Executive Pay

NEW YORK -- President Bush stepped into the swirling debate over executive pay yesterday, saying that corporate directors, not government officials, should be the ones to decide whether chief executives are earning their keep. "Government should not decide the compensation for America's corporate executives, but the salaries and bonuses of CEOs should be based on their success at improving their companies and bringing value to their shareholders," Bush told a gathering of business leaders at historic Federal Hall in Lower Manhattan.

Nation: Labor AK Steel reaches Ohio agreement AK Steel Holding Corp. said yesterday it has reached a tentative settlement with union workers at its Middletown Works plant in Ohio, ending a year-old lockout fought over the steelmaker's demands for lower labor costs. Leaders of the Machinists union weren't immediately available for comment on the deal, which comes on the lockout's anniversary. The company has continued to operate the mill with replacement workers and salaried employees, and union membership has dwindled from about 2,700 a year ago to just over 1,700 because of retirements and resignations.

Ladies and gentlemen, we have a business rarity, a specimen seldom identified outside the imaginations of certain management professors: The Perfect Merger. Textron's planned buyout of Hunt Valley's AAI Corp. and its United Industrial Corp. umbrella is good for shareholders, employees, customers and vendors at both companies. Maybe most important, it's not too good for United Industrial's executives. Textron, maker of Bell helicopters and Cessna planes, is buying United Industrial and its Maryland business of small, pilotless spy planes for $1.1 billion.

Even as the presidential candidates debate sweeping tax breaks, American businesses have beaten them to the punch.Companies large and small have been signing up executives and other top employees for a generous tax break not available to other Americans. Hundreds of thousands of people have become eligible, most in the past few years, at more than 24,000 businesses.The deal is simple: Rather than take all their pay, and pay taxes on it, executives let the company hold on to some. The company invests the money, and the executives do not pay taxes on any of it until they take the money years later.

SAN FRANCISCO -- Wider and wider grows the disparity between those who do the actual work of the world and those who presume to direct the work. Ever wider grows the gap between rich and poor, while ever louder grow demands that the gap be narrowed.Raise the minimum wage, argue many who seek to create an economically just society.A good, sound, sensible idea. Who could possibly live decently on the current minimum of $4.25 an hour -- or, for that matter, on $5.15 the future minimum legislated last month.

Speaking recently before the Council of Institutional Investors, AFL-CIO President John J. Sweeney urged members to use their power as shareholders to oppose excessive downsizing and skyrocketing executive pay."We must challenge the two most salient trends in corporate life today," said Mr. Sweeney. "One is destructive downsizing. The other is the widening gap between the pay of a handful of top executives in the companies we own and everyone else in American society."Mr. Sweeney was warmly applauded by the group, a coalition of public-employee, union and corporate pension fund owners that collectively control $800 billion in assets.

Bensalem, Pa. -- In one corner was Procter & Gamble Co., the consumer goods giant.In the other was Sister Patricia Marshall, a slight, slender 72-year-old corporate activist.For a year, the $30 billion company that produces Crest, Tide and Pampers debated the issue of executive compensation with the woman who represents the Sisters of the Blessed Sacrament to Wall Street.And in the end, after proxies and letters and discussions, it was the company that blinked.In proxy statements mailed last Friday, Cincinnati-based P&G included a paragraph on the principles underlying executive pay -- including a statement that pay is based partly on "doing the right thing."

NEW YORK -- This year's batch of proxy statements, which are just starting to hit shareholders' mailboxes, should prove to be a lot more exciting -- and revealing -- reading than their predecessors.New government rules require that proxy statements contain three new sections that are bound to interest -- and, most importantly, be understandable -- to any shareholder. The statements, which companies are required to provide to shareholders before they vote by proxy on company matters, must clearly show how much top executives are being paid, including stock options, and how well the company's stock performed.

In what could be among the first corporate responses to mounting public outrage over excessive executive pay packages, two big companies have disclosed that they will trim total compensation paid to top officers.International Business Machines Corp. said in its annual report, released yesterday, that Chairman John F. Akers expects his total salary plus bonuses for 1991 to be cut by an estimated 40 percent, to less than $1.6 million, subject to board approval.At the same time, James E. Preston, chairman and chief executive of Avon Products Inc., has frozen his salary and lowered his bonus in exchange for stock options that will more directly tie his pay to the company's performance, Avon said yesterday.

Frank A. Gunther Jr., chairman of Blue Cross and Blue Shield of Maryland, oversaw a nine-week study of the insurer and provided these major findings:* Financial operations. Blue Cross has at least $19 million in its reserve or rainy day fund and this could grow by the end of the year.The insurer admitted this month that $88 million of its $102 million reserve was achieved by unusual accounting methods approved by the insurance commissioner and that these could be disallowed.Mr. Gunther said cash flow is low because the Blues advanced $80 million to hospitals to pay bills.

