[More than half of the country’s 100 largest low-wage employers
rigged pay rules in 2020 to give CEOs 29 percent average raises while
their frontline employees made 2 percent.] [[link removed]]

HOW CORPORATIONS PUMPED UP CEO PAY WHILE THEIR LOW-WAGE WORKERS
SUFFERED IN THE PANDEMIC  
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Sarah Anderson
May 11, 2021
Inequality
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_ More than half of the country’s 100 largest low-wage employers
rigged pay rules in 2020 to give CEOs 29 percent average raises while
their frontline employees made 2 percent. _

A man bangs a spatula against a pot to show gratitude to medical
workers from Lenox Hill Hospital as part of the nightly
#ClapBecauseWeCare during the coronavirus pandemic on May 07, 2020 in
New York City., Cindy Ord | Getty Images

 

During the pandemic, low-wage workers have lost income, jobs, and
lives. And yet many of the nation's top-tier corporations have been
fixated on protecting their wealthy CEOs, even bending their own rules
to pump up executive paychecks.

A new Institute for Policy Studies report
[[link removed]] finds that 51 of the
country's 100 largest low-wage employers moved bonus goalposts or made
other rule changes in 2020 to give their CEOs 29 percent average
raises while their frontline employees made 2 percent less.

Among these 51 rule-rigging companies, average CEO compensation was
$15.3 million in 2020, while median worker pay was $28,187 on average.
The average CEO- worker pay ratio: 830 to 1.

How exactly did these companies rig their CEO pay rules? Let's look at
a few examples.

Hilton CEO Christopher Nassetta had the largest paycheck among the
rule-rigging companies. After he failed to meet the goals associated
with his multi-year stock awards, the board "modified" the awards by
disregarding poor 2020 financial results and changing the performance
metrics. Those maneuvers inflated his total compensation to $56
million—1,953 times as much as the company's median worker pay of
$28,608 in 2020.

At YUM Brands, the owner of KFC, Pizza Hut, and Taco Bell, CEO David
Gibbs garnered positive media coverage by donating $900,000 of his
salary to pay for $1,000 bonuses for restaurant general managers. But
the board changed its bonus metrics
[[link removed]]
to give Gibbs a special cash bonus and stock grant worth more than 2.5
times his voluntary salary cut. This largesse boosted Gibbs's total
compensation to $14.6 million — 1,286 times as much as median worker
pay of $11,377. The fast food giant did not offer hazard pay to these
frontline employees, whose average wages are just $9.75 per hour,
according to Payscale
[[link removed](KFC)_Corporation/Hourly_Rate].

At Coca-Cola, none of the top executives met their bonus targets last
year either, but the company board used "discretion" to give them all
bonuses anyway. For CEO James Quincey, that $960,000 bonus, combined
with new stock-based awards, drove his total compensation package
above $18 million, over 1,600 times as much as the company's typical
worker pay. In December 2020, Coca-Cola announced plans to cut about
2,200 jobs
[[link removed]],
or 17 percent of its workforce. About 1,200 of the layoffs will hit
U.S. workers.

How did corporations justify such extreme disparity in a year of
extraordinary hardship for workers?

The most common defense was the "talent retention" argument. In a
report filed with the SEC, for example, Hilton explained that the
"projected zero payouts" on the CEO's performance stock awards
would've "impaired the awards' ability to retain key talent."

This is the Great Man Theory: one heroic individual in the corner
office almost single-handedly creates company value, so pay him
whatever it takes to prevent him from abandoning ship.

So what can we do about it?

One bill pending in Congress, the Tax Excessive CEO Pay Act, would use
tax policy to incentivize corporations to narrow their pay divides by
reining in executive compensation and lifting up worker wages.

Under this proposal, companies with pay gaps between their
highest-paid executive and median worker of less than 50 to 1 would
not owe an extra dime. Corporations that refuse to narrow their gaps
below this threshold would face graduated rate increases starting at
0.5 percentage points on ratios of more than 50 to 1 and topping out
at 5.0 percentage points for companies with gaps above 500 to 1.

The Tax Excessive CEO Pay Act would generate an estimated $150 billion
over 10 years that could be used to create good jobs and meet human
needs. If the bill had been in place in 2020, Walmart, with a pay gap
of 1,078 to 1, would have owed an extra $1 billion in federal
taxes—enough to fund 13,502 clean energy jobs for a year.

Amazon, with a 1,596-to-1 pay ratio, also would have owed an extra $1
billion, enough to underwrite 115,089 public housing units for a year.
(Amazon's highest-paid exec last year was Worldwide Consumer CEO David
Clark, with $46.3 million.)

Home Depot, with a 511-to-1 gap, would have owed an extra $800
million, enough to create 18,329 jobs that pay $15 per hour with
benefits for a year.

It's time for public policy to shift corporate America away from a
business model that creates obscene wealth for a few at the top and
economic insecurity for so many of the rest of us. By inflating
executive compensation while their workers struggled during a
pandemic, corporate boards have just strengthened the case for tax
penalties on huge CEO-worker pay gaps.

SARAH ANDERSON [[link removed]]
directs the Global Economy Project
[[link removed]] of the Institute for Policy
Studies [[link removed]], and is a co-editor of Inequality.org
[[link removed]]. 

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