Executive Compensation: An Issue On Which All Candidates Agree

It is rare to find all Presidential candidates in agreement on any issue, but this morning Senator John McCain appeared on CNBC and had the following observation about executive compensation: "Greed and excess in corporate compensation is unacceptable in America. I'm not sure corporate America knows how bad their reputation is." Both Senators Obama and Clinton have also criticized not only the levels of executive compensation but the manner in which executive compensation is decided within most corporations.

Dealing with the results of disgruntled employees in businesses all across America, I work to ameliorate the consternation felt by those who suffer lower inflation-adjusted wages, increased costs of living and medical care, while reading their companies online SEC filings which, since 2006, have to reveal increases in executive compensation.

The fact that average CEO now ears 431 times the salary of an average production worker is not the problem, although many point to this literal disparity as a problem that continues to worsen.

The problem from an employee relations perspective is, interestingly, not literal, but relative. It is not so much how much the CEO makes but the fact that the average CEO enjoyed a compensation increase of 20.5% last year, this according to a study of 45 randomly selected public companies, while average revenues grew just 2.8 percent. By comparison, the median pay for workers rose only 3.5 percent, this according to the U.S. Bureau of Labor Statistics.

Why the disparity?

Many say it is an inherent defect in the way executive compensation is set, a corporate governance problem, with CEO pay set by the Board of Directors which ostensibly is there to protect shareholder interests. Yet, oftentimes the CEO is the chairman of the Board of Directors and few would argue he or she can reasonably and objectively monitor his own salary. The average board member, oftentimes selected or recommended by the CEO in question, are beholden to the CEO for whom they will make compensation decisions. In the end, many argue the answer will be found in making boards of directors more accountable, and to that end, Senator McCain, in the interview this morning suggested he favors shareholder approval or disapproval of executive compensation packages.

Regardless how one feels about the issue, it is an employee relations problem in many companies if only because demoralized and angry employees are not engaged employees. It appears the three remaining Presidential candidates see the current system of executive compensation as fatally flawed and all express an intent to deal with the issue if and when they take the top office.

The Working Poor -- Yes, they are bitter

Let me first apologize for being such a poor correspondent of late . . . it has been two months since I have added to this blog and I have no excuse except being on the road relentlessly where, ironically, much learning occurs but there is precious little time to record it.

I have spent time in Little Rock, Los Angeles, and now a small town in southern Kentucky which will home for the next several weeks. The genesis of each of these matters sprang from the same dark fountain -- unhappy, dissatisfied employees who see their standard of living being eaten away by higher fuel, food and medical costs. To add insult to their injury, they worry that their jobs may not be here much longer. And these worries are legitimate. Manufacturing companies continue to flee the United States with impugnity.

This weekend as I catch a breath, I have been fascinated by the news of Barack Obama who is being virulently criticized for saying these words: "You go into some of these small towns in Pennsylvania and, like a lot of small towns in the Midwest, the jobs have been gone now for 25 years and nothing has replaced them. And it's not surprising then they get bitter, they cling to guns, or religion, or antipathy to people who aren't like them, or anti-immigrant sentiment, or anti-trade sentiment as a way to explain their frustrations."

Regardless of one's political persuasion, I don't see the problem in this statement, if only because it is completely consistent with what I have seen developing over the last quarter century. Surely the criticism can't be calling the working poor "bitter." They are bitter and they do lash out at those who they feel responsible for their plight. Their recognition that their labor has become dispensable, or if not, at least movable to save a buck, or make an extra buck, would make anyone bitter.

While there there is no candidate for President that fully expresses my views about significant social issues, including Mr. Obama, I congratulate him for observing what should obvious -- the working poor are bitter because they have been left behind or fear they soon will be, and as such they have every reason to be bitter.

Indeed to label Obama's observation "out of touch" is itself out of touch.

Take care friends and I'll write soon . . .