Firms laid off at least 3,000 in '95 Meanwhile, CEOs at those sites got big raises, report says

22 U.S.

April 29, 1996|By KANSAS CITY STAR

Twenty-two U.S. companies last year announced layoffs of 3,000 or more workers. Meanwhile, a majority of chief executives at those companies received bigger raises than top U.S. executives in general.

A report released last week entitled "CEOs Win, Workers Lose: How Wall Street Rewards Job Destroyers," leaves little doubt what its author, the Institute for Policy Studies, thinks about the disparity.

Calling the findings "an alarming set of trends," the Washington-based research organization revealed that 14 of 20 chief executives (those among the 22 companies for whom salary details were available) earned higher-than-average compensation increases.

Authors Sarah Anderson and John Cavanagh concluded that "layoff leaders got an average raise of 13.6 percent, compared with 10.4 percent for top executives in general."

The 13.6 percent figure was calculated from information available in the companies' proxy statements. The 10.4 percent average came from a survey by William M. Mercer Inc. for the Wall Street Journal.

In comparison, U.S. workers earned an average increase in wages and benefits of 2.9 percent in 1995, the lowest level in 14 years, the report said. The authors also noted that inflation rose 2.8 percent last year, which effectively erased the average worker wage gain.

The report also charted how the stock market reacted on the days the layoffs were announced. They found the combined value of stock options held by the 22 "layoff leaders" on the day layoffs were announced rose a total of $37 million.

"It is outrageous that CEOs are benefiting personally from the destruction of jobs," Ms. Anderson said.

The study noted that stock prices of 17 of the 22 companies rose or stayed the same the day the layoffs were announced.

In two of the five cases where the stock price fell, Wall Street analysts suggested it was because the announced job cuts were less than expected or desired.

"The divide between the Wall Street winners and the Main Street workers has never been greater," Mr. Cavanagh said.

Among the 22 "layoff leaders," the five largest job cuts were announced at AT&T, Boeing, Lockheed Martin, Chase Manhattan and BellSouth.

Among the CEOs known to hold increased stock-option values after the announced cuts, the four biggest gainers were Lucio Noto of Mobil, Lawrence Bossidy of AlliedSignal, Robert E. Allen of AT&T and Thomas Labrecque of Chase Manhattan.

Drawing on data from other sources, the authors said there was "another alarming trend -- the growing gap between CEO and worker pay."

In 1992, the average ratio between CEO compensation and the average salary of the company's employees was 143-to-1. In 1995, it grew to 185-to-1. That compares to boss-to-employee pay ratios of 25-to-1 in Japan; 30-to-1 in France; and 35-to-1 in Germany, the report said.

U.S. shareholders and workers are stirring small rebellions against the pay disparity. According to the Investor Responsibility Research Center, shareholder groups in 1995 sponsored 40 resolutions to limit executive compensation or tie it to company performance.

The report also noted that a group of congressional Democrats was recommending that tax incentives be available to corporations that agree to hold executive pay to no more than 50 times the wage of its lowest-paid employee.

Pub Date: 4/29/96

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.