CEOs in the defense and oil industries have been able to translate war and rising oil prices into personal jackpots, according to a new report from the Institute for Policy Studies and United for a Fair Economy, Executive Excess 2006.
OIL BARONS: With Americans now paying over $3 per gallon, petroleum profiteers are raking in nearly three times the pay of CEOs in comparably sized businesses. In 2005, the top 15 U.S. oil CEOs got a 50% raise since 2004. They now average $32.7 million, compared with $11.6 million for all CEOs of large U.S. firms.
Executive pay at U.S.-based oil companies also far outpaced pay at oil companies based outside the United States. BP and Royal Dutch Shell paid their CEOs only one-eighth what their U.S. counterparts collected — just $5.6 and $4.1 million in 2005, respectively — even though both companies operate in the same global marketplace as their U.S.-based competitors.
CEO William Greehey of Valero Energy took home the oil industry’s biggest executive pay rewards in 2005, pocketing $95.2 million. The average construction worker at an energy company would have to work 4,279 years to equal what Greehey collected last year.
DEFENSE CONTRACTORS: Since the “War on Terror” began, CEOs at the top 34 military contractors have enjoyed average paychecks that are double the compensation they received in the four years leading up to 9/11.
The new Executive Excess report surveys all publicly held U.S. corporations among the top 100 defense contractors that had at least 10 percent of revenues in defense. These 34 CEOs combined have pocketed almost a billion dollars since 9/11 — enough to employ more than a million Iraqis for a year to rebuild their country.
In 2005, defense industry CEOs walked off with 44 times more pay than military generals with 20 years experience, and 308 times more than Army privates.
United Technologies CEO George David led the pack with over $200 million in pay since 9/11, despite investigations into the quality of the company’s Black Hawk helicopters.
CEO Jay Gellert of Health Net saw the biggest personal pay raise after 9/11, a 1,134% leap over the preceding four years. The company owes its earnings growth to American taxpayers, who may not realize they pick up a hefty share of cost overruns in the privatized military health care system.
“Americans across the political spectrum should be outraged by the sight of executives cashing in on war windfalls,” says Sarah Anderson. “Unfortunately, partisan politics has stopped Congress from effectively overseeing this war contracting free-for-all.”
Since 1990, the overall CEO-worker pay gap in the United States has grown from 107-to-1 to last year’s 411-to-1. Minimum wage workers have lost 9 percent after inflation in the same 15 years. If the minimum wage had risen at the same pace as CEO pay, it would now stand at $22.61 per hour, over four times the current $5.15.
Executive Excess 2006 also challenges the current reform agenda for addressing excessive CEO pay in oil and defense as well as throughout the American economy. That agenda, reflected in new SEC rules released at the end of July, emphasizes requiring corporate boards to fully disclose all the revenue streams — perks and pensions included — that go into contemporary executive pay.
But disclosure alone, notes report co-author Chuck Collins, won’t restore fairness to the nation’s executive suites.
“Transparency has been ineffective in curtailing CEO pay,” says Collins. “The root problem is an imbalance of power. We need to give more clout to other stakeholders, such as requiring shareholder approval of executive pay and retirement packages, as is now done in Britain.”
Authored by Sarah Anderson, John Cavanagh, Chuck Collins, and Eric Benjamin, and edited by Sam Pizzigati, Executive Excess 2006 is the 13th annual CEO pay study by the Institute for Policy Studies and United for a Fair Economy.
The Institute for Policy Studies is an independent center for progressive research and education in Washington, DC. United for a Fair Economy is a national organization based in Boston that spotlights growing economic inequality.