Pension disparities draw flack
retirement packages of company executives contrast with eroding
financial security of employees
Downey The Washington Post: April
workers' pensions erode, employees, shareholders, unions and
lawmakers are paying new attention to the many ways retirement
packages for top executives outshine those of their workers.
ailing Delta Air Lines, for instance, has asked employees to accept
pay cuts and pension changes that many oppose. At the same time, it
has set aside $25.5 million to create a special fund to guarantee
executives' pensions if the airline should be forced to declare
bankruptcy, according to corporate filings.
John McCain, R Ariz., called the Delta deal "insulting,"
coming at a time
when the foremost recipient of Delta's largess,
Chief Executive Leo Mullin, was seeking a multibillion dollar
federal aid package for the industry.
struggling American Airlines, its unions this past week
rescind pay cut agreements after learning that top officials would
get big bonuses if they stayed until 2005 and that a trust fund had
been created to protect the executives' retirement pay if American
files for bankruptcy. In response to the stir, American
dropped the bonus plan, but said they would keep the pension
agreements in place.
recent years, Verizon's
top executives boosted their pay and bonuses
by tying them to the
company's operating income, which was rising
from high investment returns racked up by the company's $40 billion
Verizon stopped doling out cost of living pension
adjustments to retirees, 90,000 of them organized a vote last year on
a shareholder proposal that executives stop using the pension fund in
their bonus computations. They proposed the measure again this year,
and Verizon agreed last month to separate the
structure from the pension fund.
Sears, five top executives receive pension credit for two years of
service for each year on the job, according to company filings.
boosts their pensions compared with those of rank-and file
workers. This proxy season, Sears faces a union backed proposal
requiring it obtain shareholder approval for future "extraordinary
pension benefits for senior executives" - including ones
that give credit for years not worked. The retirement benefits
gap between workers and executives is just part of the widening gap
in compensation. The average chief executive's pay was
42 times that
of the average hourly worker in 1980, according to Business
2000, CEO compensation was 1,531 times as much as the hourly
issues are in the limelight because of the flurry of shareholder
proposals at upcoming annual meetings. Also, there is proposed
legislation on plans to revive conversions of traditional pension
plans to plans that could bring lower benefits, especially for older
workers of America deserve better pension law oversight and
protection from their government," Janet Krueger, a 23 year IBM
employee from Rochester, Minn., testified at a pension hearing. She
said her prospective pension eroded sharply after IBM converted it to
a "cash balance" plan in 1999. In a later interview, she
complained about the generous pension IBM had constructed for Chief
Executive Louis Gerstner during the same period.
officials defend Gerstner's package as a just reward for a job well
done. "The IBM board of directors determined Mr. Gerstner's
retirement package based on a number of factors, including the
company's overall performance during his tenure," spokesman Bill
Gerstner's nine year tenure, he said, total stockholder return
increased 938 percent.
vocal debate also comes at a time when fewer workers are covered by
any kind of pension plan, and when those who are have seen their
investments in supplemental plans, such as 401(k)s, hammered in the
lawyer Lawrence Lorber, who testified for the U.S. Chamber of
Commerce at a recent pension-conversion hearing, said the
difference between executive and worker plans reflects "harsh
business realities" caused by bad economic conditions, a weak
stock market, an aging work force and intense competition. "It's
an unfortunate confluence of the need to save money and the need to
attract your savior," Lorber said.
pension gap is an issue labor organizers believe will resound with
workers. A Web site, www.paywatch.org, unveiled last week by the
AFL CIO's investment office, highlights the discrepancies. "The
difference in treatment is unbelievable," said Richard Trumka,
secretary treasurer of the AFL CIO, many of whose member
unions are major institutional shareholders through their pension
tactic is pushing shareholder resolutions.
inventive ways to embellish executive pension plans have
proliferated, new studies show
workers' plans are at risk.
by the Employment Benefits Research Institute, a nonprofit group,
found that the number of workers covered by any kind of retirement
plan has fallen in the past two years, from 60.4 percent of all
adult, full time wage and salaried workers an all time
high to 58 percent. Today's worker pensions are often different from
the traditional annuity, or defined benefit plan, that offers a
fixed monthly income upon retirement.
pension plans are defined contribution plans, such as 401(k)s.
kinds of pensions are problematic for John Rother, policy director at
AARP He said 401(k)s "sound good, because you have choice, but
suddenly, years later, people wake up to see that none of these
changes were as good as the old style pensions would have been."
from The Associated Press was included in this report.