SUNS4504 Tuesday 7 September 1999

United States: Day off for workers and pampered bosses


Washington, Sep 5 (IPS/Abid Aslam) -- US workers enjoy their annual 'Labour Day' holiday Monday but any jubilation over the state of the job market belongs to their bosses, analysts say.

Indeed, top executives have 419 times more cause to celebrate.

That is the factor by which salaries of executives outstrip the average earnings of workers at 365 leading US companies surveyed by the market research firm Standard and Poor's Compustat.

By contrast, the ratio in 1990 was a relatively modest 120-to-1.

The growing divide between the wages of those who toil in factories and those who occupy corner office suites has moved such groups as United For a Fair Economy (UFE) and the Institute for Policy Studies to decry the 1990s as "a decade of executive excess."

These have been years of world record-beating raises for US chief executive officers (CEOs), the groups add. Among mid-size firms alone, corporate chiefs here make 123 percent more than do their counterparts in 22 other countries.

The average top executive of a US firm with annual revenues of 250-500 million dollars is paid 1.07 million dollars, according to a recent private survey that compared mid-sized firms here with those abroad.

The counterparts of American CEOs earn an average of 498,118 dollars in Canada, 420,855 dollars in Japan and 398,430 dollars in Germany.

Pharmaceutical companies, who blame high drug prices on research costs, appear to coddle their CEOs at the expense of patients in the United States, in the developing world and even their own "bottom line."

US drug maker Bristol-Myers Squibb has approximately the same net income as British-based Glaxo Wellcome but spends 20 times more on its chief executive. Warner-Lambert pours 25 times more into
its CEO's pockets than the Swedish firm Astra - yet the latter company makes more money.

It is clear that bosses' earnings bear little relation to performance even without the international comparisons, reformers say.

CEOs pay has skyrocketed by 481 percent since 1990 but corporate profits have risen only 108 percent. Last year, CEOs enjoyed a 36 percent pay hike - even as their companies' earnings fell by 1.4 percent.

At the other end of the pay scale official statistics, adjusted for inflation, show that weekly pay of US workers remains below its 1973 level despite a 33-percent increase in productivity over the same period.

UFE and the Institute for Policy Studies say that if the federally-mandated minimum wage had kept pace with bosses' pay, then it would have risen to 22.08 dollars per hour. Instead, the hourly minimum stands at 5.15 dollars.

Activists acknowledge that some CEOs have given in to union pressure or volunteered to keep down their salaries in the interests of their firms' financial fitness.

Nevertheless, the deepening disparity has sparked protests among some of the country's wealthiest investors, who have launched a concerted assault on CEO pay.

At annual general meetings of companies, members of 'Responsible Wealth' - a group of investors from the richest five percent of the US population - have been urging fellow stockholders to back resolutions limiting CEOs' pay.

"I've got nothing against these people personally. It's just that the system has gone nuts," says Responsible Wealth activist Judith Barnet.

"I don't see how the people working for these companies are going to want to give willingly of the sweat of their brows to pay for the second, third or fourth house of the CEO," adds Barnet, an heiress and municipal consultant on affordable housing.

Extreme inequality undermines company loyalty, economic productivity, and social cohesion, she says, adding pointedly: "The fact that many of these great big jumps in (CEO) pay have come at the same time as massive lay-offs (of workers) is no coincidence."

In 1997, for example, nine leading companies - including such household names as American Express, Service Merchandise, and Whirlpool - each cut between 3,000 and 9,215 jobs while giving their CEOs raises averaging 20 percent.

Critics of pay inequality also cite a 1992 University of California study showing that, of 89 firms covered, those with the highest wage gap also had the poorest product quality.

None of Responsible Wealth's shareholder resolutions has passed but they have garnered enough votes to be taken up again next year.

That is no mean feat, say veteran investor-activists, since the US Securities and Exchange Commission barred such resolutions altogether until 1992 and because most individual investors defer to institutional proxies, who tend to side with management against such moves.

UFE, which assembled the investors' group, also backs Congressional proposals for an 'Income Equity Act' capping the tax deductibility of a CEO's pay at 25 times the amount paid the company's lowest full-time worker.

That measure, considered austere by some, nevertheless would be more generous than the limit of 20 times proposed by famed US financier J.P. Morgan, who died in 1913.