How CEOs are Stealing from YOUR 401K

 

How CEOs are Stealing from YOUR 401K

Over 50% of working Americans have 401k programs.  These programs are designed to allow workers to set aside money from their hard earned pay each payday for retirement.  Most of these 401k programs provide options in mutual funds.  The funds are mostly portfolios (groups) of common stock in major corporations.  Some funds mix stocks with bonds and money market instruments.

The mostly widely held funds are stock funds.  These funds can grow only when the companies they hold grow and make profits.

Profits are gross revenue less expenses.  A part of the expenses include salaries for management including CEOs.

Historically CEO pay was not a huge issue.  In fact for over 20 years the average CEO compensation was about 100 times the average worker wage in America.  Then Bush, Chaney, Greenspan, Cox and the Republican gang came to power and the CEOs started making 400 times the average worker wage.

Were the CEOs four times smarter?  No! Did they work four times as hard as they did before?  No!  Did the CEOs produce four times the profit?  No!  Did the CEOs grow the companies to be four times as large?  No! Are these CEOs four times greedier?  Yes!

The fact is this CEO greed has stolen billions from all the investors in these companies.  Thousands of the CEOs now have compensation packages that exceed $25 million per year and about 100 CEOs are getting over $100 million per year in total compensation.  If your 401k program is invested in healthcare the CEOs of the top 10 health insurance companies took billions in compensation over the past 10 years.  This money comes out of the profits of the corporation and out of your 401k fund as well.

When you factor in the 401k fund management fees, what you pay for the privilege of having your money in the fund, most Americans with 401k programs are getting screwed.

By the way if your 401k program lost money over the past few years you can rest assured the CEOs did not take major any pay cuts.  You should feel good about that.

A few examples are: (one year compensation)

Larry Ellison Oracle = $500 million

Aubrey McClendon Chesapeake Energy Corp. = $112.5 million

Sanjay Jha, Motorola Inc. = $104.4 million

Robert Iger, Walt Disney Co. - $51.1 million

Lloyd Blankfein, Goldman Sachs Group Inc. = $42.9 million (took billions in taxpayer bailout money)

Kenneth Chenault, American Express Co = $42.9 million

Vikram Pandit, Citigroup Inc. - $38.2 million (took billions in taxpayer bailout money)

Jamie Dimon, JPMorgan Chase & Co. - $35.7 million (took billions in taxpayer bailout money)

“The CEOs of Occidental Petroleum Corp, Hess Corp, Ultra Petroleum Corp, Chesapeake Energy Corp and XTO Energy Inc all took in more than $100 million in total realized compensation, while the heads of EOG Resources Inc and Nabors Industries Ltd received eight-digit awards.” - Reuters

If you feel this pay is fair - then no problem. 

The real issue here is a fair day’s work for a fair days pay.  All independent studies show that CEOs have little or no impact on how a company performs.  In fact many lower paid CEOs do better than CEOs making ten times as much.  No CEO can control the market conditions, economic conditions and few have any real impact on company products or services.

The following is a good statement to remember:

“The Society of Professional Asset-Managers and Record Keepers says nearly 73 million Americans, or just under 50% of our working population, now have a 401(k). And collectively we pour more than $200 billion into these accounts each year. But retire rich? Don't bet on it. The average 401(k) has a balance of $45,519. That's not retirement. That's two years of college. Even worse, 46% of all 401(k) accounts have less than $10,000. Today, just 21% of all U.S. workers are covered by traditional pensions.”

The US Dept of Labor says the following:

“The earnings on your investments will increase your retirement income, fees and expenses paid by your plan may substantially reduce the growth in your account. The following example demonstrates how fees and expenses can impact your account.

Assume that you are an employee with 35 years until retirement and a current 401(k) account balance of $25,000. If returns on investments in your account over the next 35 years average 7 percent and fees and expenses reduce your average returns by 0.5 percent, your account balance will grow to $227,000 at retirement, even if there are no further contributions to your account. If fees and expenses are 1.5 percent, however, your account balance will grow to only $163,000. The 1 percent difference in fees and expenses would reduce your account balance at retirement by 28 percent.”

Do you even know how much in fees you are paying?  Most 401k owners don’t.  And yes, in many cases funds charge up to 2% of your balance just to manage your fund.  If your fund only grows at 2% you make nothing.

Could this problem be solved?  Yes.  These are “public” corporations that raise money from the public.  The law should protect the investors by setting some limit on how much CEOs can be paid.  If the corporation is private let them pay whatever they like.  If they sell stock to the public they should be limited to paying CEOs and other executives to a total compensation of 100 times the pay of the average worker.

Would these CEOs leave the US and go to Europe or Japan to get paid more?  No these countries do not pay their CEOs 400 times their worker wages. 

The CEO of GM was paid 14 times what the CEO of Toyota makes in total compensation.   Is the CEO of GM 14 times better than the CEO of Toyota?  No!  The obscene greed involved in CEO compensation is un-Christian. 

The same is true for fees charged by funds to manage 401k programs.  These 401k programs are government established and the government can set limits on fees and should.

I say if the 401k account makes no money – non fees.  Maximum fees can’t exceed 5% of the total increase in the value of your 401k account.

Will the fund managers refuse to manage 401k programs?  No!  But the fund managers will not make millions to look at a computer or have a high paid flunkey look at a computer and make a few trades.

The usual suspects, the greedy Republicans will try to block any attempts to limit the personal greed of CEOs and fund managers.  They will have to explain this to Jesus when He sits on the Throne of man.

Timothy 6:8-10 (money)

 

In The Epistle of Paul – Paul tells us the following:

8 “And having food and raiment (clothes) let us be therewith content.

9 “But they that will be rich fall into temptation and a snare, and into many foolish and hurtful lusts, which drown men in destruction and perdition

10 “For the love of money is the root of all evil: which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows.

James 5:1-6 Warning to Rich Oppressors

 1”Now listen, you rich people, weep and wail because of the misery that is coming upon you.

2”Your wealth has rotted and moths have eaten your clothes

3”Your gold and silver are corroded. Their corrosion will testify against you and eat your flesh like fire. You have hoarded wealth in the last days.

4”Look! The wages you failed to pay the workmen who mowed your fields are crying out against you. The cries of the harvesters have reached the ears of the Lord Almighty.

5”You have lived on earth in luxury and self-indulgence. You have fattened yourselves in the day of slaughter.

6”You have condemned and murdered innocent men, who were not opposing you” 

Luke 12:15 

MONEY & GREED

15”Then He said to them, Beware, and be on your guard against every form of greed; for not even when one has an abundance does his life consist of his possessions."

Luke 18:22 

 22”Now when Jesus heard these things, he said unto him, Yet lackest thou one thing: sell all that thou hast, and distribute unto the poor, and thou shalt have treasure in heaven: and come, follow me.”

 

Not one of those that mock Jesus with their life style should be allowed into a Christian Church including Bill Gates and Warren Buffett.