Where is the money going? Corporate profits are up. Productivity keeps going higher and higher. Despite this “good news,” most Americans feel insecure in their jobs and income. So, where is the money?
Laura Clawson of Daily Kos shows one area where the money has gone: CEO pay. While I recommend that your read Clawson’s article, the whole story is told in a graph that accompanies the article. Before the mid-1990s, CEOs’ average pay was less than 100:1 the pay of average workers. By the end of the 1990s, the ratio had moved to 300:1. Since that time, the average has gone up and down. Still, it has ranged between 200:1 to 400:1.
This trend is only part of the story. If CEOs pay has moved this way, it’s logical to assume that other senior leaders have received healthy raises. I’m not arguing that these salary increases can’t be justified – because anything can be justified. The reality is that if pay disparity rewards the top of the pyramid, those at the bottom and middle will lose. The fight over the minimum wage is a good thing, but we also need to thing about who is being reward for economic growth and enhanced productivity. Do we want a society where a few have security and most people are running scared?
In today’s Daily Kos, the great labor reporter Laura Clawson examines the wealth of an average worker compared to Sam Walton’s offspring. According to research by the AFL-CIO, the six Walton heirs total wealth is the same as that of 52.5 million American families (42.9%). The study points out that some families have negative wealth. Adjusted for that, the number of families needed to equal the Walton wealth drops to 1.7 million. However, that adjustment also indicates that many American families have issues with “negative wealth.” Clawson also notes that a Walmart worker being paid $9 per hour would have to work 1,036 hours to make what the company’s CEO Doug McMillon makes in one hour.
Do the Walton heirs deserve to be very rich? I believe they do. Their father created an innovative business model. The bigger question is how much wealth should anyone – rich heir or CEO -- have. What is the cost to society of an economy where a few are very rich and secure and many working class and middle class families are falling behind and less secure?
The winners in the salary game also have the most retirement security. Writing for Bloomberg, Carol Hymowitz and Margaret Collins compare the situation of Target’s retiring CEO, Gregg Steinhafel, who will receive $47 million in retirement benefits with the average target employee who has $45,000 in a 401 K plan. Workers who have such plans save about $100,000 over their careers, which means an annual return of $4,000 if the rate is as high as 4%. Hymowitz and Collins tell more stories of CEOs and their retirement security, which you may find amazing or disgusting.
What scares me most about this story is what it doesn’t say about young people in their twenties and thirties who either work low wage jobs or have to pay off education loans. How will they even be able to put $100,000 in a 401 ? Something needs to change soon, or many American workers will face a dark future. Retired CEOs, on the other hand, will be among the few who can live the American Dream.
Huffington Post offers an enlightening look at CEO-worker pay ratios at top companies. For example, CVS Caremark pays its CEO 422:1 to the median worker’s salary. While no one denies that leaders of large, successful corporations should be well paid, how can we justify such a difference in the U.S. when similar ratios are not as drastic in Europe and Japan? Take a minute to look at this chart and ask yourself if it’s fair for the top to make so much while those on the bottom struggle.
Buzzfeed reports that shareholders at Domino’s Pizza are questioning the pay of CEO Patrick Doyle, whose pay is $43 million over 3 years. The groups leading the protest are not simply do-gooders. They want the best results from their investments. One member of the group says that most of the money can be paid up front with no consideration of company performance or profit. These shareholders, whatever their motivation, are holding a CEO and his friends on the Board to the fire. It’s about time. For too long, only working people have been targets. It’s time to hold the highest of the high accountable for their performance.
Aljazeera America has a mind-blowing profile of one of America’s top paid CEOs, Charif Souki of Cheniere Energy. Souki “earned” $142 million in 2013. Not bad for the leader of a company that has never turned a profit. His company is building a natural gas processing facility in Louisiana that is projected to be a big money maker. Investors must agree because the company’s stock has doubled. Aljazeera America points out that the industry is very risky. That doesn’t seem to matter to the people paying Souki or those investing in his company. Profitable companies lay off workers to keep their share price up. Some people win, and some people lose. Charif Souki is a winner, and that says a lot about what’s wrong with the U.S. economy and its politics.
Normally on Sundays I write about issues outside of the world of careers and work. But today I read a letter in the Chicago Sun-Times that made my blood boil. John Babush of Big Rock, Illinois defended the disparity in pay between CEOs and front line workers, citing the example that McDonald’s CEO makes in an hour what it takes a minimum wage worker three and a half months to make.
