Some executives have received huge compensation packages even as their firms eliminated worker pensions. Ten large U.S. companies paid senior executives a total of $350 million in the five years leading up to terminating traditional pension plans for employees, a new Government Accountability Office analysis found.
Each company in the study, which does not name the 10 publicly traded companies that filed for bankruptcy in the last decade, had underfunded its pension plan by at least $100 million and had over 5,000 workers whose pensions would be affected. The Pension Benefit Guaranty Corporation, the government agency that insures private sector pensions, then became responsible for the shortfall. Some employees who were promised retirement benefits above the PBGC’s limits, such as airline pilots, say their pensions were reduced. The PBGC insures pensions up to certain limits, which is $54,000 for a person who retires at age 65 in 2010. The pension insurer had a deficit of $22 billion in fiscal year 2009.
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Executives at some companies received salaries in excess of $10 million dollars in the years leading up to bankruptcy. In addition, many of the executives also received millions of dollars in stock awards, income tax reimbursements, retention bonuses, severance packages, and executive-only retirement plans. One airline in the study missed nearly $1 billion in required pension contributions, but managed to pay its top three executives over $50 million in salary, bonuses, stock, and supplemental retirement benefits. And an insurance company failed to make $29.2 million in pension contributions, but paid five executives $69.7 million in salary and cash bonuses during the same time period. Additional corporate perks included apartments, personal trips on company airplanes and helicopters, club memberships, legal fee reimbursement, and automobiles.
Representative George Miller, the California Democrat who requested the GAO investigation, says he is considering legislation that will freeze executive compensation if the company’s rank-and-file pension plan becomes significantly underfunded. “It is fundamentally wrong that executives were able to line their pockets with millions of dollars from bonuses, stock options, and free joyrides on corporate jets, while watching their workers’ retirement security slip into peril,” says Miller. “Executive compensation and golden parachutes should be aligned to the fate of workers’ retirement plan. This will create an incentive for executives to fix workers’ pension plans before they go broke.”
The GAO did not uncover any illegal activity among the 40 executives under review.
Tell us, should executives get bonuses in years when employee pensions aren’t fully funded?