EXECUTIVE EXCESS '98: CEOs Reap Millions From Massive Lay-Offs

Press Release - (Full Report Available)


For Immediate Release - April 9, 1998
United for a Fair Economy, (contact info below)
Institute for Policy Studies 733 15th Street, NW, #1020
Washington, DC 20005, voice: 202-234-9382 x224, fax: 202-387-7915
Betsy Leondar-Wright, UFE, 617/423-2148 x13
John Cavanagh, IPS, 202/234-9382 x224

EXECUTIVE EXCESS '98 United for a Fair Economy

CEOs Reap Millions From Massive Lay-Offs

Downsizer Dozen Roll in Dough while Dumping Workers

A new survey of corporate downsizing and executive pay finds that the CEOs of lay-off leaders are enjoying multi-million dollar pay hikes while their workers suffer.

Preliminary findings from the study, Executive Excess: CEOs Gain From Massive Downsizing, conducted by United for a Fair Economy and the Institute for Policy Studies, focus on the Downsizer Dozen. The Downsizer Dozen list spotlights CEOs who have enriched themselves enormously while presiding over the destruction of thousands of jobs.

According to today's Wall Street Journal Executive Pay Survey, total CEO pay rose 29.2% in 1997. American Express CEO Harvey Golub, featured in the Downsizer Dozen, had a whopping total pay increase of 229%.

"For ordinary Americans, there is no greater symbol of betrayal by corporate America than CEOs cashing in as they lay off workers," said Chuck Collins, Co-Director of United for a Fair Economy. "The pain of corporate downsizing should not be someone else's gain."

CEO gains dramatically outpace the wages and benefits of average workers (3.1% in 1997 according to The Wall Street Journal) and corporate profits (10.3%, according to the Bureau of Economic Analysis). While CEO pay keeps heading skyward, workers still make less in real wages than they did in the 1970s.

Highlights from the Downsizer Dozen

  • American Express Company announced layoffs of 3,300 workers in 1997. CEO Harvey Golub earned an incredible 229% increase in take-home pay over 1996, including $27 million in options gains. His annual compensation of $33.2 million equals the total annual pay of 1,500 employees earning the average 1997 weekly wage of $424.
  • Eastman Kodak led the lay-off pack with announcements of over 20,100 workers in 1997. They have made additional lay-off announcements in 1998. CEO George Fisher didn't get a bonus in 1997, but he exercised stock option gains worth $8.7 million, increasing his total 1997 compensation by 96%. Fisher's total compensation of $10.7 million is equal to the pay of 487 average US workers.
  • International Paper Company announced plans to lay-off 9,215 workers in 1997. They rewarded their CEO, John T. Dillon, with a 140% increase in salary and bonuses.
  • Whirlpool Corporation announced 4,700 layoffs and gave CEO David Whitwam a 47% pay hike. Adding in long-term compensation and exercised stock options, Whitwam walked away with a whopping 133% pay hike.
  • Barbie-maker Mattel announced over 3,174 job cuts, with 2,700 workers in Mount Laurel, PA taking the biggest hit. Chairwoman Jill Barad got a 29% increase in salary and bonuses from 1996. But her $9.1 million in long term compensation gave her a hefty 126% total pay hike.

The 30 US corporations with the most lay-offs in 1997 eliminated a total of 169,484 jobs, reports the new Executive Excess study. Additional companies include: Boeing (12,000), Citicorp (9,000) and Nationsbank (6,450). The 1996 Executive Excess survey found that top managers at the leading 30 downsizers saw an average 67.3% pay increase.

Recommendations for Reform

"We believe firms should freeze top management compensation during periods of downsizing," said John Cavanagh, Executive Director of the Institute for Policy Studies.

Over 70 shareholder resolutions addressing executive compensation have been filed this spring. United for a Fair Economy filed a shareholder resolution putting the spotlight on executive pay at General Electric, which is featured in today's Wall Street Journal. Last year's resolution at AT&T to freeze executive pay during periods of downsizing won significant shareholder support. When AT&T announced lay-offs in January, 1998, they simultaneously announced a freeze in executive pay. "AT&T's decision to freeze executive pay at times of lay-offs should be the new norm for corporate behavior," said Cavanagh.

A newly formed bi-partisan group of over 45 members of Congress have co-sponsored legislation (the Income Equity Act -- H.R. 687) to cap the deductibility of excessive compensation to 25 times the lowest paid worker in the firm. "I believe that American taxpayers should not have to subsidize excessive salaries," said lead sponsor Martin O. Sabo (D-MN). "And I don't believe our tax code intended today's high pay to be completely tax deductible."

Over 300 labor, business and religious organizations have joined together in a national coalition to promote the legislation.

On April 23rd, United for a Fair Economy and the Institute for Policy Studies will release the complete study of executive pay for the country's top 25 downsizing firms at a Capitol Hill press conference.