It’s Not Personal. It’s Just Business.

In a recent post, I detailed the “golden goodbyes,” the no longer extraordinary, very generous retirement packages, being negotiated by university presidents across the United States. I described this trend as salient evidence of the corporatization of our universities, but I don’t think that one can truly understand what is occurring with pensions without knowing the numbers.

Here are the CEOs with the top ten retirement accounts (source: the Center for Effective Government’s report Platinum-Plated Pensions):

John Hammergren

Company: McKesson

Personal Pension Fund: $144,278,492

Anticipated Monthly Pension Payment: $853,205

David Cote

Company: Honeywell

Personal Pension Fund: $134,458,619

Anticipated Monthly Pension Payment: $795,134

Michael Duke

Company: Wal-Mart

Personal Pension Fund: $113,157,559

Anticipated Monthly Pension Payment: $669,169

Rex Tillerson

Company: ExxonMobil

Personal Pension Fund: $69,414,577

Anticipated Monthly Pension Payment: $410,490

John Strangfeld

Company: Prudential Financial

Personal Pension Fund: $62,915,609

Anticipated Monthly Pension Payment: $372,058

Jeffrey Immelt

Company: General Electric

Personal Pension Fund: $59,289,731

Anticipated Monthly Pension Payment: $350,616

Brian Roberts

Company: Comcast

Personal Pension Fund: $57,203,495

Anticipated Monthly Pension Payment: $338,279

Larry Merlo

Company: CVS Caremark

Personal Pension Fund: $56,888,413

Anticipated Monthly Pension Payment: $336,415

Randall Stephenson

Company: AT&T

Personal Pension Fund: $52,152,319

Anticipated Monthly Pension Payment: $308,408

Alan Lafley

Company: Procter & Gamble

Personal Pension Fund: $50,263,265

Anticipated Monthly Pension Payment: $297,237

All of these CEOs are members of the Business Roundtable, and four of them are also on the Fix the Debt CEO Council. That group is concerned about the impact of chronically underfunded corporate pensions and the continued fiscal sustainability of the Social Security program. Its members have repeatedly described the underfunding of pensions and Social Security as an impending crisis in liabilities that are impossible to honor.

What they aren’t saying is that their corporations are directly responsible for the underfunded corporate pensions. Here are the ten corporations with the largest pension liabilities:

CEO: Jeffrey Immelt

Company: General Electric

Deficit in Pension Funding: $22.6 Billion

CEO’s Pension Fund: $59,289,731

CEO: W. James McNerney

Company: Boeing

Deficit in Pension Funding: $19.7 Billion

CEO’s Pension Fund: $45,873,226

CEO: Randall Stephenson

Company: AT&T

Deficit in Pension Funding: $13.8 Billion

CEO’s Pension Fund: $52,152,319

CEO: Alan Mulally

Company: Ford

Deficit in Pension Funding: $9.7 Billion

CEO’s Pension Fund: $937,959

CEO: Andrew Liveris

Company: Dow Chemical

Deficit in Pension Funding: $9.1 Billion

CEO’s Pension Fund: $30,212,412

CEO: Lowell C. McAdam

Company: Verizon

Deficit in Pension Funding: $8.5 Billion

CEO’s Pension Fund: $9,792,578

CEO: Rex Tillerson

Company: ExxonMobil

Deficit in Pension Funding: $7.2 billion

CEO’s Pension Fund: $69,414,577

CEO: D. Scott Davis

Company: UPS

Deficit in Pension Funding: $6.9 billion

CEO’s Pension Fund: $8,921,609

CEO: Alan Lafley

Company: Procter & Gamble

Deficit in Pension Funding: $5.9 billion

CEO’s Pension Fund: $50,623,265

CEO: Douglas Oberhelman

Company: Caterpillar

Deficit in Pension Funding: $4.9 billion

CEO’s Pension: $21,978,436

None of these companies can be said to be struggling. In fact, the rationale for the exorbitant executive compensation is that the CEOs are keeping these corporations extremely profitable.

So why are the pensions so underfunded? Simply put, the money that could have kept the pensions fully funded has gone to other priorities that have not just sustained profits but, rather, have increased profits to their absolute maximum and have thereby maximized stockholders’ dividends, which, coming full circle, provide the basis for the executives’ compensation.

Given the continued underfunding, it was inevitable that the pension deficits would balloon, and even so, it is not as if the corporations lack the resources to keep the pensions solvent. It is simply more expedient to claim that meeting the pension obligations will ruin the company and to therefore try to wipe the liability off the books. No executive wants to be responsible for any decline in the shareholders’ stock dividends because most shareholders will not care that those dividends have been artificially inflated by underfunding the pensions. So thirty years’ worth of liabilities are frequently juxtaposed against one’s year’s revenues or, worse, one year’s net profits, and it appears to most casual observers that the corporation might collapse as a consequence of having to pay “extravagant” pensions to its workers, who, not coincidentally, are typically unionized and therefore demonized as being somehow privileged.

