As CEO of American Airlines, Donald Carty didn't invent corporate greed and deception. He simply pursued it a little too blatantly.
Just as American's three unions narrowly agreed to $1.8-billion annual concessions, the money-losing company revealed that last fall it had secretly approved millions of dollars in special bonuses and a bankruptcy-proof retirement plan for its top executives. Angry workers and union leaders raised the specter of rejecting the concessions and thus pushing American into bankruptcy, but instead company directors pushed Carty out of his job late last month.
He may be gone, but his downfall is hardly a sweeping victory for labor. In recent years hundreds of other CEOs have been quietly locking in extremely generous retirement packages for themselves while undermining the retirement security of their employees and not suffering many repercussions.
But the timing of the news about his perks did Carty in. Unhappy workers, who in this case had a voice through their union, were able to threaten retaliation for what they saw as a betrayal. Normally a chief executive escapes such accountability about his compensation. He effectively names most of the corporation's directors, typically other high-paid executives, who in turn determine his pay.
Partly because of this inbred system of control, chief executive pay has soared - from 42 times the average hourly worker in 1980 to 411 times in 2001, with no clear link between pay and performance, according to a Business Week survey. While the top compensation packages tapered off last year, median executive pay still rose 6 percent, double the average worker's increase.
But as public outrage has flared and legislators have occasionally tried to rein in excess, top executives have increasingly bulked up their pay with "stealth" retirement plans. For example, now nearly all major companies offer executives the chance to defer a large part of their pay and receive payments for the rest of their lives at above market interest rates - typically 10 to 14 percent. In addition, most big companies offer supplemental executive retirement plans that annually pay a fixed percentage of the executive's highest compensation - sometimes even including stock options and bonuses. Often the existence or cost of these expensive perks is concealed even from shareholders.
On the other hand, the retirement prospects for the half of private-sector workers with any pension have grown poorer, riskier and more unequal. Compared to two decades ago, fewer people have traditional pensions that pay a clearly defined monthly benefit on retirement. Most now rely on pensions - like 401(k) plans - that are based on employee contributions (with a decreasing number also partly matched by employer contributions). As the stock market crash and corporate scandals like Enron have made clear, these can be very risky nest eggs.
More recently, hundreds of corporations have been converting their traditional defined-benefit pensions into hybrids, such as "cash-balance" pensions that resemble individual retirement accounts - and typically reduce pension payouts to older workers by 20 to 50 percent. The Bush administration is pushing legislation and pension rule changes that will spur more cash-balance plans and provide better retirement options for high-income workers while undermining pensions for low- to middle-income workers.
These pension changes often seem arcane. But the results are clear: Over the past two decades retirement income inequality has risen sharply. Fewer families can replace even half of their pre-retirement income - and more are ending up in poverty, despite the stock market and home equity boom of the 1990s, according to a recent study by New York University economics professor Edward Wolff. The only winners over this period were households with a net worth of more than $1 million - whose average retirement wealth soared by 44 percent.
Especially since the Enron debacle, the labor movement has argued that not only workers but also shareholders (including workers' pension funds) are being robbed by self-serving executives and that excessive, devious executive compensation plans typically signal more deep-seated problems with a corporation. They've had some success arguing for changes in how corporations are run. For example, a majority of shareholders recently voted in favor of an AFL-CIO proposal requiring shareholders' approval of special executive retirement packages at US Bancorp.
That's a small move in the right direction of fairer incomes, on the job and in retirement. But it will take a much bigger, more sustained public, labor and political revolt against the Ken Lays and Donald Cartys of the world to make corporations serve employees, the public and the shareholders, not just a few executives at the top.
David Moberg is a senior editor at In These Times.
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