May 10, 2011. Washington. Recently, Associated Press analyzed the pay rates of America’s largest corporations. What they found was shocking, as it is every year. The average pay package for the CEO of an S & P 500 corporation in 2010 was $9,000,000 per year, a 27 percent pay raise over the previous year according to USA Today. That’s quite a bit more than the 2 to 3 percent raise of the average worker at those very same companies.
The segments of CEO pay that increased the most were cash bonuses and the value of their stock packages. That was mainly due to the sharp increase in the value of the companies’ stock and the skyrocketing rate of corporate profits. Looking at the very same S & P Corporations in the AP study, profits in 2010 for those companies increased a staggering 41 percent from the previous year. In roughly the same time period, their stock prices have just about doubled.
On the surface, it would appear that the economy is turning around, business is better and CEO’s are being rewarded for capitalizing on it. However, a deeper look reveals that those profits were due mainly to drastic cost-cutting measures such as the cutting back or elimination of health care or other benefits from the average worker. Another popular money saving tactic CEO’s continue to use is the shuttering of US factories and service centers and relocating them on foreign shores.
Unfortunately, very often the cause of last year’s massive increase in corporate profits was due to the laying off of millions of American workers. For three decades now, the formula for a typical US CEO has been to lay-off workers, pile their job duties on the remaining employees, costs drop, profits rise and the CEO gets a big bonus. Fed-up with that trend however, Congress recently passed the Dodd Frank Wall Street Reform and Consumer Protection Act. The law forces US corporations to be more transparent with their executive pay. It also gives the shareholders a voice in executive pay issues.
The highest paid corporate CEO in America is Viacom’s Philippe Dauman. He presides over such entities as MTV, Nickelodeon and Paramount Pictures. His salary package was valued at $84.5 million per year. It’s staggering numbers like those that forced Congress and the American people to act. And while lawmakers face angry and unemployed constituents back home, the AFL-CIO and other unions and organized labor groups have begun to take a public stand on behalf of workers, union and non-union alike. The AFL-CIO even maintains a large website which tracks the pay rates for the nation’s largest corporations.
There, you can find numerous examples of the disparity of pay rates between those occupying the penthouse suites versus everyone else. One statistic they provide is, “Between 1993 and 2008, the top 1 percent of Americans captured 52 percent of all income growth in the United States”. That means that less than half of all income growth over the last decade and a half was split between 99 percent of the population. While more than half of the raises and bonuses were horded by the top 1 percent.
The AFL-CIO also points out that the combined salaries of 299 corporate executives, $3.4 billion, could support the full time employment of 102,325 workers. To make their point even more clearly, they point out that the cost of 1 CEO would pay for the hiring of any of the following:
8 Nobel Prize winners
25 University Presidents
28 US Presidents
213 Police Officers
753 Entry-level positions at minimum wage
They also point out that the average pay rate for a US CEO is $11.4 million per year, a bit higher than AP’s $9 million. Here’s how the AFL-CIO breaks-out those numbers.
Stock $3.83 million
Options $2.3 million
Non-equity compensation $2.4 million
Pension and deferred earnings $1.1 million
Other compensation $215,911
Total annual salary of typical CEO $11,358,445 per year
Speaking directly to the corporations’ stock holders and Boards of Directors, the AFL-CIO suggests that stock analysts are looking more and more at the numbers concerning the ever-increasing difference between CEO pay and average employee pay. They point out that there is a direct correlation between the amount of the gap and corporate performance, “because high CEO-to-worker pay disparities hurt employee morale and productivity”.