Posted on 06/27/2018 2:25:33 PM PDT by rickmichaels
A Walmart employee earning the company’s median salary of US$19,177 would have to work for more than a thousand years to earn the US$22.2 million that Doug McMillon, the company’s chief executive, was awarded in 2017.
At Live Nation Entertainment, the concert and ticketing company, an employee earning the median pay of US$24,406 would need to work for 2,893 years to earn the US$70.6 million that its chief executive, Michael Rapino, made last year.
And at Time Warner, where the median compensation is a relatively handsome US$75,217, an employee earning that much would still need to work for 651 years to earn the US$49 million that Jeffrey Bewkes, the chief executive, earned in just 12 months.
These stark illustrations of income inequality are revealed in the Equilar 200 Highest-Paid CEO Rankings, which are conducted annually for The New York Times by Equilar, an executive compensation consulting firm. As economic uncertainty roils the U.S., the gap between top executives and everyday employees grows ever wider.
This year, publicly traded corporations in the United States had to begin revealing their pay ratios — comparisons between the pay of their chief executive and the median compensation of other employees at the company. The results were predictably striking.
“It’s grotesque how unequal this has become,” said Louis Hyman, a business historian at Cornell University. “For CEOs, it’s like they are winning the lottery year after year. For a lot of Americans, they don’t have any savings. When they lose their job, they lose everything.”
Live Nation and Time Warner did not reply to requests for comment. Walmart said it was increasing wages for low-paid workers.
The pay ratio rule, part of the 2010 Dodd-Frank banking regulation law, has been left untouched by the effort to roll back parts of Dodd-Frank now making its way through Congress.
As glaring as the ratios may seem, they tell an incomplete story. Some companies reported very low ratios and relatively high median incomes but rely on outsourced labour for important tasks. Other companies that reported very high ratios employ many workers overseas where pay is far lower than in the United States. And not all companies have reported their pay ratios.
“As much as these numbers reveal, they also hide,” said Hyman, who in August will publish Temp, a book about gig workers and the proliferation of part-time labor. “It all depends on who you consider to be an employee in this new economy.”
For example, Mattel, the toy company, owns its factories overseas and employs thousands of low-paid workers in Asia. As a result, Mattel reported the second-highest ratio on the Equilar list: The chief executive’s pay was 4,987 times that of the median employee.
Contrast that with Incyte, a drugmaker with the lowest ratio on the Equilar list. The chief executive of Incyte made just 64 times what the median employee earned. But unlike Mattel, Incyte outsources its factory work, allowing it to keep its workforce small and its median pay high.
At least some compensation experts harbour a hopeful view that over time, sustained scrutiny of the income gap might lead to a more equitable distribution of wealth.
“This could have beneficial results about how companies communicate with their employees,” said Jannice Koors, an executive compensation consultant at Pearl Meyer. “In a good year, if the CEO’s pay goes up, does the median employee’s pay go up, too? Does the company have profit-sharing that goes deep enough into the organization that the median employee is getting equity grants?”
That may be wishful thinking, and critics of rising income inequality are quick to point out that sustained low wages can lead to reduced economic growth and marginalize large swaths of the population. Disposable income is needed for a healthy economy, and people need the time and resources to take care of themselves and their families.
“Particularly in low-wage jobs, people are struggling to pay for housing, for health insurance, for child care,” said Jennifer Gordon, a law professor at Fordham University. “When people are working two and three jobs and are not able to put together a decent wage, then at a very basic level they don’t have time to be active in their children’s schools, they don’t have the ability to engage in their local politics.”
And still, executive pay, already excessive in the eyes of many critics, rises.
For the first time, two chief executives on the list were awarded more than US$100 million each. Hock Tan of Broadcom received UA$103.2 million, while Frank Bisignano of First Data earned UA$102.2 million.
In 2017, the median pay for the 200 highest-paid chief executives was US$17.5 million, and they received an average raise of 14 per cent, compared with 9 per cent in 2016 and 5 per cent the year before that.
