Saturday, January 22, 2011

Bonus Time

New York Times published an article yesterday Pay Doubles for Bosses at Viacom By Graham Bowley:

Viacom awarded its chief executive, Philippe P. Dauman, total compensation for 2010 valued at about $84.5 million, more than double the 2009 figure, including salary, bonus and stock options, the company disclosed on Friday.

It awarded its chief operating officer, Thomas E. Dooley, total compensation valued at about $64.7 million, also more than double the 2009 compensation. Viacom disclosed the compensation in documents filed with the Securities and Exchange Commission after the market closed on Friday.

The company said, however, that the compensation was inflated by one-time stock awards linked to long-term contracts the executives signed last year. These contracts, for six and a half years, were unusually long for the industry, a spokesman, Carl Folta, said, and reflected Viacom’s recent better performance.

Without those one-time awards, Mr. Folta said, Mr. Dauman’s compensation was valued at about $30 million, including both cash and stock, and Mr. Dooley’s at about $23 million, both below their 2009 compensation.

Yes, we got it.  The compensation was reward for multiple years' efforts.  Even so, that $84,500,000 total income in one year to one person is simply obscene.

Let's look at what $84,500,000 means. 

According to U.S. Census Bureau's data, the median household income in 2008 is $52,029 in the USA and $55,980 in New York State, where Viacom's headquarters reside.  That means that Mr. Dauman's income for 2010 equals 1,624 average USA families' income (in 2008) or 1,509 average New York families' income.

Let us also look at the U.S. Department of Health & Human Services' the 2011 HHS Poverty Guidelines:

2011 HHS Poverty Guidelines
in Family
48 Contiguous
States and D.C.
Alaska Hawaii
1 $10,890 $13,600 $12,540
2  14,710  18,380  16,930
3  18,530  23,160  21,320
4  22,350  27,940  25,710
5  26,170  32,720  30,100
6  29,990  37,500  34,490
7  33,810  42,280  38,880
8  37,630  47,060  43,270
For each additional
person, add
   3,820    4,780    4,390

Therefore, it means that Mr. Dauman's income for 2010, equals the income of 7,759 persons who lives by themselves and have the income at the level of poverty line in the 48 contiguous states and D.C., including New York where Viocam's headquarters reside, or 3,781 families of four with income level at the poverty line in those said regions.

Again, U.S. Census Bureau has such data: in 2009, media sales price of new homes sold in United States 2009 was $216,700, and the average sales price was $270,900.  From that, we can calculate that Mr. Dauman's income for year 2010 could enable him to purchase 312 homes at the average sale price in 2009.

For year 2009, the average price of a new car is $28,715, according to U.S. Census Bureau who cited data from National Automobile Dealers Association.  We can gather that Mr. Dauman's 2010 income would have enabled him to purchase 2,943 new cars at the average price.

Don't you think something wrong with this picture?

Alas, the bonuses don't belong to the commercial enterprises alone.  Yesterday, San Francisco Chronicle reported that UC regents hand out raises after word of cuts.
Finances are so dire at the University of California that it might have to turn away qualified students, but UC has still found a way to reward hundreds of employees with more than $4 million in incentive pay and raises.

At the regents meeting Thursday in San Diego, UC officials reported giving rewards of $150 to $41,205 to nearly 1,500 UCSF employees who met performance targets, raising the pay of some campus executives to above market rate, and providing 10 percent raises of about $20,000 a year to three executives at their Oakland headquarters.

The executives, who have various financial responsibilities for the UC system, will earn between $216,370 and $247,500 in base pay.

"Whether a budget crisis or not, the university still has to be able to pay competitive salaries and incentives consistent with industry standards," said Steve Montiel, a spokesman for the university. "The university has no problem paying incentives to be competitive."

One of them, Grace Crickette, UC's chief risk officer, "has saved the university over $100 million by driving down the cost of workers' compensation, negotiating much more advantageous terms with our insurance company," Taylor said. The raises "are a small price to pay for people working at the highest level."


At UC Berkeley, for example, the new vice chancellor for administration and finance will earn a base salary of $375,000 - 9 percent higher than the salary midpoint of $344,000 earned by colleagues at other universities, UC officials reported.

At UCLA, the chief financial officer of the hospital system will receive a 10.5 percent raise, bringing his salary to $420,000 from $380,000 as a hedge against the possibility that he would go somewhere else. The campus called it a "pre-emptive retention salary adjustment."

I got it - Mr. Crickette earned his large bonus by making low level employees make less.

And what does $420,000 mean?  That was the equivalent of 14.6 new cars at the said average price in 2009.  How many new cars can you buy with your annual salary?

