“There are only two families in the world, as a grandmother of mine used to say: the haves and the have-nots.” Miguel de Cervantes Saavedra (Spanish writer, 1547-1616)
Miquel de Cervantes Saavedra said that nearly 400 years ago. So some things never change. A story in our local paper recently reported that earnings for the CEOs who head up the top 10 public companies in the region rose 36.8 percent last year to a combined $51.33 million. The median pay for the 10 CEOs is nearly $2.7 million, more than 37 times the $71,723 median household income in the county, according to the California Department of Finance. As staggering as these numbers are, the national disparity between CEOs and workers is even more enormous. According to Executive PayWatch in 2010 the average CEO had a compensation package that was 434 times that of the average worker. In the past year the average CEO received a pay raise of between 10 to over 20 percent. How many of you were that lucky?
If you’ve been paying attention to this topic at all you will have read, or heard said the following. CEO pay packages reflect the value they bring to the company, or CEO pay is tied to corporate performance – a high performing CEO should be paid commensurately. The thinking is that high pay will get you the best and brightest people and those people will benefit the bottom line. In many cases this seems to be true – highly paid executives generally work for companies that are doing well. For instance Proctor and Gamble’s CEO Bob McDonald’s pay jumped to nearly $16.2 million in his second year at the helm. P&G sales were up 5 percent. In 2007 P&G made Fortune’s list of the 100 best companies to work for in the U.S. and at that time the most common hourly worker (technician) made an average of $48,673 per year. P&G hasn’t made the list since 2007 so I’m not sure what the average worker makes now. As an aside P&G has received recognition for being one of the best employers in the Middle East for the past two years.
Which brings me to another interesting tidbit – in the years between 2000 and 2009 multinational firms cut 2.9 million jobs in the U.S. and added 2.4 million overseas. And, according to an article in the Washington Post, many of those same firms are lobbying for American tax breaks (more tax breaks) to create jobs but they are unwilling to disclose how many of those jobs will be in America. The companies won’t disclose how many of their jobs are here versus how many are abroad unless government officials agree to release only an aggregate number.
Executive PayWatch asks: “Are these CEOs being paid to expand their companies, grow the real economy and create good-paying jobs?” They go on to answer; “Apparently not. According to the Federal Reserve, U.S. corporations held a record $1.93 trillion in cash on their balance sheets. A lack of business investment is one reason that more than 14 million Americans remain unemployed.”
So, lets see – CEOs are raking in big bucks, companies are making big profits and hoarding them, getting tax breaks and creating jobs overseas. Meanwhile the rest of us are barely getting by. This is not healthy. This is not good for the future of our children and our country. So why are the 90 percent of us who are not controlling the country’s wealth so quiet and complacent about this? We may not have the money to put where our mouths are, so maybe we should just start with opening up our mouths!
If you’d like to delve more deeply into the topic, here are links to some of the news and analysis dealing with the topic of income disparity in America:
- With executive pay, rich pull away from rest of America. Washington Post.
- Results of a Study on how Americans feel about the present distribution of wealth.
- It’s the Inequality, Stupid! Charts and Graphs. A huge share of the nation’s economic growth over the past 30 years has gone to the top one-hundredth of one percent, who now make an average of $27 million per household. The average income for the bottom 90 percent of us? $31,244.
- The State of Working; America’s Wealth 2011 The Economic Policy Institute’s State of Working America explores how America’s workers are faring in the present economy. An in-depth, 34-page report.