An unstoppable climb in CEO pay

When we made our annual foray into the executive pay gold mine in April, chief executives’ earnings for 2012 showed what appeared to be muted growth on the year. The $14 million in median overall compensation received by the top 100 C.E.O.’s was just a 2.8 percent increase over 2011, the figures showed.

Well, what a difference a few months and a larger pool of C.E.O.’s make. According to an updated analysis, the top 200 chief executives at public companies with at least $1 billion in revenue actually got a big raise last year, over all. The research, conducted for Sunday Business by Equilar Inc., the executive compensation analysis firm, found that the median 2012 pay package came in at $15.1 million — a leap of 16 percent from 2011.

So much for the idea that shareholders were finally getting through to corporate boards on the topic of reining in pay. Read more >>

5 Best & 5 Worst States for Business

It appears CEOs prefer doing business in states run by Republican governors, or so says Chief Executive magazine’s ninth annual “The Best and Worst States for Business” survey.

The survey asked 736 CEOs to grade states on a variety of “competitive metrics that CEOs themselves regard as critical,” including taxation and regulation, quality of workforce, and living environment.

“The tax and regulatory grade includes a measure of how CEOs grade a state’s attitude toward business, a key indicator,” the report write-up notes.

“In the minds of most leaders, a state’s friendliness is closely aligned with its tax and regulatory regime. Similarly, workforce quality also measures the perceived cooperativeness of workers with management, as well as the people’s general work ethic and education attainment,” the write-up reads.

“The living environment metric measures the perceived quality of education and public health facilities, as well as the affordability and quality of real estate, the transportation system and related environmental factors,” it adds.

And although three of the top 10 worst states for business are controlled by Republican governors, the top 10 best states, as noted by the Washington Examiner’s Charlie Spiering, are all run by Republican governors.

Here are the top five best states for business:

Taxpayers Give Big Banks $83 Billion a Year

On television, in interviews and in meetings with investors, executives of the biggest U.S. banks -- notably JPMorgan Chase & Co. Chief Executive Jamie Dimon -- make the case that size is a competitive advantage. It helps them lower costs and vie for customers on an international scale. Limiting it, they warn, would impair profitability and weaken the country’s position in global finance.

So what if we told you that, by our calculations, the largest U.S. banks aren’t really profitable at all? What if the billions of dollars they allegedly earn for their shareholders were almost entirely a gift from U.S. taxpayers?

Granted, it’s a hard concept to swallow. It’s also crucial to understanding why the big banks present such a threat to the global economy.

Let’s start with a bit of background. Banks have a powerful incentive to get big and unwieldy. The larger they are, the more disastrous their failure would be and the more certain they can be of a government bailout in an emergency. The result is an implicit subsidy: The banks that are potentially the most dangerous can borrow at lower rates, because creditors perceive them as too big to fail. Read more >>

Pessimism About Economy Grows

Two major surveys of corporate financial executives this week show a stark contrast hiring outlook but are in agreement that optimism about economic growth is dropping. The American Institute of Certified Public Accountants, which maintains an office in Durham, found only 12 percent of chief executive officers, chief financial officers and other financial executives surveyed planned to expand payrolls over the next 12 months.

On Wednesday, a survey of CFOs from Duke University and CFO Magazine found that 60 percent of companies were planning to hire. Like the Duke-CFO survey, however, the AICPA report found a drop in optimism about economic growth. Its overall CPA Outlook Index declined by two points to 67 on a scale of 0-100 with 50 considered neutral. The index dropped for the first time after two quarters of growth.

“What we're seeing is the same ‘two steps forward, one step back’ cycle we encountered last year,” said Arleen Thomas, the AICPA’s senior vice president for management accounting. “There's no question survey takers have grown more pessimistic about the U.S. economy, and with expectations muted for profit, revenue and employment growth, there appear to be few catalysts to change that view.” Read more >>

Facebook's Zuckerberg Sold 30 Million Shares Before IPO

MarketWatch
Facebook Inc. Chief Executive Mark Zuckerberg has sold 30.2 million shares and director Peter Thiel has sold 16.8 million shares of the social-networking company, according to securities filings published late Tuesday.

