A recent New York Times report notes that Chief Executive Officer (CEO) pay remains stratospheric, even at companies battered by pandemic. For years now, I have been studying how CEO compensation has steadily been on a ridiculous climb whereby, according to the Economic Policy Institute, CEOs of big American companies now make on average 320 times as much as their typical worker. The report notes that in 1989, that ratio was 61-1. From 1978 to 2019, compensation grew 14% for typical workers. During the same period it rose 1,167% for CEOs. The same situation holds true in Canada where, for example, between 1995 and 2007 there was a 444% compensation increase for top Canadian CEOs.
Add it all up and it’s clear that executive pay is on the rise once again despite the millions of workers affected by layoffs due to the pandemic. Executive compensation is again rising at a much higher rate than employee pay, inflation or even corporate performance. The old justification that they deserve it based on performance doesn’t wash in many cases. The Times article noted the following companies’ CEO compensation for last year. Boeing’s CEO, David Calhoun, was rewarded with some $21.1 million in compensation despite Boeing having had a historically bad 2020. Norwegian Cruise Line barely survived the year, but the pay of Frank Del Rio, its CEO, was doubled to $36.4 million. Hilton’s CEO Chris Nassetta received compensation worth $55.9 million in 2020 despite nearly a quarter of the corporate staff members being laid off as hotels around the world sat empty and the company lost $720 million. General Electric’s CEO, Larry Culp, received $73.2 million last year and could collect well over $100 million more, thanks to a recently updated pay plan. GE is still reeling from years of mismanagement.
The above noted examples are just a few in a continuing saga of CEOs being outlandishly paid for simply being CEOs, despite companies having difficult times as a result of the pandemic. Firms will argue that much of this ridiculous situation is a result of how the market has evolved over the years regarding competition for so-called top managers. They pay lip service to the importance of supporting their workers, but still believe that their CEOs deserve more than 300 times the compensation of those very same workers. In Japan, and throughout much of Asia for that matter, there’s a much more balanced approach. In 2007, Japanese CEOs were making on average only 10 times to 15 times more than their base level employees. When their companies don’t do well, Japanese CEOs insist on taking a comparable pay cut unlike most American and Canadian CEOs.
A sad part about this pandemic on the economic front is that it continues to contribute to the growing societal inequalities that have needlessly evolved over the several decades. To deal with the economic impact of the pandemic and the deficits incurred by governments at all levels, there needs to be an increase in taxes on multi-millionaire CEOs and billionaires, most of whom have evidently benefited from soaring stock markets. Failure to deal with increasing inequities will result in more societal pain and poverty.
FROLITICKS 