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CEOs Get Their Stock Grants, Workers' Pensions Lag

Posted by: Nanette Byrnes on September 01, 2009

A recent study of the S&P 500 shows that companies with employee pension plans put less into funding those promises than they did into management’s stock grants and options. That’s despite an aggregate $283.6 billion shortfall in the 500’s pension plans.

The report’s author, Jack T. Ciesielski, well known for digging into companies’ financial figures in his research publication, the Analyst’s Accounting Observer, found that the combined fair value of restricted stock and options issued as executive compensation during 2008 was $44.5 billion. Those same companies put $39.5 billion toward employee pensions. (Only 358 companies still have pension plans and that’s the universe he looked at).

Questions of equity aside, Ciesielski questions the business sense of such a move. “From the shareholders’ point of view, one has to question why so many dollars with uncertain returns are thrown at management compensation, when shareholders could be insulated from pension claims with some of those same dollars,” Ciesielski said in the report, according to a write up of the study by the Council for Institutional Investors.

The biggest difference came from financial companies. In 2008, for every $1 contributed to their employee pension plans companies in the financial services sector granted approximately $2 of restricted stock and $0.30 of stock options to their brass.

The full report is only available to paying customers, but in Ciesielski’s own summary he argues it’s important not to focus on executive compensation in a vacuum but to compare it to other corporate obligations — like pensions — and to factors affecting corporate returns like research and development or capital expenditures. As well as how the option dilution affects their own ownership.

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Reader Comments


September 1, 2009 02:47 PM

Why are they paying out money in bonuses when they are falling short of employee pension contributions? Oh wait, because they can!

Not far away, our great economic leaders will be standing in front of us with puzzled looks saying - "We have no idea of how it happened, but the pension system has collapsed! The government guarantar of pensions is now bankrupt!.. Who would have known?"


September 1, 2009 08:51 PM

Nikko, The government, Wall Street, & the FED are obviously all one entity interconnected, wouldn't you NOW agree? 'Google' this- THE OBAMA DECEPTION, and watch it on the web.


September 2, 2009 07:22 AM

LOL. Yeah right Karl. It's all Obama's fault. I'm sure if he started throwing the bastards in prison there'd be a documentary about that too.


September 2, 2009 12:03 PM

Nikko, 'Google' this- BANK OF AMERICA COMPLAINTS SECRET LIFE INSURANCE POLICIES, and read it! Then 'Google' this- WALMARTS DEAD PEASANT SUIT AGAINST INSURERS ESCAPES THE GRAVE, and read that too! Now think about this- BofA, Citigroup, Wells Fargo, JP Morgan Chase.......... & Walmart are all BIG corporations, right? WHO runs these corporations? CEO's, correct? WHO approved these 'SECRET LIFE INSURANCE POLICIES'? Welcome to America- ONE BIG LIE! P.S. David, 'Google' this- AMERICA: FREEDOM TO FASCISM, and watch that one too. George W. Bush was the WORST President in the history of the USA, in my opinion. Obama might go down as 2nd WORST if he doesn't HELP THE AMERICAN PEOPLE, wouldn't you agree?


March 24, 2010 06:55 PM

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How can you manage smarter? BusinessWeek writers Nanette Byrnes, Patricia O’Connell, Emily Thornton, Matthew Boyle, Michelle Conlin and Diane Brady synthesize insights from the brightest business thinkers, critique the latest management trends, and comment on leaders in the news.

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