Report: Layoff Leaders Cushioned from Downturn

Press Release
For immediate release - August 28, 2001
Contact: Betsy Leondar-Wright
(617) 423-2148 x113

Labor Day Report:
Layoff Leaders Cushioned from Downturn . . .

And CEO Pay Rises at No-tax Firms with Corporate Tax Rebates

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As the stock market slides and U.S. workers face the biggest wave of job cuts in a decade, top executives continue to enjoy exorbitant pay hikes, according to a new report, "Executive Excess 2001." The report is the eighth annual CEO pay study by the Institute for Policy Studies and United for a Fair Economy.

CEOs of firms that announced layoffs of 1,000 or more workers this year earned about 80% more, on average, than executives at 365 top firms surveyed by Business Week. These layoff leaders averaged $23.7 million in total compensation in 2000, compared with $13.1 million for CEOs as a whole.

The top job-cutters received an increase in salary and bonus of nearly 20% in 2000, compared to average raises in that year for U.S. wage workers of about 3% and for salaried employees of 4%. Overall CEO pay also rose in 2000 despite the 10% drop in the S&P 500.

As rebate checks no higher than $600 arrive at many Americans’ homes, the study also found that companies that received millions of dollars in corporate tax rebates then paid their CEOs more than other firms.

Between 1996 and 1998, 41 large, profitable corporations used special tax breaks to reduce their corporate tax bill to less than zero, receiving outright federal tax rebate checks, according to the Institute on Taxation and Economic Policy. (In contrast, the current rebates are paid only to people who paid income taxes.) As a group, the CEOs of these firms averaged pay hikes of 69% in the year of the rebate, far above the typical CEO raise of 38%. In six cases – Black & Decker, Praxair, Coca-Cola, Colgate-Palmolive, Enron, and McKesson – the CEO’s raise entirely consumed his company’s tax rebate for that year.

The increased wage inequity in 2000 continued a decade-long trend. If the minimum wage had grown at the same rate as CEO pay since 1990, 571%, it would now be $25.50 an hour, rather than $5.15 an hour.

The Institute for Policy Studies is an independent center for progressive research and education in Washington, DC. United for a Fair Economy is a national organization based in Boston that spotlights growing economic inequality.


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