U.S. News

Americans query CEO pay scales as crisis deepens

PHOENIX (Reuters) - Arizona design teacher Marsha Minniss believes the culture of paying sky-high salaries to U.S. executives is “insane.”

Morning commuters walk the city sidewalks of New York December 20, 2005. REUTERS/Brendan McDermid

Public health director Paul Pisinski from Massachusetts thinks multi-million dollar payouts for CEOs are “unfair” and “unwarranted” as a global financial crisis deepens.

Texan market stall holder Alan Smythe just wishes someone would pay him a million dollars to run a Wall Street financial firm into the ground.

“They gave the guy from (American International Group) $40 million. Give me a million and I’ll run it into the ground faster than that, I’ll run it into the ground in six months.” he said.

The United States places a high value on the pursuit of wealth and many speak of the American Dream in which anyone can achieve riches and success through hard work -- and resentment toward the rich is comparatively rare.

But as U.S. lawmakers consider a $700 billion bailout for Wall Street using public money, many on Main Street are turning against the culture of lavish executive pay, analysts say.

Last year CEOs of companies in the Standard & Poor’s 500 index on average took in $10.5 million in pay, 344 times that of the typical U.S. worker, according to the Institute for Policy Studies and United for a Fair Economy, two groups that focus on social justice issues.

“It’s an issue that people are outraged about across the political spectrum.” said Sarah Anderson, an IPS analyst specializing in executive pay.

Up until now, the justification for golden CEO payouts has been that they recognize performance in a competitive international market. But as firms buckle under in the present crisis, and taxpayers are being asked to pick up the tab for some of their worst errors, many Americans are questioning that long held belief.

“I do not think it holds up,” Pisinski told Reuters. “I don’t think it’s fair, I don’t think it’s warranted for anybody to be paid the bonuses and benefits that they have received, especially in light of the fact that they seem to be rewarded for failure.”

Minniss, who was out shopping in upscale Scottsdale, Arizona, agreed.

“The whole thing’s insane and I think the average American feels that way.”


Both Republican candidate John McCain and Democrat Barack Obama have spoken out against excessive pay for executives as the presidential campaign reaches its final stretch.

The U.S. Senate passed the bailout this week, and the U.S. House of Representatives was to debate it for a second time on Friday. House lawmakers on Monday rejected the measure, partly in response to anger from their constituents whom they face in elections on November 4.

The terms of the rescue package prevent windfalls for executives who made bad decisions. In addition, the bill limits “golden parachutes” -- as hefty severance packages are known -- and requires that unearned bonuses be returned.

While many Americans say they feel that large executive payouts are unacceptable, many are uncertain about quite what additional steps should be taken to curb them, Anderson said.

“The public feel outraged, but they feel disempowered. They don’t know what they can do about it,” she said.

Shareholder activists often protest excessive corporate pay at corporate meetings, although Minniss questioned whether that alone would place a sufficient brake on boardroom greed.

“I don’t see that leaving it to shareholders has led us anywhere. Shareholders, all they care about are their profits,” she said.

Darlene Dexter, 50, a resident of Cincinnati, was also puzzled over the best steps to take to address the issue.

“People that work hard and start their own companies, if they make a lot of money, great. But if they’re not doing a good job, then no,” she said, although she drew the line at laws to curb executive pay.

“I don’t like too much government either, so probably no. It’s hard. I don’t know what the answer is.”

Her solution: “I just wish (executives would) have a conscience and take care of the people who work for them.”

Additional reporting by Andrea Hopkins, Ed Stoddard and Matthew Bigg; editing by Vicki Allen