Wins by unions are heartening, but lavish CEO pay is out of control
Astrong middle class has prospered as the backbone of the American economy, and it is imperative for the health of the economy and the polity that it be revived from what the Economic Policy Institute claims is its shrinking status in recent years. If you haven’t noticed, unions are at the helm of the fight to improve middle-class wages, and that’s a good thing. First, it’s good for the American family that deserves to be treated fairly by corporate America. When profits rise, so too should wages for those on the factory floor producing the goods.
Unions that pressure companies for their fair share of the profits also help address income and wealth inequality, which the Pew Research Center claims has been increasing since 1980. Pew’s research shows that upperincome household income has grown in recent decades, which exacerbates the shrinkage of the middle class.
When you drill down on worker anxiety about their jobs and their shrinking paychecks, it doesn’t take long to discover where they go for solutions. Too often, it’s charlatans like former President Donald Trump who prey on those polarized by an economy they think no longer works for them. President Joe Biden figured this out recently when he stood in the UAW picket line in support of its autoworkers.
It’s the strikes that seem to be making the difference. Strikes get the attention of the media, but the disparity between CEO salaries and average employee salaries gets less attention. Instead, the focus is always on the percentage increase the new contract gives to the workers, with little or no attention given to the CEO salary, which plays a role in the growing inequality in the American economy.
It’s called the Ceo-toworker ratio, and the national average of Ceo-to-employee ratio in 1989 was 44-1. In 1965, it was 15-1. With CEO pay out of control, in 2018, the Securities and Exchange Commission required publicly traded companies to disclose the pay ratio between their CEO officers and median employees. In 2022, the average S&P 500 company’s Ceo-to-worker pay ratio was 272-1. According to Executive Paywatch, which tracks the ratio for the AFL-CIO, it rose 1,460% since 1978.
The UAW strike that was recently settled raised assembly plant worker pay by more than 30% to around $42 an hour by the time new contracts end in April 2028. This latest strike ushered in a bolder and more strategic approach to dealing with Detroit automakers. After conceding to some significant concessions in 2008 when the automakers were on life support, this year witnessed the savviest union leadership taking on overpaid CEOS vulnerable to the charge that their excessive salaries contribute to the growing inequality in the American economy.
For example, UAW president Shawn Fain hammered away at executive pay, which rose by 40% over the past four years as the price of vehicles went up 30%. So, why, he argued, shouldn’t workers’ pay move in the same direction? Mary Barra, CEO of GM, counted over $28 million in 2022 as her compensation, which makes her salary 362 times that of a median GM employee. Ford’s CEO, James Farley, raked in just under $21 million last year, which makes his salary 281 times more than Ford’s average employee. His predecessor in 2019 made $17.4 million, which cements the argument that CEO pay just keeps on giving. CEO Carlos Tavaras of Stellantis, which is the name of the recently merged Fiat-chrysler Companies, wins the grand prize. His compensation of $24.8 million represented a Ceo-to-worker pay of 365-1.
Closer to home, as I mentioned in a previous column, CEO Vivek Sankaran at Albertson’s pulled down over $16 million in salaries and benefits. Salary.com computed his Ceo-to-worker ratio at 501-1, the grand marshal of overpaid CEOS when compared with his workers.
The most interesting aspect of galloping increases in CEO pay in the past few decades is how it may influence excessive pay throughout the corporate ranks. When the CEO returns from the board meeting that increased his or her salary by a significant percentage and considers how that sits with their executive team, why wouldn’t the normal reaction be to increase the salaries of those reporting to them? This “trickle-down” effect surely benefits others in the corporate suite but stops dead in its tracks at workers down the line.
How did all this happen? How did CEO pay go through the roof in recent decades? It would be interesting to be a fly on the wall at one of those corporate board meetings when CEO pay is on the agenda.
One thing is for sure: The board members who make the compensation decision for the CEO are fellow travelers of the CEO. I would be willing to bet the mortgage on the fact that, with rare exception — like finding a zebra without stripes — corporate board members are among the most financially secure folks on the planet. They knee-jerk to the recommendation of the committee tasked with considering the size of the CEO’S salary increase. Their own status in the upper reaches of the hierarchy of the well-to-do makes them oblivious to issues like recessions, Ceo-to-worker ratios or how a particular increase in CEO compensation might affect the morale and productivity of employees. And those board members get paid generously to sit there and jack up the salary of the CEO.
Let’s see those names and numbers in print.
It’s time for the media to expand its focus beyond the increases eventually given to workers. The salary packages of CEOS and executive officers of the firm should also be in the news that reports on efforts by workers to get their fair share. The board members who shell out these outrageous salaries to CEOS can also be held accountable in the media. They should be named in the media just as the CEOS are called out for their excessive compensation.
From time to time, we hear of board meetings where stockholders show up and disrupt proceedings to protest some aspect of company policy. We need more of that as well, but this time to object to excessive CEO compensation that is contributing to a society growing more unequal every day. There is simply no way to justify the outlandish increases in executive pay in recent decades, and adjusting executive pay to the realities of the American economy is an effective weapon in fighting inequality.
As we have seen in recent months, it is the strength of unions and their ability to strike and freeze the operations of companies that will prove successful in narrowing the wage and salary gap between the workers who produce and the executives at the top. Cheers to union workers fighting for their fair share of company profits in a corporate economy where executives are showered with excessive salaries and workers are forced to fight for every dime.