Monday, August 27, 2012


Every now and then you come across a fact that truly blows the mind. 

Here’s one.

26 CEO’s among the 100 highest paid corporate chief  executives made more money in 2011 than their companies paid in federal income taxes in the same year. The group earned average total compensation of $20.4 million, a 23 percent increase over the average in the prior year. 

Here’s the list:

Abbott Laboratories (NYSE:ABT)
Advanced Micro Devices (NYSE:AMD)
Anadarko Petroleum (NYSE:APC)
Boeing (NYSE:BA)
Broadcom (NASDAQ:BRCM)
Chesapeake Energy (NYSE:CHK)
Citigroup (NYSE:C)
Cooper Industries (NYSE:CBE)
Danaher (NYSE:DHR)
Devon Energy (NYSE:DVN)
FirstEnergy (NYSE:FE)
Ford Motor (NYSE:F)
Halliburton (NYSE:HAL)
International Paper (NYSE:IP)
Leucadia National (NYSE:LUK)
Marathon Oil (NYSE:MRO)
Marsh & McLennan (NYSE:MMC)
Motorola Mobility (NASDAQ:GOOG)
Newell Rubbermaid (NYSE:NWL) (NYSE:CRM)
Travelers Companies (NYSE:TRV)
Tyco International (NYSE:TYC)

The Institute for Policy Studies, which produced the report, makes the point that the US tax code includes lots of provisions encouraging excess pay, including unlimited tax deductibility of executive pay, unlimited deferred compensation, and preferential treatment of carried interest  among others items. 

The study goes on to note that 19 of the 26 companies operated subsidiaries in tax havens and that the firms, combined, operated a total of 537 tax haven subsidiaries.

The report includes lots of other mind numbing figures, including how much tax loopholes cost each of us.  And, as you would expect, the report has generated furious denials and denunciations.

 At some point in every controversy, I lose interest in the detail and only want to know the answer.  

In this case, it seems to me that two conclusions are crystal clear.  The tax code is completely screwed up and needs to be rewritten.  And corporate America needs new governance rules. 


  1. I've been told when AA exits bankrupcy CEO Tom Horton will get a $23 million dollar payday.

  2. Mr. Cradall, I would suggest you do a little more homework on the root cause of the problem at hand. The debasement of our currency is the crux. And the Federal Reserve is doing nothing to help the middle-class in its efforts to reflate our economy, but only making things worse ie the income disparity you discussed. Take a few minutes, have some coffee and watch the following video...worth the effort.

  3. Mr. Crandall:

    I agree. There is too much of a growing wealth gap between the very wealthy and the lower and middle class. The income levels of the lower and middle class need to grow or the economy will not grow on a short term or long term basis. Our nation has fundamental needs that only the government will address. All Americans including the very wealthy benefit both directly and indirectly from government services. In fact a very good case can be made that those who have the greatest net worths actually benefit the most from the services that the government provides our society. For this reason the wealthy need to pay more for these government services. Also when government polices work to elevate the incomes of the lower and middle class it allows the majority of people to increase their consumption and spending which in the long run benefits all of us including the very wealthy.

    1. It is tempting, and natural, to look at what another has, and judge those possessions in relation to our own, and judge how another uses what he has. But it is not right to judge or to covet, and does us no good.

      John Wesley, the founder of the United Methodist Church, once had a sermon title, "The Use of Money". In it he exhorted people to gain all you can; save all you can; and give all you can. We would all do well to consider his admonition. He called people to be productive, to employ to the fullest the God-given talents we have. We are then to be frugal with the fruits of our labor, enabling us to serve the most people by giving what we have gained and saved.

      While I wonder if a rich person is exercising frugality, and being generous, I should really be concerned with my own industriousness, frugality, and generosity before I start throwing stones.

      But what would it look like if these CEOs did that?

  4. Everytime I talk about this very subject. I am told I am envious of the wealthy. I talk about how the wealthy realy on the government just as much as the poor folks in this country. Look at all of the tax breaks they get, look at all of the subsidies big corporations get all the while they are making record profits, laying folks off, and their industry is not going under. I also read today that over 2000 millionaires collected unemployment in 2009. Yet the poor people are Americas problem, if you listen to some radio and news(opinion) networks. I am very glad a well to do individual like Bob Crandall is speaking out and has the same thoughts as a very poor American like me. I am accused of being lazy and ignorant because I make so little money. I am very tired of hearing that same song and dance, when I know those accusations are wrong.

  5. Money is the power, (and responsibility), to allocate resources (wisely).

    Concentrating the money power in fewer and fewer hands has never ended well in the past, and there is no reason to think it will end well this time either.

    No one person has all the answers, and should not be expected to. This is why freedom should be held in the highest regard possible to allow as many as possible to find their own answers. Our 18th century working-men forbears seemed to understand these basics of economics better than academics today.

    We need monetary freedom, as a minimum. Not State spying on personal finances.

  6. Thanks for covering this, Mr Crandall. We need more people such as yourself who have seen the game firsthand and understand the holes in our tax system and our corporate governance laws and regulations.

  7. Bob,

    I am glad to see that someone, you, who has benefited personally from the ability of corporations in the US to generate personal wealth, has realized that things have reached such a level of distortion that we are essentially threatening to kill the goose that created so much wealth during the post-WWII era.

    The level of economic inequality, the waste of capital on war making activities, the absurd tax code, and the degree to which money now is more important than individual votes are killing our golden goose. Unfortunately, those who benefit from this nonsense, are so focused on the short-term, that they either do not see or do not care that we are destroying our ability to be competitive in the medium- to long-term.

    The political system here is broken, and until money is removed from the equation I do not see how this can be fixed.

    -David Hill