Crossfire

Should CEO Salaries Be a Campaign Issue?

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

(BEGIN VIDEO CLIP)

JOE ANDREW, DNC CHAIRMAN: We don't want a candidate for the White House that himself is going to get a $20 million retirement package when he has worked for a company five over years.

PETER EISNER, CENTER FOR PUBLIC INTEGRITY: He doubled their business over the five years at the helm of Halliburton and he's being rewarded for his doing so.

(END VIDEO CLIP)

MARY MATALIN, CO-HOST: Tonight, Dick Cheney's $20-million retirement package: Is it too much and should CEOs' salaries be a campaign issue?

ANNOUNCER: Live from Washington, CROSSFIRE. On the left, Bill Press; on the right, Mary Matalin; in the CROSSFIRE, Jeff Faux, president of the Economic Policy Institute, and Michael Baroody, senior vice president of the National Association of Manufacturers.

MATALIN: Good evening and welcome to CROSSFIRE.

Al Gore, the populist, is trying to make Dick Cheney's private- sector prowess a campaign issue. The former chairman and CEO of energy-services giant Halliburton received a $20-million retirement package when George W. Bush tapped him for vice president. Should Cheney's private-sector salary be a campaign issue? And should limiting CEO salaries be a Gore policy-issue? And is Gore's newfound populism -- the people versus the powerful -- a new Democrat idea or just old-style class warfare?

Robert Reich, reining intellectual of the left, is sitting in for Bill Press this week -- Robert.

ROBERT REICH, GUEST HOST: Thank you, Mary.

Michael Baroody, question for you. Look, the Bush campaign is saying that this $20 million is completely justifiable. It's just a sign that he's a good manager.

MICHAEL BAROODY, NATIONAL ASSOCIATION OF MANUFACTURERS: You're saying the same thing the "New York Times" said. REICH: I mean, he was a good manager. He's been there five years. And was earning about $10 million a year, and then $20 million bonus at the end, a little bit by present. But you know, the researchers here at CROSSFIRE -- they are so good, they are so good -- they actually discovered this afternoon that if you look at the stock of Halliburton -- that is Cheney's firm when he was president -- it underperformed every other -- in fact, the average of all the oil- service companies -- it underperformed the average of the stock market as a whole.

Is this your definition of successful management?

BAROODY: I think the real question -- I mean, to answer the second question first -- and not your second question, but the set-up second question -- the real issue is whether Dick Cheney has the capacity to become president should that be required if he's elected vice president. And all of us who watched this network in 1991 have no doubt about his capacity to be president.

The issue about CEO salary should not be part of this campaign. It's part of the corporation-bashing and class warfare that characterizes --unfortunately not just the new Gore campaign, but also the Nader campaign, Pat Buchanan's campaign...

REICH: Mr. Baroody, I don't want to interrupt you, but I'm going to interrupt you...

(CROSSTALK)

REICH: .. just for this small follow-up question. Look, we know that during his five years at the head of this company, he got rid of a lot of workers, a lot of layoffs, cut retirement benefits, health benefits. Now, that's perhaps justifiable if the stock goes way up relative to other stocks. In other words, if you are investing in Halliburton and you really got a great deal, maybe in your terms -- the terms of the National Association of Manufacturers -- that performance justifies high CEO pay.

But look what we've discovered.

BAROODY: What we've discovered is that the company during the five years that he was there. That's pretty good performance.

(CROSSTALK)

BAROODY: ... you've complained about it, but it's a fact, these are matters that are determined by the boards of corporations. And they have to do it to the satisfaction of shareholders.

MATALIN: Jeff, can I contextualize this performance record that the professor has set out? And no one has said it better than Dick Cheney himself the day after he was tapped to be vice president by George Bush on July 26th. Let's listen to what he had to say.

(BEGIN VIDEO CLIP) DICK CHENEY (R), VICE PRESIDENTIAL CANDIDATE: I'm very proud of what I did at Halliburton. And I frankly don't feel any need to apologize for the way I've spent my time over the last five years as the CEO and chairman of a major American corporation.

