Executive Pay: A Special Report
Off to the Races Again, Leaving Many Behind
By ERIC DASH Published: April 9, 2006
OMAHA -- IN 1977, James P. Smith, a shaggy-haired 21-year-old known as Skinny, took a job as a meat grinder at what is now a ConAgra Foods pepperoni plant. At $6.40 an hour, it was among the best-paying jobs in town for a high school graduate.
Nearly three decades later, Mr. Smith still arrives at the same factory, shortly before his 3:30 a.m. shift. His hair has thinned; he has put on weight. Today, his union job pays him $13.25 an hour to operate the giant blenders that crush 3,600-pound blocks of pork and beef.
His earnings, which total about $28,000 a year, have not kept pace even with Omaha's low cost of living. The company eliminated bonuses about a decade ago. And now, almost 50, Mr. Smith is concerned that his $80,000 retirement nest egg will not be enough — especially since his plant is on a list of ones ConAgra wants to sell.
"I will probably have to work until I die," Mr. Smith said in his Nebraskan baritone.
Not so for Bruce C. Rohde, ConAgra's former chairman and chief executive, who stepped down last September amid investor pressure. He is set for life.
All told, Mr. Rohde, 57, received more than $45 million during his eight years at the helm, and was given an estimated $20 million retirement package as he walked out the door.
Each year from 1997 to 2005, when Mr. Rohde led ConAgra, he was awarded either a large cash bonus, a generous grant of stock or options, or valuable benefits, such as extra years' credit toward his guaranteed pension.
But the company, one of the nation's largest food companies with more than 100 brands, struggled under his watch. ConAgra routinely missed earnings targets and underperformed its peers. Its share price fell 28 percent. The company cut more than 9,000 jobs. Accounting problems surfaced in every one of Mr. Rohde's eight years.
Even when ConAgra restated its financial results, which lowered earnings in 2003 and 2004, Mr. Rohde's $16.4 million in bonuses for those two years stayed the same.
Mr. Rohde turned down repeated requests for an interview. Chris Kircher, a ConAgra spokesman, said that Mr. Rohde received no bonuses in 2001 and 2005, evidence that his compensation was based in part on performance. He added that Mr. Rohde's severance was negotiated 10 years ago, when he was first hired, not as he left. The whole package was "negotiated under a different board, a different point in the company's history, and in a different environment," Mr. Kircher said.
The disparity between Mr. Rohde's and Mr. Smith's pay packages may be striking, but it is not unusual. Instead, it is the norm.
Even here in the heartland, where corporate chieftains do not take home pay packages that are anywhere near those of Hollywood moguls or Wall Street bankers, the pay gap between the boss and the rank-and-file is wide.
New technology and low-cost labor in places like China and India have put downward pressure on the wages and benefits of the average American worker. Executive pay, meanwhile, continues to rise at an astonishing rate.
The average pay for a chief executive increased 27 percent last year, to $11.3 million, according to a survey of 200 large companies by Pearl Meyer & Partners, the compensation practice of Clark Consulting. The median chief executive's pay was somewhat lower, at $8.4 million, for an increase of 10.3 percent over 2004. By contrast, the average wage-earner took home $43,480 in 2004, according to Commerce Department data. And recent wage data from the Labor Department suggest that workers' weekly pay, up 2.9 percent in 2005, failed to keep pace with inflation of 3.3 percent. ...
Mr. Rohde's salary alone rose at 8 percent a year, and he collected more than $22 million in cash compensation during almost nine years at the company. Since stepping down in September, he started collecting $2.4 million in severance pay, twice his most recent salary, as well as full health benefits, which he will have through 2009. ConAgra shareholders are footing the bill for a secretary and an office near his home. And that $984,000 annual pension? It reflects 20 years of service, even though he was a ConAgra executive for not quite nine. In July, Mr. Rohde told The Omaha World-Herald that he hoped to spend part of his retirement flying his helicopter between his home and his family's Minnesota getaway home.
Mr. Smith, on the other hand, envisions spending his golden years hunting mallards and casting for catfish at a nearby riverfront cabin. He will have to make do on the $80,000 in his 401(k) plan, as well as his Social Security checks and a pension of $106 a month that was frozen almost a decade ago. But to hear Mr. Smith tell it, he is not angry at Mr. Rohde or, more broadly, at the widening gap between executive and worker pay. Instead, his feelings are somewhere between disappointment and disbelief. ...
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Carl