How much is too much?

April 28, 2003

THE AMERICAN fascination with captains of industry dates back at least to the great robber barons of the late 19th century. But in the booms of 1980s and 1990s, modern corporate titans - from Lee Iacocca, the blustery Chrysler savior, through Jack Welch, General Electric's philosopher-king - took on the sheen of pop culture heroes.

And along the way, CEO pay - 42 times that of average worker pay in 1980 - shot to an obscene level by 2000, 531 times that of workers.

The terrible bursting of the U.S. economic bubble the last few years has underscored that this tsunami of CEO pay not only wasn't lifting everyone else's boats, but also that the big shots had been busy arranging pretty posh life rafts for themselves.

Among the many angles of corruption and excess in the fall of Enron, for example, was that top executives turned millions in profits by cashing out their company stock before its crash - while Enron workers were barred from dumping their shares from their often now worthless retirement accounts.

By now, you'd think greater attention to ethics and equity would have thoroughly pervaded major corporate boardrooms, particularly at troubled firms. But the further unraveling of American Airlines last week provides a new twist.

American chief Donald J. Carty extracted $1.8 billion in wage concessions from the airline's workers - while delaying disclosure that he and other top executives had been given large retention bonuses plus costly pension protection in the event of bankruptcy.

When news of the deals broke, American scrapped the bonuses - but not the protected pensions - and Mr. Carty apologized for his "enormous mistake." But American's unions immediately threatened to rescind their wage concessions, particularly if Mr. Carty stuck around. Thus, he was forced to resign Thursday, even as American again danced on the edge of bankruptcy - until the last of its three unions Friday renegotiated lesser wage concessions.

There's an argument that Mr. Carty and other top American executives deserve every cent they can get for trying to save an airline that's lost $6 billion in the last 27 months. With a base salary of $811,000 last year, Mr. Carty was the lowest-paid CEO of the top five carriers. He showed he understood the notion of shared pain, taking a one-third salary cut in synch with worker concessions. And the bonuses ($1.6 million in his case) and pension protection (costing $41 million) aren't all that much for the world's largest airline.

But in the end, Mr. Carty ran into some bottom-line replies to the question apparently still facing the elite of corporate America: "How much is too much?" Moral answer: When it involves deception. Ironic answer: When it threatens to throw your company into bankruptcy. No-brainer: When it costs you your job. After all the talk of corporate reforms the last 18 months, that these limits are still worth noting is a travesty in itself.

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