CEO compensation at the nation’s 327 largest companies now averages $7,000 per hour or 350 times what the typical employee earns, according to new data from the AFL-CIO. This includes salaries, bonuses, perks, stock awards, stock options and other incentives.
Google CEO Eric Schmidt has a total annual compensation of nearly $101 million, or $48,548 per hour, more than the average worker makes in an entire a year ($35,204). Other top earning bosses include Oracle chief, Larry Ellison, who brings in $96.2 million per year, Leslie Moonves, (CBS), who makes $69.9 million per year, and seven others with compensation packages exceeding $40 million per year.
Money Morning writes that “most people agree” that CEOs deserve “substantially” more money than their employees. While they do not provide any data to support this claim, it is plausible considering such comments are routinely made by the media and politicians. Yet the explanations people give for why bosses deserve substantially (or any) more than their employees are irrational and unsupported by the evidence. Workers (not CEOs) do all of the heavy lifting in any workplace. CEOs primarily just make decisions about how to run the workplace, decisions that workers are much better equipped to make based on their experience and expertise (assuming the goals are to make the business run in a way that is safer for workers and the environment, that provides better quality and value for consumers, and that makes the world a better place for the majority of its people).
Of course the CEOs and other bosses do not care about any of those things. The only thing that counts are profits, which are made by paying workers as little as possible. They accumulate and maintain their power and wealth precisely because of their relationship to the means of production. As the owners, they get to make the rules, including how much to pay themselves (and how little to pay us). The greater the profits, the more valuable the CEO becomes to the shareholders and therefore the more he can demand in pay. Since lowering labor costs increases profits, the tendency is for the wage gap to continually grow, particularly during recessions (when workers are laid off or their wages are slashed more than usual)—a tendency that generally continues unchecked until labor successfully fights for wage increases, something that has not happened on any scale in over a generation.
Contrary to popular thought, shaming CEOs or legislating pay limits have very limited effect. Why should Eric Schmidt or Larry Ellison care what we think. They never have to sit next to us at the diner or wait in line with us at Walmart. (Larry Ellison, by the way, had his mansion reassessed shortly after the housing market collapse, costing several San Francisco Bay Area school districts millions of dollars in lost revenues). If it was possible to shame him, you would think the affected teachers’ unions would have done it.
As we saw with the subprime lending crisis, any attempts by Congress to limit executive pay were met by cries that this would limit competitiveness, which we are constantly told is essential for job creation, which of course is the only conceivable way to ensure we all have enough to eat, adequate health care and a roof over our heads. The notion of bailing out homeowners was never a possibility, even though this would have kept far more people in their homes than the alternative of bailing out the banks. The former solution is unacceptable because it uses tax dollars (including a sizable share contributed by the wealthy) to help working and middle class people, rather than the usual practice of funneling the money into private business. Worse, had the banks not been bailed out, many very wealthy individuals would have lost money, something else that cannot be tolerated.