Why the runway CEO is a 'symptom' of runaway inequality
Liz Shuler, AFL CIO Secretary-Treasurer, explains the issues AFL has found with increasing CEO compensation.
Video transcript
- Let's talk about what's going on with executive pay. And we're going to invite into the stream Liz Shuler, AFL CIO Secretary and Treasurer. It's good to have you here. And I pulled up the executive pay watch report. It's online. And it points out that in 2020, CEOs of S&P 500 companies received an average $15.5 million in total compensation. I know the CEO of our company, Hans Vestberg, his total compensation was $18.2 million. What's the takeaway that you want people paying attention to take from this study?
LIZ SHULER: Well I think the big takeaway is the imbalance in our economy between the pay of CEOs and working people is skyrocketing. It's out of whack. And you talked about the dollar amount. But if you look at the ratio itself of CEO to worker pay for S&P 500 companies, it's 299 to 1. And that's up from the previous year was 264 to 1. Right? So we do this report every single year. And it continues to go up, up, up. And in a time where workers are making sacrifices on the front lines of this pandemic, they're being called essential, we need to make sure that we're rewarding workers by making that gap shrink, not expand.
SEANA SMITH: Liz, why is this important, just in terms of camaraderie, the culture of companies? I mean why is this such an important issue do you think?
LIZ SHULER: Yeah, I think it does have something to do with worker morale at companies. We also think that often a high pay ratio is a warning sign of a company that's out of balance because it has this sort of winner take all approach versus the more collaborative and valuing your workers instead of looking at them as sort of a disposable commodity. So we think the pay ratio is actually a symptom of a larger problem that's going on in our economy that runaway CEO pay is a symptom of a larger problem. And that's runaway inequality.
And we've been talking about this for years. But we think the best way to remedy that inequality is to give workers more power, to allow them to come together collectively and negotiate for better pay and benefits, and of course doing that through a union is even more powerful.
- Liz, what would the ratio have been say 1953? And I pick that year arbitrarily. Because a lot of this is, I mean, salary is much less. Total compensation includes restricted stock units. And the study shows that those are much greater. Whole other issue we could talk about with that. But what would the ratio look like if we go back 50, 60 years?
LIZ SHULER: Well, we would see it be much smaller of course. We would argue that when workers had more power back in those days, unions were 30% of the economy upwards looking at toward the '70s at our peak. So we were able to get better pay, better working conditions, keep that pay ratio in balance because workers were at the table negotiating better pay for themselves and had more power. So you look at the sectors for example, where the electric utility sector, which is a very highly unionized industry. The pay ratio there is much smaller versus in the retail sector, which we have seen in terms of Amazon being the poster child these days, that the ratio is really off the charts.
And so I think that's because, again, in retail you have workers with less ability to come together leverage their power and strength and really lift wages up for workers across the industry.
SEANA SMITH: And Liz, I mean those who oppose unionizing, they say that it's going to destroy jobs, that it's going to cost employers even more. That's been some of the argument from lawmakers here when the discussions of the Pro Act have been going back and forth. I guess what do you say to that? What do you say to the critics out there?
LIZ SHULER: Well we say that actually unions are a value add to your business. We want the company to be as successful as anyone because the rising tide. When companies do well, usually their workers do well. But not so much these days. Because again, CEO pay, off the charts, the return that the workers have put into the company is not coming back to them. And unless you are able to leverage that power together, you're never going to be able to get that ratio to shrink. And you mentioned the Pro Act.
Absolutely, the Pro Act will be a solution to that because it will take the fear out from people who want to form a union in their workplace. Right now, labor laws are so broken that workers get fired. They're intimidated or harassed if they want to form a union. So with the Pro Act, it would remove the fear and bring back that sense of empowerment to working people so that they can actually have a say in the wealth that they are creating for all these companies and these CEOs.