(END VIDEO CLIP)

MATALIN: Major American -- the merger that he orchestrated created the world's largest energy services corporations. And this downturn that the professor described was the result of the Asian crisis -- economic crisis -- which Dick Cheney got them through and positioned them for the upturn that they are in now. He took no bonuses during that time. And his salary was 50 percent below market. And did all of that -- his package, his buyout package here is one- tenth of one percent of the company's earnings.

Is he really the poster boy that you want to whip around in this campaign?

JEFF FAUX, ECONOMIC POLICY INSTITUTE: Well, he's not the worst. But $20 million as a golden handcuff where he gets rid of the handcuffs and he keeps the gold, it seems to me, is a symbol of the excessive CEO pay and compensation that we have seen in the last 10 years. Over the last 10 years, CEO salaries on the average have gone up 500 percent. The average American worker has barely kept up with inflation.

And, you know, studies have been made by business schools all over the country -- and business schools are mostly supported by business, so you know what they're looking for -- and they cannot find any systematic relationship between a CEO salary and the performance of the company.

MATALIN: Then you're unfamiliar with the PriceWaterhouseCoopers' study of 320 companies and 17...

FAUX: Business schools, business schools.

MATALIN: ... seventeen industries, and they found that pay and performance is linked more closely together ever, and that the pay of the CEOs is the secret weapon of our unprecedented economy. That's PriceWaterhouseCoopers.

FAUX: Well, that's not surprising coming from PriceWaterhouse, who is employed by these people.

BAROODY: And they're involved with business schools, Jeff.

FAUX: But you -- but look at Michael Eisner, who is the real poster boy of all of this. The guy gets half-a-billion dollars, OK.

MATALIN: He is one the Democrats, by the way.

(CROSSTALK)

REICH: My friends, wait. (CROSSTALK)

BAROODY: Let me correct one thing. Compensation, worker compensation, has not been stagnant when measured against inflation. Compensation has been rising. The problem workers have in keeping up...

FAUX: Three percent.

BAROODY: The problem workers have in keeping up is that every dollar that's available for their compensation -- because they're the most productive in the world, American workers -- 10 cents of it goes just to payroll tax.

(CROSSTALK)

BAROODY: Well, that's the problem.

FAUX: Before taxes, before taxes, workers' wages in this country have barely kept up with inflation for the last...

BAROODY: If you want to bet on resentment, you can do it.

(CROSSTALK) FAUX: But wait a minute, let's talk about resentment and class warfare. Why is it when Republicans go after welfare mothers, why is it when they go after poor people who are in death row, it is not class warfare? Somebody raises a question about excessive CEO pay and suddenly it's class warfare.

BAROODY: Oh no, no, no.

REICH: Let's not have warfare here, gentlemen. Let's just have a dispassionate, clear conversation. Mr. Baroody, let's compare CEO salaries to salaries of average working people.

Now, in 1980 -- now these data -- this -- everybody agrees on these data -- CEO at major companies got a total compensation that was 40 times the compensation of the medium worker. In 1990, it went up to 85 times the compensation of the average worker. In 1999, it's up to 475 times the average worker. Now, do you think...

BAROODY: It's actually -- I believe that those numbers actually compare apples and oranges. They compare compensation of CEOs to wages for workers. And wages for workers understate compensation for workers by a fair amount. I mean, I'll give you one example, but it's a steel mill, where the average wage nine dollars an hour. That's $18,000 a year. You know that's not a very good income. But the average -- that's not the income. The income is $60,000 a year, because so much of the worker compensation comes in bonuses and incentives.

REICH: Mr. Baroody, even if we include bonuses and incentives...

BAROODY: Is that what pay (CROSSTALK)

REICH: Even if it's included...

(CROSSTALK)

REICH: You don't find average workers, production workers going up nearly as fast as CEOs.

