| A tale of two pension plans: regular
vs. CEO |
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Bebchuk and Jackson then determined the total pension
values of the CEOs' packages, which takes into account their life
expectancies as well as those of their spouses, if applicable. The
average "actuarial value" of CEO pensions in today's dollars
was $15 million for retired CEOs and $19 million for those approaching
retirement in the second sample studied.
As an aside, it may interest you to know that firms
that are going through bankruptcy proceedings "often choose
to assume fully such obligations, even when executives' pensions
are unsecured," note the authors.
The averages belie the wide variety in total pension
values, which range from $3.3 million (Symbol Technologies) to $73.4
million (Exxon Mobile). "Across our sample of more than 50
S&P 500 companies, the value of executives' pension plans added
on average more than 48 percent to total pay during the executive's
service as CEO," say the researchers.
Now mind you, these guys aren't exactly hurting for
cash to begin with. Without these pensions, if they set aside a
mere fraction of their pay, they could easily afford a fantastic
retirement with annual trips to Cote d'Azur and round-the-world
cruises aboard the QE II, among other extravagant whims.
Among the individual CEOs named in the study were
those heading Aon Corp. and Motorola, which recently froze their
pension plans to new hires. The retirement plans of these CEOs were
valued at $4.8 million and $41.3 million, respectively. Clorox Co.
had converted its pension plan to a cash-balance plan some time
ago. The value of the top guy's pension? About $23 million, according
to the researchers.
Bebchuk and Jackson argue that investors need to have
a clear picture of how much the top executives of a firm are getting
in compensation that is not linked to their performance. They advocate
that firms be required to disclose the value of all retirement plans,
whether defined benefit or deferred benefit, as well their increase
in value each year.
Yes, they need to be accountable to shareholders.
But they also need to be accountable to their employees. The hush-hush
deals made in stately boardrooms need to come out in the open. But
even beyond that, the top leadership of companies need to, well,
lead by example. If defined-benefit plans must get phased out for
employees so that a company can be more competitive, then they should
get phased out for the top brass, too.
If you have a comment or suggestion
about this column, write to Boomer
Bucks.
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