{"id":1498845,"date":"2024-02-14T06:57:18","date_gmt":"2024-02-14T06:57:18","guid":{"rendered":"https:\/\/www.counterpunch.org\/?p=313212"},"modified":"2024-02-14T06:57:18","modified_gmt":"2024-02-14T06:57:18","slug":"new-hope-for-a-check-on-ceo-compensation","status":"publish","type":"post","link":"https:\/\/radiofree.asia\/2024\/02\/14\/new-hope-for-a-check-on-ceo-compensation\/","title":{"rendered":"New Hope for a Check on CEO Compensation"},"content":{"rendered":"\"\"<\/a>\n
\n
\n
\n
\n
\"\"

Photograph by Nathaniel St. Clair<\/p><\/div>\n

Could any corporate execs walking our world today be any greedier than the execs who run Big Pharma? Hard to say. But out-grasping Big Pharma, suggests a new report<\/a> out of the U.S. Senate Committee on Health, Education, Labor, and Pensions, would certainly require some serious greed.<\/p>\n

Consider, for instance, the pay record of the Big Pharma colossus Johnson & Johnson.<\/p>\n

Two years ago, Johnson & Johnson pocketed $17.9 billion in profits and rewarded its CEO with $27.6 million in compensation. That same year, overall, saw Johnson & Johnson lay out $17.8 billion on stock buybacks, dividends, and executive pay \u2014 and only $14.6 billion on R&D.<\/p>\n

\u201cIn other words,\u201d the Senate panel\u2019s report noted, \u201cthe company spent $3.2 billion more enriching executives and stockholders than finding new cures.\u201d<\/p>\n

Back in 2022, Bristol Myers Squibb also devoted $3.2 billion more to enriching already rich execs than to helping the hurting. Merck\u2019s chief exec that same year collected an astounding $52.5 million in CEO compensation.<\/p>\n

Last year, to keep the good times rolling, Big Pharma execs spent over $351 million on lobbying lawmakers, enough to keep almost 200 <\/em>lobbyists gainfully employed on Capitol Hill.<\/p>\n

But let\u2019s not pick on Big Pharma. Our U.S. economy is overflowing with executive-suite greed, and the Financial Times<\/em> has just zeroed in on one gang of particularly avaricious souls, the hustlers who run the private equity industry.<\/p>\n

Private equity firms typically buy control of existing publicly traded companies, then take those companies private. To get the cash they need to make these initial purchases, private equity execs court deep-pocket investors. To guarantee these investors an attractive return, private equity kingpins squeeze workers at their newly acquired enterprises and shortchange their consumers.<\/p>\n

The final step: Private equity firms take their \u201crestructured\u201d firms to Wall Street for \u201cinitial public offerings\u201d that reap windfalls above and beyond the dividends they\u2019ve been extracting all along from their privately managed takeover targets.<\/p>\n

This classic high-finance wizardry, the Financial Times<\/em> points out<\/a>, has over recent years become much more difficult to sustain. \u201cSluggish demand for initial public offerings\u201d has made offloading \u201cexisting investments\u201d at huge profits next to impossible.<\/p>\n

How have private equity kings, amid this messy scene, been able to keep their gravy train going? Simple. They\u2019ve borrowed tons of new money. Last month, for instance, a giant contact lens retailer owned by the private equity giant KKR borrowed $565 million in new debt to pay off an existing loan and fund a $250-million payout to KKR.<\/p>\n

Some additional context: In fiscal 2021, KKR\u2019s two co-CEOs each pulled in<\/a> over $523 million in total personal compensation.<\/p>\n

How do execs like these rationalize their ongoing grasping? These execs can almost always, no matter how much they pocket, point to someone who\u2019s doing even more grasping than they are. Someone like Elon Musk, the world\u2019s richest individual over most of the past two years.<\/p>\n

But Musk\u2019s lucky streak of phenomenal good fortune has just hit a nasty speed bump: an unprecedented dressing down from a most unlikely source, the Delaware Court of Chancery, a state judicial body customized for corporate litigation.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n

\n
\n
\n
\n

Delaware has been a favorite refuge for grasping corporate execs ever since the early 20th century, and over two-thirds of the Fortune 500<\/em> currently make corporate-friendly Delaware their legal home. Delaware\u2019s tax and privacy laws, applauds<\/a> Forbes<\/em>, have left the state \u201cinternationally recognized as a corporate paradise.\u201d<\/p>\n

What\u2019s made Delaware so popular with the executive-suite set? Among the many goodies the state offers: Firms that choose to incorporate in Delaware can operate elsewhere and still avoid<\/a> paying the state\u2019s corporate income tax.<\/p>\n

The Court of Chancery\u2019s Kathaleen McCormick has now upset<\/a> Delaware\u2019s charming corporate apple cart and delivered Musk\u2019s empire a stinging and costly rebuke. In a 201-page ruling<\/a>, McCormick has labeled the process that led up to the Musk 2018 Tesla pay deal \u201cdeeply flawed\u201d and totally voided the contract that handed Musk \u201cthe largest potential compensation plan in the history of public markets.\u201d<\/p>\n

