compensation.

“It’s a step in the right direction,” said David DeBoskey, an accounting professor at San Diego State University. “It’s nonbinding but companies are under tremendous pressure to adhere to the votes.”

Not every investor advocate is so sanguine.

Charles M. Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware, said involving shareholders in pay decisions will intrude on the authority of directors and actually could limit their ability to negotiate for lower pay.

Instead, he said, dissatisfied investors should simply vote out directors who approve exorbitant pay packages.

“It’s a step that just doesn’t get us anywhere,” Elson said. “It’s more theater than effective and it may be counterproductive.”

-- Walter Hamilton

Companies prepare to implement 'say on pay'

Investors are getting a greater say this month on executive pay, and large public companies are gearing up for major new input in the way they set salaries for top officials.

Under the financial reform law enacted last year, publicly traded companies must implement “say on pay” requirements, which give shareholders an advisory vote on compensation for their five top-paid executives at least once every three years.

The vote would come as part of the annual shareholders meeting. In addition to voting for company directors and any shareholder resolutions, stockholders would get a yes-or-no vote on the company's executive pay plan. The new provisions take effect Jan. 21.

The votes will be nonbinding, but companies that go against their shareholders’ advice risk incurring the ire of investors as well as major shareholder advisory firms such as lnstitutional Shareholder Services, said Brian J. Lane, a corporate securities lawyer and partner with Gibson, Dunn & Crutcher.

Lane briefed a group of about 50 corporate directors and attorneys this week at the California Club, a downtown Los Angeles business club.

Although the Securities and Exchange Commission is still finalizing its say on pay rules, companies will need to implement the new required votes at their first meetings after Jan. 21, he said.

Chuck Callan, vice president of regulatory affairs for Broadridge Financial Solutions, a major provider of proxy voting services, said the company has worked out some technical glitches that he called jokingly "a mini-Y2K," and he expects the first round of shareholder voting on pay to go smoothly.

While executives might not enjoy the added degree of scrutiny of their paychecks and perks, corporate board members are also worried about other provisions of the financial reform bill still to come, M. Christian Mitchell, president of the Southern California chapter of the National Assn. of Corporate Directors, said after the meeting.

In particular, Mitchell said, a hot-button issue for his members has been the “proxy access" called for in the new law. It allows shareholders owning at least 3% of a company’s stock to propose their own nominees for up to one-quarter of the board of directors. 

The SEC has adopted regulations to provide for such votes, but they are on hold in the face of a challenge by the U.S. Chamber of Commerce and the Business Roundtable.

-- Abby Sewell

Wall Street Roundup: The battle over the Fed, CEO pay keeps ballooning

Campaign against the Fed. A group of mostly Republican economists -- with some liberals scattered in there -- wrote a letter to Ben Bernanke asking him to discontinue his recently announced plan to pour money into the economy.

Meanwhile. An obscure measure of bond options suggests the Fed's program may already be working.

Double meanwhile. A quixotic cartoon critique of the Fed's policy.

CEO pay keeps rising. The compensation of CEO's at the biggest American companies keeps going up, according to a new survey.

Goldman sale stumbles. Goldman Sachs' plan to pay back money it borrowed from Warren Buffett during the economic crisis has been put on hold by the Federal Reserve.

Investing in lawsuits. A growing number of investors are putting their money into plaintiffs, hoping to get a cut of any money recovered in a courtroom victory.

-- Nathaniel Popper