Researchers at the Institute for Policy Studies, a top progressive think tank based in Washington, D.C., have been publishing an annual report on executive pay ever since 1994. The latest edition of this Executive Excess series has just appeared.

The report's essential verdict? On executive pay, over the last year, nothing has changed — and everything has changed. How can that be? We sort out that riddle in this week's Too Much.

Also this week, we go deep in the heart of Texas history, for a look back at the “Big Rich” who changed a state, a nation, and maybe even a world.

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Rep. Susan Davis, a San Diego Democrat, held the last of her congressional summer recess town halls on a sunny Saturday a week before Labor Day. Anti-health care reform “teabaggers,” as expected, showed up in force. The unexpected: So did Billionaires for WealthCare, the new national network of merry pranksters dedicated to exposing the wealthy who profit so immensely from the health care status quo. Outfitted in tuxedos and evening gowns — and carrying signs that read “Survival of the Richest!” — the energetic Billionaires for WealthCare contingent “cheered on” the anti-healthcare protesters. Exclaimed one “billionaire”: “Abolish the VA! It's socialized medicine.“ Shouted another: “If God loved the poor people, he wouldn’t let them get sick.”

Just how immensely are America’s already wealthy profiting from health care as is? Staff for Rep. Henry Waxman’s House Energy and Commerce Committee are now poring over executive pay data Waxman requested in August from 52 national health insurers. The data, due in last Friday, will show how many execs in the health insurance industry are making at least $500,000 a year. Wendell Potter, a former Cigna VP turned whistle-blower, expects the answer “will surprise policyholders, because there's not a great deal of awareness of how much these executives do make.” Up to now, the only insurance exec pay data available has come from the annual reports publicly traded companies have to file on the pay that goes to their top five executives. The Corporate Library, from that data, last month counted 38 health insurer execs who took home at least $5 million in 2008, but called that total “just the tip of the iceberg.”

The biggest executive pay “iceberg” in health care actually floats elsewhere — in the pharmaceutical industry. But don’t go asking New York Mayor Michael Bloomberg to get up on deck and play lookout. The billionaire Bloomberg seems to have a tad of trouble recognizing overly generous pay packages. Last month, on his radio show, the mayor opined that the “last time I checked” pharmaceutical “executives don't make a lot of money.” In fact, Abbott CEO Miles White took home $28.3 million last year. In the same neighborhood: Bristol-Myers Squibb CEO Jim Cornelius, with $21.7 million, and Johnson & Johnson’s Bill Weldon with another $23 million. Bloomberg is currently running for re-election — he has spent $36 million so far this year on his campaign — and an aide must have read him the riot act during the commercial break that followed the mayor’s Big Pharma pay spiel. After the break, Bloomberg announced that he had just “looked up” the figures and found that some drug industry CEOs are “indeed making a lot of money.” But that’s okay with the mayor. As he put it on his radio show last March: “We love the rich people.”

Between that old rock and a hard place. That’s where thousands of wealthy Americans who’ve been stashing dollars in secret Swiss bank accounts are not sitting. The IRS is giving Americans with secret accounts at Swiss banking giant UBS until September 23 to come clean on their tax cheating. If they do, the IRS will waive jail time — and just collect a tax penalty. But these tax cheats, if they do come clean, could face considerable additional penalties — in divorce court. Deep-pocket hubbies, explains superstar New York divorce lawyer Raoul Lionel, regularly use secret Swiss accounts to hide fortunes from their exes. The exposing of these hidden fortunes could end up reopening divorce settlements that go back three decades. The reason? In most states, reports Time, divorce proceedings “have no statute of limitations.”

Three of the five political parties contesting the upcoming September 27 national election in Germany are vowing to raise taxes on the rich if voters give them the chance. The Social Democrats, Germany’s second-largest party, want to see a new 47 percent top tax rate on the super wealthy — and a 0.5 percent anti-speculation tax on every big stock trade. The Greens want to see income in Germany’s top bracket taxed at 45 percent, and the new Left Party is seeking a 53 percent top rate. Germany’s biggest party, the Christian Democrats, wants the nation’s highest regular income tax rate kept at 42 percent. The current top federal tax rate in the United States: 35 percent.