Among the 160 companies of that group that revealed pay ratios, the median compensation for chief executives was also US$17.5 million. In contrast, workers earned US$75,217, a decent salary in a country with a shrinking middle class but one that further demonstrates the growing gap between the C-suite and the typical employee. Equilar calculated that the median pay ratio disclosed by these companies was 275-to-1.
In defending these lavish awards, companies are quick to point out that much of this compensation is in stock, that many of the biggest awards represent long-term incentive plans and that, in some cases, the stock vests only if the company’s share price hits certain targets. As a result, they argue that the value of annual compensation packages can turn out to be much lower than initially stated.
That logic cuts both ways. If the stock does well, the total value of these compensation plans can be even greater than the large sums first reported.
In theory, such plans encourage chief executives to focus on creating value for shareholders. And at times, that pay seems to mirror the fortunes of the company. At Morgan Stanley, for example, shares were up about 20 per cent last year, while James P. Gorman, the company’s chief executive, received a 16 per cent pay rise.
“The design of executive compensation continues to emphasize shareholder alignment,” said Brian Blackwood, an executive compensation consultant at Willis Towers Watson. “When shareholders prosper, executives will benefit, and vice versa.”
It doesn’t always work out that way. Shares of TripAdvisor fell by roughly a third last year. Nonetheless, the company’s chief executive, Stephen Kaufer, was awarded a long-term incentive package worth some US$43.2 million.
And while chief executives are among the highest-paid people in the country — the country’s 200 chief executives on the Equilar list, almost all of them white men, were awarded some US$4.4 billion last year — they are not alone in enjoying lavish pay. Others who don’t hold that exact title also did well in 2017.
David T. Hamamoto, a former CEO who until January was the executive vice chairman of Colony Northstar, a real estate company, was awarded US$53 million last year. Larry Ellison, the founder, chairman and chief technology officer of Oracle, was awarded US$41.3 million, adding to his net worth of some US$57 billion.
Financiers at hedge funds, which are generally private and not included in the Equilar study, can earn billions of dollars a year. Michael Platt, the founder of BlueCrest Capital Management, earned US$2 billion last year, according to Forbes. James Simons, a founder of Renaissance Technologies, earned US$1.8 billion.
And two technology entrepreneurs who last year took their companies public were awarded generous pay packages but were not included on the list because they did not file proxy statements.
Evan Spiegel, a co-founder and the chief executive of Snap, received a stock award worth US$636.6 million in connection with the company’s initial public offering. And Dropbox co-founder and chief executive Drew Houston was awarded a performance-based grant worth about US$110 million.
“The top layer of management live like kings and queens while the people at the bottom are scrabbling for a decent existence,” Gordon said. “We should not have that in a society where equality and fairness supposedly matter.”
A business only has to pay what workers are willing to work for -— and it is really no one else’s business what the numbers are. If a CEO that will make the company millions requires a high salary, then the company has to decide if that CEO is worth the money. There will always be great disparity between the minds that run the business and the minds that run the cash registers. The only ceiling on earning potential and advancement is the worker’s willingness and ability to learn, work hard, become more valuable to the company, and actively seek advancement.
At my last office job, the CEO got a $20 million bonus for the money he saved by firing half the company and outsourcing the jobs to India. What a hero. And they wonder why so many hate them.
If the average Walmart employee possessed the same knowledge/skill sets as company CEO Doug McMillon, they would be making a lot more money and, most likely, would not be working at Walmart.
As it is, my dog is smarter and more accommodating than most of the “workers” I encounter at Walmart—assuming I can find one.
It’s very simple, as I tell my students repeatedly: The more you have to offer, the more options you will have and the more you will earn.
And I bet you like to eat with your family instead of business partners, community leaders, and nonprofit people on the rubber chicken circuit.
I also prefer a job where I don’t travel. I get away with about 10 days over the course of a year. I work in a COO’s office. My yearly travel is about the COO’s average monthly travel.
