Low-Wage American Taxpayers Spent Billions Inflating CEO Pay Through Stock Buybacks
SARAH ANDERSON for Inequality.org
A
new Institute for Policy Studies report, Executive Excess
2022, reveals how low-wage corporations have continued to pump
up CEO pay during the pandemic while workers are struggling with
rising costs.
The
report zeroes in on compensation trends at the 300 publicly held U.S.
corporations that reported the lowest median worker wages in 2020. At over a
third of these firms—106 in all—median worker pay either fell or failed to rise
above the 4.7 percent average U.S. inflation rate in 2021.
By
contrast, CEO pay at these same 300 low-wage firms soared 31 percent to an
average of $10.6 million. This stunning increase drove the average gap between
CEO and median worker pay at these companies to 670-to-1, up from 604-to-1 in
2020. At 49 of the 300 firms, pay ratios topped 1,000-to-1.
Amazon's new CEO, Andy Jassy, raked in $212.7 million last year, making him the highest-paid CEO in our corporate low-wage sample. Jassy's pay amounts to 6,474 times the $32,855 take-home of Amazon's typical worker.
Of
the 106 companies in our sample where median worker pay did not keep
pace with inflation, 67 blew a combined total of $43.7 billion on stock
buybacks. This financial maneuver inflates executive stock-based pay and
drains capital from worker raises, R&D, and other productivity-boosting
investments.
Corporate
America's perverse pay practices become even more disturbing when we consider
another often overlooked reality: Ordinary Americans are supporting our
inequitable corporate economic order through the hundreds of billions of
dollars in taxpayer-funded contracts and subsidies that flow every year to
for-profit businesses.
Of
the 300 companies in our sample, 40 percent received federal contracts totaling
$37.2 billion over the past few years.
CEO
pay apologists regularly argue that corporate leaders deserve their massive
compensation packages because they bear enormous responsibilities and must take
extraordinary risks. This argument quickly falls apart when we compare CEOs at
major contractors with the government officials ultimately responsible for
their contracts.
The
U.S. secretary of defense, for instance, manages the country's largest
workforce—more than 2 million employees—and makes life-and-death
decisions on a daily basis. And yet the defense secretary and other Biden
cabinet members make just $221,400 per
year, less than three times as much as the $76,668 average
federal employee annual pay.
By
contrast, at the low-wage contractors we studied, CEO pay averaged $11.8
million and the average CEO-worker pay ratio sat at 571-to-1 in 2021.
Across
the political spectrum, Americans are fed up with executive excess. One
new poll shows
that 87 percent see the growing gap between CEO and worker pay as a problem for
the country.
President
Biden should not wait for Congress to tackle this problem. He already has the
power to steer Corporate America in a more equitable direction through new
standards for federal contractors, a set of companies that employ an
estimated 25 percent of
the U.S. private sector workforce.
Biden
took an important step when he set a $15 per hour minimum wage for contractors.
Now he should go further by making it hard for companies with huge
CEO-worker pay gaps to land a lucrative deal with Uncle Sam.
Encouraging
big companies to narrow their gaps is a matter of fairness—but not only a
matter of fairness. It would also help ensure that taxpayer-funded contractors
perform high-quality work, since study after
study has shown that extreme pay disparities tend to undermine
employee morale and boost turnover rates.
The
president could also require contractors to remain neutral in union organizing
campaigns, a move consistent with his recent show of support for workers
fighting CEOs' union-busting efforts at Amazon and Starbucks.
The
Congressional Progressive Caucus called on Biden to take such
actions in March.
The
president could also prohibit CEOs from personally benefiting from stock bumps
that occur when they make the decision to spend company resources on stock
buybacks. This would help get the ball rolling on his proposal for
legislation along these lines.
Executive
actions, of course, can be repealed by future presidents. That's one reason to
continue pushing legislative solutions, such as raising the
corporate tax rate on companies with large CEO-worker pay gaps.
Given
the current congressional gridlock, though, the president should not hang back.
The next White House occupant might want to undo these actions, but he or she
would have a hard case to make. How do you persuade taxpayers they should be
funding corporations that are fueling inequality?
Sarah Anderson directs
the Global Economy
Project of the Institute for Policy Studies, and is a co-editor of Inequality.org.