As most of us are paying our taxes, the statistics on people’s earnings are rolling in. And while President Trump is proposing a tax bill that will shuffle more money to the top 1 percent, most of us are feeling good if we can just stay even.
Most people are disgusted with big corporations paying top executives outrageous salaries. Money Magazine reported that the highest-paid CEO in 2016 was Thomas Rutledge of Charter Communications at $98.5 million. Fortune Magazine reported on a recent study of 100 CEOs conducted by Equilar which showed that average CEO pay was $16.6 million; this while average worker pay in the U.S. is basically stagnant. According to Glass Door Research, average CEO pay is 204 times median worker pay.
The great scandal of executive compensation elicits a few grumbles here and there but nothing gets done about it. The beneficiaries of these pay packages are deeply entrenched in our political process. We continue to elect people who condemn the system during campaigns and shovel money into the system once elected. It all just seems so far away and hard to do anything about it ... especially here in Montana.
But Montana is not immune. Take NorthWestern Energy as an example. NorthWestern is not your average competitive private enterprise. As a regulated utility, it has no competitors. Montana law also virtually guarantees recovery of money invested by the utility and a reasonable profit.
A filing with the Montana Public Service Commission earlier this year shows that NorthWestern CEO Bob Rowe received a 24 percent pay raise, from over $2.1 million to over $2.6 million. The total compensation of the top five executives at NorthWestern was just over $6.1 million. The average of the raises they received was a little over 15 percent. Not bad — for them.
Some people argue these folks deserve that much money because they have been doing a good job. Well, maybe so, but there have been some pretty big mistakes over the last few years. A new gas plant they built broke down and was off-line for several months. They went all the way to the Montana Supreme Court in an effort to make consumers pay even more than they already had. Fortunately, they lost.
They bought a share of Colstrip 4 at a very high price. It broke down for seven months in 2013, forcing them to buy power in the open market while customers continued making payments on the broken down coal plant. They are still in court on that one arguing that consumers should pay more.
Then they bought some dams and natural gas production fields at very high prices. Because power and gas on the open market will likely continue to cost less than these new assets for the foreseeable future, they will probably never pencil out to the benefit of customers.
These decisions have not been the best deal for consumers. But the people who decide executive pay are the executives themselves and the stockholders, not consumers. NorthWestern Energy’s stockholders are doing just fine. Five years ago their stock price was less than $35. Today the price is close to $60, almost double. That’s a healthy return for a regulated monopoly that has a virtual guarantee to recover its costs and make a profit.
Bob Rowe and his team at NorthWestern Energy are just doing what every other executive team in business does these days. It’s just a Montana example of how much the whole system stinks.
Ken Toole served on the Montana Public Service Commission from 2007 to 2010 and in the Montana Senate from 2000 to 2006, and was chair of the Energy Committee and vice chair of the Tax Committee. He now lives outside Cascade.