The sales confirm plans detailed in a prospectus before Friday's $16 billion IPO. Zuckerberg sold 30.2 million shares at a price of $37.58 for gross proceeds of $1.13 billion; Thiel sold 16.8 million shares for gross proceeds of $633 million. Facebook insiders had told prospective shareholders of their plans in an S-1 filing last week.

As SEC Downloads More Cross-Dressing Porn, JPMorgan Lights the Fuse

Don’t worry your pretty little heads, JPMorgan Chase & Co. Chief Financial Officer Douglas Braunstein seemed to assure listeners on the bank’s quarterly earnings conference call last month. Regulators knew everything JPMorgan’s chief investment office was doing, he said.

In other words: Clearly there wasn’t a problem, because if there was, the regulators would have seen it. And of course, by all indications, they didn’t see it, even though they were embedded in JPMorgan’s offices. On May 10, JPMorgan divulged $2 billion of intra-quarter trading losses and said they might get worse. Once again, regulators seem to have been oblivious to huge risks at a bank they were supposed to be overseeing. To JPMorgan, however, they also have served a valuable purpose.

Having regulators around the clock at JPMorgan reinforces market expectations that the government has an obligation to stand behind the bank should it run into more serious trouble. Also, lest anyone forget, JPMorgan’s chief executive officer, Jamie Dimon, sits on the board of the Federal Reserve Bank of New York, even as the Fed is one of the agencies now investigating JPMorgan’s trading debacle. More...

Challenger - planned job cuts surged to a 16-month high in July

The number of planned job cuts surged to a 16-month high in July -- rising 60% in July to 66,414 from June's 41,432, according to outplacement consulting firm Challenger, Gray & Christmas.

The firm characterized it as a "sudden and unexpected burst" in downsizing.
Job killing companies

The data was hardly a surprise though, given a flurry of mass layoffs announced in the last few weeks by Cisco Systems, Merck & Co., Borders, Lockheed Martin and Boston Scientific. Those five companies alone accounted for 38,100 planned cuts in July.

"What may be most worrisome about the July surge is that the heaviest layoffs occurred in industries that, until now, have enjoyed relatively low job-cut levels, including pharmaceuticals, computer and retail," John A. Challenger, chief executive officer of Challenger, Gray & Christmas said in a statement.

Employers have now announced a total of 312,220 planned job cuts this year -- down 8% from 339,353 cuts announced in the first seven months of 2010. More...

Salary of Top American Executives Up 23 Percent in 2010

Image via WikipediaWhile the recovery remains stubbornly slow, with 14 million people still looking for work, things are definitely looking up for those few at the very top of the economic ladder.

CEO pay went up an average of 23 percent in 2010, while wages for rest of us rose a meager one-half-percent, according to a new report prepared for the New York Times.

The report, which was prepared for the New York Times by Equilar, an executive compensation data firm, found that the median CEO salary was $10.8 million.

The report found that the chief executive of DirecTV was paid $33 million last year. The head of Occidental Petroleum was paid $76 million. Viacom's chief topped all CEOs at $84.5 million, after signing a new long-term contract that included one-time stock awards.

In comparison, the average American worker made $752 a week in late 2010, according to the New York Times, up only 0.5 percent from a year earlier. More...

America's 50 Most Powerful People in Food

Any catalogue of powerful people — and certainly any ranking of them in order of clout — is bound to be highly subjective, of course. That doesn't mean that it has to be arbitrary. The Daily Meal editors collaborated to assemble our initial list, then added and subtracted, fine-tuned and developed. We did extensive research and had endless discussions and occasionally strenuous debates. One thing that was clear from the beginning was that the most influential figures in the field weren't always the best-known, and that CEOs could wield more might than celebrities. Read more...

"I am tired of the cheerleading by the mainstream press"

Cheerleading

Jeff Harding

I am tired of the cheerleading by the mainstream press where they see every positive sign as a sure sign of recovery and every negative sign as “unexpected.” Every article I read on new data from the Wall Street Journal or Bloomberg is the same–with mind numbing regularity. Worse is that they always find some economist to give them a positive quote to the effect that we are “turning the corner” or “the recovery is self-sustaining.”

