CEO Pay for 2012 in the U.S. and Connecticut: Part of a Broken System

by Categorized: Corporate finance, Economy, Labor, Wealth Date:

The AFL-CIO launched its annual database of CEO pay Monday, showing the average 2012 pay of CEOs at companies on the Standard & Poor’s 500 index was $12.3?million, or 354 times more than the average American worker earned.
The average of those S&P 500 CEOs — the 327 companies that have filed for 2012 so far — was down 5 percent from 2011. It fell, according to AFL-CIO’s Executive Paywatch web site, only because Apple CEO Timothy Cook made $378 million in 2011 in a one-time payout, compared with $4.2 million in 2012. Otherwise, the rate would have been up by 5?percent.

Click here for list of 66 Connecticut CEOs and their pay.

Click here for searchable database of CEO pay by company, industry and state.

Connecticut companies had an average CEO pay of $6.3 million in 2012 or 2011, whichever year is the latest available.
That figure compares with $5.1 million, the average of all CEOs among about 1,500 in the labor coalition’s database. The lowest was Chris Koliopoulos at Middlefield-based Zygo Corp., the optics and instrument maker who made $1.9 million last year.
Connecticut CEOs whose companies are on the S&P 500 index and have reported 2012 pay — 13 in all — out-earned their counterparts nationally, with an average of $13.6 million, compared with $12.3 million. The top was United Technologies Corp. CEO Louis Chênevert, at $27.6 million, followed closely by General Electric’s Jeffrey Immelt, at $25.8 million. Praxair’s Steven Angel pulled in $17.8 million while Aetna’s Mark Bertolini and Stanley Black & Decker’s John Lundgren each made a bit more than $13 million, and Cigna’s David M. Cordani came in at $12.9 million.

There are countless ways to measure the pay of CEOs compared with the rest of workers, and all of them show a rising ratio in favor of the top bosses over time. AFL-CIO says the ratio was 42-to-1 in 1982, 201-to-1 in 1992 and 281-to-1 in 2002 — but those measures used different data sources, presented in different ways.
The web site does not report that the S&P 500 index was up 13 percent in 2012, a good year. I know, I know, the CEOs also got outrageous pay when the index was down 35 percent in 2008, and of course, stock performance is not a broad measure of prosperity — but it’s important to keep it in mind.
Companies uniformly say their chiefs are paid for performance, now more than ever. That’s only part of the issue even if it’s true, which it isn’t in all cases. What’s not refutable is that the entire U.S. corporate compensation system is broken, skewed against typical workers, and CEO pay is a piece of that — perhaps a sign, perhaps a cause, more likely both.
“Our economic system has become so rigged that no matter what happens, the rich keep getting richer and working families continue paying for it in the form of slashed jobs, wages, health benefits and retirement. From 2009 to 2011, incomes for the bottom 99% of American households fell 0.4%, while the incomes of the wealthiest 1% grew by 11.2%,” Executive Paywatch said.
Google CEO Eric Schmidt was the only 9-figure earner in the AFL-CIO database, with a nice $101 million payday in 2012. Seventy-six CEOs made more than $20 million.
The AFL-CIO website slams big U.S.-based companies for “sheltering offshore profits from taxes.” It cites reports showing that giant companies have as much as $1.9 trillion in hoarded cash overseas, and that just 60 companies would have to pay $455 million if they brought back their foreign cash to the United States.
The web site especially criticizes executives affiliated with the Campaign to Fix The Debt, a group that favors reforms in Social Security and Medicare.
This argumehnt by AFL-CIO is duplicitous and actually hurts the union coalition’s broader cause to halt out-of-control CEO pay. The money U.S. companies make overseas is not, overwhelmingly, earned here and “sheltered” elsewhere. It’s made overseas and AFL-CIO would like those companies to bring it back to headquarters. But until and unless the companies have a reason to do so, why should they incur U.S. taxes?
The CEO pay system is a lot simpler than foreign cash flow policy, and it is outrageous, so AFL-CIO is on target overall. Left largely unsaid is that there are signs of progress, as some companies — certainly not enough — are responding to the nonbinding shareholder votes on executive pay, which started in 2011.
Also, companies are reducing bonuses and direct cash payouts in favor of stock grants. Some companies are cutting options grants, which tie pay to stock performance, but tend to allow big payouts even if CEO’s are average or below-average.
A note to avoid confusion: Executive Paywatch uses the totals as shown on Securities and Exchange Commission filings to report CEO pay. That figure includes the current or theoretical value of stocks and options granted in a given year even if the CEOs don’t actually receive those benefits in the listed year. It also includes added value of retirement packages.
In news stories, The Courant lists the value of stocks and options granted and the added value of retirement packages separately, but includes in the main total the value realized from options exercised, and stocks vested. This is a clearer view of what an executive actually received.
The result, to give two examples: The Courant previously reported Chênevert’s 2012 pay as $19.5 million, not $27.6 million, and Webster Financial Corp. CEO James C. Smith was reported as receiving $6.5 million in The Courant, compared with $4.97 million reported on the SEC forms. Over time, it should even out — and either picture shows excess, even for the tireless, effective executives in these two examples.


