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The
Corporate Reform Weekly
Vol
V, #31 September 5, 2006
In
This Issue…
Executive
Compensation
1. “Executive Excess”
report finds defense and oil CEOs making out like bandits
Government
Contracting
2. Most Katrina contracts
awarded without full competition, report finds
Scandal
3.
BP under scrutiny for trading irregularities
4. Schering-Plough pays $435
million, pleads guilty to marketing, Medicare abuse
This
Week’s Action Item:
Help
Save the Corporate Reform Weekly
Executive
Compensation
1.
“Executive Excess” report finds defense and oil CEOs making out like bandits
Though 2005
was yet another banner year for corporate CEO salaries, oil and defense
industry executives did best of all, according to “Executive Excess 2006,” a
report released last week by United for a Fair Economy and the Institute for
Policy Studies.
Overall, the
ratio of CEO pay to average worker pay is now 411-to-1, up from 107-to-1 in
1990 and 42-to-1 in 1980. Average CEO pay at large U.S. firms is now $11.6
million per year. According to the report, if the minimum wage had risen at the
same pace as CEO pay since 1990, it would be worth $22.61 today, rather than
the actual $5.15.
CEOs in the
oil sector are doing especially well. With gasoline prices topping $3 a gallon,
The top 15 U.S. oil CEOs received a 50 percent increase in pay since 2004 with
pay averaging $32.7 million, about three times the average CEO salary in the
sample. The biggest winner of all was William Greehey of Valero Energy, who
pocketed $95.2 million in 2005. The report notes: “The average
construction worker at an energy company would have to work 4,279 years to
equal what Greehey collected last year.”
Also cashing
in big were Occidental Petroleum’s Ray R. Irani, at $84 million and outgoing
ExxonMobil CEO Lee Raymond at $69.7 million. By contrast, foreign oil company
CEOs earned much less. BP and Royal Dutch Shell paid their CEOs $5.6 million
and $4.1 million, respectively. In almost all other industrialized countries,
average CEO-to-worker pay ratios rarely top 25-to-1.
Defense
contractors also made out extremely well. According to the report, CEOs at the
top 34 military contractors have seen their pay double since 9/11. The report
notes: “In 2005, defense industry CEOs walked off with 44 times more pay than
military generals with 20 years experience, and 308 times more than Army
privates.”
Leading the
way: United Technologies’ George David, who has taken home $200 million in pay
since 9/11, despite investigations into the company’s Black Hawk helicopters.
The report also highlights the compensation of Halliburton CEO David Lesar, who
“made $26.6 million last year, despite a continuing stream of scandals related
to the company’s work in Iraq, the latest being reports that the contractor
infected soldiers with contaminated wastewater. While Halliburton’s future Iraq
work is uncertain, Lesar will enjoy the nearly $50 million he has made since
the ‘War on Terror’ began.”
The report
recommends giving corporate stakeholders more power to hold CEO salaries down.
Though the Securities and Exchange Commission approved compensation disclosure
rules earlier this year, report co-author and United for a Fair Economy
director Chuck Collins said in a release that such disclosure amounts to very
little.
“Transparency
has been ineffective in curtailing CEO pay,” Collins said. “The root problem is
an imbalance of power. We need to give more clout to other stakeholders, such
as requiring shareholder approval of executive pay and retirement packages, as
is now done in Britain.”
For the full
report, see:
http://www.faireconomy.org/press/2006/ee06_ceos_pocket_the_spoils_preview.html
See also:
“Executive
Privileges,” by Lee Drutman for TomPaine.com: http://www.tompaine.com/articles/2006/08/11/executive_privileges.php
Government
Contracting
2.
Most Katrina contracts awarded without full competition, report finds
One year after
Hurricane Katrina ravaged New Orleans, a new report finds that the Bush
administration’s approach to corporate contracting has ravaged any pretensions
to competition.
According to a
report by Democrats on the House Government Reform Committee, of the $10.6
billion in contracts awarded post-Katrina, $7.4 billion (about 70 percent) were
handed out with limited or no competition.
The report
also documents 19 contracts, collectively worth $8.75 billion that “that have
experienced significant overcharges, wasteful spending, or mismanagement.” The
report cites “numerous instances of double-billing by contractors and cases of
trailers meant as emergency housing sitting empty in Arkansas.”
The report
calls mismanagement widespread: “Mistakes were made in virtually every step of
the contracting process: from pre-contract planning through contract award and
oversight. Compounding this problem, there were not enough trained contract
officials to oversee contract spending in the Gulf Coast.”
"It is
apparent that taxpayers and the residents of the Gulf Coast are paying a steep
price for the failure to stop waste, fraud and abuse in federal
contracting," Rep. Henry Waxman (D-Calif.,) the top Democrat on the House
Government Reform, told reporters.
For more
details on the report, see: “http://www.democrats.reform.house.gov/story.asp?ID=1097”
See also:
“Democrats cite no-bid Katrina contracts,” By HOPE YEN, Associated Press:
“Beyond
Halliburton,” by Lee Drutman for TomPaine.com: http://www.tompaine.com/articles/2006/05/22/beyond_halliburton.php
Scandal
3.
BP under scrutiny for trading irregularities
Federal
investigators are looking into alleged oil and gasoline trading irregularities
at oil giant BP, adding to troubles at a company already recently beleaguered
by an oil pipeline shutdown in Alaska.
Both the
Justice Department and the Commodities Futures Trading Commission are concerned
that BP may have engaged in manipulation of over-the-counter crude oil prices
in 2003 and 2004 and also gasoline prices in 2002. Investigators say other
trading companies could be involved as well.
BP has an
aggressive trading operation, which last year accounted for 13 percent of
company profits, and this is not the first time that BP has come under scrutiny
for its trading practices. In 2003, BP paid $2.5 million in fines to the New
York Mercantile Exchange to settle charges of oil trading violations. The
company also paid $3 million to settle charges of false trading during the
California energy crisis of 2000 and 2001.
For more, see:
“U.S. Agencies Open Another Investigation Into Energy Trading at BP,” By JAD MOUAWAD:
http://www.nytimes.com/2006/08/30/business/worldbusiness/30oil.html?ei=5088&en=ad1fd8a8fc073e6b&ex=1314590400&partner=rssnyt&emc=rss&pagewanted=print
4. Schering-Plough pays $435
million, pleads guilty to marketing, Medicare abuse
Drug maker
Schering-Plough last week agreed to pay $435 million and plead guilty to
conspiracy charges to end a federal investigation into charges that it
overcharged Medicaid for some drugs and marketed its drugs for unapproved uses.
Federal
investigators said they uncovered evidence that Schering-Plough was marketing
drugs for uses not approved by FDA regulators.
Investigators
also alleged that the company was providing misleading information to the
government about such drugs as Claritin RediTabs so that the company could get
business from HMOs. According to investigators, Schering reported a false best
price to the Health Care Financing Administration, which allowed it to avoid
paying millions of dollars in Medicaid rebates.
As part of the
settlement, Schering will agree to improve the way it monitors sales,
marketing, and drug pricing.
For more, see:
“Schering-Plough Agrees To Plead Guilty, Pay Fine,” By Denise Lavoie,
Associated Press: http://www.washingtonpost.com/wp-dyn/content/article/2006/08/29/AR2006082901799.html
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Week’s Action Item:
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