What is University of California now?  Still a public education and research institution?

I am reading Dostoevsky's Demons, which describes the political chaos seen in 19th-Century Russia.  However, when I read the mentioning of Internationale, I couldn't help but shudder - are we heading that mighty and destructive collision headlong?

Hungry Kids - Käthe Kollwitz
Hungry Kids - Käthe Kollwitz

Tuesday, January 11, 2011

California - the Fool's Gold

Much anticipated and dreaded new budget for California was put forth by the new governor Jerry Brown and all the fears were realized and then some.

Governor Brown presented us a rather honest budget, which needs to eliminate a budget gap of about $25 billion out of $86 billion budget.

He proposed cuts to some social services, lowered salaries for non-union state employees and a huge cut to the three-tiered university systems in California.  University of California, the jewel of the public universities in the nation, will get 25% less from the state and that translates into about 13% of the total budget, which includes funding from state, grants and students' fees.

University of California posted the image below to demonstrate the stress the University is facing:

In the past decades, California was justifiably called the Golden State, who led the nation in innovation.  That economic engine was largely the product of excellent public educational system this state used to have.  Things changed after tax-restructuring in 1970s (Proposition 13, 1978) and the funding for education became less and less adequate.  Finally, we are to see that students' fees are to surpass the funding from the state.

This budget is a bitter pill and we must swallow.  It was Californians' own undoing.  We are kill the goose that lays the golden eggs in order not to starve to death.  In the long run, if the tax situation did not change (Republicans are still opposing to any tax increase), we will have neither eggs nor goose.

The color of State of California is that of the fool's gold.

Tuesday, January 4, 2011

For Every Bill Gates, There Are Thirty-Six of These Executives of UC

Yesterday, Steve Masover commented about the demands of thirty-six highly paid executives of severely under-funded University of California for ever higher retirement pension:

The Whinging 36 are threatening legal action if they don't get their pensions plumped.

These executives claim in their letter and attached position paper (from which the foregoing quote was drawn) that the changes they demand were promised by the University's governing Board of Regents and other executives. This is actually pretty important, and I'm inclined to believe them on that point. I'm not qualified to debate signatory and Whinging 36 leader Christopher J. Edley, the dean of UC Berkeley's law school, on questions to do with the legal obligations in play.

I do note, however, that it was apparently legal for the princes of Wall St. to slurp down bonuses that make UC executive compensation look like couch-cushion change, even after financial firms accepted billions of taxpayer dollars in bailouts for the mess they made of the economy. Never mind that the "recovery" that this bailout effected has yet to return millions of people to work at real-world wages.

So it's not so surprising that some executives at the University of California feel entitled to demand exceptional pensions to wash down their exceptional pay, even though the state's and university's budgets are in crisis, layoffs are rampant, belts are tightening, employee pension plans are requiring greater contributions from staff and faculty, retirement age is being pushed back, new-employee benefits will be offered on lesser terms, and ...
Naturally, it is always the powerful to wield weapons of legality to protect their perks.  When the Wall Street capitalists were bailed out, Obama administration didn't demand them to take less payment or bonuses, due to existing contracts.  Yet, when auto companies were rescued, the existing contracts of the auto workers were modified and the waged workers were make to take less home.

People here don't like to talk about class struggle.  But ignoring it won't make it disappear.  In my blog article Nobility of the Bailliage of Blois, George Soros and Wen Jiabao, I commented that:

When I examined certain terrible political situations, I was often struck by the inability and ineffectual of some enlightened insiders' attempt to improve the situation and the great weight of societal inertia.

The ever-larger income inequality in the US is marching the entire nation towards a precipice.  In the face of a clear and present danger, someone in the upper crest of the society, such as George Soros, Bill Gates and Nancy Pelosi are trying valiantly to stem the redistribution of wealth from the middle- and lower- class to the supremely rich, in order to create a more sustainable social structure.  But the oppositions from deceptive figures like Meg Whitman and Sarah Palin, some ignorant members of Tea Party, and indifferent "independent voters", thwarted their efforts repeatedly and at the brink of decimate such attempts.  If that happens, it would be tragic for the people those enlightened insiders trying to help, and it would be even more tragic for these enlightened insiders if the order of the society collapses and they become personal victims to the situations they had tried to change, either out of selfless compassion or calculated long-term view.  Then the scale their tragedy would mount to Shakespearean.
Try they might, these enlighten members of establishment won't succeed, I'm afraid.  For every Bill Gates, there are thirty-six of these executives of University of California.

Matthew Felix Sun's Drawing_7254