Transparency best antidote to excessive CEO pay
October 29th, 2013
08:54 AM ET

Transparency best antidote to excessive CEO pay

By Heather Gautney, Special to CNN

Editor’s note: Heather Gautney is an associate professor of sociology at Fordham University. The views expressed are her own.

This past month, our nation’s caregivers got something of a pay increase. The U.S. Department of Labor passed a rule requiring that wage and overtime benefits under the Fair Labor Standards Act be extended to direct care workers. Some two million home care attendants, many of whom have been surviving on public assistance and poverty-level wages, will finally, as of 2015, be covered by basic minimum wage and overtime protections.

Yet this is a depressing contrast with the almost exponential pay curve of our country’s CEOs.

Over a little more than three decades, CEO compensation has increased some 875 percent – more than double the country's stock market growth over that same period – while the real wages of the average U.S. worker have actually declined, according to the Economic Policy Institute. In 1965, corporate executives made twenty times more than the average worker. By 2012, they made over 354 times. The same year, home care attendants made just over $20,000 per year, according to Think Progress. Not even a living wage.

In the aftermath of the Great Recession, social movements like the Tea Party and Occupy Wall Street brought millions of people onto the streets. And despite their radically different political views, both groups agreed that the Wall Street bailout was less about saving the American economy than serving the interests of fat cat bankers and CEOs. Indeed, despite the talk of a recovery since the recession, incomes for the bottom 99 percent have seen little to no improvement. The 1 percent, on the other hand, has captured some 95 percent of income gains over that period.

More from GPS: Time to rein in CEO pay

True, the government has moved to bolster regulation of the financial industry, including through the Dodd Frank Wall Street Reform and Consumer Protection Act, which is aimed at curbing runaway speculation. Among the bill’s expansive list of regulations was included a requirement that corporations disclose CEO-to-worker pay ratios. But although Dodd-Frank is now three years-old, the Securities and Exchange Commission is only now taking real steps to implement disclosure rules.

Much of the delay has been attributed to intense pressure from corporate lobbyists such as the U.S. Chamber of Commerce and the Center for Executive Compensation, who argue that the costs of implementation far outweigh benefits to shareholders. Given the complexity of today’s multinational corporate structures, they argue, such pay ratios are too difficult to calculate.

Too obscene might be closer to the truth.

Yet while revealing CEO-to-worker pay ratios can certainly highlight the seriousness of income inequality, there are other more potent forms of disclosure that could better level incomes. The same year Dodd-Frank was passed, the Supreme Court ruled on Citizen’s United v. FEC, giving corporations and labor unions the right, as a matter of free speech, to spend money from their general treasuries on political campaigns without having to disclose to shareholders nor to the public just who and what they are supporting.

Some large corporations have tried to avoid disclosure to dodge scandals such as the one Target found itself embroiled in over donations to an anti-same sex marriage politician, by donating to 501(c)(4)s, which do not (yet) have to disclose their donors, and which can in turn donate unlimited sums to super PACs. This means that a politician like Ted Cruz could argue he helped shut down the federal government with the help of “Heritage Action,” rather than pointing directly to the billionaire Koch Brothers, who have reportedly provided significant financial backing for the group.

More from CNN: Fixing exorbitant executive pay

Anti-Citizens United activists in the Congress have fought back, with Bernie Sanders introducing a constitutional amendment to reverse the Supreme Court ruling. Several members of Congress, meanwhile, sponsored the DISCLOSE Act, which would place significant limits on campaign contributions and require disclosure for donations from big companies. The SEC, for its part, is currently considering a corporate disclosure rule as a matter of shareholders’ rights.

Why is this so important? Because large corporate donors are seducing our lawmakers, the very people who decide what constitutes a poverty wage, what the federal minimum should be, and in the case of home care workers, whether for-profit home care chains can keep them in poverty wages while enjoying the spoils of their $70 billion industry.

Corporate donors can also undermine hard-won rights to collective bargaining, which is known to play a direct role in mitigating wage inequality. And they can also influence tax policy, exacerbating the problem of inequality. According to a recent Institute for Policy Studies report, between 2009 and 2011, 90 members of the pro-government austerity group “Fix the Debt” gained somewhere between $953 million and $1.6 billion from the “performance pay” loophole in our tax code. Such loopholes are helping the rich get richer by dispossessing public resources most often utilized by the poor and middle class.

