"Productivity gains" in a recession, revisited

Barry Ritholtz (of The Big Picture blog, linked to at right) linked this morning to an interesting report (the full PDF can be downloaded from that link) on CEO pay in the recession. Its conclusions dovetailed nicely with my previous post on layoffs and productivity gains, so I figured it would be good to share here. The most eye-opening conclusion?

CEOs at the 50 major firms that have laid off the most workers since the onset of the economic crisis took home nearly $12 million each on average in 2009, 42 percent more than the average compensation that went to S&P 500 CEOs.

Of course, an argument could be made that scale is a problem here--larger companies have more employees and higher profits by their nature, and they therefore should see more layoffs in a recession. CEOs, too, would expect higher compensation because of the company's size, regardless of layoffs. This seems to be a valid counter-argument, except when you consider the 50 companies in question.

Only 19 of the 50 companies cited by the CEO pay report were among the top 50 largest companies by employee (compiled by Fortune magazine) before the recession hit, and only two of the top 10 layoff leaders--Citigroup and Wal-Mart--were also previously among the 10 largest companies.

The lesson, then, seems to be that there are great rewards to be had in the short term for CEOs who lay off workers to pad profits. As I warned previously, though, when these profits come from short-lived "productivity gains", these companies are likely to find themselves in difficult positions if and when the economy turns around and hiring picks up. It's just one more example of companies and CEOs prioritizing short-term profit over long-term company health, and being rewarded for it.