‘A more perfect union’ needs pay balance for workers, CEOs

 

Bill Knight column for 7-1, 2 or 3, 2021

 This Independence Day, two new reports remind us how off-balance pay has become, and what must be done to ensure, as the Preamble to the U.S. Constitution says, “a more perfect Union [to] … promote the general Welfare and secure the Blessings of Liberty to ourselves and our posterity…”

The statistics are startling.

First, the Institute for Policy Studies (IPS) shows that 51 of the largest 100 low-wage employers together gave their CEOs raises averaging 29% last year – when their workers’ pay FELL an average of 2%. Their workers’ average pay was $28,187; those CEOs’ average compensation was $15.3 million (more than 542 times their workers).

“How did corporations justify such extreme disparity in a year of extraordinary hardship for workers?” asked IPS’ Sarah Anderson. “The most common defense was the ‘talent retention’ argument.

“This is the ‘Great Man Theory’: one heroic individual in the corner office almost single-handedly creates company value,” she added, “so pay him whatever it takes.”

(Break for reader laughter.)

Next, an Associated Press analysis of S&P 500 corporations’ bosses shows the median (midpoint) of their CEOs’ pay in 2020 was $12.7 million – up 5% from 2019. Wages of all U.S. workers increased 2.6%.

“This should have been a year for shared sacrifice,” Anderson said. “Instead, it became a year of shielding CEOs from risk while it was the frontline employees who paid the price.”

Meanwhile, here are some examples of 2020 compensation to CEOs at select, familiar companies:

* Advance Auto Parts CEO Tom Greco: $8.1 million.

* Amazon's highest-paid exec, Worldwide Consumer CEO David Clark: $46.3 million.

* Carnival CEO Arnold Donald: $13.3 million.

* Coca-Cola CEO James Quincey: $18 million.

* Hilton CEO Christopher Nassetta: $56 million.

* Home Depot CEO Craig Menear: $13.9 million.

* YUM Brands (owner of KFC, Pizza Hut and Taco Bell) CEO David Gibbs: $14.6 million.

 

“It's time for public policy to shift corporate America away from a business model that creates obscene wealth for a few at the top and economic insecurity for so many of the rest of us,” Anderson said.

It’s past time.

Eleven years ago, U.S. Rep. Barbara Lee (D-Calif.) introduced the Income Equity Act (H.R. 382), which would have denied tax deductions on any executive pay (including stock options) that runs to more than 25 times the pay of a firm’s lowest-paid worker or $500,000, whichever is higher. It was referred to the House Committee on Ways and Means, where it died.

Lee’s 2015 attempt (H.R. 1305) also was killed in committee.

Between those efforts, U.S. Rep. Jan Schakowsky (D-Ill.) introduced the Patriot Corporations of America Act (H.B. 929), a measure designed to give companies that pay their top execs relatively modestly more than their workers a better chance at winning government contracts by extending tax breaks and federal contracting preferences to companies that show such reasonably good corporate behavior.

Details of Schakowsky’s measure included defining “patriot corporation” as one that produces at least 90% of its goods and services in the United States; doesn’t pay management-level employees at a rate more than 100 times the income of its lowest-paid employee; conducts at least 50% of its research and development in the United States; contributes at least 5% of its payroll to a portable pension fund; pays at least 70% of its employees' health insurance costs; maintains a policy of neutrality in union organizing drives; provides full differential salary and insurance benefits for all National Guard and Reserve employees called to active duty; and hasn’t violated federal regulations, including regulations relating to labor relations.

It, too, died in Ways and Means.

This year, U.S. Sen. Bernie Sanders (I-Vt.) in March introduced the Tax Excessive CEO Pay Act (S. 794), which would provide incentives for corporations to increase rank-and-file pay and scale back executive compensation. It was referred to the Senate Committee on Finance.

Elsewhere, Economic Policy Institute president Thea Lee said another promising suggestion is to connect income tax rates for America’s richest to the minimum wage for America’s poorest. That would have a powerful “incentive to raise their worker pay” and help reduce our income gap before taxes, she says.

Apart from ideas, the need nags at the nation this 4th of July.

“To bring executive pay back down to mid-20th century levels, we need reforms that cut to the quick,” said IPS’ Anderson, “which recognize the dangers banks and major corporations create when they dangle oversized rewards for executive ‘performance’.”