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Food Chain CEOs Want Subsidies for Their Salaries, But Are Against Raising Workers' Wages

There's injustice inside your Chipotle burrito bowl and your Starbucks latte.
 
 
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Photo Credit: TACVBO/Flickr

 
 
 
 

You might say the chieftains of America’s largest restaurant corporations want it every which way and then some.

Having read the polls supporting a minimum wage hike, they’re skittish about trashing the idea personally. So they pay their DC lobby machine to do their dirty work. And it’s not enough for them to shove the costs of their low-wage model onto Joe Schmo taxpayer. These CEOs are also making the rest of us pay for their own fat paychecks.

How’s that again? Yes, ordinary taxpayers are not only covering the cost of billions of dollars in public assistance for restaurant workers who earn poverty wages. We’re also subsidizing the pay of our nation’s notoriously overpaid CEOs.

Here’s how it works: Under the current tax code, corporations can deduct no more than $1 million for executive pay from their federal income taxes. But there’s a giant loophole that allows unlimited deductions for “performance pay.” So, no surprise, what the big corporations tend to do is put about $1 million of their executive pay packages toward salary and call the rest “performance pay.” That way the more they shovel into their CEO’s pockets, the less they pay Uncle Sam. And the rest of us foot the bill.

A new report I co-authored at the Institute for Policy Studies explains how the 20 largest corporate members of the National Restaurant Association have benefited from this loophole. These corporations aren’t necessarily bigger exploiters than those in other sectors. But they deserve extra scrutiny because of the high social costs of their low-wage model—and because they’re fighting so hard to preserve it.

Nearly all of the big restaurant corporations are members of the National Restaurant Association, which is leading the charge against minimum wage increases.

1. Starbucks

In 2012 and 2013, Starbucks CEO Howard Schultz took in $1.5 million per year in salary, which is subject to the $1 million deductibility cap. But that was just the foam on top of a triple venti.

Now we get to the serious money. Schultz cashed in stock options worth $230 million over this two-year period. For good measure, the board tossed him $2 million-plus incentive bonuses each year. Both of these types of compensation fall into the “performance pay” loophole.

So how much does Starbucks get to subtract from its tax bill for the cost of this one guy’s “performance pay”? $82 million.

That’s a lotta lattes.

Like several other big restaurant CEOs, Schultz has taken a soft line on the minimum wage. That is, when asked about it personally. Meanwhile, Starbucks remains a member in good standing of the National Restaurant Association, which is deploying dozens of lobbyists to block a wage increase. 

2. Yum! Brands

Next time you’re shelling out for a Gordita Supreme at Taco Bell, keep in mind that you’re also contributing to a grande-sized paycheck for the CEO of the chain’s parent company, Yum! Brands. 

Yum! CEO David Novak took $67 million in “performance pay” over the years 2012 and 2013, which lowered the firm’s federal tax bill by about $23 million.

Low-level workers at Taco Bell and Yum!’s other chains (Pizza Hut and KFC) earn less than $8 per hour on average. Since that’s not a living wage anywhere in the United States, it’s no surprise that many Yum! workers must rely on Medicaid or other taxpayer-funded anti-poverty programs to make ends meet. The National Employment Law Project estimates that Yum! employees receive nearly $650 million in public assistance annually.

In addition to the firm’s membership in the NRA, Yum! has also been active with the  American Legislative Exchange Council. In 2011, a Yum! official co-led an ALEC task force focused on blocking paid sick leave benefits. Rather than giving sick employees a break, it seems they’d rather have them sneezing on your Gordita.