Babush’s first point is stunning – stunningly absurd: “How many hours do you think he or she [a minimum wage worker] would last in that job [CEO]?” No one who supports a living wage suggests that front line workers should be paid what their mangers are making much less what a CEO of a Fortune 50 company should be compensated. The question is one of degree. In the 1970s, CEOs in the U.S. earned 30-50:1 to the average employee salary. Now that ratio is often 250-300:1. Mr. Babush says we are asking the wrong question. He needs to go back to school for a little training in logic.
Worse still, Babush writes: “Anybody working a minimum wage job, should they want more income, ought to do whatever necessary to increase their value to their employer. If that doesn’t work, do whatever is necessary to makes oneself a potentially valuable asset to another employer. Keep it up and one day that minimum-wage worker might end up a CEO.” Is it possible to follow this map to success? Sure – for the very lucky few. Most successful people in the U.S. today had parents who were also successful. Fewer and fewer children born into poverty have options to rise from the class into which they were born.
“Do whatever is necessary”? Nice advice. It fits well in the myth of American Exceptionalism which conservatives like to push as a rationalization for the wealth distribution they claim to hate. Since the 1980s, middle class and working class people have seen their earnings fall, especially for those without a college degree. In the same period, the most wealth Americans have seen their incomes go up and up. Babush’s model of working hard sounds great, but is it possible in an economy where most of the new jobs pay $15 or less? Is it possible in a culture where greed drives the richest Americans to find new ways to avoid paying taxes that fund what we share in common as a society? Is it possible in a country where politicians of both parties, following neoliberal economic policies, ignore the needs of the middle class, working class, and the poor.
John Babush’s ideas have the strength of simplicity: Work hard and you will succeed. Push that balloon just a little bit, and it bursts. At first, I didn’t know why the Sun-Times published this letters, but the more I think about it, I’m glad it did. This letter gives us a chance to think about so many hard working people – now two generations since Ronald Reagan was president – have worked so hard and “done whatever it takes” to go nowhere or just tread water. We need to take a hard look at the American Dream. Is there still “equal opportunity”?
The former Labor Secretary asks a good question: Can one worker or family have too much? This is a moral question, not a legal one. Of course, it is legal for a CEO to make a ratio of 150:1 to the average worker at her company. Is it right? At a time when most of the jobs being created are low wage, we need to think about wages and who benefits most. That is what Reich explores in his commentary.
To put the question another way, how can we justify a situation where six heirs of a man who was a business genius (Sam Walton) hold more wealth than the bottom 40% of all Americans? This is not just a question for the bottom 40% (more than 100 million Americans). Wage disparity makes us all poorer because we have become a society that lives by fear rather than hope. This gap between rich and poor cannot continue to grow as it has over the last 30 years. Sooner or later, the cradle will fall.
On Memorial Day, Americans remember and honor our war dead, those who gave their lives to persevere our country’s values. What has happened to those values? Think Progress reports that average CEO salaries in 2012 were $9.7 million, a new record. The people on top are getting these raises at a time when most working people face high unemployment, stagnant wages, and reduced benefits.
Some might argue that our soldiers and sailors died for “freedom,” and CEO salary increase are a sign of that freedom. I would disagree for these reasons:
- American freedom has always been a matter of opportunity and mobility. What we see along with wage inequality is growing social immobility.
- American freedom has always respected the value of labor. Contemporary business practices put profit above all else. They project an individual liberty (i.e., Libertarianism) that ignores a very simple fact: We have to live together as a society. Absolute individual freedom is a myth.
- American freedom has always looked to the future, to giving better lives to future generations. Our current short term thinking focuses on the fiscal year and quarter rather than looking out to future generations.
- American freedom has always been about shared sacrifice. It doesn't seem like those who have the most are doing too much sacrificing.
My father fought in WWII. Two brothers fought in Vietnam. I respect all the men and women who have served this country. When we remember them, we also need to think about their sacrifices and how we honor those sacrifices. The news about record CEO pay is one more sign that we have lost our way as a culture.
I saw some interesting news in Saturday’s Chicago Sun-Times. First the real winner: Boeing CEO James McNerney received a 20% pay increase, which cashes out to a sweet $27.5 million for 2012. Meanwhile, Ford’s CEO Alan Mulally saw his pay cut by 29%. He will only earn $20.95 million. Before we feel too sorry for poor Mr. Mulally, we should note that he will still receive $680,809 in other compensation that includes a private plane, housing, and security. Most American wish they could get such a pay cut.
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