CEO pay continues to skyrocket at an exponential pace, as do the wages of the top executives beneath them. This is that ‘rat race’ we all live in, which sees all of us chasing money — at the expense of nearly everything else. While money is admittedly necessary at this moment to survive and put food on the table, how much is enough? If you view social issues like poverty to be the result of a lack of resources and money, why do so few of us question the current wealth allocation and distribution on the planet? If we were to take very small percentages of pay from the elite ‘1’ percent, we could use that money to feed, clothe, and house everybody on the planet.
As a result of this skyrocketing trend, the money of millions of people with pensions, IRAs, and 401 (k) plans continues to be expropriated, and there appears to be nothing we can do about it. Robert Reich, an American political economist, explains the severity of the situation in a recent post on his Facebook page:
Why can’t we do anything about this? Because almost all this money is parked in giant mutual funds that don’t want to rock the boat – so they approve these scandalous pay packages.
According to a report issued yesterday by shareholder advocacy group “As You Sow” (see below), the giant mutual funds Vanguard Group and BlackRock Inc. – which together manage $7.6 trillion (that’s trillion) — approved pay packages 97 percent of the time last year. TIAA-CREF approved them 94 percent of the time. T. Rowe Price Group Inc. funds supported 92 percent of executive pay plans.
Not all funds kiss the derriers of CEOs this much. Fidelity Investment’s mutual funds approved board-backed pay 79 percent of the time; Franklin Templeton, 70 percent; and Dimensional Fund Advisors only 54 percent of the time.
The point is, if you have an IRA or 401(k), it’s your money. And you can switch from a fund that’s in bed with CEOs to one that’s not.
You can view the full list HERE. Keep in mind, these are only the disclosed amounts – who knows how much more they could be receiving under the radar?
You can view the full list HERE.
Key Findings Of The Report (See Full Report HERE)
- Of the top 25 most overpaid CEOs, 11 made the list for the second year in a row. These rankings are based on a statistical analysis of company financial performance with a regression to identify predicted pay, as well as an innovative index developed by As You Sow that considers over 30 additional factors.
- Many of the overpaid CEOs are insulated from shareholder votes, suggesting that shareholder scrutiny can be an important deterrent to outrageous pay packages. A number of the most overpaid CEOs are at companies with unequal voting structures and/or triennial votes, so shareholders did not have the opportunity to vote this year on the extraordinary packages. While the say-on-pay law allows less frequent votes, shareholders have not supported the practice and the vast majority of companies hold annual votes on pay. We believe that the fact that our list of the top 25 overpaid CEOs includes several companies that do not hold annual votes on pay implies that such insulated companies are more willing to flaunt best practices on pay and performance.
- The most overpaid CEOs represent an extraordinary misallocation of assets. Regression analysis showed 17 CEOs with compensation at least $20 million more in 2014 than they would have garnered if their pay had been aligned with performance.
- Shareholder votes on pay are wide-ranging and inconsistent, with pension funds engaging in more rigorous analysis. This report, representing the broadest survey of institutional voting ever done on the topic, shows that pension funds are more likely to vote against overpaid packages than mutual funds. Using various state disclosure laws, we were able to collect data from over 30 pension funds. The data shows support for overpaid CEOs ranging from approval of 24% – indicating voting practices based on rigorous compensation analysis – to 79%.
- Mutual funds are far more likely to rubber stamp than pension funds, but among mutual funds there is wide variation. Of the largest mutual funds, American and Schwab approved 65% of these packages, while Blackrock supported 97% of them. Some funds seem to routinely rubber stamp management pay practices, enabling the worst offenders and failing in their fiduciary duty. TIAA-CREF, the leading retirement provider for teachers and college professors, is more likely to approve high-pay packages than almost any other institution of its size with support level of 97%.
- Directors, who should be acting as stewards of shareholder interests, should be held individually accountable for overseeing egregious pay practices. A number of directors serve on two or more overpaid S&P 500 compensation committees. We list the companies that over-paying directors serve on, and identify individuals who serve on two or more ‘overpaid’ S&P 500 compensation committees.
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