The Great New Surge in CEO Self-Sacrifice: Is It For Real?

By Sam Pizzigati, Too Much: A Commentary on Excess and Inequality. Posted January 16, 2009.

Citi’s share price last year plunged from just under $30 to just over $3. The stock is currently trading under $8. Last January, Citi rewarded CEO Pandit with a grant of 1 million Citi shares. If taxpayer bailout billions help the Citi share price rise just another $5 in 2009, Pandit’s personal portfolio -- from that share grant last year alone -- will gain $5 million.

Situations like Pandit’s abound. The Conference Board, a business research group, last month revealed that CEOs at the largest 10 percent of U.S. corporations are holding stocks and stock options in their companies worth "about 100 times" the value of their annual salary.

In other words, even modest increases in company share prices -- and experts expect modest increases as the stock market begins to recover from last year’s record plunge -- can translate into huge windfalls for company CEOs.

Some companies are already turbocharging these windfalls. Mike Ullman, the CEO of the J.C. Penney retail chain, last month received a new pay deal that guarantees him $25 million in cash if the Penney share price rises from its depressed $20 December level to $32.75 over the next three years.

The Peoria-based Caterpillar, at first glance, doesn’t seem to be playing by the same CEO pay cut scam playbook. Caterpillar CEO Jim Owens is facing a 50 percent cut in his total pay, not just salary and bonus. But shed no sympathy for Owens. He's coming off a 15 percent pay hike in 2007 that brought his total take-home to over $17.1 million.

Actually, we need to go considerably further back than 2007 to understand the colossal emptiness of Caterpillar’s current share-the-pain rhetoric. In the 1990s, Caterpillar helped lead Corporate America’s assault on the good union jobs that created modern America’s middle class.

Caterpillar prepped for that assault, in the 1980s, by expanding operations overseas to gradually reduce the unionized share of its workforce. Then, in 1991, Caterpillar execs provoked a strike by demanding the right to hire new workers at half the going rate.

In April 1992, five months into the strike, the union’s walkout ended -- after Caterpillar threatened to hire permanent replacements for all the strikers. The union would strike again two years later, but no contract would be signed until 1998. By that time, Caterpillar annual profits had soared nearly four-fold and the company’s share price had tripled.

Caterpillar's CEO at the time, Donald Fites, did quite well, too. Over the course of Caterpillar's five most bitter years of 1990s labor strife, he collected $10 million. Workers, meanwhile, ended up with a contract that allowed Caterpillar to replace retirees with new hires paid 70 percent of the old wage.

Fites himself retired in 1999, but he re-emerged in the news this past November -- just a month before Caterpillar’s current CEO announced his personal pay cut -- as the latest inductee into the Association of Equipment Manufacturers hall of fame. Fites, noted one tribute at the hall of fame induction, guided Caterpillar "through some very difficult times."

Those difficult times left Fites with a handsome personal fortune. His CEO successors, in our current "difficult times," see no reason to settle for anything less.

See more stories tagged with: corporations, economy, ceo, wall street, financial crisis, fites

Sam Pizzigati is the editor of the online weekly Too Much, and an associate fellow at the Institute for Policy Studies.

Liked this story? Get top stories in your inbox each week from AlterNet! Sign up now »