The Tesla defense for this over $55 billion<\/a><\/em> deal claimed that all those billions served to give Musk the motivation he needed to lead Tesla to glory. Judge McCormick essentially called that defense nonsense. Musk, she pointed out<\/a>, already held Tesla shares worth tens of billions before<\/em> the 2018 pay deal. What more motivation could he possibly need?<\/p>\n

\u201cElon Musk\u2019s compensation came to 89 percent of Tesla\u2019s gross (pre-tax) profits over the years 2019-2023,\u201d observes<\/a> economist Dean Baker. \u201cIt seems unlikely that that the company could not have attracted a competent CEO who would have agreed to work for a sum substantially less than 90\u00a0 percent of the company\u2019s profits.\u201d<\/p>\n

Musk and his Tesla legal team can still appeal McCormick\u2019s ruling, but the Delaware Supreme Court, notes<\/a> activist economist and former U.S. secretary of labor Robert Reich, \u201chas historically given chancellors like McCormick wide latitude.\u201d<\/p>\n

So has the Delaware Court of Chancery now put the kibosh on outrageous excessive executive pay? McCormick\u2019s \u201cincredibly important decision,\u201d points out<\/a> Institute for Policy Studies analyst Sarah Anderson, certainly does establish the existence of excessive compensation. And that decision, adds<\/a> Cornell University\u2019s Brian Dunn, will most likely help \u201creign in\u201d the \u201cextremes\u201d we now see in U.S.-style executive pay.<\/p>\n

But the new Delaware ruling, Dunn notes, won\u2019t likely \u201clower CEO pay overall.\u201d Realizing that broader lowering will require much more than what one open-minded Delaware judge can deliver.<\/p>\n

How can we get that much more going? We can, for starters, begin denying tax dollars and tax breaks to firms that pay their CEOs outrageously more than what they pay their workers. Lawmakers in Congress now have on their legislative plate a growing selection of measures that, if enacted, would do just that.<\/p>\n

The latest of these measures now pending \u2014 the Tax Excessive CEO Pay Act<\/a> \u2014 would link the federal corporate income tax rate to each corporation\u2019s CEO-worker compensation gap. Firms that pay their top execs over 50 times what they pay their typical workers would pay taxes at a higher rate, some 0.5 percentage points higher if those execs make under 100 times their median worker pay and 5 points higher if they pay their CEOs over 500 times their typical worker compensation.<\/p>\n

\u201cThe American people understand,\u201d notes Senator Bernie Sanders, a lead Senate sponsor of the legislation, \u201cthat today we are moving toward an oligarchic form of society where the very rich are doing phenomenally well, while working families continue to struggle to put a roof over their heads, feed their families, and pay for the basic necessities of life.\u201d<\/p>\n

\u201cMillionaire and billionaire CEOs at massive corporations are cashing in larger and larger paychecks even as their workers \u2014 who make those profits possible \u2014 barely see their pay keep pace with rising costs,\u201d agrees Senator Chris Van Hollen of Maryland, another Senate sponsor. \u201cThese obscene gaps are grossly unfair to workers and harmful to our economy as a whole.\u201d<\/p>\n

\u201cIt\u2019s disgraceful that corporations continue to rake in record profits by exploiting the labor of their workers,\u201d adds Rep. Rashida Tlaib from Michigan, one of the legislation\u2019s sponsors on the House side. \u201cWorking families deserve to live with human dignity.\u201d<\/p>\n

How much of a dollar difference could this legislation\u2019s passage make<\/a>? If the Tax Excessive CEO Pay Act had been law in 2022, JPMorgan Chase would have paid up to $1.04 billion more in taxes. Google, for its part, would have faced a tax bill up to over $3.07 billion higher.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n

The post New Hope for a Check on CEO Compensation<\/a> appeared first on CounterPunch.org<\/a>.<\/p>\n\n

This post was originally published on CounterPunch.org<\/a>. <\/p>","protected":false},"excerpt":{"rendered":"

Could any corporate execs walking our world today be any greedier than the execs who run Big Pharma? Hard to say. But out-grasping Big Pharma, suggests a new report out of the U.S. Senate Committee on Health, Education, Labor, and Pensions, would certainly require some serious greed. Consider, for instance, the pay record of the More<\/a><\/p>\n

The post New Hope for a Check on CEO Compensation<\/a> appeared first on CounterPunch.org<\/a>.<\/p>\n","protected":false},"author":55,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[22],"tags":[],"_links":{"self":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts\/1498845"}],"collection":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/users\/55"}],"replies":[{"embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/comments?post=1498845"}],"version-history":[{"count":2,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts\/1498845\/revisions"}],"predecessor-version":[{"id":1499648,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts\/1498845\/revisions\/1499648"}],"wp:attachment":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/media?parent=1498845"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/categories?post=1498845"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/tags?post=1498845"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}