At a time of sharp political division, Americans across the political spectrum share enormous common ground on at least one issue—the extreme divide between CEO and worker pay.
recent Bentley University-Gallup Survey A turnout of 96 percent is found among potential voters Democrats83 percent independents and 67 percent Republicans Agreed that businesses should reduce their CEO-worker pay gap.
It tracks with what I’m listening to. Over the past two years, I’ve traveled to small towns in three swing states for a series of nonpartisan conversations about the economy. My role was to lead discussions with residents on CEO pay, an issue I have been analyzing for 30 years.
On my first trip to Whiteville, NC, County where Donald Trump won 64 percent of the vote in 2020I am ready to refute the most common arguments in defense of higher CEO pay. Over the years, I’ve heard them all.
“If these companies don’t make 10-figure paychecks, they won’t be able to retain top talent.”
“As long as the shareholders are happy, the CEO is worth every penny.”
“Most CEOs’ pay is tied to performance metrics, so they only get huge paychecks if they do well.”
In Whiteville — and in subsequent conversations in other mostly red small towns in North Carolina, Wisconsin, and Pennsylvania — I heard none of it.
“What do you think would be the ideal difference between CEO and worker pay?” I asked about 50 people at a local seafood joint in Whiteville. “Five to one,” said one military veteran. As I mostly looked around Republicans The crowd, I saw almost every head nodding.
Last year’s average CEO-to-worker pay ratio among S&P 500 firms was 268 to 1.
In my conversations, I’ve noticed that people get angriest when CEOs pay huge salaries while their employees struggle to get by.
A A report I published recently The Institute for Policy Studies focused on the 100 S&P 500 corporations with the lowest average wages, a group we’ve dubbed the “Low Wage 100.” Last year these companies paid their CEOs an average of 538 times what they paid their most common workers.
Ross stores had both the lowest average worker wages and gross wages in the group. In 2023, Ross CEO Barbara Rentler took home $18.1 million—more than 2,100 times the $8,618 her firm’s median employee, a part-time store associate, had.
Not that the discount retailer is scrambling to stay afloat. Over the past five years, Ross has blown $4.2 billion on stock buybacks, a financial maneuver that artificially boosts the company’s stock price, and in turn, the value of CEO stock-based pay.
In a discussion I led in Richland Center, Wis., an employee who worked for a big-box home improvement chain shared his frustrations with understaffing and low pay.
Both Lowe’s and Home Depot are extreme examples of companies that enrich CEOs and shareholders while shorting workers. With the $42.6 billion Lowe’s spent on buybacks between 2019 and 2023, the company could have instead given all its employees a $30,000 annual bonus for five years.
Overall, the low-wage 100 spent $522 billion on stock buybacks between 2019 and 2023. That’s over half a trillion dollars while many of their workers are struggling to put food on the table.
Buybacks not only draw resources from workers’ wages. They also reduce long-term productive investments, such as upgrading technology, equipment and properties—capital expenditures widely known as CapEx.
Among 47 Low-Wage 100 companies, spending on stock buybacks has actually exceeded total capital spending over the past five years. I was surprised to see so many tech companies near the top of this list.
Johnson Controls, a major federal contractor and maker of “smart building” technology, has spent $8.8 billion more on stock buybacks than on CapEx over the past five years. Share repurchases at semiconductor maker Analog Devices exceeded CapEx by $6.2 billion. Half of the employees at both companies earn less than $50,000.
Can Americans move past our differences and come together to tackle this obscene pay divide? In normal people, there is no problem.
A May 2024 Survey There was broad support for a tax increase on corporations with a CEO-employee pay gap of more than 50 to 1. About 89 percent are Democrats, 77 percent are independents, and 71 percent are Republicans Thumbs up to the proposal. San Francisco and Portland have already passed a similar tax at the local level.
In Washington, it’s another story. Hyper-partisanship and CEO political power have blocked it Numerous bills Using tax policy, federal contracting dollars and other tools to rein in excessive executive pay.
Perhaps this will change as political candidates spend more time campaigning. Between the state fair corn dogs and the kissing baby, I’m guessing they’ll hear more than a few choice words about the overpaid CEO.
Sarah Anderson directs the Global Economy Project and co-edits inequality.org at the Institute for Policy Studies. He is the author of the IPS Executive Access Report series, which studies CEO pay, and has testified before the Senate Budget Committee on the issue.
The views expressed in this article are the author’s own.
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