The Institute for Policy Studies report coincides with Bernie Sanders’s income inequality tax proposal
By NICOLE LYN PESCE
Published: Sept 30, 2019 4:53 p.m. ET
This is rich. For the past two years, publicly held corporations have had to disclose the ratio between the compensation of their CEOs and the median compensation of their employees under the 2010 Dodd-Frank financial reform act. And while few American CEOs pocketed more than 40 or 50 times their worker payback in the 1960s and 70s, according to the Institute for Policy Studies’ new “Executive Excess 2019” report, nearly 80% of S&P 500 firms paid their CEO more than 100 times their median worker pay last year.
In fact, it would take the typical worker at one of the 50 public companies with the widest pay gaps an entire millennium to earn what their CEO makes in a single year. The latest report by the Institute for Policy Studies, which has researched executive compensation for 25 years, found that the median CEO pay at these 50 companies averaged $15.9 million last year, while the median worker earned just $10,027.
In fact, 10% of workers at S&P 500 firms (in 49 companies) earned less than the $27,005 poverty line for a U.S. family of four last year. That means at least 3.7 million employees at these companies didn’t earn a living wage to keep a family out of poverty. But the median 2018 CEO pay at these 49 places was $12.3 million.
The report came the same day that Democratic presidential candidate Bernie Sanders proposed his new Income Inequality Tax Plan to penalize both publicly and privately held companies with wide wage gaps between CEOs and employees. Companies who pay their CEO (or highest-paid employee, if not the CEO) more than 50 times their median worker would be taxed at 0.5 percentage points and the tax would rise incrementally until capping at 5% for companies who pay their CEO 500 times more than the average employee.
Bernie Sanders✔
@BernieSanders
Americans are sick and tired of corporate CEOs making hundreds of times what their workers make.
Walmart: 1,076 to 1
The Home Depot: 486 to 1
Nike: 379 to 1
We say to corporate America: If you don't end your greed and corruption, we will end it for you. Income Inequality Tax Plan
The American people want corporations to invest in their workers, not just dividends, stock buybacks and outrageous compensation packages to their executives.berniesanders.com
While the revenue would be used to pay for Sanders’s plan to eliminate medical debt, the tax plan’s real purpose is “send a message to corporate America: stop paying your workers' inadequate wages while CEOs make outrageous compensation packages,” according to Sanders’s website.
The complementary IPS “Executive Excess” report released Monday also supported a penalty tax to shrink the income gap and called out several businesses that “pay poverty wages while their CEOs make millions,” including Gap Inc. GAP, +1.61%, Ulta Beauty ULTA, +2.56% and Chipotle CMG, +2.64%. It also noted that while Twitter TWTR, -0.36% and Google’s GOOGL, -0.39% CEOs take home “nominal annual paychecks,” their founders are “sitting on massive stashes of company stock.” Most of these companies either declined to comment or did not respond to MarketWatch requests for comment by press time. A Chipotle representative noted that CEO Brian Niccol’s $33.5 million compensation package was based on a competitive analysis of CEO pay levels in his peer group, and included a cash sign-on award and unvested equity awards forfeited by his previous employer.
The report also name-checked several companies with especially wide wage gaps between CEOs and regular joes, including Mattel MAT, +1.20%, whose CEO took home $18.7 million last year — 3,408 times as much as the company’s median employee. And the CEO of the company that makes Invisalign ALGN, +2.89% braces made 3,168 times as much as his firm’s median employee, an associate engineer in Mexico earning $13,180. Other companies called out for pay gaps above 1000 to 1 include McDonald’s MCD, +0.73%, Disney DIS, +0.28%, T-Mobile TMUS, +1.56%, and more.
A Mattel spokesperson told MarketWatch that CEO Ynon Kreiz’s $18.7 million salary includes a one-time, new-hire performance-based stock option grant valued at approximately $4.4 million to $5 million. The other businesses declined to comment or didn’t respond by press time.
The report also suggested hypothetical ways that revenue from a penalty tax on companies with some of the highest CEO to median worker pay ratios could help the general public. For example, Walmart WMT, +0.19%, with a pay gap of 1,076 to 1, would have owed as much as $794 million in extra federal taxes last year with Sanders’s tax penalty in place. The federal government could have extended food stamp benefits to 520,997 people for an entire year with that windfall, according to the report. Or CVS CVS, +1.59% — with a 618-to-1 ratio — could reportedly have added a revenue stream big enough to provided annual Medicare prescription benefits for 33,977 seniors.
Walmart rep Randy Hargrove told MarketWatch that the company has raised its U.S. starting wages by more than 50% in the past three years, and the average total compensation and benefits for hourly associates are more than $17.50 an hour. “At Walmart, it’s about moving people beyond entry-level jobs by giving associates clearer career paths, skills-based training and more control of their schedule,” he wrote in an email.
CVS didn’t respond to a request for comment.
“Tax penalties on extreme CEO-worker pay gaps build on the living wage movement by encouraging corporations to lift up the bottom and bring down the top of their wage scales,” wrote Sarah Anderson, the lead author of the new IPS Executive Excess report. “Such reforms would also give a boost to small businesses and employee-owned firms and cooperatives that spread their resources more equitably than most large corporate enterprises.”
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