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Slashing jobs pays off ... if you're sitting in the executive suite.

By Cheryl Castro, CNN
  • Report looks at executive pay at 50 firms that laid off the most workers
  • CEOs at those firms earned $12 million on average in 2009
  • Author: Cuts often bad for business over the long-term

(CNN) -- A new report may add salt to the wounds of America's jobless. It seems many of their former bosses are profiting at their losses.

According to the report "CEO Pay and the Great Recession," chief executive officers of the 50 firms that laid off the most workers since the start of the economic crisis earned nearly $12 million on average in 2009. That's 42 percent more than the average pay of CEOs at S&P 500 firms as a whole.

"I think that really shows a really perverse incentive system in this country," said Sarah Anderson, lead author of the Institute for Policy Studies' 17th Annual Executive Compensation Survey. "You are handsomely rewarded for slashing jobs in the middle of the worst economic crisis in 80 years," she said.

It did for Fred Hassan of Schering-Plough, the man the report dubbed last year's "Golden Parachuter." Hassan was the highest paid layoff leader, earning $50 million in 2009 while his firm merged with Merck and cut 16,000 workers.

According to Anderson, "they're prioritizing CEO pay at the welfare of their workers".

So how do they get away with it? Anderson said you have to look at the make-up of many companies' executive boards. She said they're often made up of CEOs and high level executives from other companies "who really don't want to question this ridiculous pay system we have in this country that continues to pay people these absurd amounts of money when they're really not performing well for their company or the overall economy."

Another disconcerting finding of the report: 72 percent of layoff-leading firms announced mass layoffs while delivering positive earnings reports. Anderson explained layoffs are really driven by efforts "to boost short-term profits even higher and also just to continue to have such high CEO pay levels." She said these mass cuts are often bad for business over the long-term because they impact worker morale, which can lead to lower productivity. She said they also result in additional costs related to hiring and training new workers down the road.

According to the report, there are some positive signs. The report gives high marks to two new rules adopted through the financial and health care reform bills. One requires that all firms report CEO-worker pay ratios. Another caps the tax deductibility of executive pay at health insurance companies. But, "I think that our policy-makers have a long way to go toward really reigning in the problem" Anderson said. "The problems are very evident in the findings of our report".