September 08, 2007
Labor Market Rigidity Questioned
A rapidly expanding empirical literature has addressed the widely accepted claim that employment-unfriendly labor market institutions explain the pattern of unemployment across countries. The main culprits are held to be protective institutions, namely unemployment benefit entitlements, employment protection laws, and trade unions. Our assessment of the evidence offers little support for this orthodox view. The most compelling finding of the cross-country regression literature is the generally significant and robust effect of the standard measure of unemployment benefit generosity, but there are reasons to doubt both the economic importance of this relationship and the direction of causation. The micro evidence on the effects of major changes in benefit generosity on the exit rate out of unemployment has been frequently cited as supportive evidence, but these individual level effects vary widely across studies and, in any case, have no direct implication for changes in the aggregate unemployment rate (due to ``composition" and ``entitlement" effects). Finally, we find little evidence to suggest that 1990s reforms of core protective labor market institutions can explain much of either the success of the ``success stories" or the continued high unemployment of the large continental European countries. We conclude that the evidence is consistent with a more complex reality in which a variety of labor market models can be consistent with good employment performance.
September 05, 2007
CEO McMansions and Corporate Performance
Here's a fun paper via Marginal Revolution:
We study real estate purchases by major company CEOs, compiling a database of the principal residences of nearly every top executive in the Standard & Poor's 500 index. When a CEO buys real estate, future company performance is inversely related to the CEO's liquidation of company shares and options for financing the transaction. We also find that, regardless of the source of finance, future company performance deteriorates when CEOs acquire extremely large or costly mansions and estates. We therefore interpret large home acquisitions as signals of CEO entrenchment. Our research also provides useful insights for calibrating utility based models of executive compensation and for understanding patterns of Veblenian conspicuous consumption.
April 11, 2005
AFL-CIO Unveils "Jaw-Dropping" Case Studies of CEO Pay
For Immediate Release
Contact: Bridget Murphy (202) 637-5018
AFL-CIO Unveils "Jaw-Dropping" Case Studies of CEO Pay and
Rigged Deals in New Executive Paywatch Website
Launches Campaign to Curb Runaway CEO Pay
(Washington, April 11) - Excessive CEO pay enriches corporate executives at the expense of working families' retirement savings, according to the new Executive Paywatch website, www.paywatch.org, unveiled by the AFL-CIO today. As part of a growing movement to reform executive pay, the website provides case studies on companies that rewarded CEOs with huge pay packages last year. It gives visitors tools to pressure companies to reform out of control CEO pay.
According to the New York Times, average CEO pay increased 12 percent in 2004 while the pay of average workers increased just 3.6 percent. Last year, the average CEO of a major corporation received $9.84 million in total compensation.
"We have seen a tremendous amount of
interest among workers in holding CEOs and their boards accountable,"
said AFL-CIO Secretary-Treasurer Richard Trumka. "They are rightfully
outraged when they learn about jaw-dropping executive compensation
packages. It's time to put the brakes on runaway CEO pay."
This year, union-sponsored pension plans have submitted over 140 shareholder resolutions on CEO pay reform. The shareholder proposals include limiting golden parachutes, demanding pay clawbacks, expensing stock options and seeking shareholder approval of preferential executive pensions. These new shareholder proposals will accelerate the advances made last year, when an unprecedented 34 union fund-sponsored proposals on CEO pay won majority votes.
"The AFL-CIO looks out for the retirement savings of working families, which means we can't look away while CEOs run off with outrageous pay packages," said Trumka.
The paywatch website includes new case studies of excessive CEO pay for the following companies: Amgen (NASDAQ: AMGN), Coca-Cola (NYSE: KO), Dynegy (NYSE: DYN), Sprint (NYSE: FON), Sempra Energy (NYSE: SRE), and Wal-Mart Stores (NYSE: WMT). The case studies dissect the CEO pay packages and link to the union fund-sponsored shareholder proposal at each company.
At Wal-Mart, for example, President and CEO H. Lee Scott raked in nearly $23 million in total compensation in 2004. Most of that compensation was in the form of fixed price stock options and time-vesting restricted stock. At the company's annual meeting in June, shareholders will be asked to vote on a proposal urging the Board of Directors to grant Wal-Mart executives performance shares instead of stock options or restricted stock.
Coca-Cola, notorious for its generous executive severance packages, plans to give former CEO Douglas Daft an exit package reportedly worth $36 million when he left, the website reveals. The Executive Paywatch website also shines a spotlight on Sprint CEO Gary Forsee, who made over $19 million last year. He is expected to receive a $1.8 million annual pension benefit when he retires.
The new Executive Paywatch website gives
readers the tools to execute a three-pronged strategy to contact
regulators, the stock exchanges and the IRS. The campaign calls upon
the SEC, the federal regulatory agency that protects investors'
interests, to require better disclosure of CEO pay to investors.
Visitors can also urge the stock exchanges to require genuine director
independence, particularly on board of director compensation committees
that are responsible for setting CEO pay. Finally, visitors can tell
the IRS to enforce appropriate tax collection from America's executive
elite, who can get away with abusive tax shelters, deferred
compensation plans and underreporting of perks and capital gains.
"The average CEO made nearly $10 million last year while workers' wages were relatively stagnant," said Trumka. "We're calling on the SEC, the stock exchange and the IRS to join us in working towards responsible executive compensation levels."
The AFL-CIO represents more than 13 million working men and women. Union members participate in the capital markets as individual investors and through a variety of benefit plans. Union sponsored benefit plans have a total of more than $400 billion in assets.
February 10, 2005
Wal-Mart and False Economics
I am involved in an interesting debate over at the blog Assymetircal Information regarding Wal-Mart, low wages and the right to unionize. What surprises me most, though it shouldnt, is that so many intelligent people have so many false assumptions regarding labor markets.
One person wrote that if McDonalds were to unionize it would drive them out of business due to low profit margins in fast food. McDonalds profit margins are 5 times greater than those of heavily unionized Kroger supermarkets and Costco, the big box employer known for paying their workers well despite not being heavily unionized.
In the course of the debate the issue of tax payers subsidizing these low wage workers health care and other costs came up. It reminded me of an excellent white-paper-report produced by the Labor Center at Berkeley showing how much Wal-Mart costs taxpayers. Click here for the PDF of the report.
Again, check out the discussion section in the post on Asymmetrical Information to read the exchanges:
December 07, 2004
Working Conditions and Labor Rights in Export Processing Zones
This report looks at the sharp end of globalisation – the working lives of millions of people who
work in the world’s export processing zones. Since the 1970s the zones, also known as free trade
zones or maquilas, have become important instruments of economic policy. Governments seek to
attract investors with financial incentives and a liberal regulatory environment, in return for
employment creation and export earnings.
Thanks to LaborProf Blog for the tip