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Interview With 'Marketplace''s David Brancaccio

Aired April 23, 2003 - 14:29   ET

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

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


MILES O'BRIEN, CNN ANCHOR: When will they ever learn? We thought we had heard the last of corporate executives with tin ears to their employees. Enron, WorldCom, but now we are hearing all about AMR, the parent company of American Airlines. Mr. Carty, the man in charge, making sure that the top executives do well despite hard times while trying to exact some concessions out of his employees raises some questions, causes a little bit of outrage, and here to talk a little bit about it is David Brancaccio who is with the excellent program on Public Radio International called "Marketplace," which is produced by Minnesota Public Radio, and yet out of Los Angeles. Why is that, David? I've never understood that. Minnesota Public Radio, and you're in L.A.
DAVID BRANCACCIO, "MARKETPLACE": Well, the lovely folks who do "Prairie Home Companion" from Minnesota own us. But, hey, we like the weather out here in California.

O'BRIEN: Who could blame you? All right. Let's move on. Let's talk a little bit about this, and this outrage level, I think, was brought to a peak during Enron, and now that it's happening again, I think the mood is even turning uglier. Give us a sense, if you can, of the big picture here. We see these little stories of American and Enron and WorldCom. Are they the exception, or are they the rule, perhaps? We just don't know about other corporations.

BRANCACCIO: Well, Miles, I recall in this context the "New Yorker" cartoon, a couple of guys in very expensive suits sitting there talking. One guy says, "I don't care what they do to the minimum wage, as long as they keep their hands off the maximum wage."

It is a continuing tension in society. It all falls under the rubric of corporate governance. In 1980, the typical CEO in the United States was making about 40 times the average salary of the hourly workers in America. These days, Miles, I think "Business Week" calculated this last fall -- 531 times more money CEOs make these days than the average hourly worker.

O'BRIEN: That's a big number. That's a big number.

BRANCACCIO: It's a very big number.

O'BRIEN: And as that disparity widens between the people at the top and the bottom, there are all kinds of insidious effects that come into play, right?

BRANCACCIO: Well, you see those tensions at American Airlines. The negotiations toward concessions by the unions have become almost derailed because of the revelation, in fact, that executives had set aside some money for their own pensions, and had other retention bonuses. It's causing tensions, and there is talk out of Dallas that you saw today that perhaps American Airlines' CEO, Carty, might have to step down.

Overall, this is what has happened. During the 1990s, as chief executives have tied their compensation to the stock market, it's gone up a lot. Now that the stock market is not doing so well, the CEO pay not coming down quite as quickly. You know what it's like? It is like athletes, right? It is also like, I dare say, TV anchormen. There are not a lot of those, and so the top ones in their field get paid a heck of a lot of money.

What it means for those of you and I, those of us, who have mutual funds, who have investments, I guess it's up to us to pressure the companies that we own to be sure that if we're paying somebody a lot of money to run our companies, that, in fact, they're worth that money.

O'BRIEN: Is it likely that this will ultimately end up in some calls for legislation? For example, I know in some European countries, there is actually -- I don't know whether it's law, but it's certainly custom. There are ratios established between the lowest paid and the highest paid. That doesn't sound very American, but could that kind of thing happen? Or, given the fact that these are the people who fund political campaigns in this country, maybe that is unlikely.

BRANCACCIO: Well, the campaign finance aspect here may be played out in this regard. But there is some tradition in American law about this. In 1974, we passed a law in Congress, Erisa (ph), and that pretty much says that the senior people can't have fancy benefits that regular workers are not allowed to have. There is guidance in this area. I think back -- remember when Chrysler was going under about 1978? Lee Iacocca came on board, and I think in his first years, he was paid just $1 a year to rescue that company. Now, fast forward to the mid-80s when Chrysler was doing better, I think he was pulling down about $20 million, and became one of the first rock star CEOs. So these things do change over time. Sometimes not for the best.

