The Rich Get RIcher, the Poor Get Eaten Part 2

Today the AP reported that "The number of people around the world with at least $1 million in assets passed 10 million for the first time last year, according to a new report. And their bank accounts are growing even faster."

All you people bemoaning the end of the global economy must be wrong. On the other hand, the subset who are bemoaning the end of civilization are correct.

"The rarefied group of the superrich — those with at least $30 million in assets — got richer, too. There were 103,000 of them around the world last year, 9 percent more than the year before, and their wealth grew by nearly 15 percent."

So, their wealth grew by 15% in one year. Let's look at the average Joe.

Hey, Joe. Tell me about yourself.

I live in the U.S. and my real name is Median Household Income.

So, how are you doing?

Well, in 1965 I was making about $30k a year. By 2005, that grew to $45k.

Over forty years, you gained about $15k. That's about 1% a year.

Doesn't see like much when you put in in those terms.

I hate to be discouraging, but the average inflation rate over that same period of time is 4% a year.

Meaning?

You've lost a bundle.

So, the richest folks worldwide gain 10% a year. In the U.S., the country which touts its self as giving equal rights for all, the average Joe (thanks Joe), loses 3% every year against inflation. Joe loves to cruise in his car. In 1965, gas was around 35 cents a gallon and Joe was earning about $100 a day. Today Joe earns $180 a day, but a gallon of gas is around $4.

The more you know...

United Airlines Cuts over 900 jobs

I guess this would be Part Two of the on going saga of maintaining insanely high CEO pay while laying off the people that actually make the company work. (see Part One here)

``We must take the difficult but necessary step to reduce the number of people we have to run our operation,'' said United Airlines spokeswoman Megan McCarthy.

A play on words. They are not reducing the number of people running the operation (CEOs, COOs, CFOs) thereby reducing their combined salaries and benefits which cost the company over $100 million each year. They are reducing their capacity to serve. This will ultimately reduce their revenue more and so begins the downward spiral while the execs continue to draw absurd amounts of money from the shrinking revenue stream.

Why does anybody buy this?

Here's Bill Moyers on the subject:

The score is in: CEOs make more money as the rest of bite the bullet

The Associate Press has followed our lead and has begun investigating CEO pay and, like this blog, assembling the numbers. Here are the articles:

AP IMPACT: CEO pay chugs up in '07 despite economy

They must be reading this blog because they went for the specific thing I've been doing. Calling our CEOs of companies in decline:

Fixer-up: New CEOs at troubled companies earn top pay in '07

And lists like here:

List of highest-paid CEOs in 2007

Some of the "highlights":

The AP review of compensation for the heads of companies in the Standard & Poor's 500 index finds the median pay package added up to nearly $8.4 million.

At the top of the AP list: John Thain, who took the reins of Merrill Lynch on Dec. 1, 2007. His $83 million pay package was supercharged by a signing bonus and other enticements that lured him from the New York Stock Exchange to lead the investment bank as it was suffering its worst-ever losses.

FYI from Cannibal Planet, ole Johnny Boy has taken Merrill Lynch from a high of $62/share when he took the helm of company to $38/share today. Nice pay for shoddy work.

The AP even took snippets from my report on GM! You can read my more extensive report here.

But I like this little tidbit I hadn't found:

AP analysis found that CEO pay rose and fell regardless of the direction of a company's stock price or profits.

Take KB Home, battered by the subprime lending crisis and the weak housing market. According to the Los Angeles-based homebuilder's proxy statement, CEO Jeffrey Mezger is entitled to a cash bonus based on a percentage of KB's profit.

The problem was there was no profit. KB Home lost almost $930 million in 2007 and its stock lost 60 percent of its value. But Mezger still made $24.4 million, as valued by the AP, including a $6 million cash bonus.

Some good reporting by AP. I hope the masses notice that there's something going on here.

It's a theme party...no taxes

Sticking with the idea that many of the wealthiest Americans don't pay their share or really support our country at all:

We have an article from the least likely of investigative sources USA Today.

"Death is inevitable, but federal income taxes aren't for an increased number of high-income earners.