Here are some examples from recent news. These aren’t cherry-picked:

Wholesale inventories rose by 0.6% in January; sales increased 0.8 percent, the 11th consecutive increase.

WSJ: “far above expectations.” The title of their article was “Wholesale Inventories Surge.”

Bloomberg: “larger than anticipated.” Bloomberg always likes to line up some optomistic economist: “’Firms are seeing more reason for optimism in the outlook and are looking to build inventories to fill future sales growth,’ said Zach Pandl, an economist at Nomura Securities International Inc. in New York.”

It sounds good but here is the reality if you look at inventories vs. sales ratios:

Don’t you have to have sales to spur inventory? This chart was right in the Commerce Department report which they all saw.

Initial jobless claims rose by 18,000 for the latest reporting week of April 3, up to 460,000.

WSJ: ” jobless benefits rose unexpectedly last week.”

Bloomberg: “More Americans unexpectedly filed claims for jobless benefits …” They like to get someone who is bucking the report to make us feel better and it’s either Home Depot or Caterpillar: “Home Depot Inc., the largest U.S. home-improvement retailer, is adding store jobs for the first time in four years as it expects a rebound in sales, Chief Executive Officer Frank Blake said.”

More on the unemployment situation later.

A lot of retailers reported good sales in March (Saks + 12.7%; Gap + 11%; TJ Maxx + 12%; Target + 10.3%; Macy’s + 10.8%; Nordstrom + 16.8%; Kohl’s + 22.5%). This is good stuff.

WSJ: “Shoppers opened their wallets even wider than expected in March.” Here is their rosy economist: ”‘It’s a blow-out month, the biggest monthly increase we’ve seen since we began tracking monthly retail sales in 2000,’ said Ken Perkins, president of Retail Metrics.”

Bloomberg: “Gap, Saks Lead Largest Monthly Sales Gain in a Decade.”

OK, this is pretty fair reporting. But it’s not a blow-out. Look at this one-year time frame chart which shows PCE, personal savings, transfer receipts (payments from the government), and disposable personal income:

Looks pretty flat to me. While the transfer payment numbers aren’t as current, you should know that they account for 20% of personal income.

Job Openings in US decrease to 2.72 million in February (- 4.6%). They fell for the first time in three months. There are more than 5 people vying for every opening, up from about 1.8 when the recession began in December 2007.

WSJ: They didn’t even report this.

Bloomberg: I have to admit they didn’t gild the lilly here. But they again mention again that Home Depot is hiring “for the first time in four years.”

One in five US jobless–20%–are unemployed after a year according to a new Pew study.

WSJ: Again they missed this story.

Bloomberg: Kudos. They reported this fairly because it was Pew’s data. They did mention that 162,000 new jobs were added in March.

162,000 jobs added in March. Of those, 48,000 were government workers, many related to the U.S. Census. These aren’t real “economic” jobs. See my article: “Unemplyment Remains Unchanged in March.”

WSJ: “created jobs at the fastest pace in three years.” Their headline was: “Employers Added Most Jobs in Three Years in March.” They noted that YoY that employment down another 1.8% and unemployment rate unchanged at 9.7%. Toward the end they mentioned that the broadest measure of unemploment (U-6, Marginally Attached Workers) was up from 16.8% to 16.9%. And at the very end they note that average hourly earnings (wages) for workers declined 0.1%.

Bloomberg: Pretty much the same. Instead of Home Depot adding jobs, this time they used another favorite, Caterpillar as an example. Funny, they forgot to mention that wage earnings declined, again. Both articles quote economists who think things are getting better.

Institute for Supply Management’s index of non- manufacturing businesses (services) rose to 55.4 from 53 in the prior month. This is another good sign, especially if looked at in isolation.

WSJ: ”‘It looks like the recovery is definitely here in the service sector,’ said Adam York, an economist with Wells Fargo Securities.”

Bloomberg: “higher than anticipated.” “’The recovery is looking increasingly self-sustaining,’ said James O’Sullivan, chief economist at MF Global Ltd.”

Private-sector jobs in the U.S. dropped by 23,000 this month. This ADP report was at odds with the BLS numbers which showed employment gains.

WSJ: “The news rattled investors and economists who had expected March would show a gain in payrolls.” Economist Joel Prakken, chairman of Macroeconomic Advisers said the ADP report didn’t include any weather rebound or census hiring and that the numbers were reasonable.

