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Entries in Pay (11)

Friday
Oct052012

Morgan Stanley CEO Says Banking Industry Is 'Overpaid'

Scott Eells/Bloomberg via Getty Images(NEW YORK) -- Morgan Stanley CEO James Gorman has folks in the banking sector buzzing with his comments that the industry is "still overpaid."

"There's way too much capacity and compensation is way too high," Gorman told the Financial Times. "As a shareholder I'm sort of sympathetic to the shareholder view that the industry is still overpaid."

A spokeswoman for Morgan Stanley declined to elaborate or make Gorman available for comment. Gorman's doing pretty well though. He received a $10.5 million pay package in 2011, a pay cut of 25 percent from 2010. He's was the 23rd highest-paid CEO in America last year, according to Bloomberg Markets magazine.

Earlier this year, Deutsche Bank co-chief executives Anshu Jain and Juergen Fitschen said compensation reform was one of their three key objectives.

Gorman's comments come a week before the major U.S. banks report their third-quarter earnings. JPMorgan Chase and Wells Fargo will be the first with their earnings releases next Friday, Oct. 12.

Back in July, Morgan Stanley reported a 50 percent drop in its second-quarter earnings to $591 million. The company reported revenue had dropped to $6.95 billion from $9.21 billion the prior year.

Brian Foley, pay consultant and managing director of Brian Foley & Co. in White Plains, N.Y., said with little evidence in the financial markets that the tide has turned, Gorman's comments seem somewhat foreboding.

"My sense is that what's coming in the third quarter is likewise not going to be pretty or even uglier," he said.

Anthony Polini, analyst with investment firm Raymond James, said he agreed with Gorman that there are too many banks in the U.S., but he disagreed that the banking industry as a whole is underpaid.

"The banking industry is overregulated, not overcompensated," Polini said.

Although, Polini conceded, it depends which industry one uses as a comparison.

Comparing to professional athletes and film stars would make most bankers look like they got the short end of the stick, he said.

By international standards, Polini said executives at Bank of America, the second-largest U.S. bank measured by assets, are not overcompensated. Its CEO, Brian Moynihan, receives compensation of $8.1 million, which includes a salary of $950,000, $6.1 million in performance-based stock, $420,000 worth of tax and financial advice and use of the company's aircraft.

"It's all who you compare them to," he said. "I'll take a stand and say I think teachers should make a lot more money."

Polini also points out that the large number of U.S. banks, approximately 7,000 which are dominated by a handful of national corporations, could mean greater competition and choices for consumers.

"Excess capacity is a bad thing on one hand, but if you're looking for a low-interest bank or convenience, even if you live in the suburbs, you probably don't have to drive to a bank," he said. "You could probably walk to one."

Low interest rates have been negatively affecting banks, but Polini said he expects banks to report positive quarterly earnings in terms of commercial loan growth and mortgage banking.

"It doesn't mean that the outlook is going to get much better. We still have a weak economy and a low-interest rate environment," he said.

Copyright 2012 ABC News Radio

Thursday
Aug232012

Best Buy (BBY) Defends Estimated $32 Million Pay Package for New CEO

KAREN BLEIER/AFP/Getty Images(NEW YORK) -- Best Buy (BBY) is giving new CEO Hubert Joly a compensation package valued up to $32 million for three years, including a guarantee of more than $6 million even before he starts work if the deal falls apart.

A native of France, Joly has been guaranteed $6.25 million if he can't obtain a visa to work in the United States by the end of September and the deal falls apart, the Wall Street Journal reported. He will have an annual base salary of $1.175 million, plus additional cash and stock awards.

The company said Monday it had hired Joly, the former CEO of hospitality group Carlson, to replace interim CEO Mike Mikan after former chief executive Brian Dunn resigned because of an inappropriate relationship with an employee.

Best Buy Tuesday announced a near-90-percent drop in profit for the second quarter to $33 million. The company has had struggling sales as customers shop for lower-priced goods online.

