Labor Day Report Exposes Excessive Executive Pay

On-going publicity of lawsuits and investigations related to accounting irregularities have brought the issue of excessive executive pay back into the limelight this Labor Day. Leading the rallying cry for reforms are two liberal policy groups, the Institute of Policy Studies and United for a Fair Economy. A report recently released by these groups shows that poor accounting pays off for some CEOs, despite the harmful consequences for workers and shareholders.

The report contains provocative findings from a study of 23 large companies under investigation by the Justice Department, the Securities and Exchange Commission and other agencies. Examples:

  • Collectively, the CEOs of these companies pocketed $1.4 billion from 1999 to 2001, while shareholders and employees suffered massive losses. The value of shares in these companies lost $530 billion between January 1, 2000 and July 21, 2002. Employees sustained a total of 162,000 layoffs since January 2001.

  • Worker pay hasn't grown at anything near the same rate at CEO pay. The Commerce Department reported that wages and salaries decreased from December 2000 to August 2002. If the average pay for production workers had grown at the same rate since 1990 as CEO pay, the workers' 2001 annual earnings would have been $101,156 instead of $25,467. If the minimum wage had grown at the same rate as CEO pay, it would have been $21.41 an hour in 2001 instead of $5.15 an hour.

To curb these imbalances, the policy groups suggest a list of reforms that include requiring stock options to be expensed, placing limits on tax deductions for excessive compensation, banning companies from offering executive perks not available to other employees, improving plain English disclosure standards for executive compensation, requiring shareholder approval of executive severance packages, increasing barriers to selling based on insider information, and enacting broader standards of board independence.

Download a copy of "Executive Excess 2002," which is subtitled, "CEOs Cook the Books, Skewer the Rest of Us."

-Rosemary Schlank

You may like these other stories...

With tax season in the past, it's time to think about the tax implications of decisions your clients may be making about their homes in 2014. The rules are complicated and because of the huge amounts involved, the...
The Financial Accounting Standards Board (FASB) had hoped to issue a final standard on revenue recognition during the first quarter of this year. However, the standard-setting organization confirmed today that the timetable...
Read more from Scott Cytron here and in the "PR Matters" archive.A blog can help build your firm. However, simply creating a domain name and sporadically writing entries will not yield more business. In order to...

Upcoming CPE Webinars

Apr 24
In this session Excel expert David Ringstrom, CPA introduces you to a powerful but underutilized macro feature in Excel.
Apr 25
This material focuses on the principles of accounting for non-profit organizations' revenues. It will include discussions of revenue recognition for cash and non-cash contributions as well as other revenues commonly received by non-profit organizations.
Apr 30
During the second session of a four-part series on Individual Leadership, the focus will be on time management- a critical success factor for effective leadership. Each person has 24 hours of time to spend each day; the key is making wise investments and knowing what investments yield the greatest return.
May 1
This material focuses on the principles of accounting for non-profit organizations’ expenses. It will include discussions of functional expense categories, accounting for functional expenses and allocations of joint costs.