We all know about the greed and grasping at Wall Street’s failed giants. But the greed at ‘successful’ companies elsewhere in America is getting a free pass.
By Sam Pizzigati
President Barack Obama, in the opening moments of his eagerly awaited administration, last week reminded an entire world that “a nation cannot prosper long when it favors only the prosperous.” Years of “greed and irresponsibility on the part of some,” he would declare, have contributed mightily to our “badly weakened” economy.
President Obama never identified that “some” in his inaugural address. He named no names. Most of his listeners likely thought about the kingpins of Wall Street and high finance as the new President spoke. But the greed and grasping that have melted down the global economy extend well beyond Wall Street.
Indeed, right on Inauguration Day, a corporate giant across the continent from Wall Street was quietly filing some required papers that dramatize just how overwhelmingly our troubled economy continues to favor “only the prosperous.”
That filing revealed that Mark Hurd, the CEO of Hewlett-Packard, the world’s biggest computer company, had collected $42.5 million in 2008 compensation.
This lofty sum, Hewlett-Packard officialdom proclaimed, amounted to a fitting reward for the company’s “exceptional and sustained” performance ever since Hurd took the H-P reins in 2005. On Hurd’s watch, annual revenues at the California-based Hewlett-Packard have bounded from $86 billion to $118 billion. In 2008, company profits jumped 15 percent.
Hewlett-Packard board members certainly do have reason to be pleased. But other stakeholders in H-P’s “success” don’t seem to feel like cheering.
Take, for instance, H-P workers. Shortly after joining Hewlett-Packard, with over $20 million in signing “inducements,” Hurd ended the company’s pension plan for younger employees and announced plans to slash away a tenth of the H-P workforce.
Hewlett-Packard is currently completing a second round of job massive cuts. In all, Hurd will soon have eliminated almost 40,000 jobs at H-P since his inaugural 2005 speech at the company’s Silicon Valley headquarters.
“Building a great company isn’t all about a CEO,” Hurd announced in that address. “It’s a team sport.”
Hewlett-Packard customers don’t have much reason to cheer Hurd either. H-P has been busy squeezing every bit of revenue possible out of the company’s cash cow, printer ink. The last ink price increase, in October, upped costs to consumers by 9 percent, well over double the year’s inflation rate.
H-P overall product quality and service, meanwhile, are regularly leaving consumers infuriated. PCWorld magazine, after surveying 44,000 readers, earlier this month rated Hewlett-Packard dead-last — among 10 computer makers — on reliability and service for laptops, dead-last for printers, and next to dead-last for desktops.
How can Hewlett-Packard revenues and profits be increasing in the midst of so much consumer angst? Easy. To be “successful” in Corporate America today, a CEO doesn’t have to run a company that delivers quality at reasonable prices. Today’s most “successful” CEOs can take a far less demanding approach to “growing” their companies. They can simply gobble up other companies.
Comtemporary top execs acquire these other enterprises — usually by taking on huge quantities of corporate debt — and then claim the revenues of these other enterprises as their own. Instant success.
To pay off the subsequent debt, and keep their bottom lines sweet, these CEOs then lop off “redundant” workers in their newly merged operations. This merge-and-purge cycle, predictably enough, creates chaos in the workplace — and more frustration for consumers.
As Hewlett-Packard CEO, Hurd has wheeled and dealed his way to 31 mergers in just 46 months on the job. His biggest acquisition came last August when he bought up tech services giant Electronic Data Systems for over $13 billion.
Have CEOs like Mark Hurd, with all their wheeling and dealing, discovered the secret to an eternal “fountain of riches”? Or can they be stopped — before unemployment lines get still longer and consumer nerves get still more frayed?
At first glance, corporate honchos like Hurd seem home free. Congress and the new Obama administration are focusing most all their attention on companies now taking in bailout dollars. Hewlett-Packard isn’t asking for any bailout.
But that doesn’t mean that lawmakers and the White House have no leverage. Almost every major corporation in the United States, Hewlett-Packard included, is already benefiting handsomely from taxpayer dollars, either indirectly via special tax breaks or directly through government contracts and subsidies.
H-P’s new Electronic Data Systems subsidiary, to give just one example, took in $2.3 billion from federal contracts in 2007 alone.
By placing strings on these contracts, subsidies, and tax breaks, the federal government could start discouraging the outrageous rewards for top executives that create such powerful incentives for outrageous executive behavior.
In the last Congress, a number of lawmakers started moving in that direction. Their legislation, the Patriot Corporations Act, would have — if enacted — given a preference in federal contract bidding to companies that pay their top executives no more than 100 times the dollars that go to their lowest-paid employees.
Among this legislation’s co-sponsors: a senator by the name of Barack Obama.
Last year, for the record, H-P CEO Mark Hurd’s $42.5 million take-home equaled somewhere around 2,000 times the pay of Hewlett-Packard’s lowest-paid worker.
How much of that $42.5 million represents the “greed and irresponsibility” that President Obama denounced in his Inaugural Address? Hard to say. But the San Jose Mercury News last week did calculate how much Hewlett-Packard shelled out in 2008 for Hurd’s “business meals.” The food benefit came to about $181,000.
“Assuming three meals a day, every day of the year,” concluded the Mercury News, “that works out to about $165 per meal.”
Sam Pizzigati edits Too Much, the online weekly on excess and inequality.