Target: Dean Baker and Mark Weisbrot, directors of the Center for Economic and Policy Research
Goal: Commend economists for starting DirectorWatch, which will expose top executives who get paid disproportionately to the success of their corporation
CEOs have always earned a lot more than the average worker because they have a taxing job that requires responsibility over the well-being of sometimes millions of people. However, American CEOs used to make 30-40 times as much as the average worker. Now, Fortune 500 CEOs make 380 times more than the average worker. CEOs generally earn these incomes whether their companies are performing well or not.
Corporate structure is different in other developed countries. Many European and Asian countries allow shareholders to police the performance of CEOs, and allow them to take compensation accordingly. In America, many corporate boards that are supposed to represent shareholders are paid enormous salaries to attend meetings, giving them little incentive to demand that the corporation delivers a profit to shareholders.
Even if CEOs are fired for poor performance, they still take home more money in severance pay than over 99% of people will ever see in their lifetimes. Leo Apotheker was fired from Hewlett-Packard after only 11 months, but took home a $13.2 million severance package. Carol A. Bartz got a $10 million severance package when she was fired from Yahoo. These companies were performing poorly when the CEOs took office and performed worse while they were there. CEO Bob Nardelli took home $240 million during his 6-year tenure at Home Depot, even though Home Depot’s stock value went down by 40%.
In order to ensure that CEOs are working to deliver profits to shareholders, the Center for Economic and Policy Research, along with the Huffington Post, are launching a website called DirectorWatch. (DirectorWatch is currently on Indiegogo here.) DirectorWatch will expose top executives who rake in large salaries even if their corporation’s stock value is declining.
DirectorWatch will not solve corporate structural problems, but it will highlight who is getting more pay than they deserve. Commend Dean Baker and Mark Weisbrot, directors of the Center for Economic and Policy Research, for starting DirectorWatch.
Dear Dr. Baker and Dr. Weisbrot,
We commend you for helping the public monitor CEO performance with your new website DirectorWatch. In an age of government bailouts for failing banks, it is clear that companies often aren’t acting in consumers’ best interest, and that executives frequently aren’t expecting to be held liable for bad performance. CEOs now make 380 times the salary of the average worker, yet not too long ago the stock market had its worst crash since the Great Depression.
We think the days of multimillion dollar severance packages for top executives have to end. This problem will take awhile to solve, but we’re glad that you want to further highlight the problem by showing which executives are earning too much money to justify in a failing corporation. The first step towards solving any problem is knowing all you can about it.
On behalf of those whose home values and retirement portfolios are halving and quartering due to poor corporate performance, thank you.
[Your Name Here]