Behind Every Successful Modern Top Executive...you'll find worried workers and cheated consumers

From Too Much: A Commentary on Excess and Inequality:



Behind Every Successful Modern Top Executive
. . . you'll likely find, suggest billionaire Mark Cuban and recent corporate history, worried workers and cheated consumers
May 19, 2008

By Sam Pizzigati

Billionaire Mark Cuban, the owner of the Dallas Mavericks basketball team, knows jackpots. He hit his big one in 1999 when he swapped the dot.com he had founded for over $5 billion in Yahoo stock. Earlier this month, in a Dallas Morning News column, Cuban graciously shared some of his jackpot know-how — and, in the process, gave cubicle America an unusual glimpse into how corporate life operates inside top executive suites.

Our contemporary CEOs, Cuban related, can’t lose, mainly because they take the bulk of their pay in stock, either as options to buy company stock at some future date or as outright grants of company shares. Year after year, ever more shares pour into executive pockets. If the price of these shares should rise, even slightly, CEOs can do spectacularly well.

And if the share price stalls? CEOs still can do spectacularly well. Corporate boards, Cuban points out, regularly reissue or reprice executive stock awards that have lost any appreciable part of their value.

But CEOs don't have to wait for boards to reprice their options. Top executives have the power, on their own, to artistically inflate a stagnant share price. They can take one simple step that demands not one iota of talent or managerial creativity. They simply cut what their company is spending to do business. That fattens their corporate quarterly bottom line, and that makes Wall Street happy..

This cash cost-cutting, adds Cuban, does have a downside for employees who get paid in cash — and that’s “everyone who works” for the company except “the top few in management” who get most of their pay in stock. Cutting cash outlays automatically places all average employees “at risk — of losing their jobs, benefits, raises, you name it.”

The end result: “a huge disconnect,” says Cuban, “between the CEO and shareholders doing well and those who work for the company doing well.”

An interesting analysis. But Cuban is only telling half the story. Yes, employees certainly do suffer when CEOs start scrambling to inflate their company share price — and guarantee themselves a personal windfall. But the ranks of sufferers go beyond employees in these situations. Consumers suffer, too.

Take Citigroup, the banking giant that has been generating king-size executive jackpots ever since the 1998 merger that fused Citicorp and the Travelers Group together under one Citi roof. Citigroup’s current chairman emeritus, Sandy Weill, now ranks 271st on the Forbes list of America’s 400 richest. In 2000 alone, Weill pocketed $214.6 million. .....(more)

The complete piece is at: http://www.toomuchonline.org/articlenew2008/may19a.html