O'BRIEN: Rock star CEOs. OK. We are going to leave it at that. David Brancaccio, "Marketplace," Minnesota Public Radio and Public Radio International, all that stuff, somewhere out there in Los Angeles because the weather is better.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com







Aired April 23, 2003 - 14:29   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MILES O'BRIEN, CNN ANCHOR: When will they ever learn? We thought we had heard the last of corporate executives with tin ears to their employees. Enron, WorldCom, but now we are hearing all about AMR, the parent company of American Airlines. Mr. Carty, the man in charge, making sure that the top executives do well despite hard times while trying to exact some concessions out of his employees raises some questions, causes a little bit of outrage, and here to talk a little bit about it is David Brancaccio who is with the excellent program on Public Radio International called "Marketplace," which is produced by Minnesota Public Radio, and yet out of Los Angeles. Why is that, David? I've never understood that. Minnesota Public Radio, and you're in L.A.
DAVID BRANCACCIO, "MARKETPLACE": Well, the lovely folks who do "Prairie Home Companion" from Minnesota own us. But, hey, we like the weather out here in California.

O'BRIEN: Who could blame you? All right. Let's move on. Let's talk a little bit about this, and this outrage level, I think, was brought to a peak during Enron, and now that it's happening again, I think the mood is even turning uglier. Give us a sense, if you can, of the big picture here. We see these little stories of American and Enron and WorldCom. Are they the exception, or are they the rule, perhaps? We just don't know about other corporations.

BRANCACCIO: Well, Miles, I recall in this context the "New Yorker" cartoon, a couple of guys in very expensive suits sitting there talking. One guy says, "I don't care what they do to the minimum wage, as long as they keep their hands off the maximum wage."

It is a continuing tension in society. It all falls under the rubric of corporate governance. In 1980, the typical CEO in the United States was making about 40 times the average salary of the hourly workers in America. These days, Miles, I think "Business Week" calculated this last fall -- 531 times more money CEOs make these days than the average hourly worker.

O'BRIEN: That's a big number. That's a big number.

BRANCACCIO: It's a very big number.

O'BRIEN: And as that disparity widens between the people at the top and the bottom, there are all kinds of insidious effects that come into play, right?

BRANCACCIO: Well, you see those tensions at American Airlines. The negotiations toward concessions by the unions have become almost derailed because of the revelation, in fact, that executives had set aside some money for their own pensions, and had other retention bonuses. It's causing tensions, and there is talk out of Dallas that you saw today that perhaps American Airlines' CEO, Carty, might have to step down.

Overall, this is what has happened. During the 1990s, as chief executives have tied their compensation to the stock market, it's gone up a lot. Now that the stock market is not doing so well, the CEO pay not coming down quite as quickly. You know what it's like? It is like athletes, right? It is also like, I dare say, TV anchormen. There are not a lot of those, and so the top ones in their field get paid a heck of a lot of money.

What it means for those of you and I, those of us, who have mutual funds, who have investments, I guess it's up to us to pressure the companies that we own to be sure that if we're paying somebody a lot of money to run our companies, that, in fact, they're worth that money.

O'BRIEN: Is it likely that this will ultimately end up in some calls for legislation? For example, I know in some European countries, there is actually -- I don't know whether it's law, but it's certainly custom. There are ratios established between the lowest paid and the highest paid. That doesn't sound very American, but could that kind of thing happen? Or, given the fact that these are the people who fund political campaigns in this country, maybe that is unlikely.

BRANCACCIO: Well, the campaign finance aspect here may be played out in this regard. But there is some tradition in American law about this. In 1974, we passed a law in Congress, Erisa (ph), and that pretty much says that the senior people can't have fancy benefits that regular workers are not allowed to have. There is guidance in this area. I think back -- remember when Chrysler was going under about 1978? Lee Iacocca came on board, and I think in his first years, he was paid just $1 a year to rescue that company. Now, fast forward to the mid-80s when Chrysler was doing better, I think he was pulling down about $20 million, and became one of the first rock star CEOs. So these things do change over time. Sometimes not for the best.

O'BRIEN: Rock star CEOs. OK. We are going to leave it at that. David Brancaccio, "Marketplace," Minnesota Public Radio and Public Radio International, all that stuff, somewhere out there in Los Angeles because the weather is better.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com