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March 21, 2001

CEOs Get Rich While Investors And Employees Get the Short End

For the past decade, stock prices in tech stocks had skyrocketed to levels that were completely out of line with what they were worth. And CEO salaries went along for the ride. Now, stock prices are getting a massive haircut, and you'd think CEO salaries would reflect this.

Instead, the only people who get punished for falling stock prices and languishing sales are investors and company employees. Tech investors have watched the Nasdaq plummet over 63% from its highs in March 2000. The index has fallen 30% since the start of this year alone. But CEO salaries haven't budged one iota. Most CEOs had the good fortune (or enough insider information) to sell many of their shares before the Nasdaq started on its slide. Investors, though, never knew about those sales until after the fact, and they lost their shirts.

But investors aren't the only ones getting the short end of the stick. Tech companies are laying off workers in droves. The total number of layoffs is in the tens of thousands. Nortel, whose CEO John Roth made $100 million last year, recently announced that they were going to layoff 10,000 employees. How many employees would be able to keep their job if Nortel laid off Roth?

These layoffs are going to come back to haunt tech companies. An increase in unemployment means a decrease in spending power. Consumers are already starting to rein in spending even more than they have already. And the economy is going to slide further into recession. The only winner here is the CEO -- not investors, not employees, and certainly not the economy.

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