Teh_pantless_hero
23-06-2006, 15:22
With numerous companies complaining about the expenses of the average worker and the drain on company profits that is worker pernsion, they are increasingly offering a handful of executives more and more money for a pension plan that is no small fraction of the total pensions paid out to everyone in the company (executive pensions are often not distinguished from other pensions on federal filings according to the Wall Street Journal).
While long term employees of the company work decades only to get a paltry yearly compensation of 20-35%, executives who work even just a handful of years get 60-100% of their yearly pay. The supposed reasoning behind all this idiotic capitalist imbalance is the need to attract more, bette rexecutives. Ludicrous. Executives are doing great jobs - if their job is to get more money for themselves by screwing everyone else over.
The article is rather long but I will post what I am referencing.
To help explain its deep slump, General Motors Corp. often cites "legacy costs," including pensions for its giant U.S. work force. In its latest annual report, GM wrote: "Our extensive pension and [post-employment] obligations to retirees are a competitive disadvantage for us." Early this year, GM announced it was ending pensions for 42,000 workers.
But there's a twist to the auto maker's pension situation: The pension plans for its rank-and-file U.S. workers are overstuffed with cash, containing about $9 billion more than is needed to meet their obligations for years to come. [pension]
Another of GM's pension programs, however, saddles the company with a liability of $1.4 billion. These pensions are for its executives.
This is the pension squeeze companies aren't talking about: Even as many reduce, freeze or eliminate pensions for workers -- complaining of the costs -- their executives are building up ever-bigger pensions, causing the companies' financial obligations for them to balloon.
Companies disclose little about any of this. But a Wall Street Journal analysis of corporate filings reveals that executive benefits are playing a large and hidden role in the declining health of America's pensions. Among the findings: * Boosted by surging pay and rich formulas, executive pension obligations exceed $1 billion at some companies. Besides GM, they include General Electric Co. (a $3.5 billion liability); AT&T Inc. ($1.8 billion); Exxon Mobil Corp. and International Business Machines Corp. (about $1.3 billion each); and Bank of America Corp. and Pfizer Inc. (about $1.1 billion apiece). * Benefits for executives now account for a significant share of pension obligations in the U.S., an average of 8% at the companies above. Sometimes a company's obligation for a single executive's pension approaches $100 million. * These liabilities are largely hidden, because corporations don't distinguish them from overall pension obligations in their federal financial filings. * As a result, the savings that companies make by curtailing pensions for regular retirees -- which have totaled billions of dollars in recent years -- can mask a rising cost of benefits for executives. * Executive pensions, even when they won't be paid till years from now, drag down earnings today. And they do so in a way that's disproportionate to their size, because they aren't funded with dedicated assets.
One reason executive pensions have grown so large is that they are linked to ballooning overall executive compensation. Companies often design retirement payouts to replace a percentage of what a person earns while active.
But for executives, the percentage of pay replaced is itself higher. Compensation committees often aim for a pension that replaces 60% to 100% of a top executive's compensation. It's 20% to 35% for lower-level employees.
David Dorman was chief executive of AT&T Corp. from 2002 until its merger with SBC Communications in November. He left in January. His total of five years at AT&T earned him a yearly pension of $2.1 million. That will replace 60% of his annual salary and bonus in his final three years.
By contrast, former AT&T accountant Ralph Colotti's $28,800 annual pension replaces 33% of his final pay. He was at the company for 33 years.
Mr. Colotti's pension was held down by a change AT&T made in 1998 in the formula used to calculate pensions. The switch had the effect of freezing pension growth for older workers like him. The 55-year-old now works at another company with a pension plan. "Working here another 10 years won't make up for what my old pension would have been" without AT&T's change in formula, he said.
AT&T described its retirement benefits as excellent and said a pension on the scale of Mr. Colotti's is good in the telecommunications industry. Mr. Dorman's richer deal is "reasonable, customary and comparable to what similarly sized companies offer," AT&T said. A spokeswoman noted that "in any industry, senior executives are almost always provided with enhanced levels of benefits as a way to recruit and retain the best talent and the best leadership possible to lead the company."
