Hoping Treasury Secretary-designee Lew takes a new tack

By Sally Greenberg, NCL Executive Director

It appears that when the government was handing out TARP funds and bailing out ailing financial firms, the “special master for compensation” Patricia Geoghegan approved $6.2 million in raises for General Motors, Ally, and AIG. These are the findings of Christy Romero, special inspector general for TARP in her new report.

Surprise, surprise. Sheila Bair documents this preferential treatment for fat-cat executives in her book, Bull by the Horns. From Treasury Secretary Tim Geithner to Presidential Advisor Larry Summers, you can count on high-level government officials with ties to Wall Street time and again to look after their friends first before the American taxpayer.

When these bonuses were being bestowed on the industry icons, Treasury’s Compensation Chief Kenneth Feinberg (and former NCL Trumpeter Honoree), was appointed to a special oversight post created during the crisis. He scolded the companies for what he called “ill-advised” payouts to executives and vowed to curb lavish pay. Treasury nonetheless allowed seven firms to bypass pay restrictions from 2009 to 2011, according to this latest report from Christy Romero’s office. Romero said that “Treasury made no meaningful reform to its processes. Lacking criteria and an effective decision-making process, Treasury risks continuing to award executives of bailed out companies excessive cash compensation without good cause.”

That says it all. We can only hope that the new Treasury Secretary-designee, Jacob Lew, if he’s confirmed, will take a different tack. Forbes Magazine columnist Robert Lenzner has high hopes. He says in a recent column about Lew, “It’s a relief to have a man who is not in the hip pocket of the big banks, who is not part of the pin-striped old boys club, who’s likely to put the interests of his former brethren high on the priority list.” That’s a hopeful sign.

Tuition hikes, college president salaries, and student debt. Oh my!

By NCL Executive Director Sally Greenberg

One recent piece of news suggests that college students and their parents are getting rolled. College students are borrowing like never before, while finding it harder than ever to land jobs.

College seniors who graduated in 2009 owed an average of $24,000 in student loan debt, up 6% from the year before, according to a report from the Project on Student Debt. At the same time, unemployment for recent college graduates jumped from 5.8% in 2008 to 8.7% in 2009—the highest annual rate on record.

In the meantime, the salaries of college presidents have soared to levels that are  – in a word – unconscionable. The Washington Post reported recently that three college presidents in the Washington area earn more than $1 million, and three more earn more than $750,000. Johns Hopkins president William Brody actually received a $3.8 million retirement package!  Kevin Manning of Stevenson University earned $1.5 million. The salary boom of these college presidents is in line with national trends: 36 college presidents nationwide earned $1 million or more in 2009.

Who pays for these outsized salaries? Sadly, college students and their parents. In the past decade, tuition for state students public four- year colleges and universities rose 54 percent in inflation-adjusted dollars — an average of 4.4 percent per year. Similarly, over the past decade, tuition for full-time students at private four-year colleges and universities rose 33 percent in inflation-adjusted dollars — an average of 2.9 percent per year.

I know many young people who have had to take out six figure loans to pay these high tuition costs; the ones who are lucky enough to have a job in today’s economy often don’t have a lot left over for student loans payments after covering their rent, food and utilities. There’s something just fundamentally wrong with the fact that today’s graduates are swimming in debt while college presidents are taking million dollar salaries out of the till.

I know, I know, there’s the familiar excuses – we have to pay this much for high quality presidents, they raise millions of dollars etc. I’m tired of these flaccid explanations – becoming a college President should be about dedication to the academy, to education, to learning and to turning out fine young men and women who have a strong academic—and hopefully liberal arts—grounding. Unfortunately, for people like William Brody of Johns Hopkins, greed has overtaken the higher principles. Being head of a college is now a path to lifelong riches and student and their families are paying the price. What a shame.

Politicians take note: Wall Street protests reflect popular sentiment

By Sally Greenberg, NCL Executive Director 

NCL has joined with consumer and labor groups over the last few years on measures to reign in the egregious executive compensation provided to heads of American corporations. Since the 1970’s, executive pay has more than quadrupled while the salaries earned by average workers has fallen by 10 percent. The Dodd-Frank Act passed in 2010 included provisions requiring companies to report the spread between the highest and lowest paid employees.

