Top Corporate Execs Taking More Than Their Fair Share


Top corporate executives have always been very well paid. It’s no easy feat to run a huge company and the stresses that come with that definitely earn you the big bucks. It used to be that their pay reflected the company’s performance.

Dean Baker, Huffington Post says, “The fact that CEO pay often bears little resemblance to performance and that the upward explosion has not occurred to anywhere near the same extent in other countries, suggests that it is not driven by the natural workings of the market. The origins of the outrageous paychecks at the top can be more likely found in the failing of the corporate governance structure in the United States.

This matters not only because excessive CEO pay may come at the expense of shareholders or even the health of the company; the outlandish pay packages for top executives helps to set a pay structure in which those in high-level positions in all institutions receive paychecks that are grossly out of line with ordinary workers’ pay. Top executives in universities, hospitals, even private charities often draw salaries in the high hundreds of thousands or millions of dollars. This pay is justified by the fact that they could easily get more money running a business of comparable size.”

When you look at a company like Hostess, you can see the greed. Their CEO took the union’s pensions to pay the top executives, who clearly were not meeting their goals and mismanaging the company. In the end, the unions kept getting pay cuts until Hostess shut down. Then they lost their jobs. How did the CEOs do? At the end of it all they got $1.8 million in bonuses alone. That seems absurd to receive a bonus after you ran a company into the ground.

Another company to look at is Walmart. Walmart has the highest amount of workers that are on Medicaid or receiving some sort of welfare. Yet, the Walton family are one of the top richest families in the world. They’re profiting about $2 billion/year just in stocks alone, yet their workers struggle just to put food on their table.

It’s estimated that the average pay of a CEO is about 380 times the amount the average worker is making. In 1980, the average CEO was making about 42 times the amount that the average worker was making.

So what should we do about this? Is this just one of the things that makes America so great? You work your way up and get paid handsomely for it, or should we do something?

CREDO, a non-profit, started a petition to cap the amount CEOs can make. Their proposal was that the CEO should make only 50 times more than that of the average worker. The problem with this is, no congressman or congresswoman would vote this into legislation. It’s estimated 47% of politicians are millionaires themselves and anyone who did vote in favor of this can kiss that sweet lobbying money goodbye. Some people speculate that it would actually be worse for workers if this did happen. Faced with these measures, corporate boards would simply respond by outsourcing programs. They’d decide how much to pay the CEO and then they’d draw a red line just above the employees making 1/50th of his/her salary. They would hire a contract management firm and terminate all the employees below that line, who would then be hired by the contracting firm to keep doing the same jobs in the same ways they were before.

A better solution, could be Director Watch. The Center for Economic and Policy Research along with the Huffington Post have come up with a way to make sure that CEOs are being held accountable.

“Director Watch is designed to highlight the abuses of corporate directors like Erskine Bowles. Bowles has pocketed millions as a board member of companies like Morgan Stanley, that would have collapsed without a government bailout and General Motors, which did collapse. Bowles and his fellow board members feel that they can stuff their own pockets, while allowing top management to do the same, because no one is watching. While Director Watch will not directly prevent the sort of theft that characterizes the behavior at the top echelons of U.S. corporations, it will highlight the identity of the people responsible. The point of Director Watch is to let everyone know that the Erskine Bowles of the world are not decent honorable types who warrant public respect, but rather key accomplices in the corruption at the top of corporate America. With Director Watch, someone will be watching.” – Dean Baker, Huffington Post.

Either way, something needs to change.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s