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**The virtues of capitalism.....another caste system indeed..............

By Kathy M. Kristof
Times Staff Writer

January 29, 2006

Like a growing number of companies, Countrywide Financial Corp. of Calabasas is phasing out its pension plan to save money, and employees hired since Jan. 1 won't be eligible for lifetime income in retirement.

But new Countrywide executives still qualify for a special executive pension "” one that will pay Chief Executive Angelo Mozilo up to $3 million a year for life.

First American Financial Corp. of Santa Ana also has one plan for those in the cubicles and one for those in the executive suites. The workers saw their pension plan frozen in 2001. But a special plan for executives will pay Chief Executive Parker S. Kennedy nearly $1 million a year for life if he remains with the company until age 65.

Major corporations throughout the country are abandoning their pensions, saying the benefits are too costly and less important, with the widespread adoption of individual retirement accounts such as 401(k) plans.

But many of these same companies are retaining special pension plans for top executives, saying they would lose the top brass to rivals without them.

"We view this type of program as a standard and necessary component in recruiting and retaining talented top executives," Kelly Dunmore, vice president of employee benefits at First American Financial, said in a statement.

Others view it as a double standard.

"These executives earn what an entire neighborhood of typical families make collectively," said Karen Friedman, policy director at the Pension Rights Center, a nonprofit advocacy group. "They don't need this money for retirement. These plans are just outrageous."

The Times reviewed public filings that spell out pension terms for the 50 largest public companies, ranked by sales, based in California. Twenty-five of these firms reported having a traditional pension plan at some time, but today only nine still promise lifetime retirement benefits to all employees.

Of the 16 other companies, six never offered pensions to the rank and file, only to executives. Three other firms, including Hewlett-Packard Co., are phasing out pensions but "grandfathered" executives and regular workers alike into existing plans.

The remaining seven firms retained special lifetime pensions for top executives but eliminated them for the rank and file.

At Sempra Energy, for example, the board approved management's proposal to convert the pension plan to a "cash-balance" system in 1998.

Cash-balance plans allow workers to build nest eggs for retirement but do not guarantee a steady monthly income like a traditional pension.

The company's board, however, retained the special executive pension. Under that plan, Chief Executive Stephen L. Baum should get nearly $2 million a year for life in retirement, according to Sempra's public filings.

The Sempra board's compensation committee recommended the plan, believing that the special pension would be needed to compete for the best executives, said company spokeswoman Jennifer Andrews.

"All of our compensation packages are designed to attract and retain top-quality talent," she said. "They are in line with what other Fortune 500 companies are doing."

In addition to Sempra, Countrywide and First American, other big California companies that implemented this dual standard over the last decade were McKesson Corp., Northrop Grumman Corp., Edison International and Clorox Co.

McKesson declined to comment. Countrywide said that because of competitive pressure in the industry, it no longer made business sense to offer pensions to new employees, and that the special executive plan was under review.

Other companies said the executive pensions were needed to be competitive.

Patrick McGurn, executive vice president of Institutional Shareholder Services, questioned that assertion. Because the plans have not been well disclosed in the past, he said, it's hard to say whether executives choose one company over the next because of the rich pension plan.

"I think you are creating potential problems with productivity, morale and all sorts of other issues," said McGurn, whose group provides research for major shareholders, such as mutual funds. "If companies are adopting one set of rules for the senior executives and another for the rank and file, that sort of disparate treatment is going to emerge in other areas. It's got to affect how workers view their employer. It clearly sends a message to the worker about what their value is to the company relative to the executive."

Even so, surveys suggest that two-tiered systems are becoming more common in corporate retirement plans nationwide.

Just 19% of wage and salaried workers are active participants in an ongoing pension plan, according to the Bureau of Labor Statistics, compared with 35% in 1980.

But roughly two-thirds of S&P 500 companies offer so-called supplemental executive retirement programs, or SERPs, to the top brass, according to a study by two Harvard professors. The median amount that executives in these plans can expect to reap in retirement is $15 million in today's dollars, the study found.

These supplemental plans became popular more than a decade ago because of federal limits on the amount of income that can be covered under traditional pensions and still be tax-deductible. Without the supplemental plans, highly compensated employees would see a relatively small portion of their earnings in their monthly pension payments.

Since then, companies "” sometimes with board approval "” have increasingly scaled back pensions for the general workforce to cut costs. But the corporate boards that set executive pay have often allowed the special pensions for top managers to go untouched.

The dual standard is now drawing scrutiny in Congress. Rep. George Miller (D-Martinez) has introduced a bill that would bar companies from funding special executive pensions when they say they don't have enough money to fund workers' pensions. A similar measure is included in broader pension legislation backed by congressional Republicans.

"This huge disparity between protected compensation and protected pensions that CEOs have versus production workers is really immoral," Miller said. Executives "keep talking about shareholder value. But, what is the value to the corporation of this person who doesn't even work there anymore?"