Maggie Habashy, a spokeswoman for Best Buy, said in a statement that two-thirds of the amount cited by the Journal "is a one-time payment intended solely to make Mr. Joly whole for the outstanding compensation he left behind in departing Carlson, his previous employer."

A spokeswoman for Carlson, which is a privately held company based in Minnetonka, Minn., declined to comment about his pay.

Even though Joly was already working in Minnesota, he needs to obtain a new visa because he's changing employers.

Habashy said "the amount that can accurately be described as compensation going forward is weighted approximately 90 percent to variable incentives, the value of which will depend on how operational goals are met and movements in share price."

"The cash compensation is squarely in the mid-range for a CEO of a company the size of Best Buy," Habashy said in the statement. "This package was developed in consultation with leading search and compensation firms and is in line with best practice for Fortune 500 companies."

Aaron Boyd, research director with executive compensation research firm Equilar, said Joly's annual target pay figures appear to align with what other top CEOs at the largest companies receive.

The median pay for CEOs of the S&P 500 was at $9.6 million per year, Boyd said. Joly's annual pay will be at about $12 million per year.

"Beyond the annual pay, he'll likely get the most amount of value from make-whole awards meant to compensate him for leaving Carlson and the value he gave up by leaving there," Boyd said.

Best Buy is giving him a grant valued at $20 million, Boyd said.

"It is not unusual for a company to give out awards to make up for what had to be given up," he said.

Recent examples include Yahoo's hiring of Marissa Mayer from Google in July and J.C. Penney recruiting CEO Ron Johnson away from Apple Inc. in November.

Mayer has an annual base salary of $1 million a year plus other awards, including $12 million in Yahoo stock. She could earn up to $60 million if she stays with the company for five years.

J.C. Penney paid Johnson $53 million last year.

Copyright 2012 ABC News Radio

Thursday
Aug162012

Taxpayers Subsidize CEO Pay, Report Says

Justin Sullivan/Getty Images(WASHINGTON) -- The Institute for Policy Studies, a self-described “progressive multi-issue think tank,” analyzed the link between tax loopholes and excessive executive compensation and concluded that the loopholes created an “uneven playing field” between large companies and small businesses and led to lost tax revenue.

The latest edition of the institute’s annual Executive Excess compensation study found that in 2011, 26 CEOs received more in compensation than their companies paid in taxes, and that the four major tax loopholes contributing to excessive executive pay cost taxpayers about $14.4 billion a year.

“The report is timely at a time when the tax debate is so intense in this country,” Sarah Anderson, the institute’s global economy project director and the report’s co-author, told ABC News.  "Some leaders are saying we need to reduce the corporate tax burden even more while major companies are taking advantage of loopholes to lower their tax bill."

The report critiqued the major tax loopholes, including the preferential treatment of “carried interest” income for hedge fund managers.  "Carried interest" income can be taxed as capital gains -- at 15 percent tops -- instead of at 35 percent, the top income tax rate. The Congressional Budget Office's projected estimate for “carried interest” income -- revenue from investment income or dividends -- for 2012 to 2021 was $21.4 billion.

Companies can deduct executive pay as a business expense, just as they do inventory and appreciation. Because of a tax rule enacted in the early 1990s that limited the amount of cash that could be deducted to $1 million, corporations have increasingly paid executives in stock options. Corporations can exempt stock option compensation, and other performance-based pay, from taxation.

William McBride, chief economist with the Tax Foundation, a conservative-leaning nonpartisan think tank, said this makes sense, because stock options are speculative compensation.

“They’re worth nothing unless they’re in the money,” McBride told ABC News. “It wouldn’t be fair to tax someone for getting paid an option that doesn’t have any real value until it has been exercised.”

Steven Balsam, an accounting professor at the Fox School of Business at Temple University, said from a business viewpoint, “it’s an expense, just like any other person’s salary.”

