CEO Greed is Out of Control
by Holly Sklar
Z magazine, June 1998
When's the last time you had a 224 percent raise? Don't laugh.
That's what American Express CEO Henry Golub got last year. Average
CEO pay went up 35 percent in 1997 to $7.8 million, according
to Business Week's recent executive pay survey. Even without all
the extras like subsidized luxury housing, gourmet meals, country
clubs, top-notch health care, and investment advice, average CEO
pay comes to $150,000 a week.
Average worker pay went up 3 percent last year-all the way
to $424 a week. Workers still earn less in wages, adjusting for
inflation, than they did in the 1970s.
The average CEO made 326 times the pay of factory workers
last year-up from 209 times factory workers' pay in 1996. Back
in 1980, when many more workers were unionized, the CEO-worker
wage gap was much smaller: CEOs made 42 times as much as factory
To get a good picture of the growing CEO-worker wage gap,
imagine the Washington Monument. That's what the Boston-based
organization United for a Fair Economy (UFE) did. UFE found that
if the 555-foot Washington Monument reflects average 1997 CEO
pay, then a replica representing average worker pay would be just
21 inches tall. The Workers Monument shrunk almost a foot in a
year. In 1996, it was 32 inches. Back in 1970, the Workers Monument
was 13 feet, 6 inches tall-reflecting a CEO-worker wage gap of
41 to one.
UFE built the Workers Washington Monument and unveiled it
at a Capitol Hill press conference for the National Campaign to
Close the Wage Gap. UFE co-director Chuck Collins says, "In
1970, it would have required a pick-up truck to transport the
Workers Washington Monument. By 1996, you could carry on an airplane
and put it in the overhead luggage bin. The 1997 model fits easily
in the little space under the seat. If current trends continue,
the 1998 Workers Monument will fit in my pocket."
You can check out your favorite companies in Business Week
and at the AFL-CIO's web site on CEO pay-www.paywatch.org. The
AFL-CIO tells you how many workers or U.S. presidents it would
take to match the pay of particular CEOs and shows you how much
health insurance, day care, and other goods CEO salaries could
buy. You can also compare your own salary to that of CEOs.
Up, Up, and Away
The really big money is not in CEO salary and bonuses, but
in their stock options, long-term incentive plans, and other perks.
Top-earning CEO Sanford Weill of the Travelers Group made a hefty
$7.4 million in salary, but $223.3 million more in stock options
and other long-term compensation, for total 1997 pay of $230.7
million. That's over $4 million a week. In 1996, Weill made a
mere $94.2 million. The planned merger of Travelers and Citicorp
has already swelled Weill's fortune by boosting the stock prices
of both companies.
CEOs are benefiting greatly from the recent cut in the long-term
capital gains tax from 28 percent to 20 percent. For every $1
million in long-term capital gains on the sale of stock, they'll
pay $80,000 less in taxes.
The 1997 pay survey doesn't "even reflect the largest
single option sale ever," says Business Week. In December,
Disney CEO Michael Eisner exercised 7.3 million stock options
worth over $400 million. But, since the sale came after the close
of Disney's fiscal year, Eisner's windfall won't show up until
next year's pay survey. Eisner has more stock option fortunes
Corporations keep finding new ways to enrich their CEOs. A
growing number of companies are paying multi-million dollar "retention
bonuses" to CEOs who have no intention of leaving. "From
huge signing or retention bonuses to perks such as tax planning
and jet use in perpetuity, to exit packages that guarantee big
bucks even if an exec is chased out of office, financial risk
is virtually eliminated," says Business Week.
Take the former head of Apple Computer, Gilbert Amelio. As
the Wall Street Journal noted in its executive pay report, Apple
lost nearly $2 billion during Amelio's brief tenure of 17 months.
Some 3,600 employees lost their jobs. Amelio's golden parachute
included $6.7 million in severance pay plus other compensation.
Amelio said the Apple package "didn't protect my downside
as well as I had hoped it would. "
In their report, Executive Excess: CEOs Gain from Massive
Downsizing, United for a Fair Economy and
the Institute for Policy Studies feature a "Downsizer
Dozen" of "CEOs who rolled in the dough while dumping
thousands of workers."
The "Canned-Id Camera" award went to Eastman Kodak
who downsized 20,100 workers while putting CEO compensation through
the enlarger. CEO George Fisher's total 1997 compensation, including
stock options, was $17 million. Kodak has announced new layoffs
this year, estimating an additional 16,600 layoffs by 1999.
Whirlpool Corporation got the "Putting Workers Through
the Wringer Award." Whirlpool announced 4,700 layoffs in
1997 and gave CEO David Whitwam a 133 percent hike in total compensation.
In January, Whirlpool announced additional layoffs of 3,200 workers.
American Express got the "Don't Lose Your Job Without
It Award." The company announced layoffs of 3,300 workers
in 1997. CEO Harvey Golub reaped a 224 percent pay increase, bringing
his total compensation to $33.4 million.
The "Pink Slip Barbie" award went to Mattel. The
company announced over 3,174 job cuts in 1997 and gave CEO Jill
Barad $10.7 million.
Wall Street executive Julian Robertson says it well: "Everybody
here is overpaid, knows they are overpaid and is determined to
continue to be overpaid." Management guru Peter Drucker has
long been disgusted with the "unconscionable greed of CEOs."
In an interview with Wired magazine, he endorsed banker J.P. Morgan's
idea that the proper ratio "between the top people and the
rank and file should be twenty-fold, post-tax...Beyond that, you
create social tension."
Right now, taxpayers help pay for outrageous CEO salaries
because corporations can deduct them as a business expense. The
Income Equity Act, introduced by Rep. Martin Sabo (D-MN), would
cap the deductibility of executive compensation at 25 times that
of the lowest paid full-time company worker. The act now has over
The Income Equity Act is one of the measures supported by
the National Campaign to Close the Wage Gap, which has over 300
member organizations. To learn more about the campaign, visit
the United for a Fair Economy web site-www.stw.org.
If the minimum wage had kept pace with CEO salaries since
1960, reports Executive Excess, the 1997 minimum wage would have
been nearly $41 an hour.
Holly Sklar is the author of Chaos or Community Seeking Solutions,
Not Scapegoats for Bad Economics and a member of the board of
United for a Fair Economy.