UAW strike highlights pay gap between CEOs and workers

THE United Auto Workers Strike entered day six as union representatives and Detroit’s Big Three remain at odds over wage increases.

Shawn Fain, UAW President and other union leaders have argued that Ford, General Motors and Stellantis — parent company of Chrysler, Dodge, Jeep and Ram — can afford to pay workers more money because the companies have significantly increased their workers’ wages. CEO in recent years. These pay increases have helped create an unreasonably high pay gap between CEOs and average workers, the UAW claims.

“The reason we’re asking for 40 percent pay increases is because in the last four years alone, CEO pay has gone up 40 percent,” Fain said on “Face the Nation” on Sunday. from CBS News. “They are already millionaires.”

A Ford representative told CBS MoneyWatch that the UAW’s claims are misleading, noting that since 2019, CEO Jim Farley’s total compensation has increased by 21%, not 40%, while his annual salary on this period fell by 6%.

Farley earned $21 million in total compensation last year, the Detroit News reported, 281 times more than typical workers at the company, according to Ford’s filings with the Securities and Exchange Commission. Stellantis CEO Carlos Tavares earned $24.8 million in 2022, according to the Detroit Free Press, about 365 times more than the average Stellantis worker, according to SEC filings. GM CEO Mary Barra earned nearly $29 million in 2022, Automotive News reported, 362 times more than the typical GM worker.

Not specific to the automotive industry

While these ratios may seem staggering, they are not uncommon, according to Michael Dambra, a professor of accounting and law at the University at Buffalo.

“It fits right in with what’s happened over the last three or four years,” Dambra told CBS News.

Triple-digit pay gaps between CEOs and workers aren’t unique to the auto industry either, Dambra and other experts say.

In the 1960s and 1970s, business executives earned “between 20 and 30 times” regular employees, but “that number increased significantly, especially in the 2000s,” Dambra said.

Taking into account the nation’s 350 largest companies, the CEO-to-employee pay ratio was 20 to 1 in 1965, according to the Economic Policy Institute. This figure increased to 59 to 1 in 1989 and to 399 to 1 in 2021, EPI researchers said. The pay ratio of CEOs to employees at S&P 500 companies was 186 to 1 in 2022, according to executive compensation research firm Equilar.

“Unlimited” CEO compensation

This pay ratio continues to grow because CEOs are increasingly compensated in stock. Companies often justify paying CEOs in stock by claiming that it aligns a corporate executive’s financial incentives with those of the company — ostensibly, the executive earns more if the company does well or hits certain goals.

But companies often raise CEO pay even when executives fail to meet their goals, the left-leaning Institute for Policy Studies said in a 2021 report that identified 50 large companies that changed their pay rules leaders during the pandemic.

Barra told CBS News last week that 92 percent of his salary is based on GM’s financial performance in a given year. She highlighted that total employee compensation is also linked to performance through profit-sharing bonuses.

“The way General Motors is organized, if the company does well, everyone does well,” she said.

While that may be broadly accurate, employee profit sharing stops at a certain dollar amount, Dambra said, pointing to the $12,000 cap the UAW and automakers had in their now-expired contract. Barra’s salary structure has no cap, “so Mary Barra’s compensation is essentially unlimited,” he said.

“As stock performance improves and stock returns increase, the stock compensation she receives is not capped – it is exponential, unlimited growth,” Barra said.