(CROSSTALK)

REICH: Look at -- in the 1990s, CEO salaries were up 600 percent. The average CEO of a big company in 1990 was earning two million dollars. They are now earning $12 million -- two million to 12 million.

(CROSSTALK)

REICH: Now, Mr. Baroody, let me just ask you. Even if you say that average workers have gone up five percent or six percent or eight percent or 10 percent, it doesn't compare to 600 percent.

BAROODY: In part it's because of you got what you asked for. Years ago, I believe you were among the chorus saying that CEO's pay was out of control, and it out to be pegged to the performance of the economy. And now it is. It's pegged -- that company -- those numbers come from stock options and stock participation. And the good news for American workers is it's spreading to them.

There are 20 million American workers -- there may be more than that, my figures are a little dated -- who own stock in the companies they work for. They have an equal stake with any CEO in seeing the performance of that stock goes up.

REICH: But these numbers are off the charts.

(CROSSTALK)

MATALIN: Let me speak to these numbers -- and this is the bigger issue -- because if we hear it one more from this ticket, I'm going to gag -- 20 -- as if they did it -- 22 million jobs in the last eight years. And as Mike just said alluded to, it's not those who own stock in their own company, but half of America owns stock in their retirement portfolios. Who created this: the government or these private-sector employers -- which include -- which at the helm are these CEOs?

FAUX: Now, the wealth is created by a whole complicated set of things. You said -- you just said...

MATALIN: But not one (UNINTELLIGIBLE) government...

FAUX: You just said five minutes ago that poor Halliburton that got caught in the Asian crisis. Well, poor Halliburton and poor many companies and CEOs got caught in the rise of the stock market, which is about speculation, which is about good policy, which is about low interest -- which is about low interest rates and Greenspan.

(CROSSTALK)

So -- so at times like the last 10 years, you know, you can just throw a dart at the stock market and you can do very, very well.

So you've got -- no, you've got a whole lot of people there who, as Bob's figures suggest, were moderately compensated 20 years ago.

MATALIN: But you're suggesting that the rise in the stock market had nothing to do with the management? What about the...

(CROSSTALK)

FAUX: Wait a minute. Were they...

MATALIN: ... the upheavals and all the layoffs and all...

(CROSSTALK)

FAUX: Are they smarter in 1999 than they were in 1980?

MATALIN: Clearly.

FAUX: Were they really?

MATALIN: Clearly, yes.

FAUX: And workers weren't?

BAROODY: We were much more competitive in '99 than we were in '80.

FAUX: Competitive?

BAROODY: And one of the reasons -- absolutely. This is the most...

FAUX: Internationally competitive?

BAROODY: Yes, this is the most...

FAUX: We have a $300 billion trade deficit. Where did that come from?

BAROODY: And we have full employment. What's your point?

FAUX: My point is...

BAROODY: We are -- we are...

FAUX: ... that we are not competitive.

BAROODY: ... the high-quality, low-cost provider to most of the world.

FAUX: Of some things.

BAROODY: The world buys American, Jeff. Look around.

FAUX: America buys more of the world than the world buys of America. That's just fact.

BAROODY: We're the biggest exporter in the world.

(CROSSTALK)

REICH: ... Mary.

MATALIN: OK. All right. American workers. We hope you're watching instead of working right now. If want to compare your salary to your CEOs, you can go cnn.com/crossfire for the calculation. And also ask yourself while you're doing this, have you ever gotten a job from a poor person? We'll be right back on CROSSFIRE. Stay with us.

(COMMERCIAL BREAK)

REICH: Welcome back to CROSSFIRE. I'm Robert Reich, filling in for Bill Press this week. And we've been talking, yelling about Dick Cheney's whopping $20 million goodbye present from his oil company as well as the whopping pay of chief executives over all with Michael Baroody of the National Association of Manufacturers and Jeff Faux of the Economic Policy Institute -- Mary.

