shipperx | Blergh. That is all.

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William Lazonick, professor at UMass, president of the Academic-Industry Research Network, and a leading expert on the business corporation:

While most Americans struggle to make ends meet, the CEOs of major U.S. business corporations are pulling eight-figure, and sometimes even nine-figure, compensation packages. We rely on these executives to allocate corporate resources to investments in new products and processes that, in a world of global competition, can provide us with good jobs. Yet the ways in which we permit top corporate executives to be paid actually gives them a strong disincentive to invest in innovation and expansion{...}

In 1991 Graef Crystal, a prominent executive pay consultant, published a best-selling book, In Search of Excess: The Overcompensation of American Executives, in which he calculated that over the course of the 1970s and '80s, the real after-tax earnings of the average manufacturing worker had declined by 13 percent. During the same period, that of the average CEO of a major US corporation had quadrupled Bill Clinton took up the issue in his 1992 presidential campaign, and immediately upon taking office had Congress pass a law that forbade companies from recording as tax-deductible expenses executive salaries plus bonuses in excess of $1 million.

Unfortunately Clinton chose the wrong pay target. {...} The largest single component of executive compensation was from exercising stock options, representing 59 percent of the total. {...} Perversely, one reaction of corporate boards to the Clinton legislation was to take $1 million in salary plus bonus as the “government-approved minimum wage” for top executives {...} The number of named executives with salaries plus bonuses that totaled $1 million or more increased from 529 in 1992 to 922 in 1994.

The other reaction of corporate boards was to lavish more stock options on their top executives. {...} The average annual compensation of the top 500 named executives reached $21 million in 1999 with gains from exercising stock options, representing 71 percent of the total (stock options are now 80 percent of the total.) {me: which is why the 'income tax' quotes folks like Fox Business News come out with is a canard. "Regular folk" have a salaries. For execs, the majority of their salary is in the form of capital gains... which is taxed at a substantially lower rate (and which Romney wants to virtually eliminate!}

{...}The speculation-fueled “irrational exuberance” of the late 1990s brought unprecedented pay bonanzas to top executives, thus establishing a “new normal” for corporate greed. When boom turned to bust in the early 2000s, money-hungry executives had to look for another way to get stock prices up and make their millions. Their favorite weapon: "value extraction” [Top executives allocate massive sums of corporate cash to repurchase their company’s own stock with the purpose of boosting their company’s stock price.] {...}
Let’s take a look at how it works: The board of directors of Acme Corporation authorizes the CEO to repurchase the company’s own outstanding shares up to a specified value (say $5 billion) (...)by the laws of supply and demand, when the corporation spends cash on buybacks, it “manufactures” an increase in its stock price. Then, with the stock price up, the CEO, CFO and other insiders may choose to cash in their stock options. Presto! They make tons of money for themselves. {...}Some companies actually fund their buybacks by laying off workers and taking on debt. The top executives’ weapon of "value extraction" becomes a weapon of value destruction.

They are rewarded handsomely for not doing their jobs.

In 1981, 292 major corporations spent less than 3 percent of their combined net income on buybacks{...}by 2007 the very same 292 corporations now spend over 82 percent of their net income repurchasing their own stock. {...} Executive pay is a prime reason why in 2005-2008 the top .001 captured a record 11.4% of all household income (link: http://elsa.berkeley.edu/~saez/) [and] total corporate compensation of the named executives does not include income from securities, property, fees for sitting on corporate boards, etc. that would be included in their IRS tax returns. {...}

The “Say-on-Pay” provision in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act sounds good, but it just reinforces a system of incentives the does not work. {...} Through a combination of stock options and stock buybacks, Say-on-Pay provisions reinforce an alignment between the incentives of top executives and the interests of shareholders that has been undermining investment in America’s future.

It is about time that we took control of exploding executive pay. It is not just that the sums involved are unfair, and as history has shown, will only become more obscene. {...} the ways in which they bank their booty is doing severe damage to the U.S. economy.