would Carnegie do about corporate pay, charity?
USA Today Editorial
By Curt Weeden
Sunday, May 7, 2006
If Andrew Carnegie were still around, odds are he'd come up
with a way to quell the increasingly noisy debate over hefty
executive pay increases.
To lay the groundwork for his recommendations, he'd likely
open with a couple of disquieting facts:
• Survey results reported in
The Wall Street Journal
revealed that last year, CEOs of 350 major U.S.
companies were paid $4.1 billion in salary, bonus and
realized long-term compensation. The median pay for these
executives jumped 23% over what they earned in 2004.
• Corporate charitable contributions, on the other hand,
increased only 5.5% in 2005. When the IRS adds the donation
deductions that 400,000 businesses typically take in any tax
year, corporate giving is expected to total approximately
So, what's the connection between surging executive pay and
relatively sluggish corporate philanthropy? None. But
Carnegie, who made his fortune from steel, might argue there
In the late 1800s, it was Carnegie who called on his
well-heeled peers to give away their fortunes for the
benefit of the public good — and to do so while they were
still alive. A few captains of industry both past and
present have taken the Carnegie philosophy to heart. But
statistics tell us that business leaders, along with other
taxpayers who have adjusted gross incomes of $1 million or
more a year, usually limit their donations to between0.7%
and 1.4% of their investment assets, according to the
NewTithing Group, a non-profit organization that monitors
Like most of us, top executives working for publicly held
companies aren't obligated to disclose how much they give to
charity. But annual proxy statements tell the world how much
they are paid.
Because shareholders and other stakeholders are showing more
and more displeasure about the widening compensation gap
between the highest- and lowest-paid workers, here's how
Carnegie might try to calm the waters:
1) CEOs and other executives whose compensation is made
public in proxy reports would voluntarily agree to donate
50% of their annual increases in salary, bonus and realized
long-term compensation to community foundations or other
broad-based groups in locations where their companies have a
presence or interest.
2) Executives would openly disclose the value of their
"Carnegie Commitments" and would pledge that these special
grants would not offset any of their other personal
3) A community-based funding agency would determine how a
CEO's gift would best meet high-priority local needs, thus
removing any perception of self-interest. By directing these
Carnegie Commitments to towns and cities in which companies
have a vested interest, executives can show that they
understand these communities play an essential role in
keeping corporations in business.
Though the recommended supplemental contribution would put a
dent in a top executive's paycheck, it would also make for a
handsome tax write-off (the IRS permits taxpayers to take
charitable deductions of up to 50% of their annual adjusted
gross incomes). Consequently, the financial pain would be
minimal and the positive PR value immense.
Had the Carnegie plan been adopted last year by all the CEOs
included in The Journal's
survey, $360 million would have been infused into U.S.
communities. Iftop earners in the nearly 13,000 businesses
that annually report to the Securities and Exchange
Commission were to adopt the Carnegie approach, it would
mean billions of dollars for many of the nation's more than
800,000 public charities.
For a man whose motto was "the man who dies thus rich dies
disgraced," Andrew Carnegie might tell executives that this
plan should be the start of a much longer,
But he would also probably add that the plan does indeed
point executives in the right direction.
Curt Weeden is author of
Corporate Social Investing.