Typical CEO gets 264 times median worker pay

 Bill Knight column for 8-13, 14 or 15, 2020

 It’s not surprising, but it’s still shocking that CEOs of S&P 500 companies last year received, on average, 264 times the median (or midpoint) pay their workers received, according to the new “Executive Paywatch” report from the AFL-CIO.

The CEOs got an average of $14.8 million in total compensation, an increase of about $300,000 from 2018.

Although the disparity isn’t unfamiliar, it signals that income inequality will dramatically worsen this year because of the pandemic, which led to about 30 million workers losing jobs this year so far.

AFL-CIO researchers used data from public companies’ corporate proxy statements from 498 of the benchmark S&P 500 index. The employee pay is the median, or mid-point, of labor forces’ earnings.

The ratio is wildly different than decades ago, such as the post-World War II 1950s, when 34.8% of workers were in labor unions. Then, “the salaries of CEOs were, on average, just 20 times that of their mid-management employees,” says author Wade Davis from the University of British Columbia.

Writing in Rolling Stone’s story “The Unraveling of America,” Davis continues, “The elite 1% of Americans control $30 trillion of assets, while the bottom half have more debt than assets. The vast majority of Americans – white, black, and brown – are two paychecks removed from bankruptcy.

“Though living in a nation that celebrates itself as the wealthiest in history,” he adds, “most Americans live on a high wire, with no safety net.”

Indeed, too many working Americans struggle to afford the basics, much less save for college or retirement.

The labor federation says, “The ratio of CEO-to-worker pay is important. A higher pay ratio could be a sign that companies suffer from a winner-take-all philosophy where executives reap the lion’s share of compensation. A lower pay ratio could indicate the companies that are dedicated to creating high-wage jobs and investing in their employees for the company’s long-term health.”

In Illinois, dozens of companies headquartered here show the chasm between the executive suites and rank and file employees. Ten recognizable corporations and their ratios are: Caterpillar (530:1); Abbott Laboratories (329:1); Baxter Int’l (323:1); Allstate Corp. (317:1); Conagra Brands (316:1); Archer-Daniels-Midland (285:1); Deere & Co. (270:1); Navistar Int’l (265:1); Motorola Solutions (252:1); and United Airlines (169:1).

During this pandemic year, a particularly greedy trend was when 20 CEOs furloughed most of their workforces due to COVID-19 while having made more than 1,000 times their median employee compensation in 2019. Many of these “1,000-to-1 Club” CEOs head retail companies where worker wages are low and part-time jobs are common. The top 5 “offenders” in this group, the AFL-CIO reports (along with their CEO compensation and their pay ratios) are: Burlington Stores ($35,094,754; 3,030:1), TJX Companies ($19,083,676; 1,590:1); Guess Inc. ($17,383,574; 1,586:1); G-III Apparel Group ($16,597,492; 1,532:1); and Norwegian Cruise ($17,808,364; 1,052:1).

Some CEOs publicly took voluntary salary cuts when furloughing workers due to the virus. For example, when Abercrombie & Fitch on April 6 announced workforce reductions related to the pandemic, it said it cut senior executives’ salaries between 10% and 33%. However, salaries made up less than 8% of the average S&P 500 company CEO’s total compensation last year. Many also received additional compensation from stock options and other sources. Two weeks before the announcing the furloughs and executive salary cuts, Abercrombie & Fitch’s CEO received 240,701 shares of restricted stock – almost three times the amount granted the year before. (Also, these equity awards were granted early this year, when stock prices were low, creating windfalls as the stock market improved.)

The total compensation breakdown is – salary: 7.89%, bonus: 1.70%, stock awards: 53.75%, option awards: 11.19%, non-equity incentive plans:16.58%, pension and deferred compensation: 6.19% all other: 2.70%.

“The disparity is horrific, and it represents a fundamental imbalance in our economy,” AFL-CIO Secretary-Treasurer Liz Shuler said. "It exposes massive inequality.

“We saw these exact same CEO pay shenanigans after the 2008 Wall Street financial crisis,” she continued. “This is very familiar territory.”

The new Executive Paywatch can be downloaded at https://aflcio.org/paywatch