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Shareholders Act to Link Executive Pay to Worker Pay as Wage Gap Reaches Dizzying Heights
CEOs now earn 419 times the pay of average workers, up from 326 in 1997 and 42 in 1980
Opposition to out-of-control executive pay now comes from investors as well as traditional opponents on the other end of the wage gap. According to Business Week's report on executive pay at major companies, released today, CEOs now earn an astounding 419 times the pay of average blue-collar workers.
Responsible Wealth is sponsoring seven shareholder resolutions to establish a maximum ratio between the pay of the CEO and that of the lowest paid worker in the company. Among them are three case studies in outrageous pay: Citigroup, General Electric and Computer Associates.
Citigroup's Sanford Weill is 1998's third-highest paid executive, with $167 million in salary, bonus, realized stock option gains and other long-term compensation, at a time when the newly merged company from Travelers and Citicorp began laying off 10,400 workers. He's number 2 on Business Week's list of executives who gave shareholders the least for their pay and number 5 on the list of executives whose companies performed the worst relative to pay. Executive John Reed had a 138 percent pay increase to $9.5 million from Citigroup last year. He also has another $88 million in unrealized stock option gains. On April 20, 1999, in New York City, Citigroup shareholders will vote on a resolution sponsored by Responsible Wealth to establish a maximum ratio between the pay of the CEO and that of the lowest paid worker in the company.
General Electric's John Welch is the sixth-highest paid executive, with $83.7 million in compensation. He's number 5 on Business Week's list of executives who gave shareholders the least for their pay. GE shareholders will be voting in Cleveland April 21 on another Responsible Wealth resolution to establish a maximum ratio between CEO and worker pay.
The Wall Street Journal says "Enough is Enough: Computer Associates offers a cautionary example of high pay." CEO Charles Wang and other top executives received stock grants for three years beginning in 1995 valued at over $1 billion. Computer Associates had to take a $675 million charge to cover the grant. According to compensation analyst Graef Crystal, the charge "represented 43% of the company's after-tax profit for the whole three years" the plan was in effect. Computer Associates shareholders will be voting on a Responsible Wealth resolution to link CEO and worker pay in Islandia, NY, in August.
"We're on our way to generating 100 million votes for greater shared prosperity," says Scott Klinger, director of Responsible Wealth. "We already have 13 million votes on our first resolution on pay equity this year at RR Donnelley." In addition to companies already mentioned, shareholder resolutions initiated by Responsible Wealth will come to a vote at AT&T, AlliedSignal, BankAmerica and BankBoston.
CEO pay shot up 36 percent last year, beating the S&P 500 increase of 26.7 percent, and leaving blue-collar workers--who got a 2.7 percent raise--in the dust. The CEO pay hike is even more outrageous when considering that workers are still trying to make up the ground they've lost since 1973.
Shifting Fortunes: The Perils of the Growing American Wealth Gap, a new UFE report, finds that weekly wages for average workers in 1998 were 12 percent below 1973, adjusting for inflation. Productivity grew nearly 33 percent in the same period. Take someone earning $25,000 today: their 1973 counterpart made about $3,400 more.
United for a Fair Economy is also challenging this growing wage gap by urging members of Congress to sign on to the Income Equity Act (HR 740), which would cap the tax deductibility of executive compensation at 25 times the amount of the lowest paid full-time worker in the firm, and advocating "Living Wage" policies. Nineteen Living Wage ordinances around the United States now require their municipal governments to do business only with firms paying wages above the local minimum cost of living, and many more campaigns for similar ordinances are now underway.
In May, United for a Fair Economy will be releasing its annual report, Executive Excess, produced with the Washington-based Institute for Policy Studies. The report features executives who pocketed hefty pay packages while laying off thousands of employees. In addition to Citigroup, the report will highlight Black and Decker, whose CEO, Nolan Archibald enjoyed a huge 686 percent pay hike to $36.2 million as the company sawed off 3,000 employees from the workforce.
To get a good picture of the growing CEO-worker wage gap, imagine the Washington Monument. If the real 555-foot Washington Monument reflects average 1998 CEO pay, then a scaled-down replica representing average worker pay would be just 16 inches tall. In 1997, it was 21 inches. Back in 1980, the Workers Monument was over 13 feet tall, reflecting a CEO-worker wage gap of 42 to one.
UFE co-director Chuck Collins says, "In 1980, it would have required a pick-up truck to transport the Workers Washington Monument. By 1996, you could carry it on an airplane and put it in the overhead luggage bin. The 1998 Workers Monument fits easily in my briefcase. It's time to reduce the wage gap before we need a microscope to find the Workers Monument."
United for a Fair Economy is a national organization that spotlights increased economic inequality and offers positive solutions for shared prosperity. Responsible Wealth, a UFE project, is a network of over 400 businesspeople, investors and affluent individuals in the top 5 percent of income and wealth working to reverse the trend of growing economic inequality.
Copies of Shifting Fortunes are available from United for a Fair Economy (617/423-2148, email email@example.com). Excerpts from Shifting Fortunes and information about shareholder resolutions also are available.
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