May 21, 2010
By Len Boselovic
The financial meltdown spawned renewed outcries against the excesses of executive compensation, casting a brighter spotlight on how public companies use shareholder -- and in some cases, taxpayer -- money to pay their executives.
One of the yardsticks reformers like to use is the gap between what CEOs are paid and what Lunch Bucket Joe or Josephine takes home.
The Institute for Policy Studies, a liberal think tank, put the ratio at 319-1 in a report last fall. The ratio was based on 2008 average compensation of $10.1 million for S&P 500 CEOs (as compiled by The Associated Press) and the average hourly earnings of a production worker staffing an average weekly production schedule for a full year (as compiled by the U.S. Department of Labor).
The institute said the five top executives at the 20 financial firms that received the most taxpayer support to tide them over during the meltdown were paid $3.2 billion from 2006 through 2008 as they were "on their way to driving the U.S. economy off a cliff."
"One hundred U.S. workers making the 2008 average annual wage would have to labor over 1,000 years to make as much as these 100 executives made in three," the institute concluded.
What you may not get is the little picture: all the elements of pay packages that, when taken together, account for what critics say is the growing pay disparity that elected officials trumpet whenever they mount the bully pulpit.
Yet despite all their clamoring, there's been little significant reform on the executive pay front, according to Southern Methodist University Professor Mel Fugate.
"The performance management systems that got us here are still largely intact. Therefore, we're still at risk," said Dr. Fugate, who teaches management at the university's Cox School of Business.
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