Study finds CEOs rewarded for cutting jobs

Associated Press

WASHINGTON — As the economy began to stall last year and companies laid off workers, chief executives of big corporations still got hefty pay raises and were rewarded for making job cuts, according to a new study by two liberal advocacy groups.

A "decade of greed" in the 1990s was followed last year by a particularly "blatant pattern of CEOs benefiting at the expense of their workers," the Institute for Policy Studies and United for a Fair Economy said in its latest annual pay survey released Tuesday.

It found that chief executives of the 52 major companies that announced layoffs of at least 1,000 employees during the first half of 2000 earned some 80 percent more on average than CEOs at 365 big corporations surveyed by Business Week magazine. The "layoff leaders" received an average $23.7 million in total compensation, including bonuses and stock options, compared with an average $13.1 million for CEOs overall, the groups’ study found.

It said the top job-cutters got an average increase in salary and bonus of nearly 20 percent last year, compared with average raises for U.S. wage earners of around 3 percent and 4-percent increases for salaried employees.

Sarah Anderson, director of the global economy program at the Washington-based Institute for Policy Studies, said it was galling "especially in this period of economic downturn as people are feeling very insecure about their jobs, to see that the guys at the top have cushioned themselves."

One of the "layoff leaders" cited by the study is Michael Bonsignore, Honeywell International Inc.’s chief executive until last month, who is receiving a severance package worth nearly $10 million, plus generous pension checks. He was ousted by the big manufacturer’s board of directors on July 3, the same day the European Union blocked Honeywell’s anticipated merger with General Electric.

Honeywell announced in the spring that it would lay off 850 workers because of a significant downturn in the circuit-board industry.

A Honeywell spokesman, who declined to be identified by name, said Tuesday there was "no relationship" between the job cuts and Bonsignore’s compensation. He declined further comment.

"Rightly or wrongly, the cutting of staff has tended to give a boost to a company’s stock," said Charles Peck, a compensation specialist at the Conference Board, a business research and networking organization. "It’s one of the ways that Wall Street evaluates top executives’ performance."

The New York-based Conference Board’s executive pay survey for 2000 shows little change from 1999, Peck said. It shows median total compensation for 800 manufacturing CEOs of around $1.7 million in both years.

The yearlong economic slump is taking a toll on the nation’s labor markets. Last Thursday, the government reported that the number of laid-off workers drawing unemployment benefits had hit a nine-year peak. The Labor Department said the number of Americans collecting jobless benefits rose to 3.18 million in the week ending Aug. 11, the highest level since September 1992, when the country was struggling to emerge from the last recession.

Against that backdrop, compensation packages for executives have drawn some criticism.

After attorneys for troubled bicycle maker Schwinn/GT asked a bankruptcy judge to keep confidential the details of a $2 million bonus plan for its top managers and executives, the judge questioned the plan’s fairness to rank-and-file employees and expressed reservations about keeping the information under wraps.

"I’m going to do a little research," U.S. Bankruptcy Judge Sidney Brooks in Denver said last week, delaying immediate approval. "There are some pretty hefty bonuses here." Schwinn attorneys said the compensation plan was designed to keep key personnel from quitting while the bike maker goes through Chapter 11 bankruptcy reorganization.