AFL-CIO exposes rigged pay for corporate bigwigs

A new report on the AFL-CIO's Executive PayWatch website, "Too Close for Comfort," exposes corporate practices that it said have contributed to soaring executive pay in the past two decades.

The AFL-CIO said that, according to Business Week, the average chief executive officer (CEO) of a major corporation made 42 times more than the typical American factory worker in 1980 and 85 times more in 1990. In 1997, the average CEO made 326 times as much.

If a worker earning $25,000 a year five years ago were on the corporate executive pay increase track, that worker would make $138,350 today. If current CEO trends continue, that worker would make $542,968 in five more years, the federation said.

"CEO pay is clearly out-of-control and conflicted, and 'country-club' boards are some of the main culprits," AFL-CIO Secy.-Treas. Richard L. Trumka said.

"How do CEOs assure they make a mint? They sit on their own compensation committee or stack the deck in their favor with their friends and colleagues," Trumka said. "Meanwhile, American factory workers are suffering layoffs, often at the very same companies which have these rigged boards."

The AFL-CIO cited the example of William Swindells, CEO of Willamette Industries, who receives nearly $2.8 million in compensation. Sitting on the board that helps decide this pay are Paul McCracken of Tumac Lumber and Samuel Wheeler of Barclay Logging. Tumac did $43.5 million in business with Willamette, while Barclay did nearly $1 million, according to the AFL-CIO.

Nike CEO Philip Knight received $1.7 million in compensation in 1998 – more than 2,000 times the wages of a Nike factory working in China working 12 hours a day, seven days a week, the federation said. Serving as a Nike director is John Thompson, former head basketball coach at Georgetown University. Thompson received more than $400,000 in endorsement money from Nike in 1998, the AFL-CIO said.

Other companies cited by the AFL-CIO as having conflicted corporate directors that decide executive pay include Gannett and Knight Ridder, which locked out 2,000 GCIU and other union members in Detroit rather than sign fair contracts, and the Tribune Co.

Gannett CEO John J. Curley received nearly $6.4 million in salary, bonuses, stock option grants, and other compensation in 1998, the AFL-CIO said. Helping to deliver that reward was the former chairman of a law firm that provides services for Gannett. Knight Ridder CEO P. Anthony Ridder got a little help with his more than $2.7 million compensation package from one of the company's bankers. The Tribune's CEO, John Madigan, who made nearly $7 million, has a director whose company, Aon, did $645,000 worth of business with the Tribune, the AFL-CIO said.

The Executive PayWatch website lets users compare salaries with executives such as Curley. For example, Curley's compensation could support 597 minimum wage earners. And an average worker would have to work 250 years to equal Curley's compensation.

Tony Ridder's $2.7 million package could support 108 average workers and 258 minimum wage earners.

RR Donnelley & Sons Co. CEO William L. Davis made nearly $1.9 million in 1998. That salary could support 74 average workers and 177 minimum wage workers, the AFL-CIO said.

The AFL-CIO report was based on federally required proxy statements filed by companies in Standard & Poor's 500 Index of stocks in 1998. The Executive PayWatch report found that one out of five of these companies have conflicted directors on compensation boards and committees.

The federation urged working families to join in the fight to curb corporate executive pay.

"It doesn't have to be this way," Trumka said. "CEOs and directors must be held accountable for soaring executive pay. The conflicts must be cleaned up."

The AFL-CIO sent a letter to every corporate director identified as having conflicts that urges their immediate resignation.

Workers and their families can help by sending letters to corporate boards protesting overpay for executives, the AFL-CIO suggested. Workers who own stock or participate in a pension fund or 401K can tap into their shareholder power through letters, shareholder resolutions, and votes.

Other actions suggested by the federation include writing to the Securities and Exchange Commission to demand full disclosure of CEO compensation and to the Internal Revenue Service to demand that the agency close the tax loophole allowing companies to deduct excessive executive compensation over $1 million.

The AFL-CIO also urged members and local unions to help organize education and mobilization campaigns in their areas.