Listen up TAPPI, PIMA, AF&PA, PAPTAC, CEPI, and other paper industry organizations. Just because you're not-for-profit doesn't mean your executives can't have absurd compensation packages. It doesn't mean you can't dole out ludicrous retirement perks and other creative bonuses and benefits to your fattest of cats.
Never mind that for the past five or so years your member companies have been suffering one of the longest and deepest downturns in the industry's history. Ignore the fact that some 72 pulp and paper mills have closed in the U.S. alone during the past five years, as well as 33 sawmills, and that 32,000 U.S. paper industry jobs and 57,000 jobs in the wood sector have been lost since 1997 (all AF&PA figures).
Follow the lead of the New York Stock Exchange and let your member companies eat cake. What's good for the NYSE has got to be good for you. Right? After all, comptrollers of the nation's commercial purse strings know what they're doing. Right?
Wrong
As disclosed by the New York Times several weeks ago, the NYSE will be lavishing $22 million in retirement benefits on each of its two senior officials, together with $54.8 million to 17 other executives in this not-for-profit organization, to which most "public" pulp and paper companies belong. Take notes TAPPI and PIMA.
According to NYSE's interim chairman, this is a result of the same "boardroom process" that awarded the organization's former chairman a pay package of $200 million. That dwarfs the $69 million for Coke's chairman used as a sort-of benchmark for comparing paper company CEO compensation in an earlier PaperAge column ("The compensation Waltz," September 2002 issue).
At $200 million/yr, the NYSE chairman was being paid about $3.85 million/week, $770,000/day (5-day work week), $96,000/hour (8-hr work day), and at least $40,000/coffee break and/or typical trip to the men's room. The organization is reportedly working to get its executive compensation under control while it searches for a new, permanent chairman. I guess so.
The Times article further reported that the generous NYSE compensation web extended out pretty far in certain directions. A former president of the organization, for example, was paid $5.8 million in 2001, $5 million in 2000, and $7.4 million in 1999. Last year, that same person was paid $1 million as a part-time advisor to the chairman. Need any advice TAPPI?
The exchange's top regulatory official received $1.5 million in 2001 and $1.3 million in 2002. By comparison, the Times noted, the nation's top regulator, the chairman of the Securities and Exchange Commission, is paid an annual salary of only $142,500.
In particular contrast to the laughable-if-no-so-disgusting compensation at the NYSE is the fact that it occurred while member companies were slogging through some of their worst years ever and common stockholders (you and I) were losing some $7 trillion since the stock market peak a few years back
In Perspective
Being paid almost $4 million a week is like winning a lottery jackpot every Wednesday and Saturday of the year. Would someone being paid that much even need a retirement package? Wouldn't he or she have better things to do than deposit another $20 measly-million in the bank? Why bog them down with petty bonuses and meaningless retirement perks?
Where does the NYSE get those kinds of operating funds anyway? They must have a heck of a membership fee, or they charge unbelievable transaction percentages on the exchange floor, or both. It makes the membership dues, conference registration fees, and other expenses of being involved with TAPPI, PIMA, AF&PA, etc. seem very moderate and reasonable in perspective.
The paper industry certainly has its share of problems these days, but fortunately overly compensated organization executives (or unfortunately, depending on your perspective), isn't one of them. Though staff compensation information is available through public records filed by all not-for- profit groups, suffice it to say that paper industry organization executives aren't being brutalized by endless trips to deposit nuisance paychecks in the bank.
Also, as concluded in the earlier "Compensation Waltz" column, paper industry CEO pay packages remain somewhere below the average chief executive compensation, which last year was $10.3 million in the U.S. Although CEO compensation nationwide continues to climb while corporate profits dip ever further, the paper industry seems to be more or less holding the line.
For sure the line is being held on salaries of most every-day employees in the paper industry (and many other industries). According to the AFL-CIO, the pay of regular working people has increased 66% since 1980, while CEO compensation grew 1,996% during the same period.
It's difficult to get a handle on current median salary ranges for professionals in the paper industry due to the vast number of layoffs and disappearance of considerable talent and experience in the past couple of years. However, assuming that an engineer with 8-10 years of experience in the industry was making $75,000 in 1996, today he or she would be making $230,000 annually if their salary had grown at the same rate as CEOs during that period, according to an AFL-CIO salary comparison calculator. Three years from now, it would cross the half-million-dollar level. Hmmmm.
