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CEO Compensation: A Year’s Pay for a Day’s Work |
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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 PayWatch 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
Click here to read or download the entire report.
4 Comments
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CEO Pay
Dave Hurlburt CWA local 9410 c2007
We want to have our say on CEO pay.
They make more than our President’s pay.
More in one day than we make all year,
How can we not have corruption here?
How come their pay is so very enormous?
It is not even based on long term performance.
Let us not even mentioning options on stock,
The corporate treasury has lost the lock.
Stock holders and employees need to have a say,
Dividends and stock prices fall but not CEO pay.
Defined Pension and health care plans go broke;
While we taxpayers pay the bills and that’s no joke.
Corporations use the bankruptcy laws to break their word,
Contracts, pensions are lost and not CEO pay it is absurd.
They stop payments to pension plans and hide the money,
Loosing our healthcare and our pension is not at all funny.
The PBGC is not to be used for corporate welfare.
Robbing employees and taxpayers is just not fair.
These wealthy CEOs should pay taxes at a fair share rate.
Pensions the same as their workers should be their fate.
This is happening all to often. The airlines asked the employees to take a cut in pay to prevent banlruptcy then raised the CEOs pay from the savings. It is all about slick back door dealing.
It really blows my mind when I think about the disproportion of poverty and wealth. As human beings we all deserve a certain amount of dignity, but the poor are not even afforded this right. Sub-standard wages, non-existent health care, sub-standard education, limited or lack of decent food, horrendous living conditions, etc., etc. seem to be the norm for our less fortunate citizens. Why is this? Does wealth make one immune to those less fortunate? Does wealth make one superior to others? Does wealth enable one to close their eyes to the suffering of others? When does this insanity stop? When one is “poor” there are no choices, so when one really thinks about this situation, are not the poor the next thing to ’slavery’? As horrendous as this sounds, could it possibly be true! Are we not back to child labor, unfair working environments, and unscrupulous business practices? And all this for THE ALMIGHTY DOLLAR to big business, lawyers, doctors, and even our government officials. It shames me to think this is where we are!!!!
One concern I have about the big paychecks executives get is that the money they are pocketing should be invested in the product development and new machinery. On a national level, the more they get paid the further the US falls behind. When you see pictures of what’s going on in China, where investment in captal goods is on a massive scale, you get an idea of what we’re missing out on. To make matters worse, worker productivity in the US can’t keep up with that in China if they’ve got more modern machinery. American employers will have to squeeze workers even harder then they already do now.