Now that the war in Iraq has been declared officially over, can the media please put aside their preoccupation with Scott Peterson's new hairstyle and focus their attention on the sputtering U.S. economy?
In a week when even the corporate playbook Fortune has adorned its cover with the title "Oink! CEO Pay Is Still Out of Control," how about starting with the guys running corporate America? They have, after all, in the course of the last year gone from American Idols to America's Most Wanted, the most stunning transformation since Ozzy Osbourne morphed from a bat-chomping satanic rocker into America's cuddliest dad.
But no matter how battered their reputations may be, they still appear determined to rescue themselves instead of their sinking ships. For today's captains of industry, the maxim in a crisis seems to be: "To hell with the women and children -- save the lifeboats for us!"
Take American Airlines. While preparing to make a rough landing in bankruptcy court, executives at the dead-broke carrier extracted from workers $1.62 billion in wage and benefit concessions that the bosses claimed were needed to keep American aloft. At the same time, the execs secretly safeguarded themselves with a glittering array of golden parachutes, including massive cash bonuses and a $41 million trust fund to guarantee their pensions should the airline crash and burn.
Even after the secret escape plan was revealed and all hell broke loose, the company held fast to its priorities. It canceled the cash bonuses. It tossed CEO Don Carty onto the tarmac. But it still refused to relinquish the fund protecting its execs' nest eggs -- while the workers were forced to go along with a deal that will lead to thousands of layoffs and pay cuts of between 15 and 21 percent.
I guess in today's business world, that's what amounts to a compromise.
Besides making one reach for the nearest airsickness bag, the American Airlines debacle highlights the growing disparity between the ways corporate America is preparing for the golden years of its executives and for its rank and file employees.
In the clubby confines of America's boardrooms, the sky is the limit. Compensation committees are working overtime coming up with ever more creative -- and devious -- ways to boost the earnings of top executives. And supercharged pension plans are the hot new trend.
Among the gimmicks being used to goose the value of these plans is an accounting scheme that can dramatically increase a CEO's retirement windfall by adding phantom years -- even phantom decades -- of service to the exec's pension. In theory, it works the same way as those jailhouse rules that reward a model prisoner with time off for good behavior -- only these guys get rewarded no matter how many employees or shareholders they've knifed in the back with a homemade shiv.
Thanks to this latest innovation in corporate accounting, Leo Mullin, Delta Airlines' CEO, has had an additional 22 years of service tacked on to the less than six years he's actually worked for the company, while US Air's former CEO Stephen Wolf was given credit for 24 years he didn't really put in. And this scam isn't reserved for the high-flyers of the airline industry. When John Snow left CSX Railroad to become treasury secretary, he was given credit for having put in 44 years at the firm, even though he'd actually punched a time clock there for 25 -- a little fun with numbers that helped him walk away with a cool $33 million in pension booty.
Corporate directors, who have come under increasing fire from shareholders for approving excessive pay packages for high-level executives, appreciate the fact that these pension plan adjustments allow them to fly under the radar while continuing to funnel millions to CEOs. Unlike salaries and bonuses, which are regularly reported in the business press, the details of executive pension plans are usually hidden away in the extra-fine print of a company's SEC filings.
And CEOs love that pension plan payouts come with none of those annoying tied-to-performance strings attached. US Air's Wolf, for instance, made off with a $15 million pension cash-out just six months before the company filed for bankruptcy. Richard Brown, former CEO of Electronic Data Systems, was rewarded for overseeing a 62 percent drop in share price -- and steering the firm into an SEC investigation -- with a pension plan that will pay him $1.6 million a year for life. And Treasury Secretary Snow's $33 million pension prize came despite the fact that his company's stock underperformed its competitors' by two-thirds over the last 11 years of his reign.
The picture is far bleaker for those down on the factory floor or crammed inside office cubicles, where ordinary workers are seeing their pension plans slashed or eliminated altogether.
Less than half of those currently employed in the private sector have any kind of pension coverage. And 40 percent of those companies that do offer pension plans are exploring the possibility of reducing benefits. Companies are also cutting back on matching contributions to their employees' 401K accounts. Some, like Ford, Goodyear Tire and Charles Schwab, have decided to completely do away with matching contributions. They probably need the extra cash for their executives.
There is also a major push underway, spearheaded by the Bush administration, to allow companies to switch their existing traditional, defined benefits pension plans to so-called cash balance plans, which could lead to a serious loss in benefits for older workers.
And even those workers who are able to hang on to their defined benefits pensions can't rest easy: It turns out that the vast majority of corporate pension funds are critically underfunded. In fact, of the 343 S&P 500 companies that offer traditional pension plans, close to 90 percent of them are running a deficit.
In just a few short years, the nest eggs of the American worker have gone from sunny side up to seriously scrambled.
In an effort to level the lopsided pension playing field, Rep. Bernie Sanders, I-Vt., and Rep. George Miller, D-Calif., along with 124 co-sponsors, have introduced legislation that would make it harder for companies to force older workers to switch to cash-balance pension plans. To drive his point home, Sanders showed how such a conversion would affect the pensions of his fellow congressmen. Denny Hastert, for instance, would see his $540,000 lump sum benefit shrink to $164,000. And Tom DeLay's retirement payout would be cut by 60 percent, shriveling from roughly $608,000 to $251,000.
"If members of Congress think that cash-balance payments are good for American workers," declared Sanders, "then they must believe that cash-balance pensions are good for themselves."
I couldn't agree more. And the same goes for those pension-protecting executives at American Airlines. If their future is worth safeguarding, then so is their workers' present. Just think how many jobs the $41 million they put into that trust fund could save.
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