News Release

Huge Pay Gaps: Enron and Beyond

Enron disclosed in court documents on Tuesday that before collapsing last year it paid out $744 million in salary, bonuses and stock grants to the company’s 140 senior officers — an average of $5.3 million each. The following analysts are available for interviews about such practices:

DEAN BAKER
Co-director of the Center for Economic and Policy Research, Baker said today: “There have been a wide range of government policies facilitating the rise in executive compensation over the last two decades, which were supported by both parties. For example, when the Financial Accounting Standards Board wanted to require that firms list the cost of stock options as an expense against profits, Senator Joe Lieberman led the charge to stop the proposal. This has allowed firms to dramatically overstate their profits on their financial statements, even while they deduct the cost of stock options for tax purposes. Due to a lack of effective oversight, CEOs are often able to write themselves a blank check. This leads to an economy characterized by fraud and outright theft. The disparities between the money CEOs get and what the average worker gets have steadily been increasing — 1965: 20 to 1; 1978: 29 to 1; 1991: 56 to 1; 1999: 107 to 1.”
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JULIANNE MALVEAUX
An economist and columnist, Malveaux said today: “You have people who are being rewarded for chicanery while others are serving life-long sentences for crimes that are minuscule in comparison. There are people who are walking away from the table with multimillion-dollar bonuses for wrongdoing while others who followed all the rules are struggling to get their pensions paid….”
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SCOTT KLINGER, BETSY LEONDAR-WRIGHT
Co-director of Responsible Wealth, Klinger is the author of “Titans of the Enron Economy: The Ten Habits of Highly Defective Corporations.” A chartered financial analyst, Klinger is a former portfolio manager at United States Trust Company. He said today: “While the public, Congress, and even the stock exchanges have had constructive dialogues to prevent future Enrons, corporations like Enron continue to thumb their noses at change, as they deepen and extend corrupt executive compensation practices.” Co-author of “Executive Excess 2001: Layoffs, Tax Rebates, The Gender Gap; Eighth Annual CEO Compensation Survey” and communications director for United for a Fair Economy, Leondar-Wright said today: “Enron gave golden parachutes to failed executives while giving peanuts to thousands of laid-off employees. Massive layoffs have often been rewarded by executive raises. CEOs of firms that announced layoffs of 1,000 or more workers last year earned about 80 percent more, on average, than executives at 365 top firms surveyed by Business Week. These layoff leaders averaged $23.7 million in total compensation in 2000, compared with $13.1 million for CEOs as a whole. The top job-cutters received an increase in salary and bonus of nearly 20 percent in 2000, compared to average raises in that year for U.S. wage workers of about 3 percent and for salaried employees of 4 percent.”
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For more information, contact at the Institute for Public Accuracy:
Sam Husseini, (202) 347-0020; David Zupan, (541) 484-9167