It is no secret that over the last forty years the gap between CEO compensation and that of the average worker has grown at an ever increasing rate. Forty years ago the average differential was 42:1, today that ratio is 350:1, an increase of more than 730%.
The most obscene of all is the former CEO of JC Penney, Ronald Johnson who in his 18 month stint as head of the troubled retailer was paid at a rate 1,795 times that of the average worker in the company. Johnson makes no apology for this inequity, saying that he ‘deserved’ it because he had given up the potential of making $80 million on stock options that he walked away from when he left Apple where he was a retailing executive.
In a telephone interview with Bloomberg , Johnson said, “The money I earned at Penney’s in 2012 was entirely to replace money earned at Apple. If Penney’s had waited until April 2012, they wouldn’t have had to pay me a penny. The board wanted me to start sooner.”
While corporations continue to fight the proposed rule by the SEC which would require that the compensation of the average worker be considered when calculating that of the CEO the gap continues to widen.
These huge compensation packages are often the result of the increasingly popular method of compensating the CEO through stock options which allows them to claim that the salary isn’t all that high and that the reason for the huge amounts that are actually made is that the CEO is encouraged to take actions to improve the company’s performance.
What actually happens is that rather than making capital investments in the company, something that would create true growth and in the long run increase profitability, these CEOs return higher dividends to investors which, in turn, drives up the stock price making their own stock options more valuable.
There is a major downside to this approach to business is that it is destructive to worker morale and therefore reduces productivity. An unhappy worker is not nearly as productive as a happy worker. If these CEOs were really as talented as they are touted to be they would know that the long term growth of the business was preferable to the short term return on the value of the stock.
We hear constantly from the pro business TEApublicans about the ‘class warfare’ which the left is waging but the real truth is easily found in the numbers. There is class warfare being waged, however it is being waged by the haves against the have nots and CEOs like Ronald Johnson are on the front lines leading the charge.
Here are the top 10 examples of corporate greed as it relates to CEO pay versus that of the average worker, courtesy of Bloomberg: