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Cypen & Cypen

Stephen H. Cypen, Esq., Editor

Never Forget - September 11, 2001

1. STAGGERING SOCIAL COST OF U.S. BUSINESS LEADERSHIP: The Institute for Policy Studies and United for a Fair Economy have issued their 14th Annual CEO Compensation Survey, entitled “Executive Excess 2007.” Here are some key findings:

  • CEOs of large U.S. companies last year made as much money from just one day on the job as average workers made over the entire year! These top executives averaged $10.8 Million in total compensation, more than 364 times the pay of the average American worker.
  • The private equity boom has pushed the pay ceiling for American business leaders considerably further into the economic stratosphere. The top 20 private equity and hedge fund managers pocketed an average $657.5 Million, or 22,255 times the pay of an average U.S. worker.
  • Workers at the bottom rung of the U.S. economy have just received the first federal minimum wage increase in a decade. But the new minimum wage of $5.85 still stands 7 percent below where the minimum wage stood a decade ago in real terms. CEO pay, over the same decade, has increased by roughly 45 percent.
  • CEOs at major American corporations enjoyed, on average, $1.3 Million in pension gains last year. By contrast, only 58.5 percent of American households led by a 45-to-54-year old even had a retirement account in 2004. Between 2001 and 2004, the retirement accounts of these average households gained only $3,775 in value last year.
  • CEOs of S&P 500 companies retire with an average $10.1 Million in their Supplemental Executive Retirement Plan, just one type of special account large American companies routinely set up for their top executives. But most Americans now move into their retirement years with no pension protection whatsoever. In 2004, only 36.3 percent of American households headed by an individual 65 or older held any type of retirement account. The accounts that did exist, on a per household basis, averaged only $173,552 in value, a minuscule 1.7 percent of the dollars in the supplemental accounts set aside for America’s top CEOs.
  • The top 386 CEOs took in perks worth an average $438,342 in 2006. These perks ranged from using private company jets for personal travel to reimbursement for country club fees, commuter expenses and even the extra taxes due on bonus income. A minimum wage worker would need to work for 36 years to earn the equivalent of what CEOs averaged just in perks last year.

The authors suggest some proposals for change:

  • Eliminate tax subsidy for excessive CEO pay.
  • Make sure investment fund executives pay their fair share of taxes.
  • Cap “deferred” executive pay.
  • Eliminate the tax reporting loophole on CEO stock options.
  • Link government procurement to executive pay.
  • Increase the top marginal tax rate on high incomes.

For your information, the Institute for Policy Studies is an independent center for progressive research and education; its scholar-activists are dedicated to providing policy makers, journalists, academics and activists with exciting policy ideas that can make real changes possible. United for a Fair Economy is an independent national nonprofit that works to raise awareness about how concentrated wealth and power undermine the economy, corrupt democracy, deepen the racial divide and tear communities apart. The complete report is online at


While California was in a period of fiscal plight in 2003, the Legislature passed, and the Governor signed, Senate Bill 20, reducing the state’s obligation to fund the Supplemental Benefit Maintenance Account of the teachers’ retirement fund by $500 Million for fiscal year 2003-2004. The California State Teachers’ Retirement System then filed a petition for writ of mandate (mandamus) and a complaint for declaratory and injunctive relief against the Department of Finance, claiming that SB 20 was unconstitutional because it violates the contract clause of both the state and federal constitutions and interferes with CalSTRS’ plenary authority to administer its assets. CalSTRS successfully moved for summary judgment on the first ground. The state appealed, arguing that the trial court erred in finding SB 20 unconstitutional, and that the court should not have addressed the issue because the controversy was not right for adjudication. CalSTRS cross-appealed, asserting that the trial court erroneously failed to address whether SB 20 unconstitutionally interferes with its plenary authority. CalSTRS and the California Retired Teachers Association, which intervened in the action, also cross-appealed claiming that the court wrongly awarded prejudgment interest at a rate of 7%, rather than 10%, per annum. The California Third District Court of Appeal held that the trial court correctly determined that the challenged portion of SB 20 violates the contract clause of the state and federal constitutions and that the matter is ripe for adjudication, and properly declined to address CalSTRS’ alternate constitutional challenge that SB 20 interferes with CalSTRS’ plenary authority to administer its assets. However, the appellate court found that the trial court erred in awarding prejudgment interest at a rate of 7%, rather than 10%, per annum. (That little change, alone, is worth about $50 Million.) Teachers’ Retirement Board v. Genest, Case No. C050889 (Cal. App. 3d, Aug 30, 2007).


According to an annual survey conducted by Pensions & Investments and Watson Wyatt Worldwide, the world’s largest pension funds reached a new milestone in the year of sustained, steady growth and no real surprises. Last year, the world’s largest 300 pension funds grew 11.5%, with assets topping $10 Trillion for the first time, while keeping pace with the 2005 growth. Benign global markets helped to sustain returns in 2006, and further portfolio diversification added stability in the drive for alpha. A weak dollar stunted growth of U.S. pension funds when compared with counterparts in regions with stronger currencies, helping to push several U.S. funds out of the rankings in 2006. Indeed, the U.S. share of pension assets in the top 300 continued to erode, declining to 43% of the $10.4 Trillion, compared with 45% in 2005 and 63% five years earlier. The top three funds held their rankings from the previous year, led by the Government Pension Investment Fund (Tokyo), which itself controlled 9% of the total assets, with $936 Billion. But Japan’s share of the total pension assets in the top 300 also declined -- to 15% from 18% -- partly because of a fall in the yen. Norway’s Government Pension Fund (Oslo), was second with $286 Billion while Stichting Pensioenfonds ABP (the Netherlands) came in third with $274 Billion. The largest U.S. pension fund, California Public Employees’ Retirement System, inched up to fourth place from fifth place, swapping spots with Korea’s National Pension Corp. CalPERS had $218.2 Billion, while the Korean fund had $203 Billion.


A new Issue in Brief from Center for Retirement Research at Boston College treats the implications of raising Social Security’s early retirement age. Preparing for retirement is becoming more challenging for today’s workers, as traditional sources of income, such as Social Security and employer-sponsored pensions, are declining while life expectancy and health care costs are rising. One powerful antidote to income shortfalls in retirement is working longer. But many analysts believe that the availability of early Social Security benefits at age 62 induces many workers to leave the labor force at or near that time. In fact, over 50% of both men and women do claim Social Security at 62 and the average retirement age is 63 for men and 62 for women. Therefore, raising Social Security’s Early Eligibility Age could encourage many to work longer. The Brief discusses the question of whether today’s workers would be able to work longer without undue hardship if the early eligibility age were raised. Answering this question requires exploring trends in both the health of older workers and the nature of jobs. In examining these areas, the Brief focuses in particular on economically vulnerable groups such as women and minorities.


Ingram appealed a judgment affirming denial of her application for Social Security disability benefits, arguing that the district court erroneously refused to consider evidence of mental disability that she first presented to the Appeals Council. The main issue was whether a federal district court must consider evidence first presented to the Social Security Appeals Council when it decides whether to enter a judgment affirming, modifying or reversing the Commissioner’s denial of benefits, with or without remanding the cause for a rehearing. Inartful dicta in a few of the court of appeals’ own recent decisions has confused the issue, because the court of appeals mistakenly stated that evidence first presented to the Appeals Council could be considered by the court only if applicant had good cause for not presenting it earlier to the Administrative Law Judge. Based on the plain meaning of the text of Section 42 U.S.C. §405(g) and lucid explication in the court of appeals’ long standing precedents about the scope of judicial review, the appellate court concluded that a federal district court must consider evidence not submitted to the Administrative Law Judge but considered by the Appeals Council when that court reviews the Commissioner’s final decision denying Social Security benefits. Ingram v. Commissioner of Social Security Administration, 20 Fla. L. Weekly Fed. C1007 (U.S. 11th Cir., August 23, 2007).


“Money will buy a pretty good dog, but it won’t buy the wag of his tail.” Josh Billings

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Items in this Newsletter may be excerpts or summaries of original or secondary source material, and may have been reorganized for clarity and brevity. This Newsletter is general in nature and is not intended to provide specific legal or other advice.

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