When is "Too Much" Really Too Much?

Last week, I cheered for some Catholic nuns who are pressing Goldman Sachs on the issue of compensation excesses. The "how much is too much" issue seems to be gaining attention, although not enough.

In yesterday's New York Times, columnist Gretchen Morgenson interviewed a Texas money manager who argues that "you don't have to pay nosebleed compensation to attract good people."

The money manager, Albert Meyer, is a former professor of accounting and skilled at ferreting out the nuggets buried in proxy statements. Excessive compensation is a "red flag", he says: "Does the company exist for the benefit of shareholders or insiders?"

And stock-based compensation -- heralded by many as a way to ensure that executives work harder for their shareholders -- receives particular scorn: "Stock-based compensation plans are often nothing more than legalized front-running, insider trading and stock-watering all wrapped up in one package."

Mr. Meyer's money management firm ends up investing in many international companies whose corporate governance is "more respectful of shareholders" (Ms. Morgenson's phrase) than most American companies. Mr. Meyer is committed to doing the best possible job for his clients' capital, of course, but there is a significant social ethics component to his thinking too:

Middle-class America experienced a lost decade in their retirement accounts, whereas executives enjoyed record compensation packages through the subterfuge of stock option programs.... There has been a massive wealth transfer from middle-class America's retirement accounts to the bank accounts of the privileged few. The social consequences of this wealth transfer bear scrutiny.

Want an example of that wealth transfer? Turn to today's Times, and a David Carr article on Gannett.

Since I'm a journalism junkie, you don't have to tell me that running a business that has (among other properties) more than 80 small-city dailies (plus its iconic USA Today) is going to have trouble dealing with a major recession, declining circulation everywhere, and an advertising flight. Given that, you might say that CEO Craig Dubow has done a pretty good job: revenues down last year only marginally, operating cash flow up, debt down.

As Carr writes,

That's a testament to what the Street would call "aggressive cost management." But out in the rest of the world, we know that generally means dumping bodies overboard, and Gannett is a high achiever when it comes to downsizing. In the five years that Mr. Dubow has run the company, its work force has gone from 52,000 employees to just over 32,000.

Most of its employees are nonunion, so the leadership is free to manage as it sees fit, including telling some people their careers are over and telling the people that remain not to come to work.

Those Gannett employees who work for the community-news division, for example, will be taking a full week of (unpaid) furlough again this year. Lest they think that executives not be empathetic to their situation, they were told that the senior executives would each "be taking a reduction of salary that is equivalent to a week's furlough."

We may begin by musing whether a CEO is as likely to be living paycheck-to-paycheck as his lower-level employees.

And then there's the matter of the cash bonus of $1.75 million that Mr. Dubow received in 2010. Not to mention stock, options, and deferred compensation. Yeah, he's really going to have to cut back.

Carr notes that

In fact, the top six executives at the embattled publishing company would receive 2010 compensation packages of more than $28 million if the company does very well, which seems unlikely, but the symbolism remains.

The savings from two years of mandatory furloughs for the rest of Gannett employees: $33 million. Well, that didn't go very far, did it?

As one blogger on the Gannett Blog wrote, "Who says charity doesn't begin at home?"

Once again, we're seeing the rank-and-file getting screwed while the top 1% chuckle all the way to the bank. Why is there no more outrage? Could it be because we have systematically seen unions bashed and broken? Who is left who will speak for the employees? Or are we all going to buy into the plutocratic theory that if you're poor, it's your own damn fault?