The top five executives at each of the 20 banks that accepted the most federal bailout dollars averaged $32 million a piece in personal compensation from 2006 through 2008, according to the findings of the 16th annual Institute for Policy Studies' "Executive Excess" report. The institute calculated that 100 average U.S. workers would have to labor over 1,000 years to make as much as these 100 executives.
In addition, based on stock options pocketed in early 2009, the top five executives at ten of the 20 bailed-out banks have enjoyed a combined increase in value of their stock options of nearly $90 million. Only ten of the banks had revealed stock option data at the time the report was drafted.
"America's executive pay bubble remains unpopped," said Sarah Anderson, lead author of the Institute Study. "And these outrageous rewards give executives an incentive to behave outrageously, putting the rest of us at risk."
While the top bank executives enjoyed millions in rewards they laid off 160,000 employees since January 1, 2008, while the banks' 20 CEOs raked in compensation of $13.6 million each for a collective total of over a quarter-billion dollars. A generation ago major corporate executives earned about 30 to 40 times what their workers took home. In 2008 the "Executive Excess" report shows that executives averaged 319 times more than average U.S. worker pay.
No wonder we have so many unemployed workers. By the time a company finishes paying its top executives, it has to lay off workers to show a profit. Investors certainly are losing long-term gains by these excesses as well. This all leads to problems identified with corporate governance, such as the independence of compensation committees and the role of shareholders.
"Governance problems do need to be resolved," notes IPS Director John Cavanagh. "But unless we also address more fundamental questions -- about the overall size of executive pay, about the gap between the rewards that executives and workers are receiving -- the executive pay bubble will most likely continue to inflate."
The report does review legislative proposals to address executive pay issues, but concludes that officials have "not moved forward into law or regulation any measure that would actually deflate the executive pay bubble that has expanded so hugely over the last three decades."
What do you think should be done about excessive executive compensation?
Lita Epstein has written more than 25 books including Reading Financial Reports for Dummies.