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23 thoughts on “CEO Pay for 2012 in the U.S. and Connecticut: Part of a Broken System

  1. Jack

    OK… and who has the tally on union executives pay and their contributions to political campaigns, funded by forcing people to join unions ? Might as well show both sides of the story !

    1. Mitch

      Oh come on, Jack!!! You know the Courant would never do such a thing, to think of even mentioning any union in a potentially negative way.

      Which is what makes me laugh when people get bent out shape when talking about Citizen’s United and corporate donating to political campaigns, no one even mentions just how much money the unions pump it.

      If a CEO delivers for shareholders, they should get paid what they should get paid based on their contract.

      If they don’t deliver, they should be out of a job.

      That would never happen, of course, with a union person or a state or federal employee. Can’t fire them, they’re on the payroll forever.

      1. Dan Haar

        You can’t be serious. First, did you bother to read the post to begin with, with some sharp criticism of AFL-CIO?

        Second, do you actually think the CEO pay system, based on handpicked board cronies paying each other, reflects the “free market?” Really? Then why did the SEC have to force nonbinding votes on public firms, against their wishes?

        And third, if you do think the checks and balances are okay, are you actually saying you think this is the most efficient way to run an economy? I’m not talking about morality here, just efficiency — it makes sense for economic growth to hand $10 million a year to one guy, year after year, and $25 million if he actually does a good job? Is this what you are saying, or are you just trying to bash the media on right to work, an issue that I didn’t write about?

        You are correct that right-to-work is a difficult and sticky issue with lots of unintended consequences. CEO pay is not difficult. It’s broken. Period.

    2. Jack

      I worked in a Fortune 30 Corporation for over 30 years. The last CFO I worked for { NOT CEO ) probably made multiples of my pay as a sr. financial analyst. He was in before I got there around 8am , and was still in his office when I left around 7pm, then he went home to read emails to the wee hours of the night ( I saw them with “need to do’s” the next morning, with the timestamps on them) . He shouldered responsibility and pressure in that position that I didn’t have to. My pay shouldn’t have been on par with his.
      A CEO is on the carpet for results – period. Driving an organization to achieve, or even to survive in business, means everyone’s continuing job and their 401(k)’s value, is riding on the decisions he/she makes. Their life is not their own, it is an all-consuming occupation of their time – WAY BEYOND the average clock-puncher.
      I’ll put it to you another way. when I travelled on business, and got on a plane, I didn’t begrudge the pilot what his salary was – my life was in his hands.
      So perhaps the question really is – how many multiples of the do-8-hrs-go-home-don’t-be-a-hero-and-work-too-hard associate is appropriate ?
      I have a fundamental problem with criticism coming from people who have nowhere near the responsibility, and have a nice little game going themselves – the pot calling the kettle black. Just ask folks who see the corruption for themselves – I have. They don’t like what they see of either, too.

      1. Dan Haar

        That’s easy. For CEO’s, 50x to 100X — no problem. Over 200X seems excessive, over 300X seems obscene. Of course, I do not put founders in the same box as hired managers. No limit for founders — it’s their darn company.

  2. baborn3

    What about a union pay + benefits data base, from top to bottom …
    Maybe if the jealous, greedy, self-serving low information voters elected “responsible” representatives instead of people like themselves they’d get “fair, common sense” tax laws.

  3. Dr. Aki Bola, Esq.

    Some people have a hard time with the whole freedom thing. Sports stars are signing deals over $100M, top movie actors make more than $10M per movie, etc. This is possible because their value is set by their potential to make money for the investors. Is there an argument to be made that the CEO market is fixed in some way? Maybe, but the ratio of their pay to average workers mean absolutely nothing. What about the ratio of LeBron James salary to the average NBA ticket buyer? Or the ratio of President Obama’s pay to a secretary. What will you do with that information, and how does it affect your life?