Others defend performance-based compensation for high-performing executives who have overseen companies with increasing earnings and stock prices.

Balsam said it was unlikely that boards would limit executive pay even if their pay was not tax deductible.

Anderson, who co-wrote the report, said that company boards that might choose to forfeit the deduction and continue paying high compensation packages “are stacked with executives from other firms that have a vested interest in maintaining the status quo.  

“However, we need to keep chipping away at the myth that massive payouts are necessary to attract talented managers,” she said. "Having a meaningful deductibility cap would send the right message, and at least taxpayers wouldn’t have to continue to subsidize excessive pay.”

The report points to the largest beneficiaries of the tax loopholes, saying they benefit the most from the unlimited tax deductibility of executive pay because their compensation has the largest proportion of deductible, performanced-based pay.

Oracle’s Larry Ellison, the sixth richest person in the world with a net worth of $36 billion, according to Forbes, tops the list, and is followed by Discovery Communications’ David Zaslav; Viacom’s Philippe Dauman; Motorola Mobility Holdings’ Sanjay Jha; and CBS Corp.’s  Leslie Moonves.

Neither Oracle, Discovery Communications, Viacom and Motorola Mobility Holdings returned calls requesting comment. A spokeswoman for CBS Corp. and a spokeswoman for Discovery declined to comment.

Copyright 2012 ABC News Radio

Monday
Jul162012

What to Expect If You're Expecting a Raise

iStockphoto/Thinkstock(NEW YORK) -- How much higher can those fortunate enough to have a job expect their salaries to rise in the next year? The answer is three percent, according to a study by the consulting firm, Hay Group.

According to the consulting firm’s research, executives, middle management, supervisory and clerical positions will see a median three percent pay increase in 2013, based on data collected between May and June this year from 350 organizations.

The study found the vast majority of organizations, at least 80 percent, reported an average increase of between 2.5 percent and 3.5 percent salary.

The oil and gas and luxury retail sectors reported the highest median increases at 3.3 percent and 3.5 percent, respectively.

“Historically many employees saw annual salary budget increases greater than three percent, with a drastic dip or freeze during the 'great recession,' and now we have settled into what may be a new normal of three percent,” said Jeff Blair, Hay Group’s U.S. Productized Services Leader.

In 2000, salaries increased a median of 4.4 percent, followed by an uneven decline in the increases, according to the Hay Group.

Blair said this is not a “sustainable strategy, especially for hot jobs or hard-to-fill positions.”

Employers will have to be committed to creating a positive work climate among other ways to keep employers and stay productive, he said.

Wages and salaries increased 1.7 percent for the current 12-month period ending in March 2012, according to the Bureau of Labor Statistics, compared to 1.6 percent for March 2011.

Copyright 2012 ABC News Radio

Monday
May212012

Shareholders Cut CEO Pay in Backlash

Adam Gault/Thinkstock(NEW YORK) -- Amidst a climate of populist outrage and corporate missteps, shareholders are voting en mass to cut executive pay thanks to a new government rule called "say on pay." The board of directors, who determine CEO pay, don't have to listen to the shareholder vote but most of them are listening.

Sprint CEO Dan Hesse received a $3.25 million pay cut after shareholders expressed concern with a deal Hesse cut with Apple to carry the iPhone on the Sprint Network. The deal will cost Sprint $15.5 billion and the Sprint will reportedly not profit from the move until 2015.

But are "say on pay" shareholder votes, while non-binding, a helpful feedback tool or do they encourage Monday morning quarterbacking?

"I think that there is the risk of a knee-jerk reaction," said Wayne Guay, an accounting professor at the Wharton School of Business. Critics of "say on pay" argue that shareholders don't read proxy statements and are less likely to make an informed decision.

Supporters of the policy say that if a CEO can expect an unscrutinized "golden parachute," he or she may have more of an incentive to engage in risky short-term behavior.

