Colin Barr

Following the money in banking, economics, and Washington

CEOs cash in on layoff wave

September 1, 2010: 12:02 AM ET

Nothing puffs up a CEO paycheck like a flurry of pink slips.

So says the left-leaning Institute for Policy Studies, which released a report Wednesday holding a few dozen highly paid executives responsible for the massive layoff wave that boosted corporate profits last year -- while wreaking havoc on the lives of half a million workers.

No more Mr. Nice Guy

The institute says the top executives of the 50 firms with the most layoffs since the economic crisis started have taken home almost half again as much as the typical S&P 500 chieftain. The layoff crowd took home $12 million on average last year, the IPS said, compared with $8.4 million for the typical blue-chip company.

"CEOs are clearly not hurting," IPS researchers led by Sarah Anderson write in the institute's 17th annual executive pay survey. "But they are, as we detail in these pages, causing others to needlessly hurt — by cutting jobs to feather their own already comfortable executive nests."

The damage done by these champions of the cutback is enormous, the institute contends.

The companies in the top 50 layoff crowd cut 531,000 jobs between November 2008 and April 2010, accounting for three-quarters of layoffs at the biggest 500 U.S. companies.

What's more, the firing spree came at a time when unemployment was at a high not seen for almost three decades, meaning that many of the downsized found themselves without work for long stretches.

IPS takes issue with headlines that hold CEOs have taken a paycut in recent years. It says the bigger problem by far is that while the average worker's real wages -- that is, adjusted for inflation -- have been stagnant since the 1970s, executive pay has continued to rise at a rapid clip.

"After adjusting for inflation, CEO pay in 2009 more than doubled the CEO pay average for the decade of the 1990s, more than quadrupled the CEO pay average for the 1980s, and ran approximately eight times the CEO average for all the decades of the mid-20th century," IPS writes.

The IPS study also names the 10 most heartless CEOs – those receiving the biggest 2009 paychecks while announcing the biggest layoffs over the crisis period.

Topping the list is former Schering-Plough chief Fred Hassan, who took home $49.7 million after selling the drugmaker to Merck (MRK) in a deal that led to 16,000 job cuts.

Second is another pharmaceutical CEO whose leadership has come under scrutiny lately, William Weldon of Johnson & Johnson (JNJ). Weldon took home $25.6 million last year, at a time when the company was firing 8,900 workers and stumbling toward a recall debacle that's still unfolding.

And it wouldn't be an overpaid CEO list without Mark Hurd (right), who was forced out of Hewlett-Packard (HPQ) last month after it turned out that an eight-figure paycheck wasn't enough to keep him from fudging his expense account. Hurd made $24 million last year and oversaw 6,400 layoffs, but if anything those numbers understate Hurd's "contribution" to these proud fields.

HP promised a few years back to slash 25,000 jobs. Even now, after questions have arisen about any number of Hurd's supposed accomplishments at the helm, no one has expressed any doubts about Hurd's commitment to getting those numbers right.

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About This Author
Colin Barr
Colin Barr
Senior Writer, Fortune

Colin Barr has covered finance for Fortune.com since November 2007. Previously he was a writer and editor for TheStreet.com, winning a 2006 Society of American Business Editors and Writers award for "The Five Dumbest Things on Wall Street," and for Dow Jones Newswires. He is a 1991 graduate of Penn State and lives in Port Washington, N.Y., with his wife Meena Bose and their two kids.

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