A new report from the Institute for Policy Studies says that “CEOs of the 50 firms that have laid off the most workers since the onset of the economic crisis took home 42 percent more pay in 2009 than their peers at Standard & Poor’s 500 firms.”
If true, that is a troubling finding.
In tough times, expenses must be cut and executives have a duty to shareholders to ensure the survival of the enterprise. Were they to do otherwise, the nation’s long-term economic prospects would suffer dramatically.
Yet the pay raises reported by the IPS study were tacked onto salaries that are already stratospheric. S&P chief executives’ median pay is $1.025 million, or around $7.5 million with bonuses and benefits. Meanwhile, their workers are getting median packages of pay and benefits worth about $40,000.
As the Financial Times recently pointed out, a provision in the financial reform package that Congress just passed is causing nightmares for some at the top by requiring comparisons of top wages to workers’ average salaries.
Currently, mean CEO compensation is about 20 times the pay of the U.S. president and 187 times the pay of the average worker.
Two big questions: Where are the boards of these companies? And what can they be thinking?
A Steve Jobs or Bill Gates, not to mention a Warren Buffett, can mean the difference between profitability and stagnation, or worse.
But at the same time, widening pay disparities can undermine the economic system by causing many to question its basic fairness. Boards should recognize that lavish pay raises for chiefs overseeing the firings of work forces do not play well in the court of public opinion.
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