No shock that shareholders of Beazer Homes howled with pain a few weeks ago over the pay of CEO Ian J. McCarthy.
More than half them rejected a nonbinding resolution to "hereby approve" the pay of McCarthy and other Beazer bigwigs. After the results were known, Beazer directors said earnestly that they would "seek to determine the causes of any negative voting result."
They could start and finish with their own financial filings, which show McCarthy making $21 million over the past three years even as the company, builder of numerous Maryland communities, lost $1 billion. Beazer's stock trades around $5, down from $79 a few years earlier.
Get used to this. More shareholders than ever will have a nonbinding "say on pay" this year, thanks to the Dodd-Frank financial reform act. Already shareholders have voted against executive enrichment schemes at Hewlett-Packard, Jacobs Engineering Group and Shuffle Master, as well as at Beazer.
But shareholders may not be the most important constituency.
The renewed ascent of executive pay in a miserable job market sets the stage for unprecedented public disgust. Or at least it should.
Median CEO pay at 200 top corporations was $9.6 million last year, up 12 percent from the year before, The New York Times reported Sunday. Viacom's Philippe Dauman made $84.5 million, Occidental Petroleum's Ray Irani made $76.1 million, and Stanley Black & Decker's John Lundgren made $32.6 million.
Meanwhile, 13.5 million Americans are unemployed — 8.8 percent. Even conservatives, inclined to give corporate chieftains their lead, seem to be increasingly fed up.
Last year, 57 percent of Republicans told the Harris Poll they favored stricter regulation of executive pay and bonuses. In the same survey, 83 percent of Democrats and 69 percent of independents also wanted government to clamp down on executive boodle.
A year earlier, in a similar Gallup poll, 42 percent of Republicans favored government "taking steps to limit the pay of executives." (Seventy-seven percent of Democrats and 56 percent of independents felt the same way in that survey.)
Huge CEO pay at a time of layoffs ought to be "a political litmus test for conservative Republicans, liberal Democrats and radical independents," conservative columnist Cal Thomas wrote recently. "The moral issue in executive pay is whether management deserves these high salaries while employees are laid off, or denied pay increases."
Lucre and layoffs aren't just coincidental at such companies. They are intimately connected. At the newly combined Stanley Works and Black & Decker, Executive Chairman Nolan Archibald will probably make tens of millions in bonuses tied to cost cutting, much of which will be accomplished by putting thousands of his co-workers out of a job.
Such corporate "rightsizing" has been defended as a way to increase efficiency and build societal wealth. As remaining workers at downsized firms become more productive, the theory goes, their pay will increase proportionally. Meanwhile, higher profits resulting from downsizing will be reinvested in promising industries, creating jobs for those laid off.
But it hasn't worked out that way recently. Most of the productivity gains in recent decades lined the pockets of shareholders and top management, not workers. Historically high executive pay combined with historically high joblessness make that more shockingly clear than at any time since the early 1990s, when the productivity spurt began.
"It's no use pretending that what has obviously happened has not in fact happened," Joseph E. Stiglitz, winner of the Nobel Prize in economics, writes in the latest issue of Vanity Fair. "The upper 1 percent of Americans are now taking in nearly a quarter of the nation's income every year. In terms of wealth rather than income, the top 1 percent control 40 percent."
Now even corporate shareholders are mad.
Beazer Homes gave several reasons why its suffering owners should be thrilled with $6.9 million in pay for CEO McCarthy last year. He hasn't gotten a base-pay raise since 2005. He didn't get any free stock between 2005 and 2010. Blah blah blah.
Shareholders didn't use up much Kleenex, to judge by their vote.
But don't expect miracles from such "say on pay" requirements at annual meetings. As noted, these votes are nonbinding. Boards can act concerned yet do anything they want.
Perhaps the CEO haircut will instead come from Congress and the Internal Revenue Service. Many executives owe their jobs and their incomes — directly and indirectly — to bailouts from the U.S. taxpayer.
Anger at corporate pay is rising. The country faces huge deficits. Raising the top personal income-tax rate from its present level of 35 percent would be a great way for CEOs to start paying America back.