Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!news.media.mit.edu!americast.com!usa-post Newsgroups: usa-today.bonus From: usa-post@AmeriCast.Com Organization: American Cybercasting Approved: usa-post@AmeriCast.com Subject: bonus Fri, Mar 27 1992 Date: Fri, 27 Mar 92 05:43:21 EST Message-ID: 03-27 0000 BONUS: High CEO pay ignites outcry USA TODAY Update March 27-29, 1992 Source: USA TODAY:Gannett National Information Network Michael Whittaker practically spits out the words as he harshly tells how he feels about the megapay of top U.S. executives. "When the little guy is bustin' his b---s working day in and day out, and then a company starts talking about layoffs," says Whittaker, a 36-year-old Marine, "and the guy at the top is pulling in millions of dollars - you wonder where the justice is in that." A growing number of people are wondering the same thing these days. In recent weeks, a number of CEO pay packages have been revealed to the public - it's the time of year most companies put out their proxy statements, which include executive pay. WHO'S MAKING WHAT? Leon Hirsch, chairman of U.S. Surgical, a medical-instruments company, last year was awarded options for 2.75 million shares. That would give him a profit of $114 million if he could exercise them all now (he can't till 1996) in addition to his regular pay of $1.8 million last year. Coca-Cola Chief Executive Roberto Goizueta was granted 1 million shares of restricted stock, which he can sell in 1996. They're worth $82.5 million today. Plus, he raked in pay and bonuses adding up to $4.7 million. During H.J. Heinz's fiscal year, CEO Anthony O'Reilly cashed in stock options for a $71.5 million profit on top of $3.3 million in salary and bonus. IS THAT ALL? The hoopla isn't likely to fizzle soon. More proxies and more pay figures will come out in coming weeks, fueling an issue that has sunk a hook deep into public sentiment. Both Business Week and Fortune have made executive pay their current cover stories. Congress is threatening to hold hearings, pass legislation and generally make highly paid CEOs squirm. WHY ARE PEOPLE STEAMED OVER CEO PAY? While executive pay is soaring, the unemployment rate has climbed to 7.3%, and many salaried employees are lucky if they get a 5% annual raise. A recent USA TODAY poll showed that 72% of the public believes CEO pay of $1 million or more a year is too much, even if the CEO's company has performed well. HOW DO INVESTORS FEEL? Investors are fed up and want more say in how much a CEO gets paid. A mid-March survey of 360 members of USA TODAY's Investor Panel found that 88% say they're angry about high CEO pay. And 99% say a CEO should cut his or her pay if the company hits tough times. The panel is made up of USA TODAY readers, including Whittaker, who are active investors. "People who really deserve it and lead their companies to do well, I don't have a problem with that," says Keith Browning, 27, an Investor Panel member and credit analyst for Oscar Mayer. "But I have a problem with CEOs who are not doing well." WHO'S GETTING BIG RAISES WHILE PROFITS PLUNGE? Stephen Wolf, chairman of UAL, United Airlines' parent, made $18.3 million in 1990 even though UAL profits plunged 71% that year. Dun & Bradstreet's CEO, Charles Moritz, saw his base pay and bonus climb 63% to $1.6 million from 1987 to 1990. During that time, his company's total return to shareholders - stock price appreciation plus dividends paid - was flat. ARE SUCCESSFUL CEOS UNDER THE MICROSCOPE TOO? Even pay of supersuccessful CEOs is raising eyebrows. Hirsch is a good example. Hirsch argues he has done so much for the company in terms of building revenue, net income and shareholder value that he's worth his big pay. You can almost see his point. The total market capitalization of the company has soared about 550% to $5.5 billion since 1988, when it was worth just $844 million. "I'm not overpaid at all," he says. WHAT DO CRITICS SAY ABOUT HIRSCH? But Todger Anderson isn't so sure. He's president of Denver Investment Advisors, which owns 1.7% of U.S. Surgical stock and loves what Hirsch has done for the company. While Anderson doesn't directly say Hirsch should get less, he admits, "There does come a point where total option programs can be excessive. That's getting at a key issue." DO TOP EXECS KNOW THEY'RE BEING SCRUTINIZED? Though they'd never admit it, companies have long known how explosive the pay issue can be. Over the years, they have gone to great lengths to make it as difficult as possible for the public to assess how much a top executive gets paid while still honoring Securities and Exchange Commission rules about what must be disclosed. Proxies are jammed with footnotes and filled with arcane language. Pay packages are structured like Rube Goldberg machines. An executive's base salary can look almost modest. But the bells and whistles add up to a fortune. HOW IS THE PAY DISGUISED? Take the compensation of Paramount Communications' chief operating officer, Stanley Jaffe: For the calendar year beginning March 18, 1991, when he was hired, Jaffe's pay, under the heading of Compensation and Other Matters in Paramount's proxy, was only $478,071 (his annual salary is $760,000). WHAT DOES SCOURING FURTHER FIND ON JAFFE'S PAY? One section of the proxy says he got $484,600 more under a long-term performance plan. Another shows he received $1.4 million under an incentive compensation plan. Another says Jaffe was granted options to buy 700,000 shares at $42.12 each for a paper gain, as of Thursday, of $2 million. An explanation of Jaffe's employment contract says he was given 50,000 shares March 18, worth $22.3 million at Thursday's close of $45 1:8. He gets another 50,000 shares if he's still at Paramount next March 18. Add up the pieces, and you get $8.9 million if he could cash it all in today. IS THE PUBLIC BUYING IT? No. Executive pay started soaring in the go-go 1980s, but that was when the economy was strong and values leaned a little more toward admiring wealth. Toys R Us Chairman Charles Lazarus raked in $60 million in 1987. Michael Eisner, Walt Disney's chairman, got $40.1 million in 1988. Both got a lot of notice, but neither touched off a firestorm of protest. Today, though, a year-and-a-half of recession, layoffs and difficult family finances have put a different spin on the issue. HOW ARE SHAREHOLDERS SPEAKING UP? CalPERS, a pension fund that controls $68 billion, is negotiating with companies it invests in to change executive pay plans. CalPERS targeted IBM, especially since IBM last year posted its first annual loss, ending up $2.8 billion in the red. CEO John Akers' pay fell 40% to $1.6 million from $2.6 million in 1990. The New York City Employees Retirement System, which controls $20 billion in pension funds, is pushing Reebok, one of its big investments, to set up an independent committee to decide executives' pay. Bonus Editor: Michele Coleman. (1-919-855-3491) Making copies of USA TODAY Update (Copyright, 1992) for further distribution violates federal law. This article is copyright 1992 Gannett News Service. Redistribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. For more information, send-email to usa@AmeriCast.COM