06/28/2006 12:02 pm ET Updated May 25, 2011

WSJ: Report Proves Executive Payouts Causing America's Pension Crisis

In Hostile Takeover, I note that the Wall Street Journal's Ellen Schultz is, arguably, the best journalist working today. And in the last week, she has produced some of the most important reporting in the last few years, singlehandedly blowing away all the rhetoric about what's destroying America's pension system that's coming from Corporate America and their bought off cronies in government.

The public is led to believe that companies are slashing workers' pensions and backing out of their retirement promises to workers because these companies face a cash squeeze caused by the market. But in a major investigative report, Schultz points out that an "analysis of corporate filings reveals that executive benefits are playing a large and hidden role in the declining health of America's pensions." The key findings are stunning:

- Boosted by surging pay and rich formulas, executive pension obligations exceed $1 billion at some companies. Besides GM, they include General Electric Co. (a $3.5 billion liability); AT&T Inc. ($1.8 billion); Exxon Mobil Corp. and International Business Machines Corp. (about $1.3 billion each); and Bank of America Corp. and Pfizer Inc. (about $1.1 billion apiece).

- Benefits for executives now account for a significant share of pension obligations in the U.S., an average of 8% at the companies above. Sometimes a company's obligation for a single executive's pension approaches $100 million.

- These liabilities are largely hidden, because corporations don't distinguish them from overall pension obligations in their federal financial filings.

- As a result, the savings that companies make by curtailing pensions for regular retirees -- which have totaled billions of dollars in recent years -- can mask a rising cost of benefits for executives.

- Executive pensions, even when they won't be paid till years from now, drag down earnings today. And they do so in a way that's disproportionate to their size, because they aren't funded with dedicated assets.

Schultz goes on to show how many of the big companies that are slashing workers' pension are using the savings to add to executives' pension plans. And, in a sidebar story, Schultz also documents how so-called "deferred compensation" plans are making the situation even worse. You may remember these schemes from when Halliburton handed over millions of dollars in "deferred compensation" Dick Cheney at the same time the company filed lawsuits against its own retirees in order to cut retirees' benefits.

According to Schultz, these deferred compensation schemes are a key factor in "creating huge and typically unfunded corporate liabilities" - liabilities that are then used to justify more cuts to workers' pensions. Because of this abuse, at many companies the total obligation to a handful of executives approaches the total obligations to tens of thousands of workers. For instance, "General Electric's total unfunded liabilities for executives -- deferred comp plus pensions -- equals more than 15% as much as its total retirement liability for more than 500,000 workers and retirees." At Countrywide Financial Corp, "executive-retirement liability -- pensions plus deferred comp -- at the end of last year stood at $340 million - not far from its $373 million obligation for 25,915 ordinary workers and retirees. " And at Comcast, "an executive-retirement liability of $469 million exceeds the pension obligation for other employees, which is $194 million."

Faced with all of this, Congress has deliberately done nothing. Bought and paid for by the executives who are running off with billions, lawmakers allow these schemes to expand in secret - largely hidden from the investors, stockholders and employees who are getting screwed. Meanwhile, most reporters give the public a he-said-she-said account of the burgeoning retirement security crisis, leading us to believe that massive pension cutbacks are just a force of nature that cannot be stopped, rather than the unsurprising outcome of specific policy choices by greedy executives and the politicians in their back pocket.

Thankfully, there are a few people out there like Ellen Schultz who digs deeper than the rhetoric and lets us know what's really going on (Her work was an incredible resource for me in writing Hostile Takeover's chapter on pensions). The more such information gets out, the more we really see what's going on: a vicious class war being waged by elites in government and business who are doing everything they can to bleed America dry.