New IRS statistics show 7,389 federal tax returns with $200,000 or more in adjusted gross income reported no federal income taxes in 2005."

Note this data is old, but given that I pulled this from USA Today, I'm surprised they are reporting on this action of cannibalistic capitalism at all.

Read my oil slick, no new taxes

Oil company executives have been citing that petroleum companies have some of the lowest profit margins of any industry. Exxon Mobil's spokesman said that "proposals to increase taxes on the industry would discourage the sustained investments needed to safeguard U.S. energy security and are not in the interests of American consumers".

I think the interests of the American consumer is simple - cheaper oil.

So let's look at the Exxon Mobil 2007 profit margin and see if we can squeeze some extra oil from the fat:
H R Cramer Vice President $8.4 million
M E Foster Vice President $13.5 million
D D Humphreys Treasurer/CFO $9.1 million
S J Palmisano CEO $46.6 million
R W Tillerson CEO $26.5 million

You thought I was going to look at company profits? Not after economist and oil industry cheerleader Daniel North pointed out that "Exxon Mobil and other companies are not nameless entities ... they employ lots of people"

And, I might add, the people at the top have big appetites.

What shall we do now?

No recession, but wait, we are all stars

Today the Treasury Department announced that the US is not in a recession.

'I don't think we're in a recession and the data suggests that we're not,' Treasury Assistant Secretary for Economic Policy Phillip Swagel said in a press briefing today.

The GDP continues to grow, investment and orders for goods continues to expand. Retail sales are positive.

Why are so many people being laid off? Why are wages for most Americans stagnated or decreasing against rising costs?

It is simple. The rich are getting richer. With paring down the workforce, lowering wages and increasing the workload on the remaining employees, management can carve a bigger piece of the pie for themselves.

We are not in a recession. So, go "celebrate" the "good" news.

Remember, we're all stars now in the dope show.

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When will the air travel unions wake up?

The bell is tolling for thee
airline employee.

This is going to be quick. Not because it is without great merit, but because I have to work for a living.

" Continental Airlines Inc. will cut 3,000 jobs and slash its jet fleet by 18 percent, becoming the fourth big U.S. carrier to shrink operations because of soaring fuel prices."

What's new? With airline companies going bankrupt and many others cutting their routes (read employees), why not Continental?

Hmmm. Why not? Maybe because they might be more profitable if their executives did not take such absurd salaries. I posted about the former CEO Gordon Bethune who took a lump sum payment of $22 million in 2004 while driving the stock price from $17/share to $9/share.
It didn't end with Gordie. Just for a taste:
Mr James E Compton, Divisional Executive VP $4.3 million
Lawrence W Kellner , CEO/Chairman $9.1 million
Henry L Meyer III, President/Director $18.3 million
Mr Jeffrey J Misner, Executive VP/CFO $4.7 million
Mark J Moran, Divisional Executive VP $4.5 million
Oscar Munoz, Executive VP/CFO $7.9 million
Jeffery A Smisek, President/Director $7.9 million

There are many more in Continental making millions while the company struggles. Way too many for a company about to end thousands of living wage jobs. Ruining thousands of lives and driving the over all economy down further.

That's my real beef. Living wage jobs do the most to stimulate our economy. A large middle class creates a stable system. We spend a larger percentage of our income while these multimillionaires just find ways to make more money off their money. Which means they are expecting someone else to do the work of earning them money. Can you say slave class on the horizon? That's where we are headed.

By consolidating more and more of the countries wealth in the hands of fewer and fewer people, less cars get bought (notice all the auto plant closures), less travel happens (notice the airlines folding), consumer index goes down...need I go on?

Union leaders wake up! There are cannibals about and they need to be stopped!

They can tell the media that it is the rising oil prices, but we already pointed out that the oil companies are taking us for a ride. Our alternative power system could be already providing us with the power we need if we hadn't subsidized oil and nuclear for so long.

I'm not saying people in administrative roles shouldn't be compensated, but they shouldn't make 1000 times what their base workforce earns AND they definitely shouldn't make these obscene amounts when they fail to make the company profitable!

