Chronicles of Inequality [March 25, 2013]

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Stat of the Week

Swiss voters will this fall consider a national referendum proposal that limits CEO pay to 12 times the compensation of a firm’s lowest-paid worker. Thecurrent Swiss ratio: 93 to 1. The Swiss ratio in 1998: 14 to 1.

“This is morally and socially,” he would write, “unforgivable.”

If Drucker were still writing today, he’d likely be even more unforgiving. CEOs these days aren’t just slashing worker jobs to add on to their own rewards. They’re slashing worker pay as well — and no CEO may be benefiting more from shrinking paychecks than Ford chief executive Alan Mulally.

Mulally has restored Ford to profitability, his many business and political admirers never tire of pointing out, without having to take any taxpayer bailout. But Mulally has indeed enjoyed a hefty bailout — from his workers.

Entry-level workers at Ford used to make $28 an hour. That rate fell by half when the auto industry financial crunch first hit five years ago and now sits a bit above $19. And since the crunch all Ford workers, not just entry-level workers, have given up cost-of-living wage adjustments and health benefits.

Auto industry execs have declared these worker concessions as absolutely necessary. Without lower compensation for auto workers, the argument goes, the auto industry would never become “globally competitive.” This same reasoning apparently doesn’t apply to compensation for Ford CEO Mulally.

Ford has just announced that Mulally’s pay package for 2012 nearly hit $21 million. His personal rewards for the year almost doubled the pay that went last year to his chief German rival, Daimler CEO Dieter Zetsche, and even more stunningly dwarfed the $1.48 million Toyota CEO Akio Toyoda took home.

But the magnitude of how well Mulally has done for himself — since Ford workers started coughing up concessions — only swings into real focus when we step back and contemplate the towering pile of Ford shares of stock he now holds. In just over a half-dozen years, CNN Money reports, Mulally “has amassed holdings valued at more than $300 million.”

Among America’s CEOs, of course, Mulally hardly stands alone. The outrageousness of American CEO rewards has been building for some time.

Back in 1986, as Forbes noted last week, America’s ten highest-paid CEOs together pocketed $57.88 million in compensation. In 2012, the top 10 pulled in $616.4 million, about five times as much as the 1986 total after taking inflation into account.

Over that same 26-year span, average weekly wages for America’s workersbarely increased at all.

So what should we be doing about CEO compensation? In France, the newly elected government of President François Hollande has placed a 450,000 euro cap — about $580,000 — on executive pay at the 52 companies where the French government holds a majority stake.

This cap will essentially limit executives at these publicly controlled companies to no more than 20 times the pay of their lowest-paid workers.

The French people, for their part, would like to see their government apply a similar cap to executives at all corporations, not just those companies where the government holds a controlling interest.

Earlier this month, just after Swiss voters passed a national referendum that bans executive signing and merger bonuses, a major French pollster asked whether people favored or opposed creating a “maximum wage” for all corporate CEOs. Awhopping 83 percent of the French public supported the idea.

The French may have been reading their Peter Drucker. American CEOs, Drucker believed, should earn no more than 20 or 25 times their worker pay. Last year, in Great Recession-ravaged Michigan, Alan Mulally pulled in over 500 times the pay of Ford’s lowest-paid workers.

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John Cavanagh, Inequality Is Hurting Us All,OtherWords, March 20, 2013. If 1968 levels of income equality still prevailed today, a new study shows, the poorest fifth of Marylanders would be earning twice what they currently take home.

Jeff Madrick, Day of Greed,Harper’s, March 20, 2013. Scanning a day’s headlines for signs of avarice.

Equality and Global Warming, Inequality Watch, March 21, 2013. How inequality complicates the work of gaining support for addressing climate change.

Benjamin Page and Larry Bartels, The 1% aren’t like the rest of us, Los Angeles Times, March 22, 2013.
New research suggests the wealthy have “very different ideas” on “a variety of policy issues.”

What’s Too Much editor Sam Pizzigati’s just-published new book all about? Read the introduction online to get the best sense.

Shareholder distributions mainly enrich the already rich. The workers who manufacture Apple products in Asia, Isaac Shapiro points out, remain already poor, and desperately so. Apple executives pledged a year ago to make major improvements in their pay and working conditions. Those major improvements, the latest investigations have concluded, have not yet taken place.

Meanwhile, stateside, 30,000 workers at Apple stores have annual take-homes that hover around $12 an hour. Last year, by contrast, Apple’s top nine execs took in over $400 million, or $21,000 an hour, at a 40 hour-week.

America’s overall distribution of corporate income, Shapiro adds, has never on record been more unequal than today. If workers here in 2013 were receiving the same share of corporate income they received just a decade ago, some $420 billion additional dollars would now be flowing, nationally, into worker paychecks.