- The Washington Times - Thursday, April 6, 2006

Labor leaders yesterday chastised U.S. corporations for giving chief executives lucrative retirement benefits at the expense of workers and investors.

So-called super pensions have reached $6 million a year for some corporate leaders, according to an analysis by the Corporate Library and released by the AFL-CIO labor federation. The average chief executive of a Standard & Poor’s 500 company made $11.75 million in total compensation — wages and benefits — last year.

“Working Americans are being hurt every day by this out-of-whack pay structure,” AFL-CIO Secretary-Treasurer Richard Trumka said.

Mr. Trumka lamented the evaporation of defined-benefit plans for average workers in favor of retirement plans that rely on investment vehicles such as the 401(k). Twenty-one percent of private-sector workers have a defined-benefit pension plan, the Bureau of Labor Statistics reports.

Executive compensation is an increasingly sensitive issue within the labor movement as workers in the auto industry struggle to hold on to jobs and benefits, and while workers in the troubled airline industry are subject to wage and benefit cuts either to stave off bankruptcy or to help carriers emerge from bankruptcy.

The largest pensions offered guaranteed compensation of $4 million to $6.5 million annually for heads of Pfizer Inc., Exxon Mobil Corp., IBM Corp., AT&T; Corp., UnitedHealth Group Inc. and Home Depot Inc., according to data released by the AFL-CIO.

The AFL-CIO, a federation of 54 unions, and the Corporate Library, a company in Maine monitoring corporate governance issues, gathered wage and benefit data from proxy statements filed by companies with the Securities and Exchange Commission (SEC).

Pfizer CEO Henry A. McKinnell, 63, will receive an annual pension of $6.5 million upon retirement, provided he is 65.

Pfizer defended Mr. McKinnell’s compensation, writing in an e-mail that “Hank McKinnell has earned his pension benefits over the course of a career that will represent 37 years of service to Pfizer as of the time of his retirement.”

IBM CEO Samuel J. Palmisano is scheduled to earn an annual pension of $4 million upon retirement, even though the company cut employee pensions in 1999 and this year, Mr. Trumka said.

IBM said in January it will freeze all its workers’ pensions beginning in 2008 so it can save up to $3 billion through 2010.

Mr. Palmisano’s pension will be frozen, too, IBM spokesman John Bukovinsky said.

“Every employee’s pension is calculated under the same formula. The changes we announced to our pension plan earlier this year apply equally to all employees,” he said.

The Business Roundtable, a group of 160 chief executives that is headed by Mr. McKinnell, defended executive pay and argued that the organization is working to improve corporate governance and supports tying pay to performance.

“We can’t say what an executive of a large corporation should make. We can just say how it should be determined,” Business Roundtable President John J. Castellani said.

The AFL-CIO is expressing outrage over pensions as the SEC prepares to improve disclosure of executive pay by forcing companies to divulge previously unreported perks to corporate executives. In January, the SEC proposed changing disclosure rules in response to requests from investors for more information.

In light of pending disclosure changes, executive pay is increasingly tied to performance, said Frank Glassner, chief executive of Compensation Design Group Inc., a New York executive pay consulting firm.

“There has been a definitive link between pay and performance,” he said. “There are going to be fewer and fewer places where you can hide executive pay.”

Some companies are developing a new formula to determine pay. The Coca-Cola Co. this week said if earnings per share don’t rise fast enough over a three-year period, outside directors wouldn’t receive compensation. They would get a significant increase in pay if earnings fare well.

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