CEO Pay For 2012 In State, Country Part Of Broken System

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.

The database lets users look up companies by ticker symbol, and includes 66 Connecticut companies with 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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