That feeling in your backside is not an impending massage. If it is not hurting now, just wait till the end of the lubricating effects of the oil.

United Airlines Cuts over 1400 jobs

Remember Glenn "I make $10 million a year for screwing up" Titlon? Today that CEO together with COO John "I make $5 million a year for screwing up" Tague called his employees with the bad news. Oooo, a personal call. Trying to make the whole cannibal experience seem more humane.

John: "Thanks, Glenn. Earlier this year, we laid out a five-point plan aimed at building a United fit to win in today’s reality."

I bet this doesn't involve cutting their salaries!

1. "New sources of revenue" like charging for that second bag. That makes me want to fly more, not!
2. "Reducing capacity". Do you here that sucking sound?
3. "Retire old aircraft". Sounds good on the surface, but it limits there one profitable division: International travel.
4. "Elimination of Ted product." Isn't that their economy division?
5. "Reducing our workforce." i.e. screw yall while we still take home the bank.

Full text here. (need NYT login)

Like the dilemma with GM, we can solve this another way and provide better service. After all, the airlines are not a place for executives to just pad their pockets. Let's cut some of the least profitable routes, but keep all the employees so the quality of service goes up. More employees per customer usually equates to quicker, friendlier service. Friendlier because the workforce is not overstretched as it has been.

I can hear Glenn and his BFF John saying, "but where, oh where will the money come from?"

Well, their are 21 top executives making millions with tens of millions in stock options, like:
Frederic F Brace, Executive VP/CFO $4.9 million a year
Paul R Lovejoy, Senior VP $2.4 million a year
Rosemary Moore, Senior VP $2.4 million a year

With Cannibal Planet math, we let this misguided execs still take home $250k and keep their options. The rest rolls in to the salaries for the workforce they so readily wanted to fire.

That's almost $100 million a year. Wow! That is almost exactly the amount they need to keep 2000 people on the workforce at a living wage!

Hold it, that means UAL could actually help turn this nation's economy around by hiring 400 people, providing better service, thereby improving the brand, and maybe, just maybe my bags will arrive with me this time.

Maybe the workforce will hire me as a consultant?

Hey yall, Crash into Me, for all those UAL employees

Monster Trucks Shut Down!

Today GM announced the closing of four truck plants. They are considering ending production on the Hummer line of vehicle. GM CEO Rick Wagoner, cites that gasoline going above $4 a gallon represents ``a structural change, not just a cyclical change.'' Is this guy brilliant? I mean do you make vehicles just because people might buy them? Or do you look at the global economic situation?

Almost every country on the planet is full of super efficient small vehicles. Even the trucks are micro-sized, but for some feat of stupidity, CEO's of American car companies continued to make monster sized trucks with lower and lower efficiency until their Rosemary's Baby, the Hummer, was born. For me, this is akin to selling crack or heroin. People will buy it, but is it good for them?

Well, the dope dealer just got busted by Officer Reality.
The plant closings will mean the loss of almost 8,000 jobs.

But I know Cannibal Planet dwellers are really interested in Rick Wagoner's situation.
How many babies does this guy eat for breakfast while mismanaging one of the bedrock industries of America? What does he get for failing to show a profit for four years and driving the stock price down from $54/share in 2004 to $17 today?

$14,415,914

That's each year. So over the four years of driving a losing Hummer to the car lot of oblivion, he made $50 million. Fully a criminal cannibal.

In Cannibal Planet style, let's save these 8,000 jobs.
Can we do it?
Yes we can!

Every company has a bunch of executives that are paid way too much money. GM is no different. Here are some of their annual compensations:
Gary Cowger DVP $5 million
Fred Hendersen COO $7.6 million
Robert Lutz DVC $6.9 million
Thomas Stephens EVP $4.9 million

There are twenty of these guys and two gals making an average of $6 million a year. More if you go down the feed chain, but let's stay at the top.

Along with the Rick's pick, that's $146 million per year. Let's par that down to a more humane, and representative of their poor work, $250k per year. That leaves over $14o million. Over the 4 years of poor performance that is $560 million. Could a half a billion dollars be enough to transition these 8,000 workers into GM jobs making micro and electric cars? I think so. Regardless, saving $140 million a year could save over 2000 living wage jobs.