I’ve often been surprised at the lack of public outrage when CEO pay hits these ridiculous levels – rising well beyond $10 million in many companies. But now we are finally seeing public outrage in the form of the “Occupy Wall Street” protests about the excesses of too many banks and corporations – including getting bailed out with taxpayer funds, as they were several years ago, and then distributing generous bonuses and benefit packages to executives.

To their credit, the anti-Wall Street protests are going far beyond executive compensation and bailouts. They are tapping into what the Washington Post’s polling shows is widespread anger and mistrust of Wall Street: 68 percent of independents and 60 percent of Republicans have an unfavorable view of big financial institutions. Polls also show that 65 percent or so of Americans believe that millionaires should pay higher taxes – and the same number supports the President’s jobs plan.

I don’t know whether these anti-Wall Street demonstrators have begun a movement that will last – I hope they have – but I think the leadership in the House and the minority in the Senate, which has blocked the higher tax on millionaires and the Obama jobs plan, should take notice of this movement that is spreading to cities, not only in America, but across the globe. They ignore these protests at their peril.

Reining In Shameful Executive Pay

by Sally Greenberg, NCL Executive Director

Congress did it: it capped corporate pay for the first time in our nation’s history. The stimulus package Congress adopted at the end of last week goes further in capping executive salaries than even the Obama administration recommended. Nonetheless, the President has signed the bill into law. The stimulus pay cap applies to top execs and the highest paid employees at all 359 banks that have already received government assistance, according to the Washington Post. Panic has set in among executives; there’s talk of mass exodus among the top brass at companies where pay has been capped.

“That is pretty draconian — $500,000 is not a lot of money, particularly if there is no bonus,” James F. Reda told the Washington Post. Reda is founder and owner of his own compensation consulting firm. “And you know these companies that are in trouble are not going to pay much of an annual dividend.”

Now let’s get this straight. Executives of companies that took on too much risk and saw their firms collapse had to turn to the government for a taxpayer funded bailout – which they readily sought and accepted. Now when the government wants to put strings on that money, the talk is that these same executives, who failed to keep their companies solvent in the first place, will walk away because they need higher salaries – $500,000 isn’t enough for these kingpins even if it is 8 1/2 times the salary of the average American family. (figuring that Americans’ average annual salary is around $61,000) .

Mr. Reda said only a handful of big companies pay chief executives and other senior executives $500,000 or less in total compensation. He said such limits will make it hard for the companies to recruit and keep executives, most of whom could earn more money at other firms.

But the financial world brought this on themselves, with kingpins such as Lloyd Blankstein of Goldman Sachs, who made $68.5 million in 2007, setting Wall Street salary records. Richard Wagoner, the chief executive of failing General Motors, made $14.4 million in 2007 (much of it in stocks and options on a base salary of $1.6 million). (Read more on this from the Wall Street Journal.)

These shameless compensation packages and bonuses are taking place in a year when millions of Americans have their lost jobs and with it, their health insurance. Millions of homeowners are facing mortgage foreclosures, and food pantries are facing unprecedented demand. The rich have seen their incomes grow by leaps and bounds in the last 30 years while the wages of those on the bottom have stagnated. According to Lane Kenworthy, Professor at the University of Arizona, in 1979 household income among those in the top 1% averaged $325,000 (in 2005 dollars). By 2005 that had increased to nearly $1.1 million. Among the poorest 20% of households, average income was $14,500 in 1979 and $15,500 in 2005. Among the middle 60% of households, average income rose from $42,000 to $51,000.

So Congress is understandably reacting to constituent outrage about the pay packages of the top execs. For years policy makers and shareholder activists have tried to figure out how to curb outsize executive pay, with little success. Now they’ve finally done something. We agree with the President, who told NBC Nightly News: “If the taxpayers are helping you, then you have certain responsibilities to not be living high on the hog.”