After years of publicity about executive compensation, public sentiment has boiled over. AIG is one target, but the dry rot that funneled bonuses to failing financial firms, courtesy of the taxpayer, is widespread. New Mexico is not immune.
Consider this: We pay the governor $110,000 a year and the president of the United States $400,000 a year. What, then, makes the president of UNM, to use a recent example, worth $587,000 plus perks? What makes UNM’s vice president of athletics worth $408,391 plus bonuses? And how is it that the president of New Mexico Student Loans earns $300,000 after a 56 percent raise in fiscal 2007?
We’ve also heard some eyebrow-raising stories about pay to executives of nonprofits.
The former CEO of Presbyterian Medical Services in Santa Fe was making $1 million a year. Not bad for a guy who started with the organization as an ambulance driver.
Jeff Sterba, CEO of Public Service Company of New Mexico, the state’s largest public company, made $774,231 plus $400,000 in fringe benefits last year but didn’t earn any performance bonuses.
Sterba’s a have-not compared with the heads of companies receiving taxpayer largesse. Morgan Stanley, beneficiary of $10 billion in bailout funds, paid its fattest cats $3 billion in “retention bonuses,” as did Merrill Lynch.
Retention bonuses are one of industry’s bigger lies. This is supposedly to keep other companies from luring away their best performers, as if these folks have other jobs waiting for them right now. We heard a version of this one from the governor in justifying why all those appointees deserved their princely paychecks.
Another lie is peer compensation, the executive version of keeping up with the Joneses. Regents used this one to justify UNM’s big executive salaries. The Student Loans guy actually complained that his salary was low by peer standards.
CEO pay today is 400 times the wage of their average worker, up from 40 times in 1980. Execs in other industrialized countries make 20 to 25 times their workers’ wages. A major contributor to this widening gap, according to The Economist, was Wall Street’s quick profits and exorbitant salaries.
“Amid the mayhem on world financial markets, it is becoming clear that capitalism’s most dangerous enemies are capitalists,” wrote financial columnist Robert Samuelson in January 2008, before the big fall. At that point the subprime mortgage disaster had unfolded, and Merrill Lynch’s CEO had to walk the plank – with $161 million. Pay practices like this only encouraged the risk taking that ultimately unraveled the financial system.
As all this was going on, the middle class was losing financial traction, and the poor were, in fact, getting poorer. A 2008 study found that more than half of women working full time in 29 New Mexico counties were eligible for food stamps and child-care assistance. This levies a steep cost on taxpayers in public programs and crime, as kids grow up without parents, who have to work two jobs to survive.
Still, the Republicans for six years resisted raising the minimum wage. It was not a proud moment for the GOP, which ignored years of warnings that the financial erosion experienced by most Americans would eventually work against them. And it’s why the wolf howls about “socialism” fall on deaf ears now; unleashed capitalism bit too many people.
There’s a silver lining, if you like dark humor. The Economist recently pointed out that this recession hits the wealthy hardest. The richest 10 percent own 85 percent of stocks. The new administration wants to even up the scorecard, but a bigger tax on dwindling wealth won’t have the desired effect. On the other hand, poor people “will not be troubled by collapsing asset prices because they do not own assets.”
There’s some cold comfort.
© New Mexico News Services 2009