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Success of Firms, CEO Pay Studied

Boston Globe • 4/6/01

by Kimberly Blanton

While chief executives are receiving enormous pay packages, their shareholders are losing money and many employees are losing their jobs, according to a new study of executive pay.

For example, if $10,000 were invested in 1993 in the 10 companies with the highest CEO pay nationwide, the value of that investment would have plunged to $3,585 last year. If the money had been invested in the Standard & Poor's 500 index, it would have grown to $32,301

These are among the conclusions of a study released yesterday by United for a Fair Economy, a partisan think tank in Boston that recently gained attention for releasing a petition signed by wealthy individuals who oppose President Bush's tax cut.

"The existing compensation packages provide short-term incentive but not the climate for long-term sustainable business success," said Scott Klinger, a researcher who prepared the report.

Klinger analyzed the stock performance of 10 companies headed by the highest-paid CEOs in each of seven years from 1993 to 1999. The top 10 varied from year to year, but included Michael Eisner of Disney Co., Henry Schact of Lucent Technologies, and Charles Wang of Computer Associates, who is now its chairman.

He found that while the CEOs enjoyed high salaries, lavish bonuses, and stock packages, their employees didn't have job security.

From 1994 on, at least half the companies in the study each year announced layoffs of 1,000 employees or more within three years of appearing in Business Week magazine's annual release of top 10 CEOs' pay. (The year 1993 was excluded because the economy was emerging from the Gulf War recession, so layoffs were minimal   CEOs of high-tech companies will be tracked for future pay studies. United for a Fair Economy said the top 10 companies to watch next year are Citigroup, Cisco Systems, Tyco Laboratories, Qwest Communications, Advanced Micro Devices, Apple Computer, SBC Communications, Oracle, General Electric, and IBM.

Copyright 2001, The Boston Globe.

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