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Rise of the Corporate Plutocrats

Forget overpaid CEOs. Now second- and third-tier execs in American companies are getting enormous salaries--as wages and benefits for many workers stagnate or fall.

October 17, 2004|Vince Beiser | Vince Beiser last wrote for the magazine about families of murder victims who forgive the killers.

The morning sun glints off the sleek steel contours of the Cessna Citation X, a private jet gracing the tarmac at Santa Monica's airport. Inside are eight wide leather seats, equipped with individual DVD players and served by a well-stocked snack bar. It's undoubtedly a fine way to fly: The Citation's prosperous passengers don't have to deal with crowded parking garages, incompetent ticket clerks or getting their shoes X-rayed. They step aboard and are whisked from Los Angeles to New York in fewer than four hours.

"You sure get used to it," says Glenn Hinderstein, vice president of Netjets Inc., whose company supplies these private aircraft to executives at General Electric, Prudential and many other corporations. "It's a drug there's no Betty Ford for."

Not so long ago, use of a company jet was a rare privilege reserved for top corporate officials--the chief executives, presidents and chairmen whose skyrocketing pay has been well-documented in recent years. (A generation ago, the average chief executive at a big corporation made about 40 times what the average worker did; today it's nearly 400 times as much, says vice dean of faculty Kevin J. Murphy of USC's Marshall School of Business.)

Increasingly, however, those plush leather seats are being occupied by vice presidents, general managers and other second- and third-tier execs. The spreading around of private jet rides is among the more obvious emblems of a profound development in corporate America over the last 20 years: the enormous swelling in pay and privileges for a burgeoning stratum of executives, and their concomitant distancing from the people who work under them. Today, it's not just the boss, but those second, third or fifth in command who pull down seven-figure salaries, own multiple homes and stay in hotels where rooms cost more than most mortgage payments.

For The Record
Los Angeles Times Friday October 22, 2004 Home Edition Main News Part A Page 2 National Desk 2 inches; 66 words Type of Material: Correction
Salary figures -- An article in Sunday's Los Angeles Times Magazine about the growing salaries of lower-level executives in the U.S. said the average annual salary of surgeons was $73,100 and that the average annual salary of police officers was less than $40,000. The U.S. Bureau of Labor Statistics listed median salaries for surgeons in 2003 at $190,280. For police officers, the median salary was $44,960.
For The Record
Los Angeles Times Wednesday October 27, 2004 Home Edition Main News Part A Page 2 National Desk 1 inches; 38 words Type of Material: Correction
Cessna jet -- The Oct. 17 Los Angeles Times Magazine article about the growing salaries of lower-level executives in the U.S. said the Cessna Citation X uses steel in its construction. The jet is made of aluminum alloy.
For The Record
Los Angeles Times Sunday November 07, 2004 Home Edition Los Angeles Times Magazine Part I Page 14 Lat Magazine Desk 1 inches; 56 words Type of Material: Correction
The article "Rise of the Corporate Plutocrats" (Oct. 17) incorrectly stated that the average annual salary of surgeons is $73,100 and that the average annual salary of police officers is less than $40,000. The U.S. Bureau of Labor Statistics lists median salaries for surgeons in 2003 at $190,280. For police officers, the median salary was $44,960.
For The Record
Los Angeles Times Sunday November 14, 2004 Home Edition Los Angeles Times Magazine Part I Page 6 Lat Magazine Desk 0 inches; 28 words Type of Material: Correction
The article "Rise of the Corporate Plutocrats" (Oct. 17) incorrectly stated that the Cessna Citation X incorporates steel in its design. The jet is made of aluminum alloy.

Mehdi Eftekari, general manager of the Beverly Hills Four Seasons Hotel, can tell you all about it. He estimates that some 80% of his clientele are corporate officials whose companies pay for their $700- to $3,000-a-night suites. The most modest come with a DVD player, a giant flat-screen TV, a living room with a wet bar and televisions in each of the two bathrooms. Frequent guests can store extra clothes or toiletries at the hotel to lighten their luggage. A staff VIP liaison tracks their personal preferences, so that when they arrive, their rooms are stocked with favorite drinks, snacks and magazines, as well as bathrobes monogrammed with their initials. The hotel even makes sure the bed is equipped with their preferred pillows.

Twenty years ago, you would have been hard-pressed to find a chief financial officer or head of marketing with access to such a lavish expense account. The typical salaries for such corporate sub-chieftains barely cracked six figures.

Those days are history. A survey last year of multibillion-dollar corporations by Pearl Meyer & Partners, an executive compensation consulting firm, found them paying CFOs more than $3 million a year; top legal officers, $2.2 million; and human resources executives--human resources executives!--$1.6 million. And those are just the averages. BusinessWeek recently listed 10 executives with jobs below the rank of CEO who last year pulled upward of $29 million each.

We're not talking about corporate criminals of the Enron or WorldCom type--corrupt executives who pocket outrageous sums by scamming the system or ripping off investors. Nor are these the entrepreneurs whose inspirations and nerve started the company, or the investors who risked their capital to fund it. These people aren't even the top boss, who is under the most pressure, the one with whom the buck stops. They're hired hands--company employees just like the people they oversee. Their salaries are set by legal and transparent means in accordance with prevailing industry standards. It's just that those standards have gone completely off the rails. Never mind the imperial CEO; we have entered the era of the executive plutocracy.

While life has grown ever lusher at the top end of the corporate food chain, it's increasingly precarious for those farther down. As income for top executives shot up, average American workers' salaries have barely kept pace with inflation--and many are finding their jobs, health coverage and retirement prospects in jeopardy.

In fact, the boom in executive pay is only one aspect of a deeper and even more disturbing trend: the growing inequality in American society. Today, as economist James K. Galbraith points out, pay is more lopsided than at any time since the Great Depression.

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