CEOs Now Earn $7,000 per Hour (350x Employ Wages)

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.

Record Profits and Declining Living Standards, Again

For the second year in a row (and despite the continuation of high unemployment rates), American corporations posted record profits ($1.97 trillion for the 3^rd quarter of 2011, according to the Huffington Post). At the same time, pay, benefits and living standards for the majority of Americans declined.

The connection should be obvious. As bosses downsize their businesses, throwing more and more workers into the unemployment lines or compelling them to accept lower wages in exchange for protection from unemployment, those lucky enough to have jobs are being forced to worker harder, faster and longer (productivity increased by 3.2% during the 3^rd quarter of 2011). As a result, companies are spending less on labor and getting higher productivity as a result. (At least they were until this most recent quarter, when productivity actually declined by nearly 1%, probably because they have people working so hard and long they are burning out or deliberately slowing down out of exhaustion or frustration).

The AFL-CIO Executive Paywatch list found that average compensation for S&P 500 CEOs was $12.9 million in 2011, a 13.9% increase over 2010, which itself saw a 22.8% increase over 2009. Real wages for workers fell by 2%, according to the Bureau of Labor Statistics. The average CEO took home 380 times more than the average wage of their employees. 30 years ago they only took home 42 times as much as their employees. (See www.news-record.com)

CSU Faculty Approve Largest University Strike In U.S. History

Image from Recollection Books

In April, the Faculty Union of the California State University system began the strike authorization process. The votes are finally in: 70% of the organization’s 12,501 members voted and 95% of them said yes to a two-day rolling strike at the university’s 23 campuses, should negotiations break down again, the Los Angeles Times reported this week. The strike would most likely occur at the beginning of the Fall, 2012, semester.

The union represents over 23,000 CSU professors, lecturers, librarians, counselors and coaches. About 54% of them are dues-paying members, but they all will be represented by the new contract, which would make it the largest university strike in U.S. history.

The union and the university have been haggling for 22 months with little sign of an accord on the horizon. The faculty is asking for an infinitesimal 1% pay increase, which might not even cover cost of living increases. They are also asking for greater control over class sizes and increased job protections for faculty working under temporary contracts.

Administrators and regents are, not surprisingly, crying poverty and pointing to the state’s yearly multi-billion dollar deficits. Indeed, CSU’s budget was slashed by $750 million this fiscal year and is looking at another $200-million cut next year if voters do not approve a tax initiative on this November’s ballot. Yet the regents have had no problem finding the resources to give 10% raises to many university administrators, including a 25% ($100,000) raise to SDSU’s new president.

CSU Execs Get Raises, Students Get Fee Hikes & Admissions Freeze

The California State University (CSU) trustees approved a 10% raise for two campus presidents this week, according to the San Jose Mercury News. Their decision to reward these executives came immediately after hearing a grim financial forecast that prompted them to impose far-reaching cuts, including an admissions freeze that will deny admission to 16,000 students and a hiring freeze that will keep classes large and reduce course offerings and student support services.

The CSU system faces a $750 million cut in state funding for the next academic year, with an additional $200 million in cuts if voters fail to approve a tax increase in November. If this happens, the trustees plan to reduce enrollment by an additional 20,000 students and lay off 3,000 employees. Despite the university’s huge budget deficit, trustees offered the two presidents base salaries exceeding $300,000, as well as $12,000 car allowances and $60,000 housing allowances for each.

As usual, the CSU administrators are saying the raises are necessary to attract and retain top executive talent. Yet, what good is this “top talent,” when it has overseen record tuition hikes and program cuts over the past decade? (Tuition has increased six years in a row, including a 9% hike this school year).

The “top talent” argument is also specious. If the schools offered lower salaries, they would still attract qualified candidates and their academic programs certainly wouldn’t suffer as much as they do from budget cuts and tuition hikes. In fact, their predecessors did the job for less and one the executives, Leroy Morishita, did do the same job for less (nearly $30,000 less), as interim president, the L.A. Times reported this week.  

If the goal is to provide a quality education, then the solution is to keep executive pay low and do everything to keep tuition low, as well.

California’s Skyrocketing College Tuition

While inflation has been at a relatively low 3.6% for most goods and services, it has been skyrocketing in several key sectors, particularly healthcare and college education. Across the nation, average college and university tuition and fees have increased 8.3% this fall, according to the Los Angeles Times, while in California, the increase was 21%, nearly four times the national average.

For students considering getting their general ed requirements out of the way at cheaper community colleges, fees in California have increased 37%. While this is a dramatic hike, particularly for low income students who had carefully budgeted based on last year’s fees, the $1,119 they must now pay each year is still a discount compared to the $3,288 students pay at two-year colleges in the rest of the country.

While some argue that students can pay for much of this with grants, scholarships and loans, the fact remains that student loan debt is at record levels ($830 billion) and has now surpassed credit card debt nationally. According to the study cited in the Times article, roughly 56% of students who earned bachelor's degrees at public colleges in 2009-10 graduated with debt averaging $22,000. At private nonprofit schools, the average debt was $28,100.

Considering how few jobs there are right now, recent graduates could be in debt for a very long time. However, the jobs available to those with a bachelor’s degree are generally not the highest paying jobs. So even if they are lucky enough to get a job right out of college, they will not necessarily be able to pay back their loans any time soon. If they go onto graduate school, their debt burden upon graduation could easily be in the six-figure range, depending on the type of degree.

While California’s community colleges and Cal State University systems are still cheaper than their counterparts in other states, tuition at the elite University of California system is now considerably higher than the national average. University regents have blamed the yearly increases on budget cuts from the state and it is true that the state slashed UC’s annual budget by half a billion this year. However, as the state’s premier institution of high learning, UC has been bringing in considerable additional revenue from its research and discoveries ($128 million in patent income in 2007-2008). One might reasonably ask why this hasn’t been used to help defray costs for undergraduate education.

Additionally, while the university has been jacking up student fees and allowing faculty salaries to stagnate, it has been rapidly piling on new administrators with executive salaries. Over the past decade, the number of administrators has nearly doubled. UC was spending over $2 billion a year on their salaries back in 2008. However, according to a Faculty Association newsletter from 2008, the cost of just the superfluous administrators was $800 million. Furthermore, they have not been content with exorbitant salaries. 36 of the highest paid university executives recently demanded tens of millions of dollars in increased retirement benefits.

None of this should be surprising, when California’s more than 600,000 millionaires have demanded (and won) steadily decreasing income, property, and business taxes over the past three decades, depleting the state of revenue that could have been used to help fund public universities and K-12 education.