It is not Wal-Mart’s fault that landlords in mainly Democratic areas are greedy.
Single employees often struggle to get by. That’s because housing is priced for two-income households.
Successful marriage is often a key to getting by comfortably.
And don’t forget, nothing was done to get rid of the PPACA 30-hour pay cap scam Obama used to pretend the US had a low unemployment rate.
“It’s grotesque how unequal this has become,” said Louis Hyman, a business historian at Cornell University. “For CEOs, it’s like they are winning the lottery year after year. For a lot of Americans, they don’t have any savings. When they lose their job, they lose everything.”
Soy boy Hyman, have you EVER worked in the private sector? I mean not in the mis-education industry.
The solution, boys and girls, isn’t to punish rich people. The solution is to foster an environment where competition rises all boats.
Not every CEO created anything
That may not be the government's business - but if the C-suite keeps acting that way, they may find themselves being fitted for rope neckties.
Global-corporate oligarchs make bank, what else is new?
The companies pay the mainly white CEOs the big bucks because they think it is worthwhile.
The ball clubs pay the mainly black ballplayers the big bucks because they think it is worthwhile.
It’s actually because the ballplayers got paid so much that the CEOs started to play the compensation game too.
And the ballplayers owe it all to Mark McCormick, the sports agent who fought for better pay for athletes based on the value they added to their employers’ bottom-lines.
>>A Walmart employee earning the company’s median salary of US$19,177 would have to work for more than a thousand years to earn the US$22.2 million that Doug McMillon<<
And at 10+ times that much it would take me 100 years to earn that salary. It has taken me 40 years to make 1/20th of that but the amount is more than sufficient to last me and my family the rest of my days.
I begrudge him not a penny of his salary.
I made choices that worked for me and my chosen profession. Those choices did not lead me to be CEO of the biggest retail company on the planet (in fact not to be CEO of any company except a small one I started).
It never occurred to me I should be upset about choices others made to get what they wanted. I am a pretty good actor but chose not to pursue that life. I should be angry Tom Cruise did?
The results from some googling shows Walmart employs 1.4 million in the US (2.1 million world wide). Assuming each employee works an average of 1000 hours per year (mostly to make the calculations easier), 1.4 billion hours are worked in the US per year. Dividing 1.4 billion hours into what the CEO makes each year, $22,000,000, the result is $0.015 cents per hour. Another way to do this is divide the CEO’s salary by 1.4 million employees, which yields $15.70 per employee. So, each employee is contributing about $15 per year to their CEO’s salary (awkward to look at it that way), or about $0.015 each hour they work. These are trivial amounts. Using the 2.1 million employees world wide, the contribution per employees is even less.
I agree the CEO makes too much money. If the left was really concerned about this, they would be initiating a discussion on the checks and balances that cause this type of thing to happen. That would mean improving the system, which is something they really don’t want to do. Besides, reducing the CEO’s salary would give them less to complain about.
If we are at full capacity on employment the CEOs will just go to more cheap Third World labor from India and China in the tech world and then get a bonus for saving money
The high CEO pay is an indication that American companies don’t have good management in depth.
I think consensus management based on the Japanese way needs to become the norm in the USA.
If you don’t like it, start your own company and pay “fairly”.
...”intentionally shifting that “median” downward (and no - the average Walmart Employee is not getting rich).”
Okay, so they have to work only 500 years versus the 1000 to earn what the ceo earns?
Hilarious not. How many ceo positions are there?
Not all of them but most of them are there for one reason or another, and for whatever reason those private companies have every right to pay or not pay whatever anyone (including the CEO) is willing to work for.
I personally like the idea of free enterprise without government deciding who gets paid what.
Some simply dumbass comments come from members of FR. The ceo magically made wal mart all that money huh? The wealth disparity problem is much more complicated then your ridiculous assertions imply.
How much would the stockholders of GE have paid for a CEO who knew what he was doing? It’s the difference between making and losing tens of billions.
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