The Wall Street Journal ran a great piece in December about the huge disparity between the average worker's retirement plan and that of those working in the C-Suite. According to the Journal, 25% of the top executives at America's largest companies actually made money on their retirement plans in 2008. Did you? You're probably wondering right about now how they did it considering your 401(k) account probably dropped about 20% last year. It's simple - guaranteed returns. As if it's not enough that CEOs make 300 times more than the average worker, corporate boards also feel compelled to guarantee executives huge retirement packages. It's pure poppycock if you ask me. (Before you retire, read Five Retirement Questions Everyone Must Answer.)

Deferred Compensation
One of the companies written about in the article was Comcast (Nasdaq:CMCSA), whose executive vice-president, Stephen Burke, made $7.4 million in interest in 2008 from his deferred compensation, which totaled $71 million at the end of 2008. Burke was able to do so well in an awful year because Comcast pays its executives 12% guaranteed interest on all deferred compensation. Two other executives in the company, the vice president and COO, had a combined pension increase of just under $5 million. I wonder how General Electric (NYSE:GE), its new joint venture partner, feels about this?
What a World
It amazes me that the issues surrounding executive compensation continue to focus solely on the banking industry just because it was the beneficiary of so much assistance. This is a gargantuan problem for investors across every industry. It's something that taints us all and I'll continue to bang my drum as long as corporate boards insist on feeding the pigs at the trough. There is no need for the government to allow this to go on, but it does. If you look more closely at Comcast, you'll see that Burke was able to defer a substantial chunk of his total compensation in 2008. Wouldn't it be nice for the rest of us to be able to put aside funds on which we will be guaranteed a 12% return? It sure would. (For more information on executive pay, check out Evaluating Executive Compensation.)

Workers Be Damned
The Journal article highlights the fact that while the Comcast fat cats were making 12% on their money in 2008, its own employees were collectively losing their shirts to the tune of $649 million, or 28% of their 401(k)s. While it's true that Comcast's plan has likely regained much of those losses, this is a matter of fairness. Compensation plans should benefit all or none, but not a select few. Rare are companies like Intel (Nasdaq:INTC), whose executives receive no special treatment in their deferred compensation plan. In 2008, its top four executives lost 35% in their deferred compensation plan, the exact same loss as the employees' 401(k) plan. Now that's more like it.

Bottom Line
Other companies mentioned in this eye-opener of an article include Wal-Mart (NYSE:WMT), Bank of New York Mellon (NYSE:BK) and Illinois Tool Works (NYSE:ITW). All have sweetheart deals for their executives' deferred compensation plans. Having studied executive compensation for awhile, I'd be shocked if the number of S&P 500 companies offering guaranteed rates of return for its executives wasn't well above 50%. But then again, who ever said life was fair?

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Retirement

    5 Best Cruise Lines for a Recent Retiree

    The best cruise lines plan everything for you – the food, the entertainment and the itinerary. But pick a line with a compatible program and people.
  2. Retirement

    How Are 401(k) Withdrawals Taxed for Nonresidents?

    As a U.S. nonresident, deciding what to do with your 401(k) after you return home comes down to which tax penalties, if any, you're willing to incur.
  3. Retirement

    The 5 Best Retirement Communities in Asheville, N.C

    Learn about some of Asheville, North Carolina's best retirement communities and discover why the area is such a popular retirement destination.
  4. Mutual Funds & ETFs

    What Exactly Are Arbitrage Mutual Funds?

    Learn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
  5. Retirement

    Why Are Annuities Important for Retirement?

    Understand how annuities work, and identify the benefits they provide for retirement, the most salient being a guaranteed income stream for life.
  6. Retirement

    What Does It Cost to Retire in Belize?

    Find out how much monthly income you need to retire comfortably in Belize, a subtropical paradise with jungle landscapes, white beaches and crystal blue water.
  7. Savings

    Become Your Own Financial Advisor

    If you have some financial know-how, you don’t have to hire someone to advise you on investments. This tutorial will help you set goals – and get started.
  8. Investing News

    Ferrari’s IPO: Ready to Roll or Poor Timing?

    Will Ferrari's shares move fast off the line only to sputter later?
  9. Retirement

    What to Do When Your Doctor Doesn't Take Medicare

    Stay and pay the full fee? Cut and run to another provider? Five ways to cope when Medicare threatens to break up you and your medico.
  10. Retirement

    4 Reasons Why Americans Retire in Costa Rica

    Understand why more and more Americans are deciding to retire in developing countries. Learn about the top five reasons why Americans retire to Costa Rica.
  1. Can I borrow from my annuity to put a down payment on a house?

    You can borrow from your annuity to put a down payment on a house, but be prepared to pay an assortment of fees and penalties. ... Read Full Answer >>
  2. What are the main kinds of annuities?

    There are two broad categories of annuity: fixed and variable. These categories refer to the manner in which the investment ... Read Full Answer >>
  3. What are the risks of rolling my 401(k) into an annuity?

    Though the appeal of having guaranteed income after retirement is undeniable, there are actually a number of risks to consider ... Read Full Answer >>
  4. How do I get out of my annuity and transfer to a new one?

    If you decide your current annuity is not for you, there is nothing stopping you from transferring your investment to a new ... Read Full Answer >>
  5. Are Cafeteria plans exempt from Social Security?

    Typically, qualified benefits offered through cafeteria plans are exempt from Social Security taxes. However, certain types ... Read Full Answer >>
  6. What are the biggest disadvantages of annuities?

    Annuities can sound enticing when pitched by a salesperson who, not coincidentally, makes huge commissions selling them. ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!