  4. Dwight

    Yes, the issue isn’t how much the CEO is paid; the issue is how much the CEO is worth. If the CEO actually returns value to the satisfaction of investors, then there is no issue. The problem is that too many CEOs do not return value – their success is simply attributable to accounting tricks or short-term tactics. And instead of getting fired, their friends on the board keep rewarding them or allow them to retire with obscene golden parachutes.

  5. Ken Krayeske

    When we have great wealth concentrated in the hands of few, poverty for many results. Political inequality is a direct result of income inequality. As the last 30 years have shown, that power gap in a representative democracy skew more wealth distribution towards the upper echelons, and those on the bottom suffer more. It’s funny to read the defenders of this income gap fail to note or grasp the disastrous consequences of this inequality. It’s easy to attack when unions point it out, because unions are the enemy. They only gave us 40 hour workweeks and federally mandated overtime laws.

  6. JC

    Unions are ridiculous. A cashier at Weslayan University makes $20/hr. When school is over, they file for unemployment benefits. How many union members increase their overtime right before they retire to increase their pension benefits?? have you ever tried to fire a union employee?

    Why is CT the wealthiest state in the country yet with a giant budget deficit? Its not CEO pay. It’s Union employees who drain the budget to its core.

      1. Rayfromct

        Who’s version of fair share? 15 pct is about enough for all of us. Enough with state employees bring down $150k. That means I’m paying too much in taxes.

  7. one little

    No one is forced to join a union. If they refuse to join they can look for employment elsewhere. How many of you whiners posting here would turn down the salaries that you are complaining about someone else getting? N-O-N-E.

    1. Sean

      The issue is people are forced to join a union to take certain positions. The union bosses throw a fit when states like Wisconsin remove the mandatory union membership requirement. People vote with their feet and union membership drops 70%.

  8. Inexcess

    Those pays are extremely excessive. I don’t think a CEO like UTC’s should get any money for sending military work overseas to increase his bottom line. They also sold military secrets to China. His salary is partially paid by military tax dollars and we as tax payers should have a say on what he gets in compensation. If I sold military secrets to china I would be in jail at Guantanamo bay getting water boarded. He pays a $75 million dollar fine, paid for from our tax dollars and is now looking at what other military work he can outsource to make up for that loss of revenue.

  9. snafubar

    The top executives of major corporations are on contract and are paid to deliver results. When they do, they are compensated per the terms of their contract. They deliver, they get paid. No brainer. If you think they get paid too much, you have recourse – don’t buy that company’s goods or services.

    Government employees, on the other hand, unions included, get paid regardless of performance. It’s nearly impossible to fire them. Every employee under a union contract gets the same pay increases, benefit & pension increases, regardless of their performance, becasue it’s in their contract.

    Unfortunately, if you think THEY get paid too much, you have ABSOLUTELY NO RECOURSE, other than to move to another state. They have a monopoly on government “services” and all taxpayers of the state are their slaves.

  10. Sean Murphy

    The only people who have a right to complain are the company’s owners. People complaining about CEO’s pay have no idea what business owners and people who run companies put up with. It is no one’s business what a CEO makes.

    They are just envious that they do not have the drive or work ethic to get that far and make that money.

    This is all about tearing down success and demonizing everyone who is successful.

    There are serious issues with the way certain CEO’s loot a company and leave. That issue lies with its owners, not the government and not the people who work there.

    When someone has put their time and money into a business, they can talk.

  11. Inexcess

    Congratulations Dan. Finally something we agree on! Its part of the system that needs to be fixed.

  12. dave

    Is there any better example of the horrible business climate in the state of Connecticut than this article by Harr?

    Wonder why CEOs want to leave the state? How about making them the target of greed and envy?

    And later Harr will wonder where the jobs went. This is the clear picture into the distorted world of the liberal mind.

  13. Deep Time

    I love how all of these posters on here happily carrying water for executives making millions and getting double digit raises while schmucks like the rest of us have to be content with 2 or 3 percent raises if we’re lucky.

    And they are apparently OK with executives getting raises when the company does poorly. In these cases executives get paid (or get massive golden parachutes) while the proles get laid off and have to file for unemployment.

    Dan is absolutely right – the whole corporate board structure is nothing more than a group of super wealthy people feathering each other’s nests. Executives of one company are routinely on the board of several other companies and they ALL look after each other.

    Of course, most of the low-information commenters on here have no idea that’s what’s going on.

    It’s time for shareholders to start voting against all board appointment recommendations to break this continuous circle j**k that goes on with the boards of corporations.

Comments are closed.