May 28, 2007
If you had a chance to ask a question, in a public forum, to a wildly overpaid big-time corporate CEO, what question would you ask? Last week, in Denver, a high school English teacher had that chance. What did she ask? We have more in this week's Too Much.
Also in this week's issue: a look at what's making people worry — on Easy Street.
Yachts could be such fun, if only the oceans cooperated. But oceans can get rough, and traveling any ocean distance, even over smooth waters, can get awfully boring. Dockwise Transport to the rescue! This Fort Lauderdale-based company will freight your yacht across the Atlantic or just about anyplace you’d like your yacht to be. Last year, Dockwise ferried 1,200 yachts to global yachting hotspots. The typical fee to plop an East Coast yacht in the Mediterranean: $200,000 — and $200,000 more, of course, to plop it back. The ships in the Dockwise yacht-carrying fleet stretch longer than football fields and feature decks that can submerge below sea level, a thoughtful touch that lets yacht owners steer their boats into storage . . .
Two decades ago, film director Oliver Stone’s Wall Street created a new pop culture catchphrase — “greed is good” — and stripped bare the moral emptiness at Corporate America’s financial summit. Unfortunately, the film did next to nothing to derail that summit’s greed-driven engine. In 1987, the year Wall Street opened, junk bond king Michael Milken far and away topped the annual high-finance pay charts with an unprecedented $550 million in earnings. Last year, the top 25 U.S. hedge fund managers averaged $570 million. What’s this hedge fund world look like, from the inside? Michael Douglas, the star of the original Wall Street, is going to show us. Earlier this month, producer Edward Pressman announced that Douglas will reprise his Oscar-winning role as corporate raider Gordon Gekko in a Wall Street sequel entitled Money Never Sleeps. Gekko, in the new film, has reinvented himself as a hedge fund wizard . . .
The gap between CEO pay and worker pay, just about everybody knows, has been soaring over recent decades. Here’s something many people don’t know: The gap between the pay of CEOs and lower-ranking corporate executives has been soaring, too. A generation ago, in the 1970s, chief executives averaged 80 percent more pay than the third-highest paid executives in their corporations. CEOs today, report economists Carola Frydman from MIT and Raven Saks at the Federal Reserve, average 260 percent more pay than corporate number threes . . .
CEOs in India, according to the latest Mercer HR research, average “pay packets” of just over $1.1 
million a year, less than a tenth of what their counterparts in the United States take home. Maybe that’s why India’s corporate elite, gathered in New Delhi for the annual Confederation of Indian Industry convention, sat “in pin-drop silence” last Thursday while Indian Prime Minister Manmohan Singh urged his nation’s top execs to “resist excessive remuneration” and “discourage conspicuous consumption.” The “vulgar display” of wealth, Singh warned India’s corporate movers and shakers, “insults the poverty of the less privileged” and threatens “social unrest.”
America’s “elite affluent” — those households worth over $10 million — plan to contribute an average $82,000 to charity this summer, says Elite Traveler magazine. But they’re planning to spend even more — an average $94,000 — on jewelry and luxury watches. In fact, America’s decamillionaires tell market researchers they’ll be spending $622,202 per household on luxury goods and services during this year’s prime vacation season, 55 percent more than they spent over the summer months just two years ago.
Quote of the Week
“So you've just driven the $760,000 BMW off the lot. Wake up and smell the brand spanking new leather seats. If you're not parking your new motor alongside at least two other expensive cars, then you still have a long way to travel before you can consider yourself seriously rich.”
What price wealth? Star Times, May 21, 2007
New Wisdom
on Wealth
Jonathan Chait, The GOP's War On The Investor Class, New Republic. May 22, 2007. Why conservative pols are suddenly dissing shareholders.
Thomas Palaima, Immigration problems aren't confined to U.S., Austin American-Statesman, May 24, 2007. Immigration and inequality.
If you have a great deal of money, some people foolishly believe, you can live on Easy Street — and never have to worry. But rich people, in real life, worry all the time. They just worry about different things.
Which things? Forbes, the business magazine, has just published a list based on three years of polling by the Connecticut-based wealth research firm, Prince & Associates.
Prince surveyed about 2,500 Americans of “high net worth” status about the concerns that have them fretting — and broke down the results by net worth level.
Among the key revelations: Super-rich people worry about a constellation of issues that bears little resemblance to the concerns that make for angst in less opulent wealthy circles.
One example: Almost three-quarters of Americans with fortunes worth between $1 million and $5 million worry about having enough money in retirement. But just a tenth of Americans worth between $10 million and $20 million — and no one worth over $20 million — consider retirement an “extremely” or “very” important concern.
On the other hand, most folks in the $1 million-to-$5 million set don’t give the threat of getting violently attacked much of a second thought. Only just over a quarter of this crowd spend any serious time worrying about evil-doers out to attack them.
People who hold fortunes worth over $10 million, by contrast, worry about physical threats to their well-being at twice that rate.
What worries do folks with million-dollar fortunes tend to share? The most common shared concern: the fear of losing money in a divorce.
And the most fascinating tidbit from the new wealthy worry research? Maybe this one: Almost 40 percent of folks worth between $10 million and $20 million spend considerable time worrying about “how to get ahead.” Hmmm. Aren’t they already ahead enough?
Qwest, the giant Denver-based phone company, is riding high these days. The telecom came before shareholders last Wednesday, at the company’s annual meeting, with nearly $600 million in 2006 profits — and a whopping share price hike – to happily report.
Who deserves the credit — and reward — for that stunning “performance”? Give the brass ring, says a grateful Qwest corporate board, to company CEO Dick Notebaert.
In 2006, the Minneapolis Star Tribune estimates, Notebaert took home $33 million. Of every $100 in net income that Qwest’s 38,000 employees generated last year, researchers at Institutional Shareholder Services calculate, $4.16 went to Notebaert.
In effect, this awesome reward proclaims to the world, Dick Notebaert last year made a 1,600-times greater contribution to his company’s success than the average Qwest worker.
And what exactly did Notebaert do to merit such a king-sized share of the fruits from Qwest’s success? Last week, at the Qwest annual meeting, shareholder Linda Baggus wanted an answer.
Baggus, a high school teacher, noted she makes $55,000 a year.
“How is the service that you render,” she asked CEO Notebaert, “so much more valuable than the service I render?”
Notebaert's reply offered no specifics. His pay, he explained, depends on his “performance” and reflects the realities of a “very competitive market” for executive talent.
Other shareholders at last week’s Qwest annual meeting had a more specific take on the elements behind the company’s profit upsurge.
Under Notebaert, pointed out one widow of a former Qwest employee, retirees have had their life insurance coverage slashed from “a full year's salary to $10,000.” Health care benefits have also been capped.
Notebaert did his executive best, at last week's Qwest annual meeting, to smooth over shareholder critiques and end the proceedings on an upbeat note.
“This is a great country,” he marveled in his concluding remarks, “where we can gather to agree and disagree.”
Agree and disagree, Notebaert might well have added, and walk off with a few dozen million a year.
Stat of the Week
The incomes of the richest 0.01 percent of U.S. taxpayers quadrupled, after inflation, between 1985 and 2005, to an average $14 million. Corporate executive earnings, estimate economists Robert Gordon and Ian Dew-Becker, make up about 20 percent of top 0.01 percent income.
Too Much is published by the Council on International and Public Affairs, a nonprofit research and education group founded in 1954.
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