Chief executives of public companies have long had a ready answer when criticized about high pay: It's all about company performance. That argument has been put to the test by the toughest financial environment since the Great Depression. If performance is the standard, many of the Baltimore area's top-earning executives seem to be on shaky ground. To see how last year's financial crisis and worsening recession affected pay, The Baltimore Sun analyzed the 20 companies in the metro area that paid their CEOs at least $1 million.

Legg Mason Inc. shareholders Tuesday sent a strong message to three directors who awarded executive bonuses during a nonprofitable year by withholding about 40 percent of the votes for their re-election. Although John E. Koerner III, Cheryl Gordon Krongard and Scott C. Nuttall, who sit on the compensation committee, garnered majority votes to retain their board seats, shareholders withheld an average of 48 million of 120.9 million shares cast for each director - a high percentage of withheld votes, according to one proxy firm.

Constellation executive pay is a false issue Many Maryland lawmakers support Constellation Energy's joint venture with global nuclear leader EDF Group because they know it represents a unique opportunity for a multibillion-dollar private-sector stimulus program in the midst of a severe recession. Unfortunately, a few, including state Sen. Jim Rosapepe, continue to confuse debate over this venture by focusing on misleading characterizations of Constellation Energy's executive pay provisions, which are entirely unrelated to the transaction (Readers respond, June 17)

Speaking to Congress recently, President Barack Obama praised "the selflessness of workers who would rather cut their hours than see a friend lose their jobs." His sentiments need to be echoed and acted upon by community leaders everywhere. Some have already heeded the call. In early February, Montgomery County teachers accepted school administrators' proposal that they forgo raises they were expecting in order to avert layoffs. Last year, Under Armour CEO Kevin Plank voluntarily cut his salary from $500,000 to $26,000, saying he should be paid according to his Baltimore-based company's performance.

Whether you call President Barack Obama's proposed $500,000 pay cap for top executives of firms receiving federal bailout funds good or bad, there is no denying that in a market-based economy, it's downright ugly. However, it may well be necessary. Why is capping executive pay good? The most common answer is that the top executives in failing firms requiring a federal bailout have placed personal greed above the interests of all the firm's other stakeholders (e.g., stockholders, employees, customers and creditors)

WASHINGTON - An effort to limit executive pay at the nation's most troubled banks inserted at the last minute into Congress' mammoth economic stimulus bill has sparked an outcry from financial services groups and others who warn that the caps could harm the government's efforts to revive the economy. During negotiations on the $787 billion package last week, Sen. Christopher J. Dodd, chairman of the Senate banking committee, slipped in a provision that limits bonuses for executives at institutions receiving bailout funds to one-third of their salaries.

WASHINGTON - Congress wants Wall Street to feel it where it hurts: the wallet. The stratospheric pay packages of Wall Street executives have become a lightning-rod issue as Congress crafts a $700 billion bailout for financial firms. Proposals circulating on Capitol Hill vary, but they all would impose some limits or approval authority on salaries of executives whose firms seek help. The moves in Washington mirror the popular outcry - in constituent e-mails and in postings in the blogosphere - over the prospect of Wall Street's tarnished titans walking away with tens of millions of dollars a year while taxpayers pick up the tab. But Wall Street, its lobbyists and trade groups are waging a feverish lobbying campaign against compensation curbs.

William L. Jews is entitled to only half of his $18 million severance package from CareFirst BlueCross BlueShield, Maryland's top insurance regulator said yesterday in a ruling that accuses the former chief executive of abandoning the insurer's nonprofit mission. In a 65-page order, state Insurance Commissioner Ralph S. Tyler wrote that CareFirst's board had violated a 2003 state law requiring executive pay for the nonprofit to meet a "fair and reasonable" standard. The decision marks the first test of the law, which was passed by legislators furious with Jews for trying to convert CareFirst to a for-profit entity and sell it to a California company.

CareFirst BlueCross Blue- Shield's former chief executive defended his $17.65 million retirement and severance pay yesterday, and denied accusations by regulators that his sole focus as CEO was boosting profits. William L. Jews, who became a lightning rod for criticism after he tried to convert the state's largest health insurer to a for-profit company and sell it, made his comments on the last day of hearings in Hunt Valley into whether his pay deal is out of sync with the Blues plan's nonprofit mission.

CEOs are different from you and me. They get paid for failure. They get overpaid for success. But at least corporate boards are starting to ban them from pocketing bonuses from profits that later prove to be fake. Lockheed Martin is one of the first Maryland corporations to adopt a "clawback" policy to address such a situation. Beginning Jan. 1, the Bethesda-based defense contractor can reclaim executive pay tied to profits that are subsequently marked down because of fraud or negligence.