Hidden Corporate Scandal: CEOs Who Laid Off the Most Workers Rake in the Most Treasure
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The CEO of the world's biggest tech company brought down by a Reality TV "cougar." It's a hard story to resist.
And indeed, the business press has had a field day with the saga of Mark Hurd, the Hewlett-Packard chief who was recently fired for falsifying expense reports to conceal a relationship with a woman from a truly bizarre TV dating show.
After starring in a few soft porn movies, Jodie Fisher, a 50-year-old with Lady Godiva tresses, got a gig in 2007 on NBC’s "Age of Love," in which a male tennis pro was to choose a mate from groups of over-40 “cougars” or under-30 “kittens.”
Fisher didn’t get the red rose, but she did get a contract job with HP. Her task: introduce Hurd to clients at parties. Seriously -- you can get paid for that. But then Fisher claimed she lost the job because she wouldn't sleep with Hurd. He said she was merely on the wrong end of conscientious cost-cutting, but he paid her off anyway. The board got wind of the sexual harassment settlement, discovered the phony expense reports and gave Hurd the ax.
Titillating? Mildly. The biggest scandal at HP? Hardly. The biggest scandals at HP haven't made the headlines because they are so commonplace in Great Recession Corporate America. CEOs in one company after another are throwing workers onto the unemployment rolls and dodging taxes to boost short-term profits and fatten their own paychecks. They are shifting the burden of a poor economy onto the public purse -- while continuing to line their own pockets.
According to a new report by the Institute for Policy Studies, CEOs from the 50 firms that have laid off 3,000 or more workers since the onset of the crisis took home nearly $12 million on average in 2009. That’s 42 percent more than the average for CEOs of S&P 500 firms as a whole.
At HP, Hurd made $24.2 million in 2009, while cutting 6,400 jobs. That was on top of 24,600 layoffs he announced in September 2008 after a merger with EDS. His slash and burn, merge and purge approach was a stark departure from the “no-layoff” policy of HP cofounders William Hewlett and David Packard, who built the company from a garage operation into a global giant.
Messrs. Hewlett and Packard seemed to understand what more and more research is showing: Mass layoffs are often bad for business. Employers have to deal with morale problems among remaining staff and then all the costs related to hiring and training new workers when conditions improve. A University of Colorado survey of S&P 500 companies from 1982 to 2000 found no evidence that downsizing leads to increased returns on assets. In fact, stable employers — companies that have less than 5 percent annual staff turnover — outperformed companies that had major layoffs.
Today’s Hewlett-Packard illustrates still another troubling trend that has largely escaped the headlines: massive corporate tax avoidance.
Under current law, U.S. corporations face a 35 percent tax rate on corporate profits. Hewlett-Packard, under Hurd, sent $47 million to Uncle Sam in 2009 federal corporate income taxes, a mere 2 percent of the company’s reported $2.6 billion in pretax domestic net income.
As a result of various tax avoidance schemes, U.S. corporate income taxes overall have plummeted from almost a third of all non-Social Security federal tax revenues in the 1960s to only a sixth of total taxes today, according to Citizens for Tax Justice.
Since paying taxes apparently gives rich execs the hives, it’s routine for big companies to shield their CEOs from taxes on perks. In 2009, HP gave Hurd $29,028 in such “tax gross-ups” to offset taxes related to his use of the company’s private jet and other perks. Over the past three years, Hurd’s gross-ups have totaled $137,924.
After the board gave Hurd the blade, he walked away with a severance payout of cash and stock estimated at more than $28 million. That should tide him over until his next executive post, which may not be long. According to the Wall Street Journal, Hurd claims he received a recruiter call the day after he left HP.
Meanwhile, who knows how many of the tens of thousands of HP employees who have lost their jobs are stuck collecting unemployment checks. That’s the real scandal at HP.