"What's Wrong With America"
King George's constituency of the Have$ and the Havemore$ is undergoing some very unwelcome scrutiny lately, especially now that the consequences of Hizz Hindni$$' military mi$adventure in Southwest Asia has caused the price of gasoline to rise so high that even Red State America can no longer ignore it's effects on their wallets:
Fuming over gas gouging
By Kathy Uek
April 21, 2006
As gas prices hover near $3 per gallon, MetroWesters were outraged to learn of a $69.7 million compensation package -- plus a $98 million pension payout -- to ExxonMobil Corp.’s former CEO and Chairman Lee R. Raymond. Raymond resigned at the end of 2005 and retired effective Jan. 14. His $98 million pension payout reflects 43 years of service. But had he retired last year, he would have received nearly $17 million less, according to the company’s 2005 proxy statement.
"Some folks will ask the question, ’Is this more evidence of big oil taking an enormous windfall and retaining all the riches?’" said Mel Fugate, assistant professor for Southern Methodist University’s Cox School of Business. Recent news of Raymond’s payout and pension is stoking embers Fugate said had been starting to die out. With gasoline prices gaining at the pump and big oil companies about to report first-quarter earnings in coming weeks, expect more fallout, economists say.
That expected fallout has already arrived.
Bill Brown of Cape Cod isn’t happy about Raymond’s millions especially since he had to take an another job after his 1995 retirement to pay for extra expenses, which include gas.
"It’s terrible, especially when you consider the price of gas for senior citizens on a fixed income," said Nancy Swan of Natick. "I have to limit when I drive my car because of the price of gas."
"It’s disgusting and ridiculous when you consider the price of gas," said Deidre Meloski of Medway, who teaches social studies at Dedham High School. "When you have billions of dollars in profit, it says something is wrong with the system. I’m upset that the president and Congress is [sic] not responding to the increased cost of home heating oil and the rising price of gas. It’s the highest profit of any corporation in America."
"It’s not fair to the average person, as I pay more than $70 to fill up my truck," said Jay Cardwell of Grafton filling his Dodge Ram 1500. "No one is worth what he’s getting."
But then, when one is a Topper, one just has no need to care about the little people.
The pay's the thing
April 22, 2006
EXECUTIVE COMPENSATION in the United States has swollen to the point where even Gordon Gekko might blush.
Just look at two sweetheart deals in the headlines this week. A newly released review of former Exxon Mobil Corp. Chairman Lee R. Raymond's pay package shows he made $686 million on paper from 1993 to 2005.
More dodgy is the case of UnitedHealth Group Inc. Chief Executive William W. McGuire. When people like McGuire have $1.4 billion worth of unused stock options, the whole system of incentives is seriously out of whack. [More below]
Not surprisingly, these and other recent revelations about grossly overpaid CEOs have added urgency to the clamor in Washington for more laws limiting executive compensation. Sounds satisfying, but it's actually a fool's errand. In fact, this kind of logic is partly what got us here in the first place.
In 1993, Congress passed legislation that denied a corporate tax deduction for pay in excess of $1 million. Companies reacted by granting top employees an ever-increasing number of stock options and other performance-based goodies. In theory, giving executives incentives to boost a company's share price is a good idea. But shareholders and potential investors need more oversight to ensure that all compensation is properly accounted for and disclosed in an appropriate way.
One good reform idea is requiring better transparency. The SEC is pushing companies to report CEOs' total compensation in one place, rather than bury it on 15 different pages of financial reports. Another intriguing trial balloon is "indexing" options to the S&P 500 or some other broad index, so that executives can't cash out unless the stock outperforms the average company.
is for reform to start at home.
Boards of directors are frequently too cowed, and too disorganized, to reign in the star CEOs who (after all) work for them. Sure, top employees deserve high salaries, and the best talent is deservedly expensive.
earns more than the gross domestic product of many countries.
There is another reason that CEOs get so much from the companies they run. The secret for a successful tenure as CEO is identitcal to that for successful comedy, only it's not so humorous. It's having the proper timing:
Just one more option on the ways CEOs can sell out stockholders
by Loren Steffy, Houston Chronicle
For years, top executives have demonstrated an uncanny ability to exercise stock options granted near the bottom of the market. Investors and compensation experts have groused about the practice, known as options timing, since options came into vogue in the early 1990s. Now, the Securities and Exchange Commission is investigating whether some companies backdated options to ensure they were granted at market lows, thus making the options more profitable, according to the Wall Street Journal.
A study released in 1999 by accounting professors at Stanford University and the University of California examined 2,000 options grants to CEOs at 572 companies between 1991 and 1996. It found that the companies tended to announce news that might drive the stock down — disappointing earnings, for example — before awarding options. Companies announced positive news — such as big contracts — after.