Among the largest California companies, most offer 401(k) retirement plans that allow workers to set aside money for retirement on a tax-deferred basis, usually with a company contribution. Unlike pensions, however, these plans do not guarantee income for life.

Cash-balance plans are similar to 401(k)s, except that companies, and not the employees, make all the contributions and control how the money is invested. To save money, seven major California companies that once offered pensions converted them to cash-balance plans over the last decade.

Five other companies froze their pensions "” barring new employees and, in most cases, capping benefits "” but did not convert them to cash-balance plans.

Beverly Hills-based Hilton Hotels Corp. froze its pension for workers and executives in 1996. Then four years later, it created a special retirement plan for top officers.

The plan doesn't provide lifetime benefits like a traditional pension, but it will give Chief Executive Stephen Bollenbach more than 700,000 shares in company stock at retirement. Those shares are currently worth nearly $19 million.

Hilton spokeswoman Judy Notaro declined to discuss the thinking behind the plan.

"You have the information from the public record," she said. "We're going to leave it at that."

Six of California's biggest public companies "” Mattel Inc., KB Home, Advanced Micro Devices Inc., Ryland Group, Amgen Inc. and Golden West Financial Corp. "” offer employees neither a pension nor a cash-balance plan, but give their executives lucrative payouts upon retirement.

El Segundo-based Mattel, for example, never offered employees a traditional pension program, but in 2005 it significantly boosted its retirement plan for Chief Executive Robert A. Eckert.

Until last March, Mattel's supplemental retirement plan would pay executives as much as 35% of their average pay. The new plan pays 60% or more. Eckert stands to get about $1.8 million annually for life if he stays with the company at least 10 more years.

Lisa Marie Bongiovanni, a Mattel spokeswoman, called the special plan "an important retention tool." She added that the company provides a generous 401(k) plan for all workers.

Los Angeles-based KB Home also does not have a traditional pension for employees, but it makes sure its executives' retirement years are golden. Under its plan, Chief Executive Bruce Karatz is entitled to 100% of his average base pay "” which contractually can't drop below $900,000 annually "” for 25 years.

A second supplemental pension will provide Karatz with an additional $800,000 annually for 20 years. The company also pledged lifetime medical and dental benefits, and Karatz will have an office and staff support for as long as he wants it.

Ryland Group, another home builder, has obligated itself to pay Chief Executive Chad Dreier $2.4 million a year for 15 years after retirement. Dreier earned about $16 million in 2004.

Ryland's nonexecutive employees do not have a guaranteed pension, but spokeswoman Marya Jones said the company match for the 401(k) plan is generous, with Ryland kicking in $1 for each dollar that employees contribute for up to 6% of their pay.

"We have produced six consecutive years of top performance," Jones said. "We have to offer competitive benefits to senior executives and employees to retain leadership talent."

For most companies, the money set aside for the special executive pensions is relatively small compared with their profits. Countrywide, for example, reported $2.2 billion in profit in 2004.

But when Delta Air Lines Inc., bleeding red ink and jettisoning workers, planned in 2003 to put an additional $20 million into a special retirement plan for top executives, the move caused such an uproar that the company canceled the expenditure.

Even for companies in good financial health, the costs of these plans are often underestimated, said Paul Hodgson, senior research analyst with the Corporate Library, which campaigns for greater corporate accountability.

"If you are concerned about wasting stockholders' money, SERPs are high on the list of fairly grand wastes of money," Hodgson said. "There are a significant minority of companies where the SERP is going to have an impact on the company's bottom line long after the executive's retirement."



No pension woes here

Selected California companies that offer pensions or special retirement payments to top executives but scuttled or never offered pensions to other employees.

Name: Advanced Micro Devices

Headquarters: Sunnyvale

Executive retirement benefits: 10-year pension for CEO


Name: Amgen

Headquarters: Thousand Oaks

Executive retirement benefits: Multimillion-dollar payments for two executives


Name: Clorox

Headquarters: Oakland

Executive retirement benefits: Lifetime pension


Name: Countrywide Financial

Headquarters: Calabasas

Executive retirement benefits: Lifetime pension


Name: Edison International

Headquarters: Rosemead

Executive retirement benefits: Lifetime pension


Name: First American

Headquarters: Santa Ana

Executive retirement benefits: Lifetime pension


Name: Golden West Financial

Headquarters: Oakland

Executive retirement benefits: 10-year pension for three executives


Name: Hilton Hotels

Headquarters: Beverly Hills

Executive retirement benefits: $18-million stock grant for CEO


Name: KB Home

Headquarters: Los Angeles

Executive retirement benefits: 25-year pension for CEO


Name: Mattel

Headquarters: El Segundo

Executive retirement benefits: Lifetime pension


Name: McKesson

Headquarters: San Francisco

Executive retirement benefits: Lifetime pension


Name: Northrop Grumman

Headquarters: Century City

Executive retirement benefits: Lifetime pension


Name: Ryland Group

Headquarters: Calabasas

Executive retirement benefits: 15-year pension for CEO


Name: Sempra Energy

Headquarters: San Diego

Executive retirement benefits: Lifetime pension


Sources: Company filings, Times research
Original Post
In another thread, CF cited to spouse abuse in Africa and eluded to oppression in some Arab states. He then asked for the Capitalistic equivalent. Well, CF, here ya go:

Published on Monday, January 30, 2006 by the Christian Science Monitor
High Wages, Low Wages, and Morality
by David R. Francis

It's unusual for a controversial economic issue to be fought on moral grounds. But ACORN, a public advocacy group, has been winning a higher "living wage" for workers in state after state, city after city, by appealing to voters' sense of justice.
"It's probably the best [argument] we have," says Jen Kern, director of ACORN's Living Wage Resource Center. A decent income is a moral matter of "fairness," she says. Those who "play by the rules of the game should be able to support themselves by their work."

"A job should keep you out of poverty, not keep you poor," agrees Paul Sherry, coordinator of the Let Justice Roll Living Wage Campaign, a church-based coalition in Cleveland seeking to raise low wages.

According to the father of classical capitalism, Adam Smith, a Scottish professor of moral philosophy at Glasgow University in the 1700s, the "invisible hand" of self-interest ensures the most efficient use of resources in an economy, and public welfare is a byproduct.

Today Americans are mostly content to let market forces - that is, the law of supply and demand - determine the wage levels for the multiplicity of jobs, professions, and positions that make the economy work. It would be extremely difficult for a bureaucratic group to make detailed, comparative judgments as to the real value of various occupations and place a specific wage level on each.

But at some point, the extremes in wages resulting from what is called "free enterprise" begin to violate people's sense of common justice. They chuckle, then, at the portrayal in a Boston Globe cartoon of two bosses in a fancy office saying to three workers: "Why should you have a minimum wage? We don't have a maximum wage."

As it is, an employee working full-time at the federal minimum wage of $5.15 an hour makes $10,712 a year, about $1,000 above the official poverty level for an individual ($9,654).

At the other end of the scale, the compensation of top corporate executives, on average 431 times the salary of a blue-collar worker in his or her company, is widely seen as excessive. Critics often use the word "obscene" - a moral term - to characterize the tens of millions of dollars they get.

Capitalism in regard to pay is "out of whack," says Scott Klinger, codirector of Responsible Wealth, a Boston advocacy group concerned over deepening income inequality in the nation.

Mr. Klinger maintains that Adam Smith assumed equal power in a free market among its players. He didn't see the "enormous concentration" of economic and political power that has enabled the privileged to set the rules of the system. "Supply and demand is not the operative force," he says.

The Securities and Exchange Commission has just proposed that corporations disclose more information about executive compensation beyond salary, such as pensions and other perks.

"A small positive move," says Klinger. He advocates, among other things, that the directors of a firm should include not just executives from other companies, but also representatives of labor, the community, and others to better assure that business decisions take account of "stakeholders" other than company shareholders.

So far, though, rising income inequality has not aroused sufficient public indignation to prompt congressional moves to stem it.

Ms. Kern maintains it is "immoral" that so many Americans get up in the morning, work a full day, and then are paid so little they have to choose "between medicine, food, heat, or light."

ACORN campaigns with that theme have won such wide public support that 18 states and the District of Columbia have enacted higher minimum wage laws, from about $6.15 to $12 an hour.

But the federal minimum wage hasn't been raised in nine years. Action would directly help 7 percent of the workforce.

A think tank study released last week found that between the early 1980s and the early 2000s, the incomes of the country's highest-income families climbed substantially. Middle- and lower-income families, though, saw only modest increases in income and have begun to decline again despite relatively low unemployment. So today the income gap between the richest and poorest one-fifth of families is "significantly wider" than it was two decades ago, note the Center on Budget and Policy Priorities and the Economic Policy Institute, two nonprofit groups in Washington, D.C.

In past tough years, Congress has shared in economic suffering by cutting its own pay - in 1932 and 1783, for instance. Not so now. Since members of Congress last voted to boost the minimum wage, they have raised their own pay by 23 percent. Last October, the Senate voted 51 to 49 to hike the minimum wage, but it would have taken a supermajority of 60 votes to pass.

"I wonder what Adam Smith would have to say about that?" Klinger asks.

Soon Congress will consider making permanent a Republican tax measure that would fully repeal the federal estate tax - a tax that only hits a rich elite. This year, all estate assets worth less than $2 million per individual (and double that for a couple) are exempt from the estate tax. Only huge estates, one in 370 (0.27 percent), are subject to the tax.

Mr. Sherry of Let Justice Roll hopes that the "momentum" building at the state level for a legislated boost in the pay of the poor will carry over to the federal level. "People are seeing it more as an ethical, moral issue," he says.

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