Pay gap widens between CEOs and workers as companies still stress profits
Recent modest wage gains in some sectors haven't been a match for inflationary trends. Credit: ISTOCK
This is a tough time for the average American worker.
Employees have long been aware that their earning power is limited and that, too often, their pay raises don't match inflation. But as the cost of so many critical items, from gas to food, is rising exponentially, the lack of corresponding movement in employees' paychecks stands out even more. Even recent modest wage gains in some sectors haven't been a match for inflationary trends.
Perhaps that's why this year's CEO pay studies, produced by The Associated Press and Equilar, a data and information services firm focused on compensation, struck such a chord. Workers trying to stretch their pay to fill their gas tanks might want to sit down before reading on.
Annual median pay for CEOs among companies in the S & P 500 reached $14.5 million in 2021, a 17.1% increase from 2020. That includes salary, bonuses, stock options and more.
By contrast, median employee pay in those same companies stood at $76,142 in 2021, up 4.8% from 2020. Needless to say, most of them aren't getting stock options and bonuses.
In recent years, publicly-traded companies have been required to report what's known as the CEO Pay Ratio. It seemed some lawmakers thought that perhaps publicizing that statistic would shame companies into closing the gap.
No such luck. Instead, the Equilar study found that the median CEO Pay Ratio rose from 166:1 in 2020 to 186:1 in 2021.
That gap worsens beyond the S & P 500. A study from the left-leaning Institute for Policy Studies found that among 300 corporations paying some of the lowest salaries in the country, including companies like Amazon and Starbucks, the CEO Pay Ratio gap widened to 670:1 in 2021, from 606:1 in 2020.
Shocking? Not really.
This isn't a new phenomenon. A recently released biography of former General Electric chief executive Jack Welch by David Gelles illustrated how much of it began when Welch made it his mission to increase shareholder value and make profit king, no matter the cost to the rank-and-file. "The Man Who Broke Capitalism" told well-known stories of how Welch, who died in 2020, would slash jobs every year and, rather than sinking corporate profits back into growing the company or even paying them out to workers, used them for stock buybacks and dividends to the joy of investors.
Other CEOs have copied and perfected that strategy over the decades, to the point of excess. As a reward, CEOs have seen their pay rocket; some at the top of those pay lists earn upward of $200 million a year. And so far, nothing — not the 2008 financial crisis, not attempts to change the law or reporting requirements, not the immediate pandemic impact, and certainly not any efforts to shame — has stopped the trend.
Gelles nevertheless sounds an optimistic note, saying "transformation is possible." He talks of celebrating long-term growth rather than short-term gains, raising worker pay and improving benefits.
That all sounds great. But it's unclear what, if anything, would jump-start such a shift. The pandemic has rightly forced a rethinking of how we live and work. Could it also be the shock to the corporate system necessary to change how companies view their workers' financial worth? Or could the current labor shortage give workers the upper hand, allowing them to demand a rebalancing of the salary scales?
Unfortunately for all of those workers on the wrong side of the pay ratio, not yet.
Columnist Randi F. Marshall's opinions are her own.
Randi Marshall is a member of the Newsday editorial board.
