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A Times Editorial

Workers feel the pinch while bosses just get richer

There's new evidence of the outsized greed Wall Street allows for corporate executives. A new Government Accountability Office report details how 40 top executives at 10 large corporations underfunded their workers' pension plans but still walked away with a combined $350 million in compensation. The GAO said there was no illegal conduct. But that only means the law needs to catch up. At the very least, new rules are needed to let the government claw back these lavish riches when they come at the expense of a pension's solvency.

The GAO didn't name the offending companies, identifying the businesses as publicly traded companies in electronics, manufacturing, steel, textiles, air travel and insurance. During the five years leading up to the termination of their pension plans, the companies' boards paid their high-ranking executives outsized pay packages that included multimillion dollar salaries, bonuses, stock options, retirement benefits and other perks — such as the personal use of corporate jets for family vacations to Europe.

In one example, the GAO reports that an airline missed nearly $1 billion in required pension contributions. Meanwhile it gave its three top executives more than $50 million in salary, bonuses, stock and supplemental retirement benefits. In another example, an insurance company underfunded its pension plan for 7,718 participants by $121 million at the same time two top executives were paid nearly $20 million each in salary and bonuses.

What happens to these terminated plans? Their liabilities were shifted to the Pension Benefit Guaranty Corporation, a federal corporation set up to insure worker retirement benefits for 44 million workers and retirees in about 29,000 pension plans. But the PBGC has more obligations than funds. In fiscal year 2009, it reported a deficit of about $20 billion and the potential exposure to future losses from teetering companies at $168 billion.

As a result, the PBGC often pays workers less in benefits than they had been promised, since federal law caps PBGC payouts. In one example cited by the GAO report, a retired pilot had his monthly pension reduced by two-thirds.

The very executives who are choosing to underfund their workers' pension plans are reaping huge rewards for themselves — millions in compensation and golden parachutes that typically can't be recovered by the PBGC when the pension plan is terminated. Rep. George Miller, a California Democrat who is chairman of the House Education and Labor Committee, is considering legislation to freeze executive pay when rank-and-file pensions are underfunded. Sounds like a plan.

Workers feel the pinch while bosses just get richer 11/20/09 [Last modified: Friday, November 20, 2009 6:31pm]
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