Executive Briefing

Employment cost data; when a CEO’s health data may be private; employees avoid their company’s stock; more.

By Rita Zeidner Mar 1, 2009

March 2009 CoverEmployee Earnings Up in 2008

At long last, some good economic news from the U.S. Labor Department: Collectively, U.S. civilian workers got a 2.7 percent raise in 2008, according to a report released Jan. 30.

Not feeling 2.7 percent richer? Not surprising, explains a U.S. Bureau of Labor Statistics (BLS) spokesman. Even though the percentage takes into account changes in the Consumer Price Index, it measures employers’ costs per hour. It doesn’t reflect the fact that many companies are cutting back hours and thus paying workers less.

How does last year’s increase compare to previous years’? Not so good, according to BLS officials. In the "good ol’ days"—meaning 2007—wages and salaries increased by 3.4 percent over the year before.

Benefits cost increases continued a slowing trend. In 2008, they increased by 2.2 percent, compared with 3.1 percent in 2007 and 3.6 percent in 2006. In 2003 and 2004, per- hour benefits costs jumped by 6.4 percent and 6.7 percent, respectively, over the previous year, the BLS reported.

Is a CEO’s Health Anyone’s Business?

News that Apple Inc.’s Chief Executive Officer Steve Jobs is taking a temporary leave of absence for health reasons raises important questions for human resource professionals and corporate board members who usually keep employee health data under lock and key.

Company officials must decide if the CEO’s health is "material information" that an investor would consider important, says Boston-based attorney Steven R. London of Pepper Hamilton LLP. "If the information is determined to be material, then the company must disclose the news to the public or require all of its insiders to refrain from trading in the company’s securities."

Ordinarily, the health of a CEO or other key employees would not rise to the level of material information, according to London. But an illness that is likely to result in death or incapacitation of a critical driving force in a company in the reasonably near future would be. In the case of Apple, "one could argue that Steve Jobs is that type of dominant figure. If his illness is likely to incapacitate him, the current status of his health is material information," London says.

Company officials need to balance the magnitude of the event with the likelihood that the event will occur. That means considering competing factors, including the severity of the illness, the officer’s importance to the company and the generally accepted policy of protecting the privacy of health information, London advises.

Stocks, Sadly, Investments Of Choice

A little-noticed report released late last year speaks volumes about the importance of a diversified retirement portfolio.

At year-end 2007, the bulk of 401(k) assets, two-thirds, were invested in stocks, according to data released jointly in December by the Employee Benefit Research Institute and the Investment Company Institute. During 2008, the Dow Jones Industrial Average lost more than a third of its value and the Standard and Poor’s 500 Index fell nearly 40 percent. The end result: the majority of investors—those with stock-heavy retirement portfolios—took a beating.

If there’s a bright spot in how U.S. employees choose to invest, it’s that they are diversifying. In response, at least in part, to the Enron debacle—where workers were over-invested in their employer’s ultimately worthless stock—the amount invested in their own company’s stock is continuing a downward slide. At year-end 2007, company stock made up less than 11 percent of 401(k) investments, down from 19 percent in 1999.

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Pay Mix-up, C-Suite Style

Take a peek at what’s going on in the C-suite regarding executive pay. Here are the major trends reported by The Conference Board at the close of 2008:

Compensation mix reallocated toward stock. Almost all industries show a reallocation of compensation toward stock and away from total cash compensation and stock options. In financial service companies other than banks, for example, the average percent of total compensation delivered in nonequity incentives fell by 2.62 percentage points, from just over 24 percent to 21.5 percent.

Cash may be losing share—but the median chief executive officer still earns more of it. Median cash compensation increased in more than two-thirds of the industries studied, as did total compensation. Insurance executives are faring the best, receiving a not-too-shabby 34 percent of their pay in cash—on average, about $1.2 million.

Food and tobacco executives number among the top earners. Among the 22 industries represented, companies in the food and tobacco industries showed the highest median CEO total compensation. The category tops the list—with $6.34 million in median total compensation, and $2.7 million in median total cash compensation—followed by utilities, insurance and financial-service companies other than banks.

CEOs already have plenty of "skin in the game." In the companies among the largest 10 percent of the sample, the median CEO holds almost 100 times, 99.97 percent, of his or her salary in total stock and stock-options holdings in the company.

Antidote for Cyberloafing:Keeping Workers Busy

The Internet holds seemingly endless opportunities for wasting time—on and off the job. The challenge for human resource professionals: Finding ways to limit how much time employees waste while they’re on the clock.

Alleviating workplace stress might help, according to a study in the fall 2008 Journal of Managerial Issues.

Management professor Christine A. Henle of the University of Rhode Island and Anita L. Blanchard, an associate professor of psychology and organization science at the University of North Carolina, surveyed 162 graduate business students about their Internet use patterns at work and found they are more likely to cyberloaf when they perceive "role ambiguity or conflict on the job." The problem can be reduced by clarifying job expectations and duties through job analysis, job design, training programs and performance appraisal systems, the researchers concluded.

Henle and Blanchard also acknowledged that employees are less likely to waste time surfing the net if they are busy. But, they cautioned against increasing workload "because having too much work is likely to be highly stressful."


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