The Market Made Them Do It

Sam Pizzigati

Sam Pizzigati Editor, Too Much online magazine

Back in 1999, near the dizzying height of the dot.com boom, no executive in Corporate America personified the soaring pay packages of America’s CEOs more than Jack Welch, the chief exec at General Electric. Welch took home $75 million that year.

What explained the enormity of that compensation? Welch didn’t claim any genius on his part. He credited his success, instead, to the genius of the free market.

“Is my salary too high?” mused Welch. “Somebody else will have to decide that, but this is a competitive marketplace.”

Translation: “I deserve every penny. The market says so.”

Top U.S. corporate execs today, on average, are doing even better than top execs in Welch’s heyday. In 1999, notes a just-released new report from the Economic Policy Institute, CEOs at the nation’s 350 biggest corporations pocketed 248 times the pay of average workers in their industries. Top execs last year averaged 312 times more.

What explains this growing generosity to America’s top corporate chiefs? Today’s apologists for over-the-top CEO compensation, like Jack Welch a generation ago, point to the market.

One leading critic of these apologists, the Dutch management scientist Manfred Kets de Vries, neatly summed up this market world view earlier this year: Big CEO pay packages “reflect market demands for a CEO’s unique skills and contribution to the bottom line.” Mega-million executive paychecks “merely represent the market forces of supply and demand.”

“CEOs who cheerlead for market forces wouldn’t think of having them actually applied to their own pay packages,” as commentator Matthew Miller has noted in the Los Angeles Times. “The reality is that CEO pay is set through a clubby, rigged system in which CEOs, their buddies on board compensation committees and a small cadre of lawyers and ‘compensation consultants’ are in cahoots to keep the millions coming.”

“CEO compensation,” agree Lawrence Michel and Jessica Schieder, the authors of the new Economic Policy Institute executive pay report, “appears to reflect not greater productivity of executives but the power of CEOs to extract concessions.”

If CEOs earned less, the pair add, we would see “no adverse impact on output or employment.” Instead, they go on, lower executive paychecks would mean higher rewards for corporate workers, since the huge paydays that go to CEOs today reflect “income that otherwise would have accrued to others.”

How could those “others,” the rest of us, best go about lowering CEO compensation? Michel and Schieder offer a variety of promising proposals, ranging from higher marginal income tax rates to higher corporate tax rates on companies with excessively wide CEO-to-worker compensation ratios.

And what might a reasonable CEO-to-worker pay ratio be? The new Economic Policy Institute research suggests one plausible goal. Back in 1965, Michel and Schieder calculate, America’s top execs only pulled down 20 times more pay than the nation’s average workers.

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Reposted from Inequality.org

Sam Pizzigati edits Too Much, the online weekly on excess and inequality. He is an associate fellow at the Institute for Policy Studies in Washington, D.C. Last year, he played an active role on the team that generated The Nation magazine special issue on extreme inequality. That issue recently won the 2009 Hillman Prize for magazine journalism. Pizzigati’s latest book, Greed and Good: Understanding and Overcoming the Inequality that Limits Our Lives (Apex Press, 2004), won an “outstanding title” of the year ranking from the American Library Association’s Choice book review journal.

Posted In: Allied Approaches

Union Matters

Human Service Workers at Persad Center Vote to Join the USW

From the USW

Workers at Persad Center, a human service organization that serves the LGBTQ+ and HIV/AIDS communities of the Pittsburgh area, voted last week to join the United Steelworkers (USW) union.

The unit of 24 workers, ranging from therapists and program coordinators to case managers and administrative staff, announced their union campaign as the Persad Staff Union last month and filed for an election with the National Labor Relations Board (NLRB).

“We care about our work and the communities we serve,” said Johanna Smith, Persad’s Development, Communications, and Events Associate. “We strongly believe this work and our connections to our clients will only improve now that we will be represented by a union.”

The Persad workers join the growing number of white-collar professionals organizing with the USW, especially in the Pittsburgh region. Their membership is also in line with the recent work the Steelworkers have been doing to engage LGBTQ+ members and improve contract language regarding issues that affect their lives.

“Workplaces are changing and evolving, and the labor movement is changing and evolving along with that,” said USW Vice President Fred Redmond, who oversees the union’s LGBTQ+ Advisory Committee as well as the USW Health Care Workers Council. “This campaign gives us an opportunity to diversify our great union while uplifting and empowering a group of workers who give their all for others.”

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There is Dignity in All Work

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