Public Skeptical of Corporate Corruption Crackdown
Byline: Patrice Hill, THE WASHINGTON TIMES
The public is giving the government little credit in opinion polls for trying to stamp out corporate corruption, partly because chief executives, even those implicated in scandals, continue to rake in huge pay packages and perks.
Despite indictments of top executives at Tyco, Enron, WorldCom and other high-profile companies, polls show voters still hold corporate America in low esteem and do not believe justice has been served.
The issue has been feeding into the elections in a way that favors the presumptive Democratic nominee, Sen. John Kerry, who says he wants to roll back President Bush's "tax cuts for the rich" and restore higher tax rates for top income-earners as well as for stock gains.
"The anticorporate message does well" in voter polls, said Democracy Corps pollster Stan Greenberg, with as many as 80 percent of voters surveyed saying they are more likely to support Mr. Kerry of Massachusetts because of his platform against "corporate greed and excesses."
Securities and Exchange Commission Chairman William H. Donaldson, a Bush appointee who has received high marks for aggressively pursuing corporate fraud, recently said he has been struggling with the pervasive public skepticism.
He noted hundreds of enforcement actions and new regulations put out by the agency since the Enron scandal erupted in December 2001.
"For all the progress, this has yet to engender much good will among the general public," he said, blaming the excessive pay of chief executives, which he said now averages about 400 times the earnings of hourly workers in the United States.
According to data compiled by Business Week, the AFL-CIO and other groups, executive pay ballooned particularly during the late 1990s when the stock market boomed and compensation increasingly was granted in the form of stock options.
Before the widespread use of stock options, CEOs earned about 40 times the pay of average workers in 1980 and 85 times ordinary workers in 1990.
The rationale for the escalating pay during the 1990s was that the executives had earned it because their outstanding management had led to increased earnings and soaring stock prices.
However, since the stock market bust of 2000, many Wall Street analysts have questioned whether the higher stock prices were because of deft management by executives or a herd mentality that led to the overvaluation of most company stocks.
In addition, the revelations since Enron's collapse have shown the executives' manipulation of earnings in many cases were fraudulent or questionable and short-sighted at best.
Stocks fall, CEO pay dips
Whatever the original justification, executive pay did not follow the stock market down after the bust in March 2000.
While major stock indexes fell as much as 80 percent and remain far below their March 2000 highs, executive pay declined about 20 percent from a high of more than 500 times the average worker's earnings in 2000 to 400 in the past two years.
Moreover, executive pay appears to be back on its sharp upward trajectory, thanks to the revival of the stock market. The value of unexercised CEO stock options skyrocketed by 53 percent last year to a median value of $8.3 million, according to Watson Wyatt Worldwide, an executive consulting firm.
When added to an average 8.3 percent increase in base pay to $818,000, and an average 13 percent jump in bonuses to more than $1 million, total CEO compensation last year climbed well to over $10 million on average, according to preliminary Watson estimates.
Even when the drubbing in the stock market rendered many executives' stock options worthless during 2002, corporate boards made up for it by lavishing a 42 percent average increase in cash compensation on high-performing CEOs, Watson said.
By contrast, the heads of the worst-performing companies, where stocks lost billions of dollars in value, saw their cash pay cut by 7 percent on average, the firm said. …