Tuesday, March 23, 2004

Retirement and the concentration of wealth

Title: The 10K Run - The sweetheart deals hiding in corporate annual reports.
Date: March 19, 2004
Source: Slate

From the article:
    check out the retirement deal of Former CEO John M. Trani, who attracted controversy two years ago when he proposed moving the Connecticut-based company to Bermuda to avoid taxes. Trani resigned on Jan. 1 and began collecting $243,750 a month under his retirement agreement.
    [Gannett] plans to pay former Chief Financial Officer Larry Miller $600,000 a year under a consulting contract signed last year when Miller retired. That's $40,000 more than Miller made when he was working full time for the company, and now he only has to work half time.
These retirement plans pale in comparison to some of the more elaborate ones crafted by the big name CEOs. For example, Jack Welch (former CEO of GE), whose divorce made public his "perks-for-life retirement deal" from GE, was found to be receiving a $9 million annual pension, a $15 million Manhattan penthouse plus use of corporate jets, helicopters and limos. According to this article:
    "After [Welch] cut his deal with GE six years ago, compensation pros were quick to dig his new contract out of SEC documents shareholders rarely scrutinize. Soon CEOs were waving Welch's deal in front of their own boards, demanding similar treatment, pay consultants and corporate directors tell NEWSWEEK. While no CEO admits to mimicking Welch's contract, the executive elite began getting similar deals. IBM's then CEO Lou Gerstner renegotiated his contract to extend his perks for 20 years after retirement. Larry Bossidy, the former Honeywell CEO, cut a perks-for-life deal, which he says is much less generous than Welch's. Emerson Electric's former CEO Charles Knight-who approved Gerstner's deal as an IBM director-got his perks extended 15 years beyond retirement. 'Jack's contract became the gold standard,' says one pay consultant."
You pay for ridiculous retirement packages like these through higher prices and lower wages.

The concept of a retirement plan for "normal" employees has largely evaporated, like many other benefits. In some companies, what employees are left with is the ability to contriibute their own money to a 401(K) plan. But in many companies, even that option is not available.

Yet executives are given lush retirement packages that include millions of dollars in pay, corporate funded assistants and office space, use of corporate jets, etc. Consumers fund all of this largess through higher prices. The concentration of wealth accelerates.


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