After the pandemic shut down their industry last March, Carnival and other cruise lines scrambled to get paying customers home—often while stranding employees at sea. As late as August, the company still had employees stuck on ships.
That same month, the company's board awarded CEO Arnold Donald a special "retention and incentive" stock grant that inflated his 2020 compensation to $13.3 million—490 times more than the company's median worker pay of just $27,151.
Carnival had to rely on a Federal Reserve lifeline to stay afloat, but board members still went out of their way to pad the CEO's paycheck while their workers struggled.
This behavior, I learned, was common among America's top tier corporations.
In a new report for the Institute for Policy Studies, I found that 51 of the 100 largest low-wage U.S. employers pulled similar maneuvers to pump up CEO pay during the pandemic. Average CEO compensation at these companies rose 29 percent to $15.3 million in 2020, while typical worker pay dropped by 2 percent to $28,187.
This is just the latest evidence that corporate America has a "pay for nonperformance" system for their almost entirely white and male chief executives. It is particularly galling at a time of such severe hardship for their diverse frontline workers.
Tyson Foods employees, for instance, suffered at least 12,000 COVID-19 infections and 38 deaths—more than at any other meatpacker. But like their Carnival counterparts, Tyson board members were fixated on keeping top brass happy.
When executives didn't meet their cash bonus targets, Tyson directors gave them stock awards to make up the difference. Company chair John Tyson, the heir and grandson of the company founder, hardly needed that extra boost. His personal wealth has increased 72 percent during the pandemic—to $2.6 billion.
Fifteen of the 51 low-wage employers that bent rules to inflate executive pay had CEO-worker pay ratios higher than 1,000 to one. At Chipotle, the board modified performance metrics to boost the CEO's pay by $23 million to a total of $38 million, 2,898 times median worker pay.
Today's CEOs didn't cause the pandemic in the same way that Wall Street executives making reckless bets to hit bonus targets caused the 2008 financial crisis. But in between those crises, many CEOs did make Americans more vulnerable by outsourcing jobs and turning remaining jobs into poverty jobs with no benefits.
To build a more equitable and resilient economy, we need to change course.
President Joe Biden is pushing a sensible increase in the corporate tax rate to fund a massive infrastructure plan. But through other tax and contracting reforms, we can do more than raise revenue—we can also steer corporations toward pay fairness.
Four Democrats in the Senate and 20 in the House recently introduced the Tax Excessive CEO Pay Act, which would apply graduated tax rate increases based on the size of a company's pay ratio. The rate for companies that pay their CEOs more than 50 times their median workers would rise by 0.5 percentage points. At the top end, the rate for companies with ratios of more than 500 to one would increase by 5 percentage points.
If this bill had been in place in 2020, Walmart, with a pay gap of 1,078 to one, would've owed an extra $1 billion in federal taxes, enough to cover the cost of 13,500 clean energy jobs for a year.
In total, the bill would generate an estimated $150 billion over 10 years. But companies could avoid the penalty by narrowing their gaps, either by reining in executive pay or lifting up worker wages—or both.
The federal government could also reduce taxpayer subsidies for inequality by giving companies with narrow pay ratios a leg up in bidding processes for infrastructure contracts.
Narrowing these gaps wouldn't just benefit workers and taxpayers. It would also be good for business, since research shows that more equitable firms tend to perform better. Biden's own Treasury secretary, economist Janet Yellen, called this "common sense" in a 1990 research paper.
Unfortunately, few leaders of major U.S. corporations have common sense when it comes to CEO pay. Since Yellen's paper, the average pay gap between big company CEOs and their typical workers increased from about 60 to one to more than 300 to one.
Over the past year, low-wage workers have demonstrated—perhaps more clearly than ever before—just how essential they are to our economy and our health. It's time for public policy to shift corporate America away from a business model that creates prosperity for a few at the top and precarity for so many of the rest of us.
Sarah Anderson directs the Global Economy Project and co-edits Inequality.org at the Institute for Policy Studies.
The views expressed in this article are the writer's own.
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
