America’s super-rich continue to make mind-boggling sums
Two recent metrics examine 2010 take-home among the super-rich — that top one-hundredth of one percent of Americans whose median household income exceeds $27 million a year, nearly 1,000 times what the bottom 90 percent of Americans make. USA Today’s CEO pay survey and a look at hedge fund manager earnings from Absolute Return + Alpha (AR), a magazine dedicated to hedge funds, both reveal that even as hundreds of millions of Americans remain mired in the recession, top earners, like the companies they work for, are doing better than ever.
Viacom CEO Philippe Dauman topped the USA Today list, with a combined $84.5 million in pay, between a $2.6 million salary, an $11.25 million bonus and a $70.5 million return on stock options in 2010. Hovering near the bottom were executives like Steve Jobs, John Mackey of Whole Foods and Vikram Pandit of Citigroup, whose symbolic $1 annual salaries belie massive net worths thanks to their holding stock in their respective companies. Though Jobs’ $8.3 billion and Mackey’s $1.8 billion dwarf Pandit’s net worth, estimated in the tens of millions, as of this year, Pandit will earn $1.75 million, exceeding what he was earning before the recession hit.
All told, the 175 CEOs that USA Today collected data on made a combined $1.84 billion, with a median annual pay of $8.8 million. This represents a 26 percent jump in annual pay from 2009; average private industry workers, on the other hand, saw pay raises of 2.1 percent over the same period.
Meanwhile, hedge fund managers are making money that makes CEO income look pitiful by comparison. The top 25 hedge fund managers in the U.S. made a combined $22 billion, bolstered by surging gold prices and a generally bullish market. This works out to an average of $883 million in 2010 income for those 25 managers, the third-highest in history.
Far and away the top earner among them was John Paulson of Paulson & Co., who personally made $4.9 billion in 2010, largely in gold. Other hedge fund managers invested heavily in the emerging lawsuit market, lending millions to law firms heading up major class-action suits. Interest on the loans is passed on to the firm’s clients in additional fees, meaning that many plaintiffs who are victorious in class-action suits end up paying for the “privilege” of winning.
Even assuming Paulson works at the high-end of the industry standard for people working for hedge funds — say, 60 hours a week — his astronomical pay would break down to about $436 per second on the job. It would take him one minute and 48 seconds to earn the median yearly income for American men.
Despite their massive haul in 2010, hedge fund managers continue to exploit a controversial “carried interest” tax loophole that allows them to pay a maximum of 15 percent on the vast majority of their income, as opposed to the 35 percent that others in the top tax bracket are required to pay. Efforts (PDF) to close the loophole in the past have been unsuccessful.