Quote of the Week

“The 20 U.S. financial firms that have received the most bailout dollars from taxpayers awarded their top five executive officers, in the three years through 2008, pay packages worth a combined $3.2 billion. These 100 financial executives, on their way to driving the U.S. economy off a cliff, averaged $32 million each. One hundred U.S. workers making the 2008 annual average wage would have to labor over 1,000 years to make as much as these 100 executives made in three.”
America’s Bailout Barons, the latest Institute for Policy Studies Executive Excess report, September 2, 2009

New Wisdom
on Wealth

Dr. Stephen Bezruchka, The effect of economic recession on population health, Canadian Medical Association Journal, August 31, 2009. A new analysis from an outspoken doctor who sees inequality as our “biggest contributor to ill health.”

David Moberg, How Could Obama Reduce Economic Inequality? In These Times, September 1, 2009. America's top labor reporter explains why the nation needs to “use legislative and cultural pressure to restrain top incomes.”

Patrick Wintour, Gordon Brown hints at move towards imposing cap on city bonuses, Guardian, September 1, 2009. Britain's prime minister, under increasing populist pressure, now seems to be willing to consider real pay limits.

Executive Pay: A New Progressive Appraisal

Top U.S. corporate executives, the Institute for Policy Studies reported last week, are still making hundreds of times more than average U.S. workers, just as they have since the mid 1990s. To be exact: In 2008, top execs took home 319 times the average U.S. annual worker wage.

Three decades ago, Institute analysts note in the newly released 2009 edition of their annual Executive Excess report, top execs seldom took home more than 30 times average worker pay.

Executive pay in the United States, in short, remains painfully excessive. That much hasn’t changed — at all — over the last year. What has changed? This year, for the first time ever, most Americans now seem to understand the pain — and danger — that excessive executive pay invariably produces.

Credit that understanding to the global economic meltdown that erupted last September. Super-sized rewards for executives, the new IPS report points out, created the incentives for the executive “recklessness that brought the United States — and the world — to the brink of economic cataclysm.” And most Americans know it, from the President on down.

Unfortunately, the report shows, this new awareness hasn’t translated into any significant action to limit the rewards at America’s economic summit.

“The denizens of our nation’s executive suites,” as IPS analyst Sarah Anderson puts it, “are still going about their business with the same visions of compensation sugarplums that danced in their heads before last September.”

In fact, adds Anderson, America’s financial industry kingpins have essentially turned last year’s high finance meltdown into a springboard to more windfalls.

The IPS report spells out the incredible stats: The 20 financial industry giants that have received the most bailout dollars from taxpayers have together laid off 160,000 workers since the beginning of last year. In 2008, the top 100 executives at these 20 firms together collected $795.5 million in compensation.

And the gravy train continues. Early in 2009, with financial industry share prices near record lows, Wall Street’s biggest banks began stuffing the pockets of their power suits with millions of stock options. These options give executives the right to buy company shares, a few years down the road, at the early 2009 bargain-basement price.

Financial industry share prices, thanks to bailout dollars from U.S. taxpayers, have already started rising. These higher share prices mean that dozens of top financial industry execs have already this year seen their personal portfolios jump by multiple millions — and that's without counting any salary or bonuses.

This past January, for instance, American Express CEO Ken Chenault pocketed a new option grant that gives him the right to buy nearly 1.2 million shares at just $16.71 per share. Amex shares ended August trading near $34, around half the credit card giant’s highest share price in 2007 before the meltdown began. Chenault stands to make, from his 2009 options alone, over $20 million.

At other firms, a similar story. At JPMorgan Chase, four top executives have watched their 2009 options jump a combined $21.6 million. At PNC, five executives are looking at $18.5 million in gains on their 2009 options.

