Companies keep resisting rules requiring them to disclose how much more their CEOs earn than average workers. So the AFL-CIO is doing the math for them.
CEOs in the AFL-CIO’s pay database released Wednesday earned an average of $13.5 million last year, which is 373 times more than the $36,000 per year paid to the average production and nonsupervisory worker, says the AFL-CIO. CEO pay in the AFL-CIO study increased 16% in 2014. The AFL-CIO is a labor union representing workers’ rights. The average CEO pay reported by the AFL-CIO is in line with the $12.7 million calculated using S&P Capital IQ data as of a few weeks ago and $14.3 million average reported among the largest 100 companies calculated by Equilar and compensation consultant Towers Watson.
The debate over wages is of utmost importance to investors in sectors where wages are significant costs, such as retail and restaurants. Upward pressure on worker wages could dent profitability going forward. Some retailers including Target (TGT) and Wal-Mart (WMT) have already moved to increase wages – and many more CEOs are talking about the possibility. Meanwhile, the Securities and Exchange Commission has proposed new rules that would require companies to disclose how much more CEOs earn that the average employee at the companies. Companies have resisted the proposal – and implementation has been stalled. That’s why the AFL-CIO’s calculation is of so much interest to investors – as they wait for companies themselves to disclose the data.
The union takes special aim at discount retailer Wal-Mart – which has found itself in the center of the firestorm over worker pay. Wal-Mart CEO C. Douglas McMillon was paid $19.4 million in 2014. That included $1.2 million in salary, $14.6 million in stock awards and $2.9 million in non-equity incentive plan compensation.
Assuming a 50-hour workweek, McMillon’s pay works out to $7,461 an hour, which is 82,800% higher than the $9-an-hour pay for a new Wal-Mart employee.
Wal-Mart says McMillon was not actually paid $19.4 million, according Randy Hargrove, spokesman at Wal-Mart. The company says that a portion of the $14.6 million in stock awards granted in 2014 are not actually earned until the company meets performance goals over a three-year period. The company also says 75.3% of the CEO’s pay in fiscal 2015 was tied to performance goals. Wal-Mart paid executives below what they could have earned in fiscal 2015 because the company’s financial performance fell short of the company’s goals.
And while there’s a big spread between starting hourly workers’ pay and executive pay – there are ways to advance within the company and earn more, Hargrove says. McMillon himself started as an hourly employee in a distribution center 30 years ago, Hargrove says.
The fact companies are digging in and resisting disclosure on how CEO pay compares to workers leave investors to calculate the stats themselves as best they can. There’s a similar disconnect in the restaurant industry.
A Princeton PhD, was a US diplomat for over 20 years, mostly in Eastern Europe, and was promoted to the Senior Foreign Service in 1997. For the Open World Leadership Center, he speaks with
its delegates from Europe/Eurasia on the topic, "E Pluribus Unum? What Keeps the United States United." Affiliated with Georgetown University for over ten years, he shares ideas with students about public diplomacy.
The papers of his deceased father -- poet and diplomat John L. Brown -- are stored at Georgetown University Special Collections at the Lauinger Library. They are manuscript materials valuable to scholars interested in post-WWII U.S.-European cultural relations.
This blog is dedicated to him, Dr. John L. Brown, a remarkable linguist/humanist who wrote in the Foreign Service Journal (1964) -- years before "soft power" was ever coined -- that "The CAO [Cultural Affairs Officer] soon comes to realize that his job is really a form of love-making and that making love is never really successful unless both partners are participating."