Bloomberg: “Companies in the U.S. unexpectedly cut payrolls.” They also blamed it on the weather and quoted Mr. Prakken as well. They again cited Caterpillar as a company that is hiring.

Personal spending (PCE) increased by 0.3% in February, but personal income was flat and savings were lower. PCE is really weak overall. No one connected the dots that said consumers had to resort to savings to make purchases. See my article: “Consumers Draw Down Savings For Personal Consumption.” PCE is really weak overall.

WSJ: They reported the facts. They didn’t make a note of the connection between a rise in PCE and a decline in savings.

Bloomberg: “Consumer spending in the U.S. rose in February for a fifth consecutive month.” “’Considering the circumstances, this is a fine performance with the job market still not strong,’” said Michael Moran, chief economist at Daiwa Securities America Inc. in New York.” They noted that savings declined as a result of spending and declining wage earnings.

Oh really?

Dems are now shaking down CEOs who don't get with the program

powerlineblog
The Empire Strikes Back

We wrote here about the consequences of Obamacare that are beginning to be felt, even before its provisions are implemented: Caterpillar said Obamacare will cost it an additional $100 million in the first year; Medtronic warned that the new tax on its products "could force it to lay off a thousand workers;" Verizon told its employees that it "will likely have to cut healthcare benefits to offset the new costs;" and AT&T announced that it will record a $1 billion non-cash expense in the first quarter and "will be evaluating prospective changes to the active and retiree health care benefits offered by the company."

These announcements are the tip of the iceberg; hundreds like them will follow as Obamacare becomes a reality. Congressional Democrats, evidently stung by the bad publicity, are trying to strike back. A reader writes:

Good post on the true cost of ObamaCare. But it gets better: the Dems are now shaking down CEOs who don't get with the program. In the attached letter, Henry Waxman not only orders the CEOs of AT&T, Caterpillar, Deere & Co, and Verizon to testify before the Energy and Commerce Committee, but also to produce internal analyses and emails related to their statements. They don't expressly subpoena the CEOs, so we can hope that they tell the Dems to GFY, though somehow I doubt that will happen.

The Dems sent these letters to the Republicans on the committee after 6pm tonight with no advance notice or prior cooperation.

Here is the letter Waxman sent to the Chairman of AT&T; the others are similar. Click here to enlarge:

In my original post, I wondered why these companies had not spoken out sooner, when it could have done some good. I suppose this is the answer: they know how vindictive the Democrats are. The Democrats' reaction would have been even more hostile (and more dangerous to the companies' well-being) if they had dared to blow the whistle on Obamacare before Congress voted.

Goldman Sachs bankers stockpiling weapons in case people revolt

Image via CrunchBase

Alice Schroeder
Bloomberg
“I just wrote my first reference for a gun permit,” said a friend, who told me of swearing to the good character of a Goldman Sachs Group Inc. banker who applied to the local police for a permit to buy a pistol. The banker had told this friend of mine that senior Goldman people have loaded up on firearms and are now equipped to defend themselves if there is a populist uprising against the bank.

I called Goldman Sachs spokesman Lucas van Praag to ask whether it’s true that Goldman partners feel they need handguns to protect themselves from the angry proletariat. He didn’t call me back. The New York Police Department has told me that “as a preliminary matter” it believes some of the bankers I inquired about do have pistol permits. The NYPD also said it will be a while before it can name names.

While we wait, Goldman has wrapped itself in the flag of Warren Buffett, with whom it will jointly donate $500 million, part of an effort to burnish its image -- and gain new Goldman clients. Goldman Sachs Chief Executive Officer Lloyd Blankfein also reversed himself after having previously called Goldman’s greed “God’s work” and apologized earlier this month for having participated in things that were “clearly wrong.”

Has it really come to this? Imagine what emotions must be billowing through the halls of Goldman Sachs to provoke the firm into an apology. Talk that Goldman bankers might have armed themselves in self-defense would sound ludicrous, were it not so apt a metaphor for the way that the most successful people on Wall Street have become a target for public rage.