In percentage of pay replaced, Pfizer's chairman and CEO, Henry McKinnell, does best of all. His future $6.5 million-a-year pension will replace 100% of his current salary and bonus.
Time to start taking business classes in college.
While long term employees of the company work decades only to get a paltry yearly compensation of 20-35%, executives who work even just a handful of years get 60-100% of their yearly pay. The supposed reasoning behind all this idiotic capitalist imbalance is the need to attract more, bette rexecutives. Ludicrous. Executives are doing great jobs - if their job is to get more money for themselves by screwing everyone else over.
The article is rather long but I will post what I am referencing.
To help explain its deep slump, General Motors Corp. often cites "legacy costs," including pensions for its giant U.S. work force. In its latest annual report, GM wrote: "Our extensive pension and [post-employment] obligations to retirees are a competitive disadvantage for us." Early this year, GM announced it was ending pensions for 42,000 workers.
But there's a twist to the auto maker's pension situation: The pension plans for its rank-and-file U.S. workers are overstuffed with cash, containing about $9 billion more than is needed to meet their obligations for years to come. [pension]
Another of GM's pension programs, however, saddles the company with a liability of $1.4 billion. These pensions are for its executives.
This is the pension squeeze companies aren't talking about: Even as many reduce, freeze or eliminate pensions for workers -- complaining of the costs -- their executives are building up ever-bigger pensions, causing the companies' financial obligations for them to balloon.
Companies disclose little about any of this. But a Wall Street Journal analysis of corporate filings reveals that executive benefits are playing a large and hidden role in the declining health of America's pensions. Among the findings: * Boosted by surging pay and rich formulas, executive pension obligations exceed $1 billion at some companies. Besides GM, they include General Electric Co. (a $3.5 billion liability); AT&T Inc. ($1.8 billion); Exxon Mobil Corp. and International Business Machines Corp. (about $1.3 billion each); and Bank of America Corp. and Pfizer Inc. (about $1.1 billion apiece). * Benefits for executives now account for a significant share of pension obligations in the U.S., an average of 8% at the companies above. Sometimes a company's obligation for a single executive's pension approaches $100 million. * These liabilities are largely hidden, because corporations don't distinguish them from overall pension obligations in their federal financial filings. * As a result, the savings that companies make by curtailing pensions for regular retirees -- which have totaled billions of dollars in recent years -- can mask a rising cost of benefits for executives. * Executive pensions, even when they won't be paid till years from now, drag down earnings today. And they do so in a way that's disproportionate to their size, because they aren't funded with dedicated assets.
One reason executive pensions have grown so large is that they are linked to ballooning overall executive compensation. Companies often design retirement payouts to replace a percentage of what a person earns while active.
But for executives, the percentage of pay replaced is itself higher. Compensation committees often aim for a pension that replaces 60% to 100% of a top executive's compensation. It's 20% to 35% for lower-level employees.
David Dorman was chief executive of AT&T Corp. from 2002 until its merger with SBC Communications in November. He left in January. His total of five years at AT&T earned him a yearly pension of $2.1 million. That will replace 60% of his annual salary and bonus in his final three years.
By contrast, former AT&T accountant Ralph Colotti's $28,800 annual pension replaces 33% of his final pay. He was at the company for 33 years.
Mr. Colotti's pension was held down by a change AT&T made in 1998 in the formula used to calculate pensions. The switch had the effect of freezing pension growth for older workers like him. The 55-year-old now works at another company with a pension plan. "Working here another 10 years won't make up for what my old pension would have been" without AT&T's change in formula, he said.
AT&T described its retirement benefits as excellent and said a pension on the scale of Mr. Colotti's is good in the telecommunications industry. Mr. Dorman's richer deal is "reasonable, customary and comparable to what similarly sized companies offer," AT&T said. A spokeswoman noted that "in any industry, senior executives are almost always provided with enhanced levels of benefits as a way to recruit and retain the best talent and the best leadership possible to lead the company."
In percentage of pay replaced, Pfizer's chairman and CEO, Henry McKinnell, does best of all. His future $6.5 million-a-year pension will replace 100% of his current salary and bonus.
Time to start taking business classes in college.