Category Archives: CEO pay-ratio

The wage gap is still enormous

You’re probably wondering.  Wage gap?  Huh?

This isn’t a sexy topic, but it’s troubling, and it’s not the first time I’ve written about it.  There are certainly more compelling topics to discuss right now (e.g., gun safety, the persistence of Covid), but I want to focus on this today.

 Five years ago, in July 2017, I noted my concern with the CEO-worker wage gap [https://susanjustwrites.com/2017/07/31/random-thoughts-ii/].

What was bothering me?  The CEO “pay ratio” was standing at 271-to-1.

I was looking at the Economic Policy Institute’s annual report on executive compensation released on July 20, 2017.  According to that report, chief executives of America’s 350 largest companies made an average of $15.6 million in 2016, or 271 times more than what the typical worker made last year.

Yes, the number was slightly lower than it was in 2015, when the average pay was $16.3 million, and the ratio was 286-to-1.   And it was even lower than the highest ratio calculated, 376-to-1 in 2000.

But, as I pointed out, before we popped any champagne corks because of the slightly lower number, we had to remember that in 1989, after eight years of Ronald Reagan in the White House, the ratio was 59-to-1, and in 1965, in the midst of the Vietnam War and civil rights turmoil, it was 20-to-1.

In 2017, I wanted us to reflect on those numbers.  To think about how distorted these ratios were and what they said about our country.  I asked, “Did somebody say ‘income inequality’?”

Why am I writing about this issue again?  Because this week Andrew Ross Sorkin reported in The New York Times that the average pay gap between low-wage workers and the CEOs of their companies is still enormous.

Sorkin reported that, according to a brand-new study by the Institute for Policy Studies, the median pay for workers at companies that tend to pay low wages was, thanks to inflation,  up by 17 percent,.  But that raise was dwarfed by the rise in CEO pay, which rose by 30 percent at those same companies.  The lead author of the study “Executive Excess” noted, “this could have been a time when companies used rising profits to level the playing field.  Instead,” said Sarah Anderson, “we haven’t seen a very big shift in pay equity.”

Further, CEOs did even better at companies where salaries didn’t keep pace with inflation. The study looked at median workers’ wages at about a third of the firms in the study, firms whose wages did not keep pace with inflation.  The average CEO pay at those companies was up by 65 percent, or more than double the increase at all of the firms in the study.

One company in this group was Best Buy, where median pay fell two percent last year (to $29,999), while the CEO, Corie Barry, got a 30 percent pay increase to $15.6 million.  Barry may have done a bang-up job, but the huge difference in pay is pretty stark.

Hey, Best Buy, I just bought some stuff from you.  If I’d known that my purchases have led to this vast inequity in pay, I’d have thought twice about giving my business to you.  I don’t like to think that such a big chunk of your profits, including those derived from customers like me, went straight to your CEO instead of to your workers.

Is there any possibility for change?  There may be a glimmer of hope.  Sorkin’s report also noted that the SEC (Securities and Exchange Commission) could possibly move in that direction.  According to Sorkin, a group of former regulators (including two former SEC commissioners) have asked the SEC to issue new rules illuminating this disparity. 

The petition for this rule-change contends that “investors need more information about what companies pay workers,” and it urges the SEC to propose new rules requiring companies to disclose how much they’re investing in their workforces.

The two former SEC commissioners (Joseph Grundfest and Robert Jackson) have, in the past, often had opposing views.  They noted, “We differ in our views about the regulation of firms’ relationships with their employees generally.”  But, they added, “we all share the view that investors need additional information.”  The group stated that the current accounting and tax rules make “investing in machines more attractive than spending on humans.

Right now only about 15 percent of public companies disclose their labor costs. The proposed rules would require that companies disclose their labor costs (and no longer lump them in with other expenses).  They’d also require companies to provide detailed workforce compensation data, including information on the breakdown for contract, part-time, and full-time employees.

So we may be able to clearly see the current disparity in compensation.  If these new rules are endorsed by the SEC, we could see much more transparency in workers’ compensation because data revealing who earns how much would be revealed for everyone, including investors, to see.  

At least some investors could then make choices that would benefit workers’ compensation.

The goal is achieving greater equity.  I think that many if not most investors would welcome a move in that direction.  As Virginia’s Senator Mark Warner, who supports the petition, says, “No one can credibly argue that this type of disclosure wouldn’t be valuable or material to investors in a highly competitive, 21st-century, global economy.”

The Summer of Love and Other Random Thoughts

  1.  The CEO pay ratio is now 271-to-1.

 According to the Economic Policy Institute’s annual report on executive compensation, released on July 20, chief executives of America’s 350 largest companies made an average of $15.6 million in 2016, or 271 times more than what the typical worker made last year.

