Date: Fri 23-Apr-1999

Publication: Bee

Author: LISA

Quick Words:

Commentary-Collins

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COMMENTARY: The Salary's OK, But I Need Another Million In Options

By Bill Collins

Millions come,

Millions go;

Mostly to,

Our CEO.

Plato once told Aristotle that no citizen should be more than five times

richer than another. Nice try. Such a law was no more likely to pass then than

now. Aside from some pre-industrial tribes and a few communist societies,

wealth has never shown much interest in being shared.

Such thoughts spring to mind each April. That's when the corporate annual

reports come out. They tell us how much our corporate moguls were paid last

year. By and large, these moguls have not adhered to Plato's admonition.

Business Week estimates that, nationally, they were paid 326 times the rate of

their average shop worker. And growing fast. Back in 1980, that ratio was only

42:1. Nor are shop workers the poorest-paid folks in the plant.

One of Connecticut's best-paid CEOs is Jack Welch of General Electric -- $74

million last year. His union claims that comes to $50,000 an hour. Hmm,...

sounds high. Actually he's probably not making a penny over $35,000 an hour,

so it's hard to see what they're complaining about.

But Sandy Weill at Travelers? Well, that's different. He got $167 million. Now

we're talking real money. Of course it doesn't look like so much to him. He

got $227 million the year before. (The stock hit a snag.)

No, most Connecticut CEOs weren't in that range. They tended to run between

$1-5 million, although the boss at CIGNA did get $14 million. These rates seem

to hold up whether the company's stock had a good year or bad. For those which

floundered, the bonuses were sometimes down a trifle, but for those who

flourished, bonanza! And according to press reports, variations in bonus and

stock options seemed to be based entirely on current stock performance. The

company's long-term health didn't count for much.

Take Caldor. That firm's corporate executives managed to kill it altogether.

And we mean the whole thing -- bankruptcy. You'd think perhaps they'd have

been driven from the headquarters in sack cloth and ashes. Well, not quite.

The severance plan approved by the bankruptcy judge calls for the 13 biggest

cheeses to split a pot of $3.2 million. The 11,000 union members will split

$2.4 million.

In healthier companies you may have noticed that the biggest chunk of CEO pay

comes in stock options. There's a reason. Cashing in those options after a

modest holding period constitutes a capital gain, taxed at 20 percent. Salary

for these guys is taxed at 39 percent. Sure, the stock price may occasionally

go down, but not to worry. Many corporations simply rejigger the price the CEO

has to pay for the options, so he can still make a killing.

Is there anything a citizen or shareholder can do to stop this thievery. Well,

no. Corporate boards of directors, especially the compensation committees, are

stacked by the CEO. He often brings in CEOs from other companies. Disgruntled

shareholders at Anheuser-Busch this year are trying a couple of restrictive

resolutions at their annual meeting, but they'll go nowhere.

Of course the General Assembly could do something. It might place a limit on

CEO pay for firms which do business with the state. In the past such ideas

have been labeled Communist, and disregarded. Perhaps one's best bet is simply

to marry into a CEO's family.

(Bill Collins, a former mayor of Norwalk, is a syndicated columnist.)