But some experts point out that underperforming CEO's are already punished because many of them own a large amount company stock.

Still, compensation packages are often generous enough to offset the loss in stock value. The most famous example was in 2008 when executives from Lehman Brothers collected $483 million in compensation before the company went under in a bankruptcy that is credited with starting the recent financial meltdown. Without worthless stock options, Lehman's CEO Richard Fuld still made close to $350 million.

"It's risk-free for the individual [the CEO] but it's risky for the company," said Rep. Barney Frank, D-Mass., back in 2009 while the law was being debated. "And when you accumulate risks for companies, it's risky for the economy," said Frank.

When big companies fall, like they did in 2008, there is often a domino effect that takes down other companies that rely on their business.

Will "say on pay" have a long-term positive effect?

The rule has been in effect for only one year here in the U.S. but the law was adopted in the U.K. in 2002.

One study on the U.K. system done by a professor from the Columbia Business School and one by a professor at the University of Southern California found that their system encouraged an enhanced dialogue between the board and shareholders. Those shareholders were most likely to punish a CEO by objecting to a generous severance package. When the boards ignored the "say on pay" vote, the next vote was almost always lopsided against the board.

The boards in the U.K study almost always capitulated after the third vote.

Here in the U.S., say on pay is likely too new to be able to assess the effects.

JPMorgan Chase CEO Jamie Dimon last week apologized immediately and profusely for the company's trading fiasco that reportedly cost the company $3 billion. "We made a terrible egregious mistake. There's almost no excuse for it," said Dimon on NBC's "Meet the Press."

Two days after the apology, 91.5 percent of the company's shareholders voted to approve of Dimon's $23 million pay package. However, many of those votes were likely submitted before the trading fiasco was disclosed.

Copyright 2012 ABC News Radio

Monday
May142012

Missouri Petitions to Raise Minimum Wage

iStockphoto/Thinkstock(NEW YORK) -- What's the national minimum wage? If you're, say, one of three Republican candidates running in Missouri's U.S. Senate primary, you might be hard-pressed to remember it (it's $7.25).

But if you're one of about 173,000 people living in Missouri, you can probably rattle it off the top of your head. That's the number of people in Missouri -- enough signatures to put the measure on the November ballot -- who signed a petition to raise the state's minimum wage from the national average per hour to $8.25 in 2013, and provide for cost-of-living adjustments in the future.

The measure would also require that employees who earn tips receive 60 percent of the state minimum wage, up from the current 50 percent. And if the federal minimum wage rises above the state rate, then Missouri would adopt the federal wage and apply cost-of-living adjustments to that.

There's a good chance that the measure will pass. Missouri Jobs with Justice, a backer of the minimum wage proposal, supported a successful campaign in 2006 to approve a ballot measure that raised Missouri's minimum wage to $6.50, with adjusted cost-of-living increases.

But not everyone is in favor of it. Some critics of the change says the ballot summaries and cost estimates for the proposals are unfair.

Many economists maintain that raising the minimum wage can negatively impact employment numbers, especially among teenagers and young workers. Scott Brown, chief economist at Raymond James Equity Research, in St. Petersburg, Fla., said that he does not think the Missouri situation would cause any problems. "It's probably not going to matter much," he said. "The typical concern is that it will lead to less-entry level jobs for young people. That's the fear. But again -- what's the going wage and what are the typical starting salaries in an office or fast food? Very often those are well above the minimum wage in some areas."

On its website, the U.S. Department of Labor lists the states whose minimum wage is above the national average, below, the same -- or doesn't have a minimum wage law. (23 states have a minimum wage at the federal level of $7.25.)

