USA Today Story Explains Bush's Economic Happy Talk

We've heard a lot lately from the Bush administration about how the economy is supposedly doing so well for so many Americans - happy talk that ignores the fact that workers' real wages have decreased since President Bush was first elected. But a new USA Today story goes a long way in explaining why the White House thinks everything is A.O.K.

As Greg Farrell reports, CEO pay is skyrocketing as never before - both at companies that are doing well, and companies that are losing money. Whereas workers are regularly told to accept draconian pay cuts when the company faces financial trouble (think Delphi), CEO and top executives at these same companies are rolling in cash.

In a confidential letter written by major pension funds and obtained by the paper, we learn "that CEO pay at many companies in the Russell 3000 index (representing 99% of the U.S. stock market) bore no relation to how well those companies performed." Here's more:

"At 60 of the worst-performing companies in that group, which lost $769 billion in market value over the past five years, the aggregate pay for the top five executives of those 60 companies over the same period was $12 billion. In other words, since January of 2000, some 300 executives who were responsible for more than three-quarters of a trillion dollars in shareholder value vanishing were rewarded by their shareholders with salary, bonuses and stock options worth $12 billion. That averages out to $40 million for each of those companies' top five executives over the five-year period, or $8 million per executive per year."

The specific examples are nauseating:

"The letter to the SEC from the pension funds cites Honeywell as a company where during the last five years managers erased $4.3 billion in economic value — defined as net operating profit minus the total cost of capital used up — while the top five executives earned a total of $223 million for the period. Executives at Time Warner destroyed $41.4 billion in economic value (and $59.8 billion in market value) while collecting $1.3 billion in pay. Honeywell and Time Warner declined comment."

After reading this story, the White House's disconnected-from-reality happy talk suddenly seems perfectly logical. President Bush and Vice President Cheney are both millionaires and former corporate executives. They are surrounded by a cabinet of millionaires and former corporate executives, and their political campaigns have been largely financed by millionaires and corporate executives. In short, all the people they actually interact with on a daily basis are the people who are doing just great.

It will be interesting to see what comes of the pension funds that are looking to use their market share to stop the CEO rip-offs. As I noted earlier, there was a story in the Financial Times last week which reported that corporate CEOs and executives "are hiring surveillance firms to find out who their shareholders are and which ones might cause trouble." Put another way, corporate managers know that their own shareholders are looking to put an end to their nonsense, and they are bracing for a fight. Stay tuned.

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