Can I get my consulting fee now?

BTW Hummer's suck. Notice the Jeep passing the Hummer in the second shot.

Oil Company CEOs hit hard by the economy

Yeah, they are hit hard by the amount of money they are hauling home. They need to design a bigger Hummer with a trailer to fit all their cash.

The five year salaries of the top 30 Oil Executives totals $2,250 million. That is more than 20,000 average American citizens.

You think that might be criminal in the face of the job and economic situation we are in?

Wait. There is more.

The oil stock these 30 dudes (Yes, they are all dudes. I checked.) is worth $5,737 million (I could write it in billions, but it loses the drama).

Let's do some Cannibal Planet math. If we waved the magic wand of nationalizing oil wealth of only these 30 guys, we could do an Oprah, but with solar panels. Remember, this is just the oil stock holdings of 30 guys. Not their 3-5 houses, their money market portfolios, hedge funds, other real estate holdings, nor their pure bred Arabian Horses. Just the oil stock turned over to all Americans.

With that money, my buddy Tom could put enough panels on roofs to power 230,000 households.

Talk about a quick road to energy independence!

For scoring low, you still get to fly high

For the exclusive club of airline CEOs, performance has nothing to do with pay. First off, all these guys qualify as cannibals because they take home over a million in salary, bonuses, and exercised options EACH YEAR. What I'd like to summarize here is the performance from these high flying fancy boys versus how much they wrangle in all compensation including options not yet exercised.

The score card:

US Airways. CEO Douglas Parker $26 million in 2007
Stock price fell from $61/share in May 2007 to a virtual backruptcy of $4/share today.

Continental Airlines. CEO Gordon Bethune $22 million in 2004
under his helm stock price fell from $17/share in January 2004 to $9/share in January 2005

United Airlines. CEO Glenn Tilton $10 million in 2007
Stock price fell from $50/share in January 2007 to $7/share today.

Skywest. CEO Jerry C. Atkin $9.9 million in 2007
Stock price fell from $28/share in January 2007 to $15/share today.

American Airlines. CEO Gerard Arpey $7.9 million in 2007
Stock price fell from $40/share in January 2007 to $13/share in January 2008

JetBlue. CEO David Barger $5.2 million in 2007
Stock price fell from $17/share in January 2007 to under $4/share today.

Mesa Airlines. CEO Jonathan G Ornstein $4.1 million in 2007
Stock price fell from $8/share in January 2007 to a virtual backruptcy of $.72/share today. (that's 72 cents!)

Delta Airlines. CEO Richard Anderson $3.3 million in 2007
Stock price fell from $21/share in April 2007 to a virtual backruptcy of $6/share today.

Southwest. CEO Gary C. Kelly $3.1 million in 2007
Stock price nudged down from $16/share in January 2007 to $13/share today.

Northwest Airlines. CEO Douglas M. Steenland $2.6 million in 2007
Stock price fell from $26/share in May 2007 to a virtual backruptcy of $7/share today.

Because Mesa (via Go! Airlines) wiped out Aloha, Hawaiian is gaining because of little, and soon no, competition:

Hawaiian Airlines. CEO Mark B. Dunkerley $2.7 million in 2007
Stock PRICES GAINED from $3/share in March of 2007 to $7/share today.

You can say these guys are doing the best they can in a downturning economy, but do they really have to make these obscene amounts of money while they drive their companies off the cliff?

Each one of these personal payouts could be downsized and save not dozens, but hundreds, and in the case of some, thousands of living wage jobs.

Gary Kelly, CEO of Southwest, is one of the lowest compensated in the bunch and has made some of the smartest decisions, like getting a fixed price on aircraft fuel for the next couple of years.

On the other hand, Douggie Parker of US Airways, made truly the worst decisions in the industry, and received the highest compensation.



Sooooo...bigger compensation does not equal better performance....laid out clearly here on Cannibal Planet.

Crash and burn baby.