DATE: Friday, May 2, 1997                   TAG: 9705020583

SECTION: BUSINESS                PAGE: 1D   EDITION: FINAL 

SOURCE: BY DIANE STAFFORD, KANSAS CITY STAR 

                                            LENGTH:  116 lines

SHARPENING THE AX: CEOS PROFITED IN BIG WAY FROM LAYOFFS, REPORT SAYS

The 30 chief executive officers who cut the most employees from their U.S. payrolls in 1996 earned an average salary and bonus increase of 22 percent.

Meanwhile, the average U.S. worker received a 3 percent raise, according to a ``layoff leaders'' study released Thursday by two groups allied with labor interests.

The 30 CEOs named in ``Executive Excess: CEOs Gain from Massive Downsizing'' were rewarded more handsomely than the cash compensation gap indicates, the report said.

``The layoff leaders enjoyed an average increase in total direct compensation (including salary, bonus and long-term compensation) of 67.3 percent - far above the average increase of 54 percent for executives at the top 365 U.S. firms,'' the report said.

The report was published by the Institute for Policy Studies, a Washington organization that describes itself as a ``center for progressive research and education,'' and by United for a Fair Economy, a Boston organization founded ``to focus public attention and action on economic inequality.''

Robert B. Zevin, economist and senior vice president of United States Trust Co. of Boston, used barbed words in his foreword to the report:

``The 30 worthy gentlemen tabulated in this study were paid an average of $4,610,200 for their efforts in 1996. But they were perhaps entitled to extra compensation for bearing the collective burden of serving as executioners of the dreams of 209,015 workers and their families - a staggering 6,967 average layoff per CEO.''

Zevin, who has led calls for ``socially responsible investing'' for three decades, suggests a ``steeply progressive income tax or consumption tax'' to help put brakes on CEO pay packages.

Executive compensation experts agree that CEO pay has soared in recent years, largely because their compensation packages are linked to their companies' stock gains in a bull market.

Additionally, notes Spencer Fields, an executive compensation consultant in the Kansas City, Mo., office of William M. Mercer Inc., competition to attract and keep proven corporate leaders pushes some pay packages as high as the market will bear.

``Reasonably or unreasonably, some are deemed superstars because they've turned companies around or outperformed their competitors, or they've been able to get results in ways that previous CEOs weren't able to do,'' Fields said. ``And they're good negotiators.''

The report researched publicly announced corporate layoffs last year to find the nation's top 30 layoff leaders. The CEOs included in the study presided over cuts of between 2,800 and 48,640 workers each.

This is the fourth year for the layoff-leaders survey. The first, covering 1993 pay and layoffs, found that average compensation for 23 layoff-leading CEOs rose 30 percent to $1.9 million - nearly $3 million less than the 1996 layoff leaders' average compensation.

``Our analysis of CEO compensation at the 30 corporations that made the largest layoff announcements of 1996 reveals that Wall Street continues to favor downsizers,'' the report said, noting that most of the compensation gains came from stock options.

Executive Compensation Reports, a business newsletter, reported in February that stock options for CEOs at 57 of the largest U.S. companies last year accounted for 45 percent of their total pay packages, up from 40 percent a year earlier.

The newsletter also said that the salary share of the CEOs' pay packages dropped to 22 percent from 27 percent a year earlier and that the bonus share remained unchanged.

Among this year's 30 layoff-leading companies, United for a Fair Economy was able to gather data from 12 of them about pay levels of their lowest-paid full-time workers. That information produced an average ratio of CEO compensation to lowest-paid worker of 178-to-1.

The report singled out several executives for criticism. For example, Lawrence Bossidy, CEO of AlliedSignal Inc., was blasted for his support of the North American Free Trade Agreement on the grounds that it would create U.S. jobs. At the same time, the report said, he laid off workers at seven U.S. plants.

Furthermore, the report said that Bossidy, ``with his $4.8 million-a-year salary, makes almost the same money in a day - $18,461 - that an entry-level union employee makes in an entire year.''

On that basis, ``AlliedSignal could have kept the majority of the 3,250 workers they laid off last year if Bossidy had taken a cut in his pay,'' the report said.

A public-relations official at AlliedSignal, asked to respond to the report, disagreed with some of its conclusions.

Mark Greenberg, vice president of external communications in Morristown, N.J., said total employment at AlliedSignal was unchanged since 1993. Some layoffs have occurred in the company's ``poorly performing businesses,'' he said in a written response, but ``a comparable number of jobs have been added in those of our businesses which are doing well.''

The AlliedSignal spokesman also defended Bossidy's compensation as a fair reflection of the improvements he has made at the company.

``When he arrived in mid-1991, the company was in financial and operational trouble, and the jobs of all its employees were endangered,'' Greenberg said. ``He has had to make some hard decisions which resulted in the elimination of some jobs but greater job security for the vast majority of employees.

``During his tenure, the company's sales and earnings have turned around dramatically, and the market value of the company has increased nearly fivefold, creating $16 billion of new wealth for hundreds of thousands of union members and other workers - including 40,000 of our own employees - whose pension funds and retirement savings plans own the bulk of AlliedSignal shares.''

That defense illustrates why some corporate compensation officials think some CEOs are worth the huge pay packages: They are being rewarded for expertise that creates wealth for others.

Nonetheless, the report mirrors several ongoing efforts regarding the CEO/worker pay gap:

The AFL-CIO's Office of Investment in Washington has set up an Executive Pay Watch Web page at (http://www.paywatch.org). CEO salary information from proxy reports is given.

United for a Fair Economy this month launched its Campaign to Close the Wage Gap and is seeking co-sponsors to help distribute pay information.

Democratic U.S. Rep. Martin Sabo of Minnesota has introduced the Income Equity Act of 1997, which would limit the tax deduction for executive compensation to 25 times the salary of the lowest-paid full-time worker in the company.

Executive pay compensation consultants nationwide, including Webb Bassick of the Hay Group, are beginning to call on CEOs and corporate compensation committees to limit their pay packages on their own.

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