Pistol Ready

Common sense tells you a handgun is probably not even all that useful. Suppose an intruder sneaks past the doorman or jumps the security fence at night. By the time you pull the pistol out of your wife’s jewelry safe, find the ammunition, and load your weapon, Fifi the Pomeranian has already been taken hostage and the gun won’t do you any good. As for carrying a loaded pistol when you venture outside, dream on. Concealed gun permits are almost impossible for ordinary citizens to obtain in New York or nearby states.

In other words, a little humility and contrition are probably the better route.

Until a couple of weeks ago, that was obvious to everyone but Goldman, a firm famous for both prescience and arrogance. In a display of both, Blankfein began to raise his personal- security threat level early in the financial crisis. He keeps a summer home near the Hamptons, where unrestricted public access would put him at risk if the angry mobs rose up and marched to the East End of Long Island.

To the Barricades

He tried to buy a house elsewhere without attracting attention as the financial crisis unfolded in 2007, a move that was foiled by the New York Post. Then, Blankfein got permission from the local authorities to install a security gate at his house two months before Bear Stearns Cos. collapsed.

This is the kind of foresight that Goldman Sachs is justly famous for. Blankfein somehow anticipated the persecution complex his fellow bankers would soon suffer. Surely, though, this man who can afford to surround himself with a private army of security guards isn’t sleeping with the key to a gun safe under his pillow. The thought is just too bizarre to be true.

So maybe other senior people at Goldman Sachs have gone out and bought guns, and they know something. But what?

Henry Paulson, U.S. Treasury secretary during the bailout and a former Goldman Sachs CEO, let it slip during testimony to Congress last summer when he explained why it was so critical to bail out Goldman Sachs, and -- oh yes -- the other banks. People “were unhappy with the big discrepancies in wealth, but they at least believed in the system and in some form of market-driven capitalism. But if we had a complete meltdown, it could lead to people questioning the basis of the system.”

Torn Curtain

There you have it. The bailout was meant to keep the curtain drawn on the way the rich make money, not from the free market, but from the lack of one. Goldman Sachs blew its cover when the firm’s revenue from trading reached a record $27 billion in the first nine months of this year, and a public that was writhing in financial agony caught on that the profits earned on taxpayer capital were going to pay employee bonuses.

This slip-up let the other bailed-out banks happily hand off public blame to Goldman, which is unpopular among its peers because it always seems to win at everyone’s expense.

Plenty of Wall Streeters worry about the big discrepancies in wealth, and think the rise of a financial industry-led plutocracy is unjust. That doesn’t mean any of them plan to move into a double-wide mobile home as a show of solidarity with the little people, though.

Cool Hand Lloyd

No, talk of Goldman and guns plays right into the way Wall- Streeters like to think of themselves. Even those who were bailed out believe they are tough, macho Clint Eastwoods of the financial frontier, protecting the fistful of dollars in one hand with the Glock in the other. The last thing they want is to be so reasonably paid that the peasants have no interest in lynching them.

And if the proles really do appear brandishing pitchforks at the doors of Park Avenue and the gates of Round Hill Road, you can be sure that the Goldman guys and their families will be holed up in their safe rooms with their firearms. If nothing else, that pistol permit might go part way toward explaining why they won’t be standing outside with the rest of the crowd, broke and humiliated, saying, “Damn, I was on the wrong side of a trade with Goldman again.”

Four Financial Related Deaths in 24 hours

Image by Getty Images via Daylife

Hat Tip to Dprogram.net

(Reuters) – James McDonald, chief executive officer of investment management firm Rockefeller & Co, committed suicide on Sunday in Massachusetts, the Wall Street Journal said, citing people familiar with the matter.

(LATimes) – Newport Beach financier Danny Pang died early Saturday at a local hospital, according to the Orange County coroner’s office. The cause of death has not been determined and an autopsy is planned for Sunday, said Larry Esslinger, supervising deputy coroner.

(Inquisitr) – Ex-CEO of Beneficial Corp. Finn H.W. Casperson was found dead in an apparent suicide behind an office building in Westerly, Rhode Island.

(CNN) – Police are investigating the death of the former chief fundraiser for ex-Illinois Gov. Rod Blagojevich as a “death-suicide,” an Illinois mayor said Sunday.