MATALIN: Notice, we haven't been talking about Robert Rubin's golden parachute, whopping golden parachute, when he joined the Clinton administration, which exceeded Cheney's, or Clinton's chief of staff, Erskine Bowles, who's worth more money than we'll ever know.

REICH: Let's talk about them. Let's talk about them.

MATALIN: No, I'm just -- what I want to talk about is hypocrisy here, and that obviously why we're on this subject is because of Al Gore's latest reinvention. He's a populist now. He's taking on those powerful interests, tobacco and polluters and oil and the insurance companies and the pharmaceuticals, every one of which have bankrolled either him or his vice president for their entire personal and political careers.

Wouldn't it be more courageous to attack as powerful entities the teachers unions, which are denying school choice to inner city poor kids? Or how about the trial lawyers, who escalate insurance costs, which are disproportionate on poor people? Wouldn't that be more courageous as a moral and more successful as a political strategy?

FAUX: Well, I don't think the pay of teachers is a moral question for this country. I think the pay of CEOs is. And so, you know, sure, politicians use issues that work for them. But the reason this is working for Gore is because there's a lot of resentment out there. There are a lot of people who have been through this economic recovery and feel like they haven't gotten their share, and they're right. They're right. They open the newspapers every day and they see the lavish parties at Republican conventions and Democratic conventions. And they see...

MATALIN: So they should join the party. Become a delegate and they can go to those parties.

Look, even President Clinton, as reported in "The Washington Post" today, and Democrats have three concerns about this. We don't know if this is working yet. Clinton's concern was that it does stoke resentment, not the natural optimism, which is the underpinning of the American dream.

FAUX: Well...

MATALIN: That it stereotypes the Democratic Party as what it once was, losers envious of others, and that finally it's the same old negative tone that the country is sick up of. Do you think this is a good political strategy?

FAUX: It certainly has worked so far and it touches something that is out there, and neither party -- and people in this country know where the money is coming from to finance both of those parties. And they -- when they listen for politicians, they're looking for something like this because they don't find it. It costs a lot...

(CROSSTALK)

... when rich people run out of things to buy, they politicians. And that's what's going on right now.

REICH: Mr. Baroody...

BAROODY: Please!

REICH: ... there is an issue here in this campaign, .

BAROODY: I'm looking for it.

REICH: And it has to do with pay, and let me just talk about it. On an hourly basis, since we're talking about executive pay, average CEOs of major companies earned last year $6,000 an hour.

BAROODY: And when you give a speech...

REICH: Now, wait a minute. Wait a minute.

BAROODY: When you give a speech for $50,000, that's $100,000 an hour.

REICH: Mike -- I wish I did. I wish it did.

BAROODY: I'm not sure I got your point.

REICH: Wait a minute. Let me get my question out.

BAROODY: I'm sorry. Please.

REICH: $6,000... BAROODY: We're going to be quiet and dispassionate.

REICH: $6,000 an hour.

BAROODY: Yes.

REICH: Now, the minimum wage in this country, when I last looked, was $5.15 an hour.

BAROODY: Which goes, as you know, mostly to teenagers.

REICH: No, I'm sorry.

BAROODY: And young people into their early 20s.

REICH: Mr. Baroody, I used to be...

REICH: People supplementing a family income.

REICH: I used to do this for a living.

BAROODY: And I did, too. I was the assistant secretary.

REICH: Now, the minimum wage is $5.15 an hour.

BAROODY: Yes.

REICH: Don't you think, given that CEO pay is $6,000 an hour, we could raise the minimum wage from 5.15 to 6.15 next year. Why doesn't the National Association of Manufacturers get behind this and behind...

BAROODY: Because it's bad -- because it is bad social and economic policy. The big -- the real major challenge we've got in employment terms right now, as you well know, is the people struggling courageously to move from welfare to work, and we do not wish to price them out. They have, as you well know, many of them absolutely no work experience. A year after they start at the present minimum wage, by all the statistics, you know as well as I, they'll be well above it if they do well in that job.

REICH: But if they get a job...

BAROODY: We must not do that...