The number was slightly lower than it was in 2015, when the average pay was $16.3 million, and the ratio was 286-to-1.   And it was even lower than the highest ratio calculated, 376-to-1 in 2000.

But before we pop any champagne corks because of the slightly lower number, let’s recall that in 1989, after eight years of Ronald Reagan in the White House, the ratio was 59-to-1, and in 1965, in the midst of the Vietnam War and civil rights turmoil, it was 20-to-1.

Let’s reflect on those numbers for a moment.  Just think about how distorted these ratios are and what they say about our country.

Did somebody say “income inequality”?

[This report appeared in the San Francisco Chronicle on July 21, 2017.]

 

  1. Smiling

 I’ve written in this blog, at least once before, about the positive results of smiling.  [Please see “If You’re Getting Older, You May Be Getting Nicer,” published on May 30, 2014.]

But I can’t resist adding one more item about smiling.  In a story in The Wall Street Journal in June, a cardiologist named Dr. John Day wrote about a woman, aged 107, whom he met in the small city of Bapan, China.  Bapan is known as “Longevity Village” because so many of its people are centenarians (one for every 100 who live there; the average in the U.S. is one in 5,780).

Day asked the 107-year-old woman how she reached her advanced age.  Noting that she was always smiling, he asked if she smiled even through the hard times in her life.  She replied, “Those are the times in which smiling is most important, don’t you agree?”

Day added the results of a study published in Psychological Science in 2010.  It showed that baseball players who smiled in their playing-card photographs lived seven years longer, on average, than those who looked stern.

So, he wrote, “The next time you’re standing in front of a mirror, grin at yourself.  Then make that a habit.”

[Dr. Day’s article appeared in The Wall Street Journal on June 24-25, 2017.]

 

  1. The Summer of Love

This summer, San Francisco is awash in celebrations of the “Summer of Love,” the name attached to the city’s summer of 1967.   Fifty years later, the SF Symphony, the SF Jazz Center, a bunch of local theaters, even the Conservatory of Flowers in Golden Gate Park, have all presented their own take on it.

Most notably, “The Summer of Love Experience,” an exhibit at the de Young Museum in Golden Gate Park, is a vivid display of the music, artwork, and fashions that popped up in San Francisco that summer.

As a happy denizen of San Francisco for the past 12 years, I showed up at the de Young to see the exhibit for myself.

My favorite part of the exhibit was the sometimes outrageous fashions artfully displayed on an array of mannequins.  Not surprisingly, they included a healthy representation of denim.  Some items were even donated by the Levi’s archives in San Francisco.  [Please see the reference to Levi’s in my post, “They’re My Blue Jeans and I’ll Wear Them If I Want To,” published in May.]

Other fashions featured colorful beads, crochet, appliqué, and embroidery, often on silk, velvet, leather, and suede.  Maybe it was my favorite part of the exhibit because I’ve donated clothing from the same era to the Chicago History Museum, although my own clothing choices back then were considerably different.

Other highlights in the exhibit were perfectly preserved psychedelic posters featuring rock groups like The Grateful Dead, The Doors, and Moby Grape, along with record album covers and many photographs taken in San Francisco during the summer of 1967.  Joan Baez made an appearance as well, notably with her two sisters in a prominently displayed anti-Vietnam War poster.  Rock and roll music of the time is the constant background music for the entire exhibit.

In 1967, I may have been vaguely aware of San Francisco’s Summer of Love, but I was totally removed from it.  I’d just graduated from law school, and back in Chicago, I was immersed in studying for the Illinois bar exam.  I’d also begun to show up in the chambers of Judge Julius J. Hoffman, the federal district judge for whom I’d be a law clerk for the next two years.  [Judge Hoffman will be the subject of a future post or two.]

So although the whole country was hearing news stories about the antics of the thousands of hippies who flocked to Haight-Ashbury and Golden Gate Park in San Francisco, my focus was on my life in Chicago, with minimal interest in what was happening 2000 miles away.  For that reason, much of the exhibit at the de Young was brand-new to me.

The curators of the exhibit clearly chose to emphasize the creativity of the art, fashion, and music of the time.  At the same time, the exhibit largely ignores the downside of the Summer of Love—the widespread use of drugs, the unpleasant changes that took place in the quiet neighborhood around Haight-Ashbury, the problems created by the hordes of young people who filled Golden Gate Park.

But I was glad I saw it–twice.

You may decide to come to San Francisco to see this exhibit for yourself.

If you do, please don’t forget:  “If you’re going to San Francisco, be sure to wear some flowers in your hair.”