My Workers Are Better Than Your Workers
The U.S. Chamber of Commerce threw a little hissy fit last week, stomping its Gucci-shod feet over a new rule requiring corporations to report the difference in pay between their median workers and their CEOs.
As usual, the navel-gazing Chamber got it all wrong. The big business lobby whined and wailed that the regulation likely to take effect later this year was mean-spirited, that its goal was to shame overpaid CEOs.
Those poor, picked-on CEOs! Well, maybe not poor since the average Fortune 500 CEO pocketed a record $10.5 million last year.
The reporting requirement isn’t about CEOs at all. Their morbidly obese pay packages already are disclosed. Instead, the rule is about workers. And investors. Congress figured that investors have the right to know when CEOs are shoving such big hunks of the corporate profit pie into their maws that workers are starved and investors cheated. The point of the law is to change the way that pie is sliced so that workers and investors get their just desserts.
Last year, the average Fortune 500 CEO got an 8.8 percent pay bump. The average worker, not so much: 1.3 percent. This follows a 30-year trend. During that time, corporations were very, very good to CEOs. The Economic Policy Institute, a nonpartisan think tank, has calculated that from 1978 to 2011 CEO pay rose 725 percent.
During those same years, worker pay increased only 5.7 percent. As corporate profits rose since 1970, the share of those earnings that workers received in wages fell. The money was there. Corporations showered CEOs with it but denied it to the workers whose labor produced it.
The New York Post noted this in a story about Domino’s Pizza shareholders protesting the corporation’s executive pay packages. The corporate board delivered $43 million to CEO J. Patrick Doyle over the past three years. That prompted the Post to lead its story with this: “ Hey, J. Patrick Doyle, save some dough for the pizzas.”
Domino’s workers don’t get the same treatment as Doyle. Twenty-three Domino’s outlets in New York admitted to wage theft – cheating their already low-paid workers out of earnings. Hey, J. Patrick Doyle, save some dough for the workers!
One reason this occurs is the my-dog’s-bigger-than-your-dog pathology of corporate boards. They want to brag that they’ve got the best CEO, and their measure of the man is the size of his pay package.
It’s certainly not based on performance since boards continue paying CEOs big bucks, even granting them bonuses, when stock prices fall. For example, the board of Alpha Natural Resources, one of the nation’s largest coal companies, gave its CEO a $2 million bonus after stock prices slumped and the government fined the company $27.5 million for polluting.
The my-dog’s-bigger pay program works like this: Corporate boards look at rival executive compensation, then pay their own CEO more to prove he’s the best. This, according to University of Delaware researchers Charles Elson and Craig Ferrere, spirals CEO pay continuously upward.
Unfortunately for workers, corporate boards don’t give them the same consideration. Governing boards don’t measure their corporations against competitors by saying, “My workforce is better than yours because it’s better paid.”
The requirement that corporations determine the pay ratio between CEOs and median workers could change that because a wide ratio could prove costly. In the 1950s through 1970s, the ratio was about 20-to-1. For every dollar the average worker made, the CEO got $20. Now, the AFL-CIO says that figure has skyrocketed to 331-to-1.