Someone Is Profiting From The Slow Economy

While you are struggling with high gas, high food, foreclosures and a completely dysfunctional economy, there are some that are doing well regardless of the dark days to come.

Average CEO compensation grew by 3.5 percent last year despite slowing economic growth, falling profits and mass layoffs, according to an Associated Press review published Monday. The review found that the S&P 500 CEO received an average yearly compensation of $8.4 million, up $280,000 (an average raise that is the equivalent of six times the US median household income) during 2006.

The data render ridiculous those apologies for social inequality resting on the idea that CEO pay is linked to ‘performance’ in some meaningful way. The Associated Press review found that “CEO pay rose or fell regardless of the direction of a company’s stock price or profits.” The report also notes that half of the 10 best paid CEOs—who collectively hauled in half a billion dollars last year—presided over companies whose profits shrank “dramatically.”

John Thain, the CEO of Merrill Lynch, ranks first on the list. He received $83 million in compensation for the year, despite presiding over a company that posted a $9.8 billion loss in the fourth quarter. He replaced former CEO Stanley O’Neal on December 1, 2007. O’Neal left the bank with a compensation package worth over $161 million, despite his direct oversight of the bank’s gambling with mortgage-backed securities that ultimately exploded in 2006-2007.

Likewise, John Mack of Morgan Stanley, also in the top 10, received a compensation package worth $41.7 million, even though his firm announced the writing down of $9.8 billion worth of loans and a loss of $3.61 billion in the fourth quarter.

And what have been the social consequences of all this? Who has paid the cost of this enrichment of a tiny layer at the top of the social ladder? According to the latest estimates, one in twenty Americans will soon have negative equity in their homes, and millions already face foreclosure. Energy prices have shot up by 17 percent in the past year alone. Real wages have fallen by about 1 percent during the same period, with far steeper declines threatened.

Now do you feel better?