Lawmaker in Congressional hearing on bank CEOs’ pay: “It doesn’t look good”

From today’s CBS News Online:

Making their first appearance before Congress since the financial crisis a decade ago, the CEOs of America’s biggest banks told lawmakers their financial institutions are now smaller and are taking on less risk.

With Democrats in control of the U.S. House, banks and the men that lead them are facing renewed scrutiny over their practices and record profits.

Since the massive taxpayer-funded bank bailout in 2009, large U.S. banks have raked in $780 billion in profits — nearly five times the amount they paid in fines. “[N]o one has made out better than the CEOs,” Maxine Waters, D.-California, chair of the U.S. House Financial Services Committee, said in starting the hearing. 

The financial giants represented at the gathering include seven of eight global “systemically important” banks, which paid a total of nearly $164 billion in fines during the last 10 years, according to a committee memorandum. Because their profits greatly exceed the penalties, Waters questioned whether banks view regulatory fines as simply the cost of doing business.

New York Democrat Alexandria Ocasio-Cortez pointed to a litany of what she described as bank misdeeds, from JPMorgan’s failure to oversee its trading practices in 2013 to last month’s $25 million fine against Citibank for violating the Fair Housing Act. “I have concerns about how much things have changed,” she told the bankers. 

Ocasio-Cortez also questioned the fairness of a legal system that fines banks for legal violations but imprisons low-income people for relatively minor offenses. Mentioning that Riker’s Island is part of her congressional district, the lawmaker said: “I represent kids who go to jail for jumping a turnstile because they couldn’t afford a metro card.” 

JPMorgan Chase CEO Jamie Dimon responded by saying he did not support prison for turnstile jumping. He drew praise from the freshman lawmaker for JPMorgan’s decision last month to halt financing of private operators of prisons and detention centers.

The last time the panel convened such a hearing, the country was in recession and the CEOs had to explain taking billions in taxpayer bailouts. Banks have since by-and-large repaid taxpayers and bounced back to record profits.

Read the complete article here.

The stock market boom has given CEOs a raise. What about average workers?

From today’s PBS News Hour:

Over the past few years, many economic indicators have returned to where they were before the Great Recession — among them, the unemployment rate, which has dropped below the 5 percent mark of 2007, housing prices and the stock market, which has nearly doubled its pre-recession peak.

Another, buoyed by rising stock prices: the enormous pay difference between CEOs of the largest U.S. companies and their employees, who earn more than 300 times less than those at the top, according to new data.

Here’s a closer look at the issue.

How has CEO compensation changed?

In 2000, the average CEO was paid 343 times more than the average worker, according to the liberal-leaning Economic Policy Institute. That number dropped to about 188-to-1 in 2009.

It has since rebounded to 312-to-1 last year, according to a report from the Economic Policy Institute.

From 2016 to 2017, the average pay of CEOs from the top 350 publicly traded firms increased 17.6 percent — to $18.9 million — even after being adjusted for inflation, the group found.

How to close the gap

The reason for the pay disparity between CEOs and employees is relatively simple. Closing the gap is much more complex.

A number of methods have been proposed to close the gap, including a cap on compensation, clawbacks for poor performance or executive misconduct, and, as mentioned previously, mandatory publishing of CEOs’ salaries.

James Galbraith, the director of the University of Texas Inequality Project who also served as an adviser to Sen. Bernie Sanders’ presidential campaign, said U.S. companies should look to other countries where laws encourage business leaders to reinvest in their tangible products instead of their stocks.

Read the complete article here.

Opinion: Treating Workers Fairly at Rent the Runway

From today’s New York Times:

I am ashamed to say that until recently I was part of the majority: I am the chief executive of a company that gave different benefits to different groups of employees.

Like so many companies before us, my company, Rent the Runway, had two tiers of workers. Our salaried employees — who typically came from relatively privileged, educated backgrounds — were given generous parental leave, paid sick leave and the flexibility to work from home, or even abroad. Our hourly employees, working in Rent the Runway’s warehouse, on the customer service team and in our retail stores, had to face life events like caring for a newborn, grieving after the death of a family member or taking care of a critically ill loved one without this same level of benefits.

I had inadvertently created classes of employees — and by doing so, had done my part to contribute to America’s inequality problem.

When you’re founding a business, you take your cues on corporate culture from larger, already successful organizations. In America, some of the biggest companies have decided to handle the dual pressures of keeping costs down while retaining “corporate talent” by ramping up benefits packages. Companies like Starbucks and Walgreens compete for top-tier candidates by offering cushy policies in areas like parental leave or vacation.

But the best benefits are reserved for corporate talent, for whom the competition is considered steepest; employees who work at hourly rates are an afterthought (and that doesn’t begin to factor in companies like Uber that opt to consider the people they work with “contractors”). When I started Rent the Runway, I simply followed suit.

But over the years, I began to reflect on how the system that I and others had constructed may have been perpetuating deep-seated social problems. Last month, I equalized benefits for all of our employees at Rent the Runway. Our warehouse, customer service and store employees now have the same bereavement, parental leave, family sick leave and sabbatical packages that corporate employees have.

We know the grim statistics, such as only 14 percent of civilian workers in the United States have access to paid family leave; one in every four new mothers go back to work just 10 days after giving birth; and people who make more than $75,000 a year are twice as likely as those who make less than $30,000 to get paid leave.

Of course, chief executives and their leadership teams have outsize salaries as well as outsize benefits. C.E.O.s at the 350 largest companies make 271 times the earnings of the typical worker. The people with the most means have the most flexibility in their lives, not only because they have the ability to throw money at their problems but also because their companies grant them this flexibility to keep them happy.

Read the complete article here.