In all these companies, meanwhile, ordinary shareholders who hold the same shares they held back in 2007 are still sitting deeply in the red. At PNC, the shares these shareholders hold are trading 35.7 percent off their 2007 high.

In effect, notes the new IPS report, America’s top banks have invented “a perpetual upward-motion machine for executive compensation.”

If share prices should sink, no problem for executives. Boards of directors simply shell out to them new batches of stock options, all exercisable at the current low share price. And if share prices should sink even lower the next year, explains Executive Excess 2009, boards merely hand out still more option “incentives,” all exercisable at an even lower price.

“Boards,” the IPS study sums up, “just keep lowering the ‘performance’ bar until they find a height executives can jump over.”

The bottom line in all this? Says Sarah Anderson, the Executive Excess 2009 lead author: “America’s executive pay bubble remains un-popped.”

Congress and the White House could do the popping, note Anderson and co-authors John Cavanagh, Chuck Collins, and Too Much editor Sam Pizzigati.

But both Congress and the White House have swallowed Wall Street’s “basic operating assumptions” — “that ‘performance’ justifies whatever windfalls may come an executive’s way, that the ‘incentives’ for misbehavior these windfalls create need not be regulated, that executives need never share the rewards that marketplace ‘success’ creates.”

Lawmakers and the Obama administration, having swallowed this Wall Street perspective, remain fixated on reforms that help shareholders deny windfalls to executives who pocket mammoth rewards while share prices plummet. But the CEO pay problem we face today goes far beyond windfalls for poor performers.

“Our problem has become the mammoth rewards, in and of themselves,” observes study co-author Collins. “Outrageously high rewards give execs an incentive to behave outrageously. They downsize. They outsource. They cook their books. They eventually, if left on their own, crash the global economy.”

A few bills now before Congress, the IPS Executive Excess 2009 study notes, do offer some tantalizing hints of what real executive pay reform could look like.

One bill, sponsored by Rep. Jan Schakowsky of Illinois, would extend tax breaks and federal contract bidding preferences to companies that meet benchmarks for good corporate behavior. Among the benchmarks: executive pay that does not exceed worker pay by more than 100 times.

This legislation’s basic message to Corporate America: If you overpay your CEO, you’re not going to get taxpayer dollars.

Nothing that has happened within the U.S. — or global — economy over recent years, the new IPS study sums up, justifies the enormous current pay gap between executives and their workers.

“High-ranking executives,” the study notes, “have neither become ‘smarter’ than their workers over the last generation or more ‘productive.’ They have, on the other hand, become more powerful.”

The time has come for lawmakers and the White House to challenge that power.

“Until they do,” IPS concludes, “reckless executive behavior will continue to threaten the economic security — and decency — that Americans hold dear.”

Big State, Big Rich, Big Legacy

Bryan Burrough, The Big Rich: The Rise and Fall of the Greatest Texas Oil Fortunes. The Penguin Press, 2009. 466 pp.

“America in 1950,” former Wall Street Journal reporter Bryan Burrough writes in this his latest book of business history, “had not a single leading politician who could be termed conservative by today's standards.”

Imagine that. Not one national politico who demonized government and exalted the wealthy. Today, of course, such figures dominate, even dictate, our political discourse.

So what happened between then and now? Essentially, suggests author Burrough, “Texas Oil” happened. The vast fortunes that gushed from the oil fields of Texas, he argues rather convincingly, transformed American politics.

“In a very real sense,” Burrough posits, “the influence of Texas conservatives in America today — in fact, the entire ‘Texanization’ of right-wing politics that brought figures such as George W. Bush and Tom DeLay to national prominence — can be traced to forces set into motion by restive Texas oilmen.”

Those oilmen had struck it fabulously rich in the early 1930s, a span of a few years that witnessed what Burrough calls “perhaps the largest creation of individual wealth between the Gilded Age and the Internet boom of the 1990s.”

The four biggest beneficiaries from this “spigot of cash” — Roy Cullen, Clint Murchison, Sid Richardson, and H. L. Hunt — would go on to take turns, over coming decades, as “America's wealthiest man.”

