Companies Keep Enriching CEOs

Sam Pizzigati

Sam Pizzigati Editor, Too Much online magazine

Jeff Immelt, CEO of General Electric since 2001, is retiring. The 61-year-old will be making a well-compensated exit.

Fortune magazine estimates that Immelt will walk off with nearly $211 million, on top of his regular annual pay. Immelt’s annual pay hasn’t been too shabby either. He pulled down $21.3 million last year, after $37.25 million in 2014.

But Immelt’s millions don’t come close to matching the haul that his predecessor Jack Welch collected. Welch’s annual compensation topped $144 million in 2000. He stepped down the next year with a retirement package valued at $417 million.

What did Immelt and Welch actually do to merit their super-sized rewards? What did they add to a GE hall of fame that already included breakthroughs like the first high- altitude jet engine (1949) and the first laser lights (1962)?

In simple truth, not much at all.

“We bring good things to life,” the GE ad slogan used to proudly pronounce. Not lately.

And not surprisingly either. Mature business enterprises, we’ve learned over recent decades, either make breakthroughs for consumers or grand fortunes for their top execs. They don’t do both.

Why not? Making breakthroughs, for starters, takes time. Enterprises have to invest in research, training, and nurturing high-performance teams.

Years can go by before any of these investments bear fruit. By that time, the executives who made the original investments might not even be around.

Grand fortunes, by contrast, can come quick. CEOs can downsize here, cut a merger there, then sit back and watch short-term quarterly earnings – and the value of their stock options – soar.

If those don’t do the trick, CEOs can always just slash worker pensions or R&D and put the resulting “savings” into dividends and “buybacks,” two slick corporate maneuvers that jack up company share prices and inflate executive paychecks.

Slickness scale

On any CEO slickness scale, Jack Welch would have to rank right near the top. In 1981, his first year as the GE chief, Welch quickly realized he was never going to get fabulously rich making toasters and irons.

So Welch started selling off GE’s manufacturing assets. In his first two years, analyst Jeff Madrick notes, Welch “gutted or sold” businesses that employed 20 percent of GE’s workforce.

By 2000, Welch was making about 3,500 times the income of a typical American family.

By contrast, in 1975, Welch’s predecessor took home merely 36 times that year’s typical American family.

As Welch’s successor, Jeffrey Immelt would give an apology of sorts in a 2009 address at West Point. Corporate America, he told the corps of cadets, had wrongfully “tilted toward the quicker profits of financial services” at the expense of manufacturing and R&D, leaving America’s poorest 25 percent “poorer than they were 25 years ago.”

“Rewards became perverted,” Immelt went on. “The richest people made the most mistakes with the least accountability.”

Unfortunately, and sadly, Immelt never took his own analysis to heart. As a rich CEO in his own right, he continued to make mistakes and suffer no particular consequences.

One example: After the Great Recession, Immelt froze the GE worker pension system and offered workers a riskier, less generous 401(k). Within five years, notes the Institute for Policy Studies, the GE pension deficit widened from $18 billion to $23 billion – even as Immelt’s personal GE retirement assets were nearly doubling to $92 million.

“If we want to slow – or better yet, reverse – accelerating income inequality,” the Harvard business historian Nancy Koehn noted a few years ago, “the most powerful lever we have to pull is that of outrageous executive compensation.”

How many more outrageously compensated executives will retire off into lush sunsets, the Jeff Immelt story virtually begs us to ask, before we start yanking that lever?

***

Reposted from Vandy.

Sam Pizzigati edits Too Much, the online weekly on excess and inequality. He is an associate fellow at the Institute for Policy Studies in Washington, D.C. Last year, he played an active role on the team that generated The Nation magazine special issue on extreme inequality. That issue recently won the 2009 Hillman Prize for magazine journalism. Pizzigati’s latest book, Greed and Good: Understanding and Overcoming the Inequality that Limits Our Lives (Apex Press, 2004), won an “outstanding title” of the year ranking from the American Library Association’s Choice book review journal.

Posted In: Allied Approaches

Union Matters

Failing Bridges Hold Public Hostage

From the USW

From tumbledown bridges to decrepit roads and failing water systems, crumbling infrastructure undermines America’s safety and prosperity. In coming weeks, Union Matters will delve into this neglect and the urgent need for a rebuilding campaign that creates jobs, fuels economic growth and revitalizes communities.

The Seattle Department of Transportation (SDOT) gave the public just a few hours’ notice before closing a major bridge in March, citing significant safety concerns.

The West Seattle Bridge functioned as an essential component of  the city’s local and regional transportation network, carrying 125,000 travelers a day while serving Seattle’s critical maritime and freight industries. Closing it was a huge blow to the city and its citizens. 

Yet neither Seattle’s struggle with bridge maintenance nor the inconvenience now facing the city’s motorists is unusual. Decades of neglect left bridges across the country crumbling or near collapse, requiring a massive investment to keep traffic flowing safely.

When they opened it in 1984, officials predicted the West Seattle Bridge would last 75 years.

But in 2013, cracks started appearing in the center span’s box girders, the main horizontal support beams below the roadway. These cracks spread 2 feet in a little more than two weeks, prompting the bridge’s closure.

And it’s still at risk of falling.  

The city set up an emergency alert system so those in the “fall zone” could be quickly evacuated if the bridge deteriorates to the point of collapse.

More than one-third of U.S. bridges similarly need repair work or replacement, a reminder of America’s urgent need to invest in long-ignored infrastructure.

Fixing or replacing America’s bridges wouldn’t just keep Americans moving. It would also provide millions of family-supporting jobs for steel and cement workers, while also boosting the building trades and other industries.

With bridges across the country close to failure and millions unemployed, America needs a major infrastructure campaign now more than ever.

 

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There is Dignity in All Work

There is Dignity in All Work