REICH: Mr. Baroody, if they get a job...

BAROODY: ... to people struggling to get from welfare to work.

REICH: If they get a job at $5.15 an hour, that means that they're earning $10,712 a year. How does that get them out of poverty?

BAROODY: Welfare...

REICH: Unlike the average CEO, who's earning this year 12 million, $10,712 doesn't go far.

BAROODY: The same way all the rest of us in America have done that. We have worked our way out of it. And what we must not do is put a barrier to entry into the work force for people who have no work experience.

But you said before the break, American workers deserve a raise. I absolutely agree. We've believed this for a long time at the NAM, which is why we are for tax cuts. That's the effective way to give them a raise, and meaningfully, in terms of take-home pay.

We've got the highest tax burden in post-war history in this country.

FAUX: But that's not what the numbers show.

BAROODY: OK, tell me what the numbers show.

FAUX: What the numbers show is that the wage problem is before taxes. It's not what the government's been taking out.

BAROODY: The wage problem, I told you, is only a small part of the compensation problem.

(CROSSTALK)

REICH: One at a time. One at a time.

BAROODY: Total compensation.

MATALIN: The workers in that -- you're of course familiar with the statistics, which is a government, one, it's not a political one, that those workers in that lower quintile of earners, these minimum- wage earners, who are stepping that rung, that ladder, into the working environment, don't stay in the lowest quintile. Seven percent of them stay in that quintile. The rest move up. It's called a market. It's called incentives, it's called America. What would you have? The government set wages? That's what you want? What's the upshot of this conversation?

FAUX: Wait a minute, wait a minute, the government does do a lot of setting of wages, the government sets minimum wage. The government subsidizes CEOs, who get the pay that we're talking about. It declared the government -- you know, corporations are creatures of the government. Corporations are a legal creature of the government.

MATALIN: And they create nothing?

(CROSSTALK)

FAUX: No, the government does have certain rights, but they don't -- Halliburton, for example, what is Cheney's value to Halliburton? Was it because he was -- had this history of being a wonderful manager? No. He was secretary of defense. What caused Halliburton's stock to rise were two big projects. One was with DOD after Cheney left. The other was with the government of Brazil. It was contacts. The taxpayers paid for Cheney's...

MATALIN: Of course he's leaving it out, because otherwise, that would be the truth, and that would be something they would go against.

FAUX: The taxpayers paid for this.

MATALIN: Thank you, Mr. Faux. Thank you, Mr. Baroody. The debate continues. Do you think there's no different between these party philosophies? Stay tuned. Robert Reich and I will wrap up what those differences are. Stay with us.

(COMMERCIAL BREAK)

REICH: You know, Mary, this issue of execute pay, it's not just Dick Cheney. It's executive pay overall. It's the soaring executive -- this is a terrific for new issue for the new populist Al Gore. And I remember back in 1992 Bill Clinton -- now that was when CEO pay was only 90 times the average worker. Now it's 475 times, but Bill Clinton said we should not stop companies from awarding high CEO pay, but if there's going to be a tax reduction, there's no reason why taxpayers ought to subsidizes tax deductions of companies providing CEOs over a million dollars.

MATALIN: Mr. Labor Secretary, this latest Al Gore reinvention is the worst political pandering. It stokes up resentment and envy in the working class. My father was a steelworker. My mother was a hairdresser. You know what they taught me, if I work hard and take advantages of the opportunity of this, the greatest economy and Democracy in the world, I would have achieved the American dream, and I did it. And I didn't do it by resenting anybody or attacking people who have been successful. This is the differences between these parties. I pray, I pray you run on this theme. It is so un-American.

REICH: Mary, there's nothing resentful about working for decent pay for a decent job and a decent day's wage.

And overworked and underpayed from the left, sitting in for Bill Press, I'm Robert Reich. Good night for CROSSFIRE.

MATALIN: And from the righteous right, I'm Mary Matalin. Join us again tomorrow night for more CROSSFIRE.

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