For years, AFSCME has been leading the fight to rein in the grotesque and excessive paychecks that unaccountable boards of directors have been giving too many of America's CEOs. We've fought shareholder battles and taken our case to the media, arguing that directors who approve exorbitant salaries for executives cheat shareholders and workers. We created a network of institutional and individual investors that fights to get shareowners a voice on executive compensation packages and in the boardrooms of major corporations. But the CEOs want their sky-high pay guaranteed even when they fail, so they've fought us every step of the way, building thick walls of resistance to pay reform.
Finally, we're beginning to knock down the wall. As unemployment reached a 30 year high this week, President Obama took the case to the American people. "We all need to take responsibility," the President said on Wednesday, "and this includes executives at major financial firms who turned to the American people, hat in hand, when they were in trouble, even as they paid themselves their customary lavish bonuses." The President called excessive pay and bonuses "the height of irresponsibility." More importantly, he laid the responsibility for our country's economic crisis right in the hands of CEOs who have put greed ahead of the well-being of everyone else. "That's shameful," the President said.
President Obama decried the "culture of narrow self-interest and short-term gain at the expense of everything else" that has produced countless tales of corporate irresponsibility. For example, Martin J. Sullivan ran AIG, the giant insurance and financial services firm, into the ground. He was fired, but walked away with a severance package estimated at $47 million. He wasn't alone. At a time when taxpayers were handing over $700 billion to bailout failing banks, the top echelon of the banks collected more than $18 billion in bonuses.
Benefits and pay for most Americans are being cut to the bone, jobs are disappearing, health care costs are skyrocketing and working families are struggling to make ends meet. Yet, CEOs are paid an average of 344 times more than average workers. This madness has to end. Unjustified executive salaries are padded with generous benefits, bonuses and contracts with so-called golden parachute provisions. The boards of directors in their pockets even offer golden coffins, corporate death benefits that continue to be paid out years after the CEO has died. So much for pay for performance.
That's why it was heartening to hear the President pledge that our taxes wouldn't be spent to line the pockets of those who already get too much. "For top executives to award themselves these kinds of compensation packages in the midst of this economic crisis is not only in bad taste - it's a bad strategy - and I will not tolerate it as President." Yesterday, the Senate followed the President's lead and passed two important amendments to the President's jobs and recovery legislation. Senators adopted an amendment from Senator Claire McCaskill (D-MO), which imposes a $400,000 salary cap, what the president of the United States makes, on officers and directors at firms that receive bailout funding from the Treasury Department. This is an important first step in bringing some common-sense into the payouts we're being asked to make to the country's failing banks.
The Senate also adopted an amendment offered by Senator Christopher J. Dodd, (D-CT), chairman of the Banking Committee, to prohibit bonuses and other incentives for at least the 25 most highly paid executives at firms that receive bailout funds from the Treasury Department. Senator Dodd's amendment would also require the Treasury Department to conduct a retroactive review of bonuses given out by the firms.
As the meltdown of the financial sector has illustrated, the perverse system of excessive pay, even for failure, created incentives for unwise risk-taking by major financial institutions that have contributed to the worst economic collapse since the Great Depression. The President's announcement Wednesday and the Senate's actions yesterday, signal a real and dramatic effort to fix the corrupt and broken system.
Now, for the first time in memory, our political leaders are taking action that can lead to accountability and reform. But more must be done. It's time to stop rewarding corporate executives for failure. Shareowners must have a say on executive pay. It's time for Congress to pass legislation that gives shareholders a voice in how top corporate executives are paid and a chance to elect directors who will represent shareholder interests. We need bold action to bring these rampant abuses to an end.