Last month, the Journal took a different approach. It did a mathematical analysis to determine the odds of such favorable grant patterns occurring by chance. It examined stock performance two months before and two months after executive options grants. Dallas-based Affiliated Computer Services, for example, awarded CEO Jeff Rich options six times from 1995 to 2002, each just before a sharp rise in the stock.
Based on that, you're 7,500 times more likely to contract mad cow disease and 129,000 times more likely to be killed by lightning than you are to time the market that well.
That's why the SEC's backdating investigation is so interesting, and so overdue. As a compensation expert told me five years ago, options timing is too consistent to be a coincidence. Options are supposed to tie an executive's reward for performance to shareholders' reward for their investment risk. That risk involves buying low with the hope of selling high.
What are the odds of that? Probably about 1 in 300 billion.
I promised you more about UnitedHealth's CEO:
For UnitedHealth CEO, $1.6B will do nicely
By Bruce Meyerson, Associated Press
It's not as clear what type of point William McGuire hoped to make Tuesday by announcing that he asked his board of directors to stop awarding new options to him and other senior executives at the nation's second biggest health insurer. It seems McGuire's realization that perhaps he and his colleagues now have enough in common with shareholders wasn't triggered by some predetermined target, or even a simple "eureka" moment.
that maybe $1.6 billion in stock options was enough incentive for an executive.
At the end of 2005, the five most highly paid executives at UnitedHealth held options to buy 54.5 million shares of stock, including about 10 million they are not yet free to exercise. If all of those options were exercised and converted to stock, those shares would represent a nearly 4 percent ownership stake in the company. Although McGuire cashed in about 2.3 million of his 35.2 million options in February for $136.7 million, the remaining stash would still give him a 2 percent stake in the company.
Coming into 2006, they were worth nearly $2.7 billion.
A more likely reality is that some highly questionable circumstances surrounding those options, exposed by The Wall Street Journal [see above], played a more prominent role in McGuire's call to halt new grants.
The CEO may be, at least partly, a victim of his own tremendous success as a doctor-turned-executive. To boost profits, UnitedHealth has been relentless in wringing costs from the health-care system, streamlining the way medical bills are processed and paid, while boosting insurance premiums. The company's shares have climbed almost without interruption since McGuire took the helm in 1989. Over the past five years, the stock has quadrupled in value, though the past four months have seen a 20 percent retreat.
would be justified in asking whether that compensation is a little gluttonous.
While some corporate founders have amassed larger fortunes, not even some of the most celebrated CEO's of the past few decades have been rewarded so generously. "We sleep with good conscience," McGuire said in response to a question about the options controversy.
That's not entirely comforting to hear.
I guess we are supposed to be comforted by the idea that our lost health care coverage and our impaired mobility through higher costs are making possible the sort of lifestyle to which we would all like to become accustomed - for a select few.
One common misconception so-called conservatives have of the rest of us is that we want to take away their wealth. such is not the case. What we want to to take away the ability of wealthy people to use their money to abuse the rest of us.
Case in point: Exxon's CEO probably supported tax breaks for the purchase of gas-guzzling vehicles, such as the Hummer, which business-friendly Forbes Magazine billed as a symbol of all that's wrong with America. The maximum allowable credit in Section 179 of the tax code rose to $102,000 in 2004, which let H1 buyers claim the bulk of the purchase price as a deduction. Congress has since limited that deduction to 'only' $25,000, but Hummer owners will "probably end up spending most of that tax break at the pump" just so that corporate executives like Exxon's Lee Raymond can retire in decadently opulent luxury.
Such a massive roadhog "gets a paltry 13 mpg on the highway and 10 mpg in the city" and is "a lightning rod for those who feel we haven't done enough to shed ourselves of our ties to the Middle East." "[T]he vehicle is so large that it is exempt from reporting its fuel economy. The Web site will tell you there's a 32-gallon tank, but not how often you'll need to fill it."
Maybe that is what is really wrong with America. Millions of dollars are spent by corporate America to counter advertising which proptes opposition to their desires to sell us vehicles (among too many other things) which are not good for us or for the nation as a whole. Millions more are spent 'electing' representatives who will see things the corporate way and not the way of the people. Still more millions are spent promoting the idea that almost 2400 Americans died defending this nation, and not instead revealing that their deaths were in the services of defending the ability of a small cadre of greedy people to bleed this nation white economically as well as politically.
Lord Acton said that absolute power corrupts absolutely. Such absolute economic power, as personified by these two corporate CEOs (among too many others), has absolutely corrupted our nation, especially when it is considered more important to protect such incredible incomes with the lives of the less-fortunate.
Among those less-fortunate are the dozens, if not hundreds, who died riding in a vehicle which the Marines want to replace with something more suitable for combat than the Schwarzenegger inspiration for the civilian tax-subsidized Hummer.
You could call that the 'Fill 'er up' premium.
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