Other Texan oilmen did quite well, too. In 1957, only 76 Americans held fortunes worth at least $75 million. Over a third of these originated their fortunes to the oil industry, and most of that third came from Texas.

This Texas “Big Rich,” notes Burrough, “would channel tens of millions of dollars into new conservative causes, bankrolling everything from mainstream Republican think tanks to Senator Joseph McCarthy’s red-baiting campaigns.”

Big Oil even birthed the intellectual godfather of conservatism’s 20th century comeback, William F. Buckley, the founder of the right-wing’s most influential journal. Buckley’s daddy made his fortune in crude.

The Texas Big Rich actually divided politically into two camps. One would be virulently racist — and virulently anti-Semitic, anti-New Deal, and anti-communist as well. The other would prove far more tolerant — of any politicians who could help oilmen keep their money and make lots more of it.

Lyndon Johnson, elected by oil money to the U.S. Senate in 1948, would be the first pol to realize how lucrative this helpfulness could be. By the mid 1950s politicians from across the United States, not just Texas, would be beating a path to Texas Oil doors.

Texas Oil would get plenty in return. After World War II, lawmakers partial to petroleum would bounce out of office a federal regulator intent on limiting the price of the natural gas that had just begun flowing, out of Texas, via pipeline. Between 1948 and 1955, unregulated natural gas prices would almost double.

Northern consumers cried foul, and the courts soon agreed. In retaliation, Big Rich-friendly lawmakers passed legislation that, in effect, nullified the pro-consumer court action.

But President Dwight Eisenhower vetoed the bill. The Big Rich, that veto made plain, had overreached. They had become politically radioactive. Their politics reeked of a brazen self-interest that outraged public and press alike.

The Big Rich, to prevail politically, needed more than powerful pols in their pockets. They needed a public bought into their fiercely anti-“Big Government” world view. That they couldn't afford to purchase — and, in 1950s America, they could never find enough other super rich to help them close the deal.

The reason? Outside Big Oil, the mid-20th century United States had almost no super rich at all.

In 1954, for instance, only 201 Americans reported over $1 million in income to the IRS. Oilman H.L. Hunt that year claimed to have an after-tax income of $54 million. If he did, his after-tax income equaled 30 percent of the entire after-tax income of America's 1954 millionaires.

In the 1950s and into the 1960s, running corporations and banks could make you rich but not super rich. What enabled Texas oilmen to reach that elusive super-rich status? They enjoyed perhaps the most lucrative tax loophole of all time, the oil depletion allowance.

With this magical allowance, historian Robert Bryce has noted, an oilman who spent $100,000 drilling a well that annually produced $1 million a year worth of oil could, over ten years time, deduct $2.75 million off his taxable income.

Congress wouldn’t get around to ending this sweet deal until 1975. But, by then, oilmen really didn’t need it. The top federal income tax rate had already dropped from its mid-century 91 percent peak and would drop still more, a few years later, after Ronald Reagan’s 1980 election.

The United States, in quick order, would once again be a nurturing place for all grand fortune. In this new milieu, the offspring of the bigger-than-life original Texas oil tycoons would become “mere rich people.”

“It’s as if,” says author Burrough, “the knighted nobles have been replaced by a faceless plutocracy.”

That faceless plutocracy owes the Big Rich — big-time. In conservatism’s darkest hour, they fanned the flame that lit the way back to an inequality that America, for a brief moment in time, seemed eager to extinguish.

Stat of the Week

The 20 financial industry giants that have received the most bailout dollars from U.S. taxpayers have together laid off 160,000 workers since the beginning of last year. In 2008, notes the Institute for Policy Studies, the top 100 executives at these 20 firms together collected $795.5 million in compensation.

Too Much is published by the Council on International and Public Affairs, a nonprofit research and education group founded in 1954. Office: Suite 3C, 777 United Nations Plaza, New York, NY 10017. E-mail: editor@toomuchonline.org.