Here's the top states with the highest minimum wages:

1. Washington

$9.04

2. Oregon

$8.80

3. Vermont

$8.46

4. Nevada, Connecticut, Illinois

$8.25

Here are the bottom states with the lowest minimum:


47. Arkansas

$6.25

(Applicable to employers of 4 or more)

48. Georgia

$5.15

49. Minnesota

Small employer (enterprise with annual receipts of less than $625,000) $5.25

Large employer (enterprise with annual receipts of $625,000 or more) $6.15

50. Wyoming

$5.15

(Applicable to employers of 4 or more employees)

Copyright 2012 ABC News Radio

Friday
Apr202012

CEO Pay Now 380 Times Average Worker's, Says AFL-CIO

Adam Gault/Thinkstock(NEW YORK) -- Just when you thought executive compensation couldn't get much higher, the average CEO pay increased 14 percent to $12.9 million in 2011, 380 times that of the average worker, according to the AFL-CIO's annual Executive Paywatch report released on Thursday.

The report, called CEO Pay and the 99 percent, found that among the 300 firms of the S&P 500 companies that filed annual proxy reports, the average level of CEO pay rose 13.9 percent, following a 22.8-percent rise in 2010.

The national labor group launched its Executive Paywatch analysis 15 years ago to inform the public about growing inequality in labor wages, AFL-CIO President Richard Trumka said in a press conference about this year's report.

As CEO pay increased, Trumka said more than 12 million workers are without a job, and "those with a job had a 2.8-percent raise, barely keeping up with inflation," he said.

The updated data is searchable by industry and state, and includes a list of the 100 highest-paid CEOs.

The report shows the growing gap between pay of workers and CEOs, allowing visitors to the Executive Paywatch site to compare their own pay to that of various CEOs and the average worker, which was $34,053 in 2011, according to the AFL-CIO.

For the first time, the website details how mutual fund companies have voted as shareholders on executive compensation packages. The report looked at the 40 largest mutual fund families to see how they influence executive compensation, encouraging transparency on behalf of workers who hold fund investments. Trumka explained that investors can see how their mutual funds voted, and can voice their concerns about CEO pay.

"Mutual funds wield enormous clout on CEO pay issues, thanks to the new CEO 'say-on-pay' requirement [in which] shareholders can cast a vote on CEO pay," Trumka said.

Mutual fund company Harbor Funds was labeled as the biggest "pay enabler" by the AFL-CIO for voting against less than 1 percent of executive compensation packages. Mutual funds from Federated Investors allowed that investment company to be crowned the biggest "pay constrainer" for voting against 73.6 percent of pay packages.

FirstMerit Corp. became the fourth company this year on Wednesday to have a failed vote from shareholders about executive compensation. Citigroup had its failed vote on Tuesday after Actuant Corp., an industrial manufacturer and distributor, and International Game Technology, a gaming machines company.

Most companies with publicly traded stock held "say-on-pay" votes in 2011, according to the Dodd-Frank financial regulatory reform law. The U.S. Securities and Exchange Commission exempted smaller companies with less than $75 million in publicly traded stock from holding these votes until 2013. Only 41 out of the 3,000 companies in the Russell 3000 Index had failed "say-on-pay" votes last year, according to Ted Allen, spokesman for ISS Proxy Advisory Services.

The following is the AFL-CIO's list of top 10 mutual fund family "pay enablers" and the percentage of pay packages they voted against.

  1. 0.59 percent -- Harbor Funds
  2. 1.34 percent -- Goldman Sachs Asset Management
  3. 1.37 percent -- The Vanguard group
  4. 2.87 percent -- Lord Abbett and Co.
  5. 3.37 percent -- BlackRock
  6. 3.69 percent -- TIAA-Cref
  7. 4.13 percent -- ING Funds
  8. 5.67 percent -- Putnam Investments
  9. 5.97 percent -- T. Rowe Price
  10. 7.18 percent -- Nationwide Mutual Funds

Copyright 2012 ABC News Radio

Thursday
Dec152011

Obama Announces New Minimum Wage Rules for Home Caregivers

Pete Souza/The White House via Getty Images(WASHINGTON) -- As part of his ongoing executive action campaign, President Obama Thursday announced new rules to provide minimum wage and overtime protections for the nearly 1.8 million workers who provide in-home care to the elderly.