So, the problem isn’t pensions per se. Rather, the problem is our pensions.

Let’s look, then, at what the average worker’s pension looks like in comparison to the average CEO’s pension:

The average CEO on the Business Roundtable has a pension fund of $14,550,089 and can expect to receive a monthly pension check of $86, 043 and a monthly Social Security check for $2,533, for a total monthly retirement income of $88,576.

In contrast, the average worker in one of those corporations will have a retirement fund of $12,000 and can expect to a monthly pension check of $71 and a monthly Social Security check for $1,237, for a total monthly retirement income of $1,308.

The average CEO’s corporate pension is 1,212 times as large as the average worker’s.

So, when ordinary American workers advocate strenuously for actual funding of the pensions that they have been promised contractually, the corporate leadership and their media mouthpieces immediately accuse the workers of engaging in class warfare.

It’s a cute trick. For what is the failure to meet pension obligations if not class warfare? The retirement income that is owed to ordinary workers is being transferred to corporate stockholders and to the executives who insure that the dividends that the stockholders receive remain as high as possible, basic ethics be damned. Worse, all Americans are asked to be concerned about any reduction in the wealth of the most affluent, even if the meager resources of the rest of us need to be sacrificed to maintain that maximum level of wealth.

To understand the gross injustice of what is occurring, one might consider whether the loss of the average worker’s $71 monthly pension check will cause that worker more harm than the average CEO’s loss of the equivalent of the worker’s entire monthly retirement income.

In losing the pension check, the worker will lose 5.5% of his monthly income.

In losing the equivalent of the average worker’s entire monthly retirement income, the average CEO would lose 1.4% of his monthly retirement income.

Pensions are a significant part of a worker’s compensation.

If failing to honor pension obligations is not criminal, then why are corporate executives so insistent that their own pensions remain untouchable?

Yet, this sort of grand theft seems no longer to be illegal.

But that doesn’t make it any less criminal, any less immoral.

As Jon Stewart pointed out in one of the segments of his show tonight, if corporations are indeed people, when are the people who are the public faces of those corporations going to start going to jail for the kinds of crimes that any other person would be serving serious time for committing?

5 thoughts on “It’s Not Personal. It’s Just Business.

  1. Great column, Marty. I would have hit the “like” button, but for some reason or other, none exists on my screen.

    • Mike:

      Last night when I was posting it, I must have inadvertently hit the “like” button. This morning, when I noticed that I had “liked” my own post, I could not figure out how to “unlike” it; so I resorted to hiding the feature. By that point, however, about 50 readers had already looked at the post and no doubt came away thinking that I was pretty unabashedly self-congratulatory.

  2. I agree with your data and your comments about C-suite compensation being unreasonably high relative to other employees (pension being a big part). What I don’t understand entirely yet, is how these companies (and government organizations as well) are allowed to accumulate these pension deficits. GE for example in their 2014 annual report states their principal pension fund is 104% funded per ERISA guidelines (versus your GAAP deficit number, which corresponds to 68% funded), therefore no funding is required. If you step back from the problem, which is an accurate representation of the state of the pension funding? To the best of my knowledge, the difference is all in the discount rate applied to future benefits. ERISA allows a higher discount rate than GAAP, therefore a smaller projected benefit obligation. You can thank “your” US “representatives” for that after they attached the pension discount rate relief to a highway transportation bill. Oh, and if your are a beneficiary of a “multi employer pension plan” (most unions), “your” US “representatives” authorized a cut to your benefits…

    • Whatever is occurring on the private-sector side is occurring with somewhat different but equally hypocritical permutations on the public-sector side. States have been chronically under-funding public-employee pensions, then declaring the pension funds to be in crisis, and then demanding increased contributions from employees to cover the deficits. One of the most egregious examples of this strategy has occurred in New Jersey. Chris Christie made a very big deal out of the need to “reform” New Jersey’s public pension system. The public-employee unions agreed to pay more into the retirement funds as a match a more appropriate state appropriation, with the two increases intended to eliminate the under-funding. In 2013 and 2014, the public-employee unions complied with this agreement, but Christie diverted the state appropriation to other “needs,” thus extending the problem that had led to the under-funding to begin with. And he did this while talking at every opportunity about his administration’s innovative approach to pension reform. Earlier this year, when the public-employee unions took his administration to court for not meeting any of its funding obligations under the agreement, he complained that the public employees were attempting to hold the state hostage to their unreasonable demands. The judge pointed out that Christie could not now credibly denounce the pension reform for which he had been taking credit at every available opportunity.

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