BOSTON - August 30 - 2004 was a banner year for CEOs and a dismal year for workers, according to a new report from the Institute for Policy Studies and United for a Fair Economy, "Executive Excess 2005: Defense Contractors Get More Bucks for the Bang."
The ratio of average CEO pay (now $11.8 million) to worker pay (now $27,460) spiked up from 301-to-1 in 2003 to 431-to-1 in 2004.
If the minimum wage had risen as fast as CEO pay since 1990, the lowest paid workers in the United States would be earning $23.03 an hour today, not $5.15 an hour.
The report found that CEOs are individually profiting from the Iraq War, with huge average raises at the biggest defense contractors.
At the 34 publicly traded U.S. corporations among the 2004 top 100 defense contractors with 10 percent or more of their revenues from defense contracts -- companies such as United Technologies, Textron, and General Dynamics -- average CEO pay increased 200 percent from 2001 to 2004, versus 7 percent for all CEOs.
For example, David H. Brooks, CEO of bulletproof vest maker DHB Industries, earned $70 million in 2004, 13,349 percent more than his 2001 compensation of $525,000. Brooks also sold company stock worth about $186 million last year, spooking investors who drove DHB's share price from more than $22 to as low as $6.50. In May 2005, the US Marines recalled more than 5,000 DHB armored vests after questions were raised about their effectiveness. By that time, Brooks had pocketed over $250 million in war windfalls.
Since September 11, the ratio between median pay for defense CEOs and pay for military generals has nearly doubled to 23-to-1, up from 12-to-1 just three years earlier. The pay ratio between defense CEOs and army privates soared to 160-to-1, up from just 89-to-1 in 2001.
The report reviewed trends in CEO pay and gave CEO Hall of Shame awards to executives who have exemplified five types of excessive pay:
- PENSION UNDERFUNDERS: The CEOs of those firms with the most underfunded pensions, on average, received 72 percent more than the average large company CEO.
Inducted into the CEO Hall of Shame in this category is Exxon Mobil's Lee Raymond.
- TAX DODGERS: 46 large companies paid no federal income tax in 2003, despite collectively earning $30 billion in profits. Some of the savings wound up in the pockets of their CEOs, who made $12.6 million in average pay in 2004.
Inducted into the CEO Hall of Shame in this category is Pfizer's Hank McKinnell.
- BOOK COOKERS: In the last ten years, CEOs of firms with shady accounting appeared 18 times on the top ten lists of highest paid executives. This includes leaders whose companies were either later found to have committed fraud or were forced to make material restatements of earnings to correct previous overstatements of profits.
Inducted into the CEO Hall of Shame in this category is Tyco's Dennis Kozlowski, the highest paid book cooker - more than a half billion dollars.
- STOCK TANKERS: If you had invested in the stock of the company led by the year's single highest paid CEO each year since 1990, you actually would have lost money. You would have done nearly six times better by investing in the S&P 500 index. A $10,000 investment in such a Greedy CEO portfolio in 1991 would have decreased in value to $8,079 by the end of 2004, while a similar investment in the S&P 500 would have increased to $48,350.
Inducted into the CEO Hall of Shame in this category is Computer Associates' Charles Wang.
- GROSS PAY: Over the last 15 years, the cumulative pay of the ten highest paid CEOs in each year together totals more than $11.7 billion.
Inducted into the CEO Hall of Shame in this category is Citigroup's Sandy Weill, whose $1.1 billion in cumulative pay since 1990 topped all others.
Authored by Sarah Anderson, John Cavanagh, Scott Klinger, and Liz Stanton, Executive Excess 2005 is the twelfth annual CEO pay study by the Institute for Policy Studies (IPS) and United for a Fair Economy (UFE). The IPS is an independent center for progressive research and education in Washington, DC. UFE is a national organization based in Boston that spotlights growing economic inequality.
An embargoed PDF version of the report is now available to journalists on the web: http://www.faireconomy.org/CEO. For hard copies or to set up interviews with the co-authors, call 617-423- 2148 ext. 113 or e-mail email@example.com.