“As the home-care business has changed over the years, the law hasn’t changed to keep up. So even though workers … do everything from bathing to cooking, they’re still lumped in the same category as teenage babysitters when it comes to how much they make,” Obama said at a “We Can’t Wait” event at the White House. “That’s just wrong. In this country, it’s inexcusable.”

Workers classified as “companions” do not qualify for minimum wage and overtime pay. Such workers were exempted under 1974 guidelines that were meant to apply to casual babysitters and companions for the elderly.

“I can tell you firsthand that these men and women, they work their tails off, and they don’t complain. They deserve to be treated fairly. They deserve to be paid fairly for a service that many older Americans couldn’t live without. And companies who do pay fair wages to these women shouldn’t be put at a disadvantage,” the president said.

While the provisions in the president’s $447 billion American Jobs Act remain stalled on Capitol Hill, Obama has been taking small unilateral actions to boost job growth and foster his image as a president taking charge of the economy.

Obama was joined at Thursday’s event by Pauline Beck, a home-care worker from California whom the president met during his 2008 campaign when Beck was Obama’s boss for a day as part of a “Walk a Day in My Shoes” event.

“Heroic work and hard work: That’s what Pauline was all about,” the president said. “She was glad to be working hard, and she was glad to be helping someone. All she wanted in return for a hard day’s work was enough to take care of those kids she was going home to, enough to save a little bit for retirement, maybe take a day off once in a while to rest her aching back.

“Americans all deserve a fair shake and a fair shot. And as long as I have the honor of serving as president, I’m going to do everything in my power to make sure that those very modest expectations are fulfilled,” Obama concluded.

Copyright 2011 ABC News Radio

Tuesday
Jun072011

CEO Pay Rebounding as Recession Stock Grants Gain Value, Salaries Increase

Adam Gault/Thinkstock(NEW YORK) -- Corporate watchdog group GovernanceMetrics International (formerly The Corporate Library) released a preliminary version of its annual report on CEO pay, noting that the "modest economic recovery has led to large executive gains.”

Total median annual compensation was up 28 percent in 2010 according to the report, reversing two years of declines during the recession.

The median compensation was $8.49 million. This number includes base salary, bonuses, non-equity incentives, perks & benefits, change in the value of pensions, the value of any exercised stock options, vesting of stock and payments from vested retirement plans.

While that’s a significant increase, the median comp package still is not above the pre-recession level ($9.24 million in 2007).

The top 10 list is topped by the CEO of ABC's parent company. Bob Iger got a total pay package of $54.9 million last year, according to GMI’s number crunching from public corporate data.

View the top 10 paid CEOs list here.

Copyright 2011 ABC News Radio

Wednesday
Apr132011

Over One in Three Workers Don't Get Paid Sick Days, Study Finds

Jupiterimages/Thinkstock(WASHINGTON) -- Millions of workers in the U.S. who ought to call in sick when they don’t feel well often show up to work anyway, because if they don't, they won’t get paid.

A new study by the Economic Policy Institute reveals that a whopping 38 percent of private-sector employees receive no paid sick time.

There’s a huge disparity between the haves and have-nots: 86 percent of the highest-paid workers continue receiving salary when they take sick days, compared to just 19 percent of people at the low end of the pay scale.

Study author Elise Gould contends, “Access to sick days is vastly unequal [because] low-income workers are the ones who can least afford to lose pay when they are sick.”

The U.S. is behind the rest of the world in this regard, according to Gould, who says most nations, whether their populations are well-off or destitute, make sure workers are compensated for sick days.

Supporters of paid sick days argue that they boost productivity and worker loyalty.  Conversely, some employers say such a mandate is only more government regulation and also leads to possible abuse of absentee policies.

Copyright 2011 ABC News Radio







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