Bosses' Salaries Are Controversial in the United States Too
    By Eric Leser
    Le Monde

    Monday 19 June 2006

    The Zacharias affair (named after the former CEO of Vinci) that recently grabbed the headlines was not the first of its kind. For a long time, bosses' remuneration has been debated in France. In the United States, it's not the same. Capitalism's adversaries are in a minority there, and, according to opinion studies, more than three Americans out of four are not jealous of managers' salaries. They hope that they or their children will one day have similar ones. Nonetheless, the controversy has been swelling the last few months on the other side of the Atlantic too.

    Thus, we witnessed a shareholder revolt on May 25th at the Annual General Meeting of the distribution group, Home Depot. The boss, Robert Nardelli, assisted by a very accommodating Board of Directors, was paid 245 million dollars (194 millions Euros) during the last five years. During the same period, the company's share price dipped 12% and its principal competitor, Lowe, presented better results. The administrators were not even present at the AGM and Mr. Nardelli, who refused to answer questions, cut off the session after thirty minutes.

    At Exxon Mobil, the company that realized the greatest profit in history last year (more than 36 billion dollars), the AGM that took place May 31st in Dallas (Texas) was also an occasion for shareholders to demonstrate their anger. The object of their ire: the salary and pension bonus of 69.4 million dollars and 98.4 million dollars respectively given CEO Lee Raymond on his departure. According to an analysis done for the New York Times by expert accountant Brian Foley, Mr. Raymond will have received more than 686 million dollars between 1993 and 2005, or $144,573 dollars per day spent at the head of the petroleum giant.

    It's not just an issue of isolated cases. Greed is often the rule in American companies. On retirement, Jack Welch, historic General Electric (GE) boss, maintained the right to use the company's airplanes, to stay in a New York apartment, the rent for which - paid by GE - is $50,000 a month, and obtained numerous other benefits evaluated as worth 2.5 million dollars a year. It required divorce proceedings - and an ex-wife who claimed her share of the "pie" - to make these "details" public.

    "The Latest Scandal"

    Former Delta Airlines President Ronald Allen obtained another arrangement on quitting his post: he remains a consultant to the company for $500,000 a year and this remuneration will continue to be paid to his wife should he die first.

    Morgan Stanley's CEO, Phillip Purcell, received a 45% increase in salary in 2004, while the bank's profits over the same period increased 18%. Mr. Purcell has since been forced to resign. He received 44 million dollars indemnity and 62 million dollars more in the form of shares and retirement benefits.

    "Bosses' salaries are the latest company scandal. While CEOs unceasingly reduce workers' families' retirement benefits, most of them reserve exorbitant pensions for themselves," asserts Brandon Rees, AFL-CIO Assistant Director. According to an American Federal Reserve (Fed) study made public last month, American CEO remuneration in 2005 represented on average a multiple of 170 times that of the average salary. In 1970, that multiple was 40. The average salary of a CEO for one of the one hundred largest United States companies last year reached 17.9 million dollars, a 25% increase over 2004. At the same time, employees obtained an average 3% salary increase!

    The discontent of pension funds, Congress, and Americans in general - with the memory of the Enron, WorldCom, Tyco, AIG scandals in the background - has led the Securities and Exchange Commission (SEC), the markets' regulator, and its new boss, Christopher Cox, to try to force total transparency with respect to the remuneration of management on quoted American companies. "A large part (of the remuneration) has nothing to do with their salaries, for example, share disbursements spread out over time, or pensions. A growing part of their income escapes the public's knowledge," Mr. Cox emphasizes.

    The SEC's five commissioners unanimously voted in favor of a planned reform at the beginning of the year. It must still be definitely adopted to come into effect in 2007.

    Quoted companies will have to publish the annual total remunerations for their five best-paid managers and to specify the diverse benefits they enjoy. They will also have to explain what criteria are used to set bosses' remuneration and to judge their performance.

    Even the Business Roundtable, which represents the biggest American companies, is "in favor of greater transparency." William Donaldson, the former SEC chairman forced to resign a year ago under pressure from the lobbying of big companies that found him too aggressive, deems that the best method for reducing excessive remunerations consists of ... uncovering them.