It’s clearly time to rein in excessive CEO pay. But it’s also time to rein in their excessive political power. Disclosure may be a small step in that direction, but it’s a crucial one. The extent of corporate pushback against transparency in pay scales and campaign finance highlights that power holders know full well what greater awareness can do. After all, the more people become aware of their own exploitation, the more likely they are to rise up against it.


soundoff (85 Responses)
  1. doc becker

    I find all this touchy, feel good chat uplifting. However standing on my own two feet and breathing normal O2 I see a vastly different picture. The CEO for Ben and Jerry's Ice cream had a unique approach. The CEO could not have a wage that is more than 7 times that of the lowest worker. The far left praised Ben and Jerry's for their efforts to end income equality and made them one of their poster children. This scenario worked well for over 20 years. One day the CEO became tired running a multi-national corporation and decided to enjoy the fruits of his labor. THe search went out for a suitable replacement. No qualified candidates were found who would work a multi-national corporation for about $150,000/year. You see the CEO was one of the founders and although he took the ratio seriously, his real wealth was found in his stock, (which was mind blowingly large). Eventually Ben and Jerry's had to abandon the dream and raise their compensation to get the appropriate CEO to manage the company. Income equality is a good thought. But when its your future on the line you tend to want the best. As my boss said frequently, "Good people aren't cheap, cheap people aren't good." Even the best, passionate lefty would balk when its thier 20 years of hard work and financial future on the line. SOme animals Are more equal than other animals.

    October 30, 2013 at 9:59 am | Reply
    • stephen douglas

      That is why there needs to be some sort of oversight. The founder of a company – think Walt Disney, Bill Gates, etc. – should be able to run it and reap all the benefits he or she wants from it, a thousand times more than the lowest paid employee. BUT, no hired CEO or other executive should be able to walk in and be paid the same amount or more. They did not have the original vision, they did not put in the sweat or the time – in short, they have no skin in the game. The lowest paid employee in a company who has been there from the start has more investment in that company than a newly hired CEO.

      October 30, 2013 at 10:08 am | Reply
    • Mac

      Many CEO's claim they take no salary but make huge income in stock options and other incentives. I'm sure they is some factual liberties taken in this story. If B&J's was offering significant stock options they would have no problems finding CEO's as it is quite common now-a-days.

      October 30, 2013 at 10:51 am | Reply
      • SmarterthanAverage

        I've worked "Executive Comp," don't be naive. They definitely take a salary, an stock options, and bonuses, and fringe benefits (i.e., private plans). They also never enter a contract without first negotiating their "Golden Parachute," in the event they do an awful job. Many, many have "exit contracts" that pay them more for leaving then staying and doing a good job.

        November 1, 2013 at 8:27 pm |
    • kenny

      wrong on so many levels. Your anecdote is garbage. So the ceo's of 30 years ago were idiiots? the gains in productivity by the workers caused profits to soar but workers didn't see them. they all went to the top. so now the top is used to it. A ceo can be ANYONE. They make decisions. The more they know the better. But in the end its just a decision. They sit on the boards of other companies and hire each other.

      October 30, 2013 at 11:32 am | Reply
      • SmarterthanAverage

        A CEO can't be anyone. Unless it's your startup, you had best come from the right family with all the right connections. You'll never get too high on the corporate ladder unless you did. The President of the U.S. can be anyone. Corporations are old Europe.

        November 1, 2013 at 8:29 pm |
  2. John

    I think Fareed should disclose his pay. I bet he makes more than a lot of CEOs.

    October 30, 2013 at 10:28 am | Reply
    • Howard

      Fareed didn't write this article, or didn't you read that part?

      October 30, 2013 at 11:58 am | Reply
    • SmarterthanAverage

      Journalists are terribly underpaid. If they make a grand sum its from book royalties, (a side job.) It's why we don't have objective journalists anymore, like Walter Cronkite, David Jennings and Harry Reasoner. The networks aim to turn them into pundit celebrities to reel in more advertising. Bloggers and iPhones have killed job in their industry.

      November 1, 2013 at 8:19 pm | Reply
  3. Jack

    The main regulation role of the federal government should be to require simple, understandable disclosure. If the people (in this case, stockholders) can read and understand how much the CEO is paid in relation to the stock value, then they can decide to pay more, less, or what have you. If salaries are too high, then stockholders vote to try a "bargain" CEO who will work for 80% of the salary, but produce 90% of the results- a net gain. The key is that to make that decision, stockholders ahev to clearly understand the choice. Then let them- not a centrally-planned federal government- make the decision on what to pay CEO's.

    October 30, 2013 at 11:25 am | Reply
  4. Sal Martorano

    Yes, most CEO's are being paid too much compared to the average worker, but so are these sports team players overpaid for what they do! 

    October 30, 2013 at 11:33 am | Reply
  5. humtake

    Only way to fix it is to change our form of government to one that is legally allowed to dictate what private businesses can and can't do in terms of salaries. Then that just gives more power to the government which introduces so many other problems. Until some genius comes up with a solution nobody has thought of, the same thing will continue because greed is just as much human nature as any other part of our minds.

    October 30, 2013 at 12:23 pm | Reply
  6. Dave Allen

    Transparency. HA HA good luck with that. About as much chance as that as transparency from the Obama administration.

    October 30, 2013 at 2:59 pm | Reply
  7. Rick McDaniel

    The only good correction is to establish compensation limits, to eliminate golden parachutes, and to eliminate stock options.

    We have provided to many incentives for CEO's to do entirely the WRONG things for their companies, just to benefit THEMSELVES, personally.

    October 30, 2013 at 6:31 pm | Reply
  8. Allan Kinsman

    Being transparent is a good idea. I would be grateful to see more of it in the world today. For intance the compensation packages for congress, and those in the stock market. Let us be open about how investment policies in the United States have created financial chaos without any corporate integrity or oversight from a legal system which has not done anything to curtail such practises. Let us discuss a fed policy which is making the savings of retired individuals impotent by lowering interests rates and making savings a worthless endeavor, all the while making it easy for banks to borrow all the while reducing loans to those people which need help. When you have such finanical injustice in a "free" country our problems are just beginning.

    October 31, 2013 at 2:00 pm | Reply
  9. Harry

    This author professor is another academic nut case freak with a twisted sense of life and the private sector and a stupid idiotic fool. Let me ask her this- justify why Fordham, the univserity where she is employed is allowed to charge $42,000 a year in tuition and that's okay. Really there is no jusitifcation for that whasoever. Fordham is no better than any community college out there but she finds it okay to work for a place that charges a student that much to get a degree? But I guess to her, a typical liberal, attacking and making divisive statements is the norm regardless of whether that same person is working for a place that over pays its professors to teach a class in sociology. If I were a student in her class and she started spouting off this crap, I'd spit in her face and demand a tuition refund.

    October 31, 2013 at 9:51 pm | Reply
    • SmarterthanAverage

      Because tuition covers thousands of employee paychecks and benefits, not just one. As well as the cost of building maintenance inclusive of student housing. CEOs are known to spend more than $42,000 on their wife's birthday party; and much more buying favors from politicians. Think: Dennis Kozlowski – Tyco. CEOs wouldn't be where they were if it weren't for the connections and recommendations they got from their Alma Mater.

      November 1, 2013 at 8:24 pm | Reply
  10. Timmy Suckle

    I kissed my way up to VP at a health insurance company. Now I take over $600,000 of your health care dollars for NO VALUE ADDED to your health care. And that’s just me. Now think about how many other VPs, Directors, Managers, etc. are at my company alone. Now multiply that by thousands of others at hundreds of other health insurance companies. From 10 to 25% of your health care dollars go towards administration that adds NO VALUE to your health care. But my company’s PAC dollars will continue to fool you little people into thinking that a single payer system will be bad. Little people like you are so easy to fool. Little people also don’t realize that a single payer system is the ONLY system that would allow little people (as an entire country) to negotiate better health care prices. Little people don’t realize that the Medical Cartels already know that. And that is the reason why the Medical Cartels spend so much PAC money from the hospitals and doctors lobbying against a single payer system. Some little people say that a single payer system would cost you little people more. But if that were true, then wouldn’t the hospitals and doctors WANT that extra money? Yes they would. So why do the Medical Cartels lobby against a single payer system? It’s because the Medical Cartels know it would allow little people to negotiate better health care prices. And that’s what the Medical Cartels are afraid of. Period.
    But us big wigs at insurance companies, hospitals, and pharmacy companies don’t ever need to worry about health care no matter what it costs. We get our health care paid for one way or another by you little people. And we get the little people that work at our companies to contribute to our PACs. And us big wigs say it’s to protect the little peoples’ jobs. But in reality it would be in the little peoples’ best interest to NOT contribute to the PAC. Again, little people are so easily fooled. I won’t ever have to worry about losing my job with so many little people being brain washed by the Medical Cartels’ PAC money. Not only that, the Medical Cartels’ PAC money is used to elect so many republicans that will never allow a single payer system. Republicans have always fought against any meaningful health care reform. But that’s what our Medical Cartels’ PACs pay them for. Politicians can be bought so easily.
    Pretty soon the only people that will be able to afford health care is us big wigs. And that’s the way it should be. We don’t want you little people using up the resources when we need them. And once again, I thank you little people for capping my SS tax at the $113,700 level. Now I only pay 1.2% SS tax and you little people pay 6.2%. Also, thank you for extending my tax breaks. I’m using the extra money on my vacation houses.

    November 1, 2013 at 8:31 pm | Reply
  11. wini

    What seems to be overlooked by "excessive" compensation packages for corporate executives is to whom do the profits of a corporation belong? To the owners, generally referred to as shares holders and bondholders. It seems to me that board of directors charged with representing the owners are doing a poor job, since it is this group that decides, ultimately, who gets what compensation. The same lopsided thinking of over rewarding applies to the entertainment and sports fields as well.

    November 3, 2013 at 8:24 am | Reply
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