As many of us in the 99% are acutely aware, the economic rebound from the worst financial crisis since the great depression is tepid at best. The unemployment numbers continue to drift downward, albeit at a snail’s pace. The official unemployment rate stood at 8.9 percent at the end of October 2011 and five months later we are at 8.2 percent. While the downward sloping trend line for unemployment is encouraging the pace of job recoveries appears to have stalled and since January of 2012 has hovered around 8.3 to 8.2 percent.
According to the Bureau of Labor Statistics, the average hourly earnings for all employees on private nonfarm payrolls rose by 5 cents, or 0.2 percent, to $23.39 and the hourly earnings of private-sector production and nonsupervisory employees rose by a whopping 3 cents, (yes, you read correctly- 3 cents per hour) to $19.68 in March 2012.
The continued stagnation in the employment ranks of the average American got me to thinking about a recent announcement from one of America’s largest multinational companies Proctor & Gamble (P&G) the maker of such consumer staples as Tide, Charmin, and Gillette. Back in February of 2012, the Chief Financial Officer of P&G, Jon Moeller, stated they would eliminate 1600 non-manufacturing jobs by June of this year thereby saving $240 million annually. Moreover, P&G earlier in 2012 announced the elimination of 2700 shelf stocking jobs from its payroll through an “outsourcing plan” which is politically correct subterfuge language that generally means the employees were fired, possibly rehired by a contract company, albeit at a lower wage rate and probably with less in less benefits, to include health benefits, if any, at all.
Jon Moeller, CFO, concluded his remarks about the ongoing downsizings and hiring freezes by stating, and I quote, “We’re examining all areas of cost in every business, including product design, manufacturing, logistics and marketing spending.” The comments by the CFO of P&G, once again, got me to thinking about P&G and if indeed all areas of cost had in fact been examined and what that might have entailed for those that occupy the executive suite, the Board members, and one employee related to Jon Moeller, the person responsible for examining all areas of cost at P&G.
Investigating the numbers produced by P&G and available in their annual Proxy Statements I found the following regarding executive compensation; surprise surprise….it increased for five of the six Named Executive Officers. Remember earlier where the Bureau of Labor found that the average workers’ hourly wage increased by a whopping 3 cents to $19.68! Well, just look at the absolute and percentage increase in the total compensation of the P&G senior management over the last few years provided in Table 1. If Mr. McDonald, CEO of P&G, worked 24 hours per day, 365 days per year his hourly total compensation would equal $1847.95; quite a dramatic difference from the $19.68 for the average Joe!
TABLE 1. P&G Executive Compensation
While Mr. Moeller claims to have examined all areas of cost it appears the total compensation of the Named Executive Officers (NEOs) escaped any serious scrutiny given that five of the six NEOs all had increases in their total compensation packages and one remained relatively flat. The data derived from the company’s public SEC filings reveals that as rank and file P&G employees were being outsourced and hiring freezes put in place that senior management increased their compensation while firing low level employees.
Additionally, the wife of Jon Moeller is employed as a Vice President-Global Packaging of P&G with total compensation of $750,000, quite a sum for a VP of packaging. Would P&G care to reveal anyone in a comparable position and their level of compensation? Does Mr. Moeller really want us to believe that no one in some emerging market economy has the technical skills for that position at a tenth of the price?
Non-Employee Directors Compensation
The total compensation paid to P&G non-employee Directors in fiscal year 2010-2011 totaled $2.4 million dollars. In 2007 the annual retainer fees for non-employee directors’ was increased from $75,000 to $100,000 or 33 percent.
Table 2. Non-Employee Directors Compensation
The total non-employee Director compensation would have been higher had it not been for the resignation of Rajat K. Gupta, the businessman accused of securities fraud and conspiracy, and two other directors elected in late 2010 and early 2011 and therefore received only a prorated portion of their Director’s compensation. Additionally, the number of non-employee directors’ changed over the time period. By way of example, in the 2007-2008 period P&G had 14 non-employee directors whereas in 2010-2009 P&G had 12 and in the current period they numbered 11 which suggests the average non-employee directors’ compensation increased each year as well.
In conclusion, over the last five years the total number employees at P&G has decreased from approximately 136,000 in 2006 to 127,000 at the end of 2010 while both the directors and senior managers have increased their levels of compensation. While management of P&G has every legal right to continue to operate in this fashion quite possibly the American public comprising the 99% might think twice next time about purchasing that box of Tide or Gillette razors and send a strong and unequivocal message to the senior managers of P&G.