Related topics: telecommunications, Hewlett-Packard, Johnson and Johnson, Verizon, IBM
Across America, the Great Recession and its aftermath have hit the haves and the have-nots in very different ways.
Turns out that while legions of workers got pink slips, the CEOs at some of the companies making the steepest job cuts earned some of the biggest salaries. And the issue isn't the much-discussed pay gap between executives and average workers; these CEOs earned pay packages that were often two or three times the average pay for other CEOs.
Meanwhile, the layoffs cost us all -- because of a weaker economic recovery due to a dwindling consumer class and the cost to the government of supporting an army of unemployed.
This unsettling CEO reward system, highlighted in a new report from the Institute for Policy Studies, raises an obvious question: Is one reason unemployment remains high that, for CEOs, cutting jobs pays? "By hollowing out their companies and cutting costs, CEOs can get a short-term stock price increase" and cash in on their stock and stock options, says Brandon Rees, the deputy director of the AFL-CIO Office of Investment.
Hard hit at AT & T
Michael Brush
The phone giant AT&T (T, news) offers a great case study in how this trend of two economies is playing out in the job market. Let's take a brief glimpse into the lives of two longtime AT & T employees, Nancy McSwain and Randall Stephenson.
McSwain, who lives in New Orleans, lost her home to Hurricane Katrina in 2005. Water destroyed everything on the ground floor. Looters got what was left upstairs. A year later, she battled cancer and won. By 2008, McSwain thought she was home free as she moved back in to her rebuilt home.
But the Great Recession -- and corporate America's penchant for firing workers to support profits -- would create a whole new set of problems. Four days after Christmas in 2009, McSwain got a pink slip -- after 39 years of service.
"It's been really difficult," McSwain says. "I had major expenses from Katrina, and I needed a job desperately." She had hoped to finish out her career and work four or five more years to help pay all those bills. "I had no intentions of leaving."
Her layoff was part of a big downsizing that saw the profitable phone giant announce 12,300 layoffs over 18 months. AT & T's objective: Cut costs to prop up earnings, as a healthy 9% growth in wireless revenue failed to offset a steep decline in landline phones.
That brings us to Stephenson, who joined the company in 1982 and moved into the CEO job in 2005. He sets the cost-cutting tone and oversees the managers who carry out all those layoffs. In 2009, the year McSwain got her pink slip, Stephenson had one of his most lucrative years ever.
Stephenson realized $6.9 million when 270,000 of his stock options vested. On top of that, AT & T granted him a pay package valued at $20.2 million by The Associated Press. That's nearly 2-1/2 times the average pay for CEOs at S & P 500 companies that year.
Relentless squeezing of jobs and pay
The contrasting fates of rank-and-file managers who get laid off, like McSwain, and the richly paid CEOs overseeing layoffs, like AT & T's Stephenson, played out across many industries during the Great Recession, according to the Institute for Policy Studies report.
In fact, it's all part of "the relentless squeezing" of jobs, pay and benefits to boost corporate earnings and keep money flowing to executives, says Sarah Anderson, a co-author of the report, titled "Executive Excess 2010: CEO Pay and the Great Recession" (.pdf file).
