As a measure of the health of capitalism, the ratio of the pay of a company's chief executive officers to that of the average employee has the virtue of simplicity if not cold, stark, absolute precision. This year, for the first time, publicly owned companies are obliged to report that ratio on financial disclosure documents.
The results are eye-popping, emblematic of how the U.S. economic system in the past four decades has come to favor ever fewer people. Income equality has risen as government policymakers have chosen to reward executives and shareholders at the expense of those whose brains and brawn produce the revenue.
Equilar, an executive compensation consulting firm, and The New York Times annually review data for public companies with revenues of at least $1 billion. The AFL-CIO has its own long-running study comparing compensation of chief executives at Fortune 500 firms with the average pay of all U.S. production and nonsupervisory workers — $38,613 in 2017.
This year's Equilar study included 160 companies, finding the median compensation (half made more, half made less) for chief executives was $17.5 million. The median pay for those companies' workers was $75,217. The median pay gap radio was 275 to 1.
The AFL-CIO's study for 2016 found the ratio was 347 to 1, up from 20 to 1 in 1950, 42 to 1 in 1980 and 120 to 1 in 2000.
Results vary widely depending on who a company's workers are. At Mattel Inc. the ratio was 4,987 to 1, but the company operates a lot of overseas factories with extremely low-paid workers. Also, CEO Margaret Georgiadis left the struggling toy maker last month, forfeiting all but $10.8 million of what was to have been $31.3 million in compensation. In other instances, ratios can be lower when companies outsource a lot of labor to contract employees.
One good example of what's happened might be Randall L. Stephenson, CEO of AT&T, once a mere Baby Bell headquartered in St. Louis, now a huge Dallas-based telecom and, perhaps, cable firm. In its attempt to sway policy, AT&T spent $600,000 on Michael Cohen, President Donald Trump's lawyer and bagman.
Stephenson earned $25.3 million in 2017, 366 times more than the median earned by his employees — and half of them earn more than $78,000 year.
That's a pretty good wage, but at a conference hosted by the Dallas Federal Reservelast week, AT&T's chief financial officer John Stephens warned it might not last. "When you go from cable-connecting telephone poles to spectrum in the sky, you have different jobs," Stephens said. And fewer of them, we might add.
Technology and outsourcing are great disrupters, boosting profits and pay at the top and cutting jobs at the bottom. The captains of industry who talk so much about the glories of capitalism are endangering it with their greed.
REPRINTED FROM THE ST LOUIS POST DISPATCH
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