growing disparirty in wages - (6/22/2008)
growing disparirty in wages
Although Labor Day celebrates America’s workers, it seems that CEOs are getting all the gifts. CEOs of large U.S. companies last year made as much money in one day on the job as average workers made over the entire year, according to a new report. These top executives averaged $10.8 million in total compensation, over 364 times the pay of the average American worker.
The report, Executive Excess 2007 by the Institute for Policy Studies and United for a Fair Economy, was released today and shows that while CEOs are taking home obscene pay checks, the average worker is struggling to make ends meet.
Workers at the bottom rung of the U.S. economy have just received the first federal minimum wage increase in a decade. But the new minimum wage of $5.85 an hour is still 7 percent below where the minimum wage stood a decade ago in real dollars. CEO pay, over that same decade, has increased by about 45 percent.
The 20 highest-paid CEOs of U.S. public companies were paid an average of $36.4 million last year, three times more than the 20 highest-paid European CEOs, 38 times more than the 20 highest-paid leaders at U.S. nonprofit organizations and 204 times more than the 20 highest-paid generals in the U.S. military.
(To learn more about CEO pay, visit the AFL-CIO Executive Pay Watch site.)
Sam Pizzigati, an Institute for Policy Studies associate fellow, says the gap between corporate and elected leaders’ pay is dangerous for the country.
Today’s soaring pay gap between business executives and elected leaders in government essentially makes corruption inevitable. With such huge windfalls at stake, business leaders have a powerful incentive to manipulate the political decisions that affect corporate earnings.
The AFL-CIO and a broad coalition of institutional investors, large corporations and prominent academics agreed to a core set of principles aimed at shifting the focus of management to long-term goals for performance and executive compensation instead of being rewarded on the basis of meeting quarterly earnings targets.
The guidelines call for companies to stop providing quarterly earnings guidance to securities analysts, compensation committees to be comprised solely of independent directors with relevant expertise and require companies to disclose their succession planning process to investors. The principles also recommend that companies award stock options and other equity compensation at fixed times each year to prevent the manipulation of grants, and advocate that corporate directors communicate with long-term investors on executive pay.
Recent polls show Americans take the pay gap seriously and want reform. A Financial Times/Harris poll in July found that 77 percent of Americans feel that corporate executives “earn too much.” Only 11 percent admire “those who run” America’s “largest companies” either “a great deal” or “quite a bit.” On top of that, the public—by an overwhelming margin—want to see the nation’s top income earners pay more in taxes. Just 12 percent say the country “correctly taxes those who earn the highest incomes.” Five times that number, 61 percent, say wealthy Americans “should be taxed more.”
It’s time for Congress to catch up with the American people on this issue, says Sarah Anderson of the Institute for Policy Studies and a co-author of the study:
The CEO-worker pay gap is finally getting some high-profile attention from presidential candidates. But lawmakers still aren’t doing nearly enough to tackle the gap.
The study suggests several policy changes to bring CEO pay under control:
Changing the tax code to require higher tax rates on private equity and hedge funds
Capping deferred compensation contribution limits
Denying federal contracts to companies with excessive pay disparities